1. Which of the following statements regarding assurance services is true with respect to internal auditors?
I. Assurance services by internal auditors can be provided only to internal management and the audit committee; that is, they cannot be provided to outside entities.
II. Assurance services require the specification of assertions to be tested.
III. Assurance services can be provided only in the areas of controls and financial reporting.
a. I and II
b. II only
c. I, II, and III
d. None of the above
2. Which of the following statements is correct regarding the performance of consulting activities by internal auditors?
a. Consulting activities, by definition, impair the independence of the auditor and therefore should be performed only in areas the internal audit department does not plan to audit in the future.
b. Consulting activities are simply an extension of the auditor’s current work in providing recommendations.
c. Consulting is a more proactive approach in which the auditor takes the lead in analyzing problems, deciding the best course of action, and assisting management in implementing solutions.
d. Consulting should be limited to internal controls, because that is the auditor’s area of primary competence.
3. Which of the following statements are true regarding independence and objectivity as applied to internal auditing?
I. Independence is a departmental feature that affects the scope of audits.
II. Only the audit committee can determine independence.
III. Objectivity is a personal feature that is to be exhibited by all internal audit team members on an audit.
a. I and II
b. I and III
c. I, II, and III
d. III only
4. The internal auditor is primarily responsible to:
a. The audit committee
b. Senior management
c. The external auditor
d. Both the audit committee and senior management
5. Which of the following would not be an audit activity that contributes to improved corporate governance?
a. Perform a compliance audit to determine if the marketing department operates in conformance with company policies.
b. Help train operational managers in control self-assessment.
c. Assist the external auditors in conducting the annual external audit.
d. Perform an operational audit of the company’s procurement processes.
6. Which of the following statements is not correct regarding the internal and external audit profession?
a. External auditors cannot perform internal audit work for public company audit clients.
b. Internal audit work is broader in scope than is the external audit.
c. Both functions require their auditors to be certified.
d. The audit committee is the primary client.
7. The major objective of an operational audit is to:
a. Analyze operational areas for control deficiencies, especially those that would allow a fraud to go undetected.
b. Perform trend analysis to identify high-risk areas that merit management attention.
c. Analyze operations to identify potential deficiencies as a basis for improving operational performance.
d. Determine mismanagement or ineffective management by department or divisional managers.
8. Which of the following items would be the least appropriate criteria for an operational audit of the effectiveness of a bicycle manufacturer’s distribution system?
a. The best practices in an unrelated industry, such as the distribution practices of a company like Dell Computer.
b. Generally accepted good distribution system principles discussed in college textbooks.
c. Related practices in similar industries based on the auditor’s personal experience.
d. Company objectives for superior distribution management as adopted by management.
9. Operational auditing is primarily oriented toward:
a. Future improvements to accomplish management’s goals.
b. The accuracy of data reflected in management’s financial records.
c. Verifying that a company’s financial statements are fairly presented.
d. Past protection provided by existing internal control.
10. If the internal auditor determines that management has accepted a level of risk associated with activities that the auditor believes is too large, the auditor should:
a. Report the matter to the Chairman of the Board.
b. Discuss with the external auditor to better understand their independent assessment of risk.
c. Report to the Board if the auditor does not agree with management’s rationale.
d. Note the disagreement in the audit work papers, but do not report the audit findings to management and the board.

  • CreatedDecember 29, 2012
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