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NEW QUESTION 72
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When comparing an organization's current performance to that of the prior year, an internal auditor found that:
Total labor costs had increased.
More overtime costs had been incurred.
The total number of workers had increased.
Net income was 10 percent lower.
Based solely on this information, which of the following is a valid conclusion?
- A. Wage rates increased.
- B. Net income per worker decreased.
- C. Worker efficiency decreased.
- D. Total labor hours increased.
Answer: B
NEW QUESTION 73
Which of the following statements correctly describes how workpaper standards can improve the efficiency of internal audit operations?
- A. They allow the design and content to vary depending on the nature of the engagement.
- B. They grant external parties approved by management access to workpapers.
- C. They require supervisors to provide written confirmation of the workpapers they review.
- D. They mandate the workpaper retention period.
Answer: A
NEW QUESTION 74
Which of the following statements is correct regarding risk analysis?
- A. The extent to which management judgments are required in an area could serve as a risk factor in assisting the auditor in making a comparative risk analysis.
- B. The highest risk assessment should always be assigned to the area with the largest potential loss.
- C. The highest risk assessment should always be assigned to the area with the highest probability of occurrence.
- D. Risk analysis must be reduced to quantitative terms in order to provide meaningful comparisons across an organization.
Answer: A
NEW QUESTION 75
Which of the following statements is true regarding assurance services provided to clients outside of the organization?
- A. The nature of assurance services for outside clients is the same as for internal clients.
- B. The nature of assurance services for outside clients should be defined in the internal audit charter.
- C. Assurance services for outside clients must be approved on a case-by-case basis by the board of directors.
- D. Assurance services for outside clients are not covered under the internal audit charter.
Answer: B
NEW QUESTION 76
Which of the following best contributes to the effectiveness of the internal audit activity in an organization?
- A. Assurance of internal audit objectivity by the board.
- B. Appropriate compliance coverage in the annual audit plan.
- C. Regular review of the audit charter by management.
- D. Appropriate terms of internal audit scope and responsibility in the charter.
Answer: D
NEW QUESTION 77
If management has not established a risk management process, the internal audit activity could:
- A. Assume primary responsibility for determining if adequate and effective processes are in place.
- B. Identify and mitigate risks to the organization.
- C. Assume responsibility for the management of identified risks.
- D. Take a proactive role that supplements traditional assurance activities.
Answer: D
NEW QUESTION 78
An internal auditor makes a series of observations when performing an analytical review of division operations.
The auditor notes the following things: the current ratio is increasing and the quick ratio is decreasing, sales and current liabilities have remained constant, and the number of day sales in inventory is increasing. Which conclusion should the auditor draw from this data?
- A. The division produced fewer items this year than in prior years.
- B. The gross margin has increased.
- C. The gross margin has decreased.
- D. Cash or accounts receivable has decreased.
Answer: D
Explanation:
Section: Volume E
Explanation/Reference:
NEW QUESTION 79
Why is it important for the chief audit executive to periodically review the audit charter and present the results to senior management and the board?
- A. Because changes in the organization may impair the internal audit activity's ability to meet its objectives.
- B. Because management requires the review to measure effectiveness of the internal audit activity.
- C. So that the individual objectivity of the internal audit staff can be more clearly established.
- D. So that there is assurance of the internal audit staff's proficiency to complete audit activities.
Answer: A
NEW QUESTION 80
Company A has a formal comprehensive corporate code of ethics while company B does not. Which of the following statements regarding the existence of the code of ethics in company A can be logically inferred?
1. Company A exhibits a higher standard of ethical behavior than does company B.
2. Company A has established objective criteria by which an employee's actions can be evaluated.
3. The absence of a formal corporate code of ethics in company B would prevent a successful audit of ethical behavior in that company.
- A. 2 and 3 only
- B. 2 only
- C. 3 only
- D. 1 and 2 only
Answer: B
NEW QUESTION 81
Which of the following statements is true regarding the use of non-statistical sampling in auditing control tests?
- A. Non-statistical sample results must be projected to the population.
- B. Sampling risk will be accurately quantified through non-statistical sampling.
- C. Lesser evidence is required to support a conclusion than for statistical sampling.
- D. It considers tolerable deviation rate more effectively than does statistical sampling.
Answer: A
NEW QUESTION 82
In a manufacturing organization, all sales prices are determined centrally and are electronically sent to the distribution centers to update their sales price tables. Any pricing deviations must be approved by central headquarters. To determine how this process is functioning, an internal auditor should:
- A. Obtain a copy of the existing flowchart for the computer program to determine how price data are accessed.
- B. Identify who approves the shipment of goods and how the goods are priced.
- C. Develop a flowchart of the sales order process to determine how orders are taken and priced.
- D. Document the flow of sales price information, and determine how the table is accessed and updated.
Answer: D
NEW QUESTION 83
While attending a conference, an internal auditor won an all-expense paid trip sponsored by a vendor of the internal auditor's organization.
Which of the following actions are most appropriate for the auditor to take?
- A. Consult with an immediate supervisor and notify the organization's audit committee.
- B. Give the prize to a friend or family member and review the organization's ethics policy.
- C. Give the prize to a friend or family member and notitfy the organization's audit committee.
- D. Consult with an immediate supervisor and review the organization's ethics policy.
Answer: D
Explanation:
Section: Volume E
NEW QUESTION 84
Management has asked the chief audit executive (CAE) to provide assurance on the organization's automated control system related to financial data. The current audit staff does not have the expertise needed to conduct this type of engagement. Which of the following would be the best response by the CAE?
- A. Accept the assignment if the engagement is included in the current audit plan, but inform senior management that the current audit staff does not have the knowledge and skills required.
- B. Do not accept the assignment because the internal audit activity lacks the competency to perform the engagement with due professional care.
- C. Accept the assignment and use an external provider with the necessary knowledge and skills to perform the engagement.
- D. Accept the assignment and use control self-assessment to complete the project.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION 85
An organization decides to take no action on one of its financial risks because the cost of implementing the control outweighs the value of the asset being protected. Which of the following best describes this risk strategy?
- A. Risk sharing.
- B. Risk-benefit analysis.
- C. Risk avoidance.
- D. Risk acceptance.
Answer: D
NEW QUESTION 86
A quantitative risk assessment model has all of the following advantages except:
- A. Providing a systematic method of applying weightings to risks and priorities.
- B. Accommodating a large number of risk factors in the assessment.
- C. Providing documentation for the chief audit executive, who must defend the long-range audit plan.
- D. Removing the need for judgment on the part of the chief audit executive.
Answer: D
NEW QUESTION 87
Which of the following is not an appropriate control related to sales in a manufacturing company?
- A. Goods shipped are matched with valid customer orders.
- B. Goods returned are inspected for damage by the sales department and then entered into inventory.
- C. Credit department approval is required for credit sales transactions.
- D. Customers' orders are recorded promptly.
Answer: B
NEW QUESTION 88
Which of the following statements is correct regarding risk analysis?
- A. The extent to which management judgments are required in an area could serve as a risk factor in assisting the auditor in making a comparative risk analysis.
- B. The highest risk assessment should always be assigned to the area with the largest potential loss.
- C. The highest risk assessment should always be assigned to the area with the highest probability of occurrence.
- D. Risk analysis must be reduced to quantitative terms in order to provide meaningful comparisons across an organization.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION 89
Which of the following scenarios exemplifies a potential internal control weakness?
- A. The same employee who records cash receipts in the accounts receivable subsidiary ledger ensures that the ledger automatically updates the information.
- B. The same employee who makes deposits at the bank prepares the monthly bank reconciliation.
- C. The same employee who receives cash from customers prepares a prelisting of cash receipts.
- D. The same employee who restrictively endorses checks received from customers prepares the bank's check deposit slips.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION 90
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Duration, language, and format of IIA-CIA-Part1 Exam
- Passing score: 600
- Number of Questions: 125
- Format: Multiple choices, multiple answers
- Language: Arabic, Chinese Simplified, Chinese Traditional, Czech, English, French, German, Hebrew, Indonesian, Italian, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Thai, and Turkish
- Length of examination: 150 mins
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