IIA-CIA-PART2 practice questions 11–20

1. Question 11 · 475 in bank

   Which of the following procedures would provide the best evidence of the effectiveness of a credit-granting function?

   • AObserve the process.
   • BReview the trend in receivables write-offs.
   • CAsk the credit manager about the effectiveness of the function.
   • DCheck for evidence of credit approval on a sample of customer orders.

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   Answer: B

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2. Question 12 · 475 in bank

   A report prepared by the internal audit activity contains several observations that disclose proprietary information regarding the organization's manufacturing process. According to the International Professional Practices Framework, which of the following is the appropriate treatment for this report?

   • ADistribute the report only to the board to protect disclosure.
   • BDisclose and distribute this information in a separate report.
   • CRemove the observations and report verbally to senior management.
   • DRequire a separate non-disclosure statement from each recipient.

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   Answer: B

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3. Question 13 · 475 in bank

   During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?

   • ADefective pricing.
   • BCost mischarging.
   • CFictitious vendor.
   • DBid rotation.

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   Answer: B

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4. Question 14 · 475 in bank

   Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?

   • AAn increase in the discount offered for early payment.
   • BA more liberal credit policy.
   • CInvoices provided on a weekly rather than a monthly basis.
   • DIncreased cash sales.

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   Answer: B

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5. Question 15 · 475 in bank

   The most effective way for internal auditors to enhance the reliability of computerized financial and operating information is by:

   • ADetermining if controls over record keeping and reporting are adequate and effective.
   • BReviewing data provided by information systems to test compliance with external requirements.
   • CDetermining if information systems provide management with timely information.
   • DDetermining if information systems provide complete information.

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   Answer: A

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6. Question 16 · 475 in bank

   According to the International Professional Practices Framework, the internal audit activity's decision to defer follow-up of recommendations and management's corrective actions until the next scheduled engagement for the area is justified when:

   • AThe reported findings or recommendations are significant enough to require immediate action by management.
   • BThe action taken by management to address the recommendation is sufficient when weighed against the importance of the finding.
   • CManagement has adequately understood and appropriately accepted the risk of not taking action to implement the recommendation.
   • DThe significance of the finding or recommendation will allow auditors to perform monitoring by receiving periodic updates from management on corrective

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   Answer: B

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7. Question 17 · 475 in bank

   A staff auditor, nearly finished with an audit engagement, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing engagement and there is pressure to complete the current engagement. The auditor notes the problem and forwards the information to the chief audit executive but performs no further follow-up. The auditor's actions would: I. Be in violation of the IIA Code of Ethics for withholding meaningful information. II. Be in violation of the Standards because the auditor did not properly follow up on a red flag that might indicate the existence of fraud. III. Not be in violation of either the IIA Code of Ethics or Standards.

   • AI only
   • BII only
   • CIII only
   • DI and II only

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   Answer: C

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8. Question 18 · 475 in bank

   Which of the following would be the best audit procedure to use to determine if a division's unusually high sales and gross margin for November and December were the result of fraudulently recorded sales?

   • ATrace a sample of shipping documents to related sales invoices to verify proper billing.
   • BConfirm accounts receivable balances with customers.
   • CCompare sales and gross margin totals with those of the previous ten months and the first month of the following year.
   • DUse regression analysis techniques to estimate the sales and cost of goods sold for November and December.

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   Answer: B

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9. Question 19 · 475 in bank

   Which of the following conditions should a chief audit executive take into account when deciding if a follow-up audit engagement is necessary? The reported observations were significant and high risk. Internal audit resources and the time it will require for follow-up. Management may not have the resources to take action. Management has previously decided not to take any action.

   • A1, 2, and 3 only
   • B1, 2, and 4 only
   • C1, 3, and 4 only
   • D2, 3, and 4 only

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   Answer: B

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10. Question 20 · 475 in bank

    Which of the following factors could interfere with effective problem solving by an internal auditor? I. Reacting to previous experiences with clients. II. Focusing only on the most likely cause. III. Correcting the symptoms of problems.

    • AI only
    • BIII only
    • CI and II only
    • DI, II, and III

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    Answer: D

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IIA-CIA-PART2 practice, question 11. 475 questions available.