Internal Auditing Assurance & Advisory Services 4th Edition Urton L. Anderson, Michael J. Head, Sridhar Ramamoorti, Cris Riddle, Mark Salamasick, Paul J. Sobel - Solutions

The Standards requires policies and procedures to guide the internal audit staff. Which of the following statements is false with respect to this requirement?a. A small internal audit function may be managed informally through close supervision and written memos.b. Formal administrative and
Per IIA Standards, internal audit functions are required to evaluate and contribute to the improvement of their organizations’ governance, risk management, and control processes.a. Provide several examples of governance responsibilities an internal audit function can assume.b. Describe 1) the
Internal audit engagements must be performed with proficiency and due professional care. What do proficiency and due professional care mean?
What is the definition of fraud provided in the Fraud Guide?
What fraud schemes were reported to be most common in the ACFE’s 2016 Report to the Nations?a. Corruption.b. Fraudulent billing.c. Misappropriation of assets by employees.d. Inappropriately reporting revenues in published financial results.
A number of large cases of fraud have come to trial and the postmortems are completed. You have learned a lot related to identifying fraud risk, mitigating control activities, as well as promoting organizational ethics and compliance. You now should understand that fraud incidence is more common
The process of conducting a fraud risk assessment is similar to that of conducting an enterprise risk assessment. The three key steps are:1. Identify inherent fraud risks.2. Assess impact and likelihood of the identified risks.3. Develop responses to those risks that have a sufficiently high impact
When conducting a consulting engagement to improve the efficiency and quality of a production process, the audit team is faced with a scope limitation because several months of the production data have been lost or are incomplete. Faced with this scope limitation, the CAE should:a. Resign from the
There are multiple approaches a CAE can use to create an annual internal audit plan. How is a top-down, risk-based approach conducted?
Which of the following is not a responsibility of the CAE?a. To communicate the internal audit function’s plans and resource requirements to senior management and the board for review and approval.b. To oversee the establishment, administration, and assessment of the organization’s system of
The CAE is required to present the internal audit plan to senior management and the board for approval. What specific information should be communicated to senior management and the board?
The Standards requires the CAE to share information and coordinate activities with other internal and external providers of assurance services. With regard to the independent outside auditor, which of the following would not be an appropriate way for the CAE to meet this requirement?a. Holding a
What key elements are taken into consideration when determining how to manage resources in an internal audit function?
Organizational independence exists if the CAE reports <List A> to some other organizational level than the CEO or similar head of the organization as long as the internal audit activity <List B> without interference:a. List A: administratively; List B: controls the scope and performance
What is the difference between a flat organization structure and a hierarchical organization structure in an internal audit function and what are the advantages and disadvantages of each?
Audit committees are most likely to participate in the approval of:a. Audit staff promotions and salary increases.b. The internal audit report observations and recommendations.c. Audit work schedules.d. The appointment of the CAE.
What are the different positions within a hierarchically structured internal audit function and what are their primary responsibilities?
According to the IPPF, the independence of the internal audit activity is achieved through:a. Staffing and supervision.b. Continuing professional development and due professional care.c. Human relations and communications.d. Organizational status and objectivity.
What are the lines of defense in the assurance layering strategy referred to as the Three Lines of Defense model?
Which of the following activities undertaken by the internal auditor might be in conflict with the standard of independence?a. Risk management consultant.b. Product development team leader.c. Ethics advocate.d. External audit liaison.
What topics are discussed during coordination efforts between the internal audit function and the independent outside auditors?
According to the IPPF, internal auditors should possess which of the following skills?I. Internal auditors should understand human relations and be skilled in dealing with people.II. Internal auditors should be able to recognize and evaluate the materiality and significance of deviations from good
What are the CAE’s responsibilities when reporting to the audit committee?
Which of the following best describes an auditor’s responsibility after noting some indicators of fraud?a. Expand activities to determine whether an investigation is warranted.b. Report the possibility of fraud to senior management and ask how to proceed.c. Consult with external legal counsel to
What are the CAE’s and the internal audit function’s responsibilities regarding governance?
Which of the following activities are designed to provide feedback on the effectiveness of an internal audit activity?I. Proper supervision.II. Proper training.III. Internal assessments.IV. External assessments.a. I, II, and III only.b. I, II, and IV only.c. I, III, and IV only.d. All of these.
What is the difference between risk mitigation and risk management?
According to The IIA, how does an internal audit function determine whether risk management processes are effective?
How does the internal audit function assist the organization in maintaining effective controls?
Why is it important for an internal audit function to have an effective quality assurance and improvement program? What aspects of an internal audit function should a quality program assessment cover?
In what ways can technology be used to increase internal audit process productivity and efficiency?
What does “professional skepticism” mean?
Professional skepticism means that internal auditors beginning an assurance engagement should:a. Assume client personnel are dishonest until they gather evidence that clearly indicates otherwise.b. Assume client personnel are honest until they gather evidence that clearly indicates otherwise.c.
You are studying in the campus library for your next internal audit exam with Mark and Ann, two of your classmates. Mark says: “I really don’t understand this vouching and tracing stuff. For example, what difference does it make whether I start with sales invoices and match them with shipping
The purpose of this case is to familiarize you with the ACL software and give you an opportunity to practice its application.A. Print and read the Getting Started manual.B. Print the ACL in Practice manual. Work through the tutorial contained in the manual. Beginning in chapter 2, “Examine
What does “reasonable assurance” mean? Why do internal auditors provide reasonable assurance rather than absolute assurance?
Which of the following statements regarding audit evidence would be the least appropriate for an internal auditor to make?a. “I consider the level of risk involved when deciding the kind of evidence I will gather.”b. “I do not perform procedures that provide persuasive evidence because I must
The purpose of this case is to familiarize you with the CaseWare IDEA software and give you an opportunity to practice its application.A. Print the IDEA Tutorial. Read:■ The Foreword and Preface.■ Section One, IDEA Overview.■ Section Two, What’s On the IDEA Screen.■ Section Three, IDEA
What are the defining characteristics of persuasive audit evidence?
The following information is available for MVF Company (dollar amounts are in millions):a. Calculate the following ratios for each year:• Gross profit percentage.• Inventory turnover.• Cost of materials purchased to cost of finished goods produced.b. Analyze the results obtained in 3.a.
Audit evidence is generally considered sufficient when:a. It is appropriate.b. There is enough of it to support well-founded conclusions.c. It is relevant, reliable, and free from bias.d. It has been obtained via random sampling.
Companies are facing heightened regulatory expectations. One area of particular interest is information or data produced or manipulated by employees or company systems that is relied on by management to perform key controls or to make significant business decisions. Regulators commonly refer to
Documentary evidence is one of the principal types of corroborating information used by an internal auditor. Which one of the following examples of documentary evidence generally is considered the most reliable?a. A vendor’s invoice obtained from the accounts payable department.b. A credit
What do internal auditors mean when they refer to the nature, extent, and timing of audit procedures?
An internal auditor must weigh the cost of an audit procedure against the persuasiveness of the evidence to be gathered. Observation is one audit procedure that involves cost-benefit tradeoffs. Which of the following statements regarding observation as an audit procedure is/are correct?I.
Internal auditors are required to document their work in working papers that provide complete, accurate, and concise documentation of the engagement process. Discuss the potential adverse consequences of poorly prepared internal audit working papers.
What are some common characteristics of effective interviewers?
Your audit objective is to determine that purchases of office supplies have been properly authorized. If purchases of office supplies are made through the purchasing department, which of the following procedures is most appropriate?a. Vouch purchase orders to approved purchase requisitions.b. Trace
What is the difference between vouching and tracing?
A production manager of MSM Company ordered excessive raw materials and had them delivered to a side business he operated. The manager falsified receiving reports and approved the invoices for payment. Which of the following procedures would most likely detect this fraud?a. Vouch cash disbursements
What types of analytical procedures are used by internal auditors?
An internal auditor is concerned that fraud, in the form of payments to fictitious vendors, may exist. Company purchasers, responsible for purchases of specific product lines, have been granted the authority to approve expenditures up to $10,000. Which of the following applications of generalized
What are some common types of CAATs?
Which of the following most completely describes the appropriate content of internal audit assurance engagement working papers?a. Objectives, procedures, and conclusions.b. Purpose, criteria, techniques, and conclusions.c. Objectives, procedures, facts, conclusions, and recommendations.d. Subject,
What types of data analysis procedures can internal auditors perform with generalized audit software?
Internal audit engagement teams prepare working papers primarily for the benefit of the:a. Auditee.b. Internal audit function.c. Board and senior management.d. Independent outside auditor.
What are the two predominant generalized audit software programs used by internal auditors?
Which of the following represents the most competent evidence that trade receivables actually exist?a. Positive confirmations.b. Sales invoices.c. Receiving reports.d. Bills of lading.
What are the purposes of internal audit working papers?
Competent evidence is best defined as evidence that:a. Is reasonably free from error and bias and faithfully represents that which it purports to represent.b. Is obtained by observing people, property, and events.c. Is supplementary to other evidence already gathered and that tends to strengthen or
What are some common types of working papers?
Workpaper summaries, if prepared, can be used to:a. Promote efficient workpaper review by internal audit supervisors.b. Replace the detailed workpaper files for permanent retention.c. Serve as an engagement final communication to senior management.d. Document the full development of engagement
What are the key characteristics of well-prepared working papers?
An internal auditor gathered the following accounts receivable trend and ratio analysis information:Which of the following is the least reasonable explanation for the changes observed by the auditor?a. Fictitious sales may have been recorded in years 2 and 3.b. The effectiveness of credit and
When using a rational decision-making process, the next step after defining the problem is:a. Developing alternative solutions.b. Identifying acceptable levels of risk.c. Recognizing the gap between reality and expectations.d. Confirming hypotheses.
What is internal audit data analytics?
In which phase(s) of the internal audit engagement can data analytics be used?I. Planning the individual engagement.II. Testing effectiveness and efficiency of controls.III. Assessing risk to determine which areas of the organization to audit.a. I only.b. II only.c. I and III only.d. I, II, and III.
The CAE of HVR Company has asked you to explain the fundamental differences between statistical and non statistical sampling in a manner that will help him make an informed decision about the nature of the sampling training that his internal audit staff needs. Explain to the CAE how the two
Review the video for TeamMate Analytics at http://www.teammatesolutions.com/data-analytics.aspx. After reviewing the video, download a university-allocated version of TeamMate Analytics (Note: TeamMate Analytics will not work with Mac machines) or use a version your instructor has had installed in
What are the key steps involved when the internal audit function performs data analytics?
Which of the following is true?a. Continuous monitoring is the CAE’s responsibility.b. If a control breakdown is identified through continuous auditing, it should be reported to management on a timely basis.c. Data analytic technologies cannot be used for substantive testing.d. Continuous
You and a friend are studying audit sampling together. Your friend is having a hard time understanding the various aspects of risk associated with attribute sampling and has put together the following list of questions she wants to discuss with you. Answer each question.a. What is:■ Audit
A division of your company purchased a large quantity of new desktop computers during the current fiscal year. An internal audit manager has asked you to audit the process used to acquire the computers. He also wants you to determine whether the computers have been used properly and accounted for
Describe the challenges that internal audit functions encounter when implementing a successful data analytics program.
AVF Company processes an average of 400 vouchers payable every month. Each voucher package contains a copy of the check disbursed and supporting documents such as vendor invoices, receiving reports, and purchase orders. The internal auditor plans to examine a sample of vouchers listed in the
Which of the following is/are barriers to widespread use of data analytics by internal audit functions?I. The scope of the intended use of data analytics is not well defined.II. The amount of time required to clean and prepare data for analysis.III. The extensive programing skills required to
Review the video for TeamMate Analytics at http://www.teammatesolutions.com/data-analytics.aspx. After reviewing the video, download a university-allocated version of TeamMate Analytics (Note: TeamMate Analytics will not work with Mac machines) or use a version your instructor has had installed in
What are some of the key areas to which internal auditors can apply the use of data analytics?
Which of the following is not typically a barrier to internal auditors using data analytics in achieving the engagement objective?a. Knowing what data exists and where to find it.b. Poorly defining the scope of the intended use of data analytics.c. Data analytic software is limited by the number of
Probability-proportional-to-size (PPS) sampling is used by internal auditors to reach conclusions regarding monetary amounts.a. Describe the situation in which the application of PPS sampling is most applicable.b. Explain how a PPS sample should be selected.c. Identify the factors that affect PPS
The purpose of this case is to familiarize you with the attribute sampling functionality of the CaseWare IDEA and ACL software. Your instructor will provide you with instructions for how to access IDEA and ACL. Once you have access, complete the following:A. Open the software. Locate the
How is “audit sampling” defined in this chapter?
Data analytics allow internal auditors to focus their resources on high risk transactions and provide management with a higher level of operational assurance. A proven process includes the following steps:Utilize the KnowledgeLeader website and perform the following:A. Authenticate to the
Which of the following is the most significant to the internal audit client in providing information related to the future direction and actions that can improve the operation of the organization?a. Descriptive.b. Diagnostic.c. Predictive.d. Prescriptive.
What are the two general types of audit sampling?
The primary reason for an internal auditor to use statistical sampling rather than nonstatistical sampling is to:a. Allow the auditor to quantify, and therefore control, the risk of making an incorrect decision based on sample evidence.b. Obtain a smaller sample than would be required if
How is “sampling risk” defined in this chapter? What are the two aspects of sampling risk that an internal auditor considers when performing tests of controls?
Which of the following is an element of sampling risk as opposed to an element of nonsampling risk?a. Determining a sample size that is too small.b. Performing an inappropriate audit procedure.c. Failing to detect a control deviation.d. Forgetting to perform a specified audit procedure.
How does nonsampling risk differ from sampling risk?
For which of the following would an internal auditor most likely use attribute sampling?a. Determining whether the year-end inventory balance is overstated.b. Selecting fixed asset additions to inspect.c. Choosing inventory items to test count.d. Inspecting employee time cards for proper approval.
An internal auditor is testing cash disbursement transactions. Internal control policies require every check request to be accompanied by an approved voucher (that is, a package of documents evidencing that a good or service has been received and invoiced by the vendor). The voucher approval is
What factors affect the size of an attribute sample?
An internal auditor selects a sample of sales invoices and matches them to shipping documents. This procedure most directly addresses which of the following assertions?a. All shipments to customers are recorded as receivables.b. All billed sales are for goods shipped to customers.c. All recorded
What are the nine steps involved in attribute sampling?
If all other factors specified in an attribute sampling plan remain constant, changing the expected population deviation rate from 1 percent to 2 percent and changing the tolerable deviation rate from 7 percent to 6 percent would cause the required sample size to:a. Increase.b. Decrease.c. Remain
What is attribute sampling? What are the three variations of attribute sampling described?
What steps are involved in evaluating the results of an attribute sampling application?
If all other factors specified in a PPS sampling plan remain constant, changing the specified tolerable misstatement from $200,000 to $100,000 and changing the specified risk of incorrect acceptance from 10 percent to 5 percent would cause the required sample size to:a. Increase.b. Decrease.c.
An internal auditor should consider the qualitative aspects of deviations found in a sample in addition to evaluating the number of deviations. For which of the following situations should the internal auditor be most concerned?a. There were fewer deviations in the sample than expected.b. The
What should an internal auditor do if documents pertinent to tests of controls are missing?

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Internal Auditing Assurance & Advisory Services 4th Edition Urton L. Anderson, Michael J. Head, Sridhar Ramamoorti, Cris Riddle, Mark Salamasick, Paul J. Sobel - Solutions

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