IIA-CIA-PART2 practice questions 31–40

1. Question 31 · 475 in bank

   Which of the following statements about internal audit's follow-up process is true?

   • AThe nature, timing, and extent of follow-up for assurance engagements is standardized to ensure quality performance.
   • BThe actions of external auditors and other external assurance providers is not encompassed by internal audit's follow-up process.
   • CInternal auditors have responsibility for determining if management and the board have implemented the recommended action or otherwise accepted the risk.
   • DThe follow-up process must be complete and documented in the working papers in order to conclude the engagement.

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   Answer: C

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2. Question 32 · 475 in bank

   A manufacturing process could create hazardous waste at several production stages, from raw materials handling to finished goods storage. If the objective of a pollution prevention audit engagement is to identify opportunities for minimizing waste, in what order should the following opportunities be considered? I. Recycling and reuse. II. Elimination at the source. III. Energy conservation. IV. Recovery as a usable product Treatment.

   • AV, II, IV, I, III.
   • BIV, II, I, III, V.
   • CI, III, IV, II, V.
   • DIII, IV, II, V, I.

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   Answer: B

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3. Question 33 · 475 in bank

   A manufacturer is under contract to produce and deliver a number of aircraft to a major airline. As part of the contract, the manufacturer is also providing training to the airline's pilots. At the time of the audit, the delivery of the aircraft had fallen substantially behind schedule while the training had already been completed. If half of the aircraft under contract have been delivered, which of the following should the internal auditor expect to be accounted for in the general ledger?

   • ATraining costs allocated to the number of aircraft delivered, and the cost of actual production hours completed to date.
   • BAll completed training costs, and the cost of actual production hours completed to date.
   • CTraining costs allocated to the number of aircraft delivered, and 50% of contracted production costs.
   • DAll completed training costs, and 50% of the contracted production costs.

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   Answer: D

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4. Question 34 · 475 in bank

   Persuasive evidence indicates that a member of senior management has been involved in insider trading that would be considered fraudulent. However, the evidence was encountered during an operational audit and is not considered relevant to the audit. Which of the following is the most appropriate action for the chief audit executive to take?

   • AReport the evidence to external legal counsel for investigation. Report the legal counsel findings to management.
   • BReport the evidence to the chairperson of the audit committee and recommend an investigation.
   • CConduct sufficient audit work to conclude whether fraudulent activity has taken place, then report the findings to the chairperson of the audit committee and to government officials if appropriate action is not taken.
   • DDiscontinue audit work associated with the insider trading since it is not relevant to the existing audit.

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   Answer: B

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5. Question 35 · 475 in bank

   An internal auditor has been asked to participate in an advisory capacity to assist a committee in redesigning the organization's current financial reports to provide better information to management and the board. Which of the following actions on the part of the auditor would provide the greatest value to this project?

   • AThe internal auditor has a set of generic report templates from a former project and presents them to the group because they worked so well for the previous employer.
   • BThe internal auditor interviews each stakeholder and documents the requirements and preferences of each and creates a report template that meets as many of the requirements and preferences as possible.
   • CThe internal auditor gathers the stakeholder group and holds a brainstorming session where they generate report requirements and preferences and then rank them in order of importance.
   • DThe internal auditor undertakes a project to gather report templates and formats from other organizations in the same line of business and presents them all to

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   Answer: C

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6. Question 36 · 475 in bank

   A manager of one of a retailer's several retail outlets is stealing cash from cash sales, recording the sales as accounts receivable, and subsequently writing off the fictitious accounts receivable as bad debts. Which of the following comparisons would be most effective in signaling the possibility of such a fraud?

   • ABad debt expense as a percentage of sales, compared to that of the other outlets.
   • BBad debt expense as a percentage of sales, compared to that of previous years.
   • CPercentage of past-due accounts receivable, compared to that of the other outlets.
   • DPercentage of past-due accounts receivable, compared to that of previous years.

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   Answer: A

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7. Question 37 · 475 in bank

   An auditor is performing a review of a complex process to identify opportunities to increase efficiency. What is the most practical way to document the process to identify areas of inefficiency?

   • AWrite a description of the process activities in sequential order.
   • BDevelop a PERT (program evaluation and review technique) diagram.
   • CFlowchart the process.
   • DCreate a decision tree.

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   Answer: C

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8. Question 38 · 475 in bank

   What is the most likely source of information for a detailed schedule of a company's insurance policies in force?

   • AOriginal journal entries found in the cash disbursements journal, along with supporting checks processed by the bank.
   • BPolicies and procedures governing insurance coverage.
   • CThe current fiscal year's budget for insurance, together with the beginning balance of the prepaid insurance account.
   • DThe files containing insurance policies with various carriers.

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   Answer: D

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9. Question 39 · 475 in bank

   An organization's internal auditors are reviewing production costs at a gas-powered electrical generating plant. They identify a serious problem with the accuracy of carbon dioxide emissions reported to the environmental regulatory agency, due to computer errors. The auditors should immediately report the concern to:

   • AThe regulatory agency.
   • BPlant management.
   • CA plant health and safety officer.
   • DThe risk management function.

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   Answer: B

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10. Question 40 · 475 in bank

    The internal audit activity of an investment company received a request to provide assurance on the risk management process. Preliminary discussion with senior management revealed that separate functions within the organization perform some form of risk management activities. Which of the following is the most effective tool for ensuring that risk management activities are coordinated among these functions?

    • ADelphi technique.
    • BAssurance map.
    • CFacilitated workshop.
    • DAnalytical reviews.

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    Answer: B

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IIA-CIA-PART2 practice, question 31. 475 questions available.