1. Which of the following best describes the objective of internal auditing? a. To assist members of the organization in the effective discharge of their responsibilities b. To assist management with with the design and implementation implementation of accounting accounting and control systems systems c. To examine and evaluate an organization's organization's accounting system as a service to management d. To monitor the organization's internal control system for the external auditors . !ccording the the "tatement of #esponsibilities #esponsibilities of $nternal !uditing% !uditing% which of the following is not included in the scope of the internal audit function? a. !ppraising the economy and efficiency with which resources are employed b. #eviewing the strategic strategic management process% assessing assessing the &uality of management management decision maing both &uantatively &uantatively and &ualitatively% &ualitatively% and reporting the results to the audit committee committee c. #eviewing the means of safeguarding assets and% as appropriate% verifying the existence of such assets d. #eviewing operations or programs to ascertain whether results are consisten with established objectives and goals and whether the operations or programs are being carried out as planned. (. )f the following% which is the major objective of The $nstitue of $nternal !uditors? !uditors? a. *ultivate% promote and disseminate information concerning internal auditing and related subjects b. )versee the activities activities of internal auditors auditors c. +romulgate standards that must be followed by all corporations d. $nvestigate accusations that *ertified $nternal !uditors have violated The $ nstitute of $nternal !uditors *ode of ,thics -. )ne of the purposes of the "tandards for the +rofessional +ractice of $nternal !uditing !uditing as stated in the $ntroduction to the "tandards is to a. ,ncourage the professionalization professionalization of internal auditing b. ,stablish the independence independence of the internal internal audit department and emphasize the objectivity objectivity of internal auditing c. ,ncourage external auditors to mae more extensive use of the wor of internal auditors d. ,stablish the basis for guidance and measurement of internal auditing performance . Which of the following statements does not describe one of the purposes of The $$! *ode of ,thics? The $$! *ode of ,thics a. "ets forth basic principles in the practice of internal auditing b. *harges $$! members to maintain high high standards of conduct c. ,xplains the internal audit profession's responsibility responsibility to society at large d. "tates that a distinguishing mar of a profession is acceptance by its members of responsibility to those it serves /. $ndependence permits internal auditors to render impartial and unbiased judgments. The best way to achieve independence is through a. $ndividual nowledge and sills b. )rganizational )rganizational status and objectivity objectivity c. "upervision within the organization d. )rganizational nowledge and sills
0. Which of the following is considered a major reason for establishing an internal audit function? a. To relieve overburdened management of the responsibility for establishing an effective control structure b. To safeguard resources entrusted to the organization c. To ensure the accuracy% reliability and timeliness of financial and operating data used in managment's decision maing d. To assist members of the organization in the measurement and evaluation of the effectivenss of the established internal control structure . The internal auditor's responsibility for the prevention of fraud includes all of the following except a. 2etermining if the organizational environment fosters control consciousness b. ,nsuring that fraud will not occur c. 3eing aware of activities in which fraud is liely to occur d. ,valuating the effectiveness of actions taen by management to deter fraud 4. The internal auditing profession is believed to have advanced primarily as a conse&uence of a. $ncreased interest by graduating students and experienced auditors b. The limitation of external audit scope c. 5ob &ualification specifications that include added emphasis on bacground nowledge and sills d. $ncreased complexity and sophistication of business operations 16. The audit committee can serve several important purposes% some of which directly benefit internal auditing. The most significant benefit provided by the audit committee to the internal auditor is a. +rotecting the independence of the internal auditor from undue management influence b. #eviewing annual audit plans and monitoring audit results c. !pproving audit plans% scheduling% staffing and meeting with the internal auditor as needed d. #eviewing copies of the procedures manuals for selected company operations and meeting with company officials to discuss them 11. Which of the following best describes and internal auditor's purpose in reviewing the ade&uacy of the system of internal control? a. To help determine the nature% timing and extent of tests necessary to achieve audit objectives b. To ensure that material weanesses in the internal control system are corrected c. To determine whether the internal control system provides reasonable assurance that the organization's objectives and goals are met efficiently and economically d. To determine whether the internal control system ensures that the accounting records are correct and that financial statements are fairly stated
1. !ccording to the "tatement of #esponsibilities% the authority of the internal auditing department is limited to that granted by
a. The board of directors and the controller b. "enior management and the "tandards c. 7anagement and the board of directors d. The audit committee and the chief financial officer . ! company's new president meets the director of internal auditing for the first time and ass the director to briefly describe the department's overall responsibility. The director states that internal auditing's overall responsibility is to a. !ct an an independent appraisal function to review operations as a service to management by measuring and evaluating the effectiveness of controls b. #eview the means of safeguarding assets and% as appropriate% verify the existence of such assets c. ,nsure compliance with policies% plans% procedures% laws and regulations that could have a significant impact on operations and reports d. #eview the reliability and integrity of financial and operating information and the means used top identify% measure% classify and report such informtion (. ! charter is being drafted for a newly formed internal auditing department. Which of the following best describes the appropriate opganizational status that should be incorporated into the charter? a. The director of internal auditing should report to the chief executive officer but have access to the board of directors b. The director of internal auditing should be a member of the audit committee of the board of directors c. The director of internal auditing should be a staff officer reporting to the chief financial officer d. The director of internal auditing should report to an administrative vice president -. 8nder "tandard 116% the purpose% authority and responsibility of the internal audit department should be defined in a formal written document 9charter:. ! written charter% approved by the board of directors% is primarily meant to enhance the department's a. 2ue professional care b. "tature within the organization c. #elationship with management d. $ndependence . !n auditor's objectivity could be compromised in all of the following situations except a. ! conflict of interest b. !uditee familiarity with auditor due to lac of rotation in assignments c. !uditor assumption of operational duties on a temporary basis d. #eliance on outside expert opinion when appropriate /. !ccording to the "tandards% internal auditors should review the means of physically safeguarding assets from losses arising from a. 7isapplication of accounting principles b. +rocedures that are not cost justified c. ,xposure to the elements d. 8nderusage of physical facilities 0. $n conducting an appraisal of the economy and efficiency with which resources are employed% an internal auditor is responsible for
a. 2etermining whether operating standards have been established b. ;erifying the existence of assets c. #eviewing the reliability of operating information d. ;erifying the accuracy of asset valuation . !ccording to the "tandards% an internal auditor's role with respect to operating objectives and goals includes a. !pproving the operating objectives or goals to be met b. 2etermining whether underlying assumptions are appropriate c. 2eveloping and implementing control procedures d. !ccomplishing desired operating program results 4. The "tandards re&uire that the internal audit director establish and maintain a &uality assurance program to evaluate the operations of the internal audit department. !ll of the following are considered elements of a &uality assurance program except a. !nnual appraisals of individual internal auditors' performance b. $nternal reviews of audits completed c. "upervision of audit wor d. ,xternal reviews to assess compliance with standards 16. !s used in the "tandards when discussing audit planning or ris assessment% the term ris is best defined as the probability that a. !n internal auditor will fail to detect a material error or event that causes financial statements or internal reports to be misstated or misleading b. !n event or action my adversely affect the organization c. 7anagement will% either nowingly or unnowingly% mae decisions that increase the potential liability of the organization d.
1. ! primary purpose for establishing a code of conduct within a professional organization is to a. #educe the lielihood that members of the profession will be sued for substandard wor b. ,nsure that all members of the profession perform at approximately the same level of competence c. 2emonstrate acceptance of responsibility to the interests of those served by the profession d. #e&uire members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization . !n accounting association established a code of ethics for all members. $dentify the association's primary purpose for establishing the code of ethics. a. To outline criteria for professional behavior to maintain standards of competence% morality% honesty and dignity within the association b. To establish standards to follow for effective accounting practice c. To provide a framewor within which accounting policies can be effectively developed and executed d. To outline criteria that can be used in conducting interviews of potential new accountants (. >2ue care implies reason&ble care and competence% not infallibility or extraordinary performance.> This statement maes which of the following unnecessary? a. The conduct of examinations and verifications to a reasonable extent b. The conduct of extensive examinations c. The reasonable assurance that compliance does exist d. The consideration of the possibility of material irregularities -. !n internal auditor observes that a receivables cler has physical access to and control of cash receipts. The auditor wored with the cler several years before and has a high level of trust in the individual. !ccordingly% the auditor notes in the woring papers that controls over receipts are ade&uate. $s the auditor in compliance with the "tandards? a. es% reasonable care has been taen b. @o% irregularities were not noted c. @o% alertness to conditions where irregularities are most liely was not shown d. es% the woring papers were annotated . The *ode of ,thics re&uires $$! members to exercise three particular &ualities in the performance of their duties. These &ualities are a. Aonesty% objectivity and dilegence b. Timeliness% sobriety and clarity c. Bnowledge% sill and discipline d. +unctuality% loyalty and dignity
/. ! *ertified $nternal !uditor% woring for a chemical manufacturer% believed that toxic waste was being dumped in violation of the law. )ut of loyalty to the company% no evidence regarding the dumping was collected. The auditor
a. ;iolated the *ode of ,thics by nowingly becoming a party to an illegal act b. ;iolated the *ode of ,thics by failing to protect the wellCbeing of the general public c. 2id not violate the *ode of ,thics. Doyalty to the employer in all matters is re&uired d. 2id not violate the *ode of ,thics. *onclusive evidence of wrongdoing was not gathered 0. Which of the following concurrent occupations could appear to subvert the ethical behavior of an internal auditor? a. $nternal auditor and a wellCnown charitable organization's local inChouse chairperson b. $nternal auditor and partCtime business insurance broer c. $nternal auditor and adjunct faculty member of local business college that educates potential employees d. $nternal auditor and landlord of apartment buildings that publicly advertise for tenants in local newspapers listing monthly rental fees . $nternal auditors should be prudent in their relationships with persons and organizations external to their employers. Which of the following activities is least liely to affect internal auditors' ethical behavior adversely? a. !ccepting compensation from professional organizations for consulting wor b. "erving as consultants to competitor organizations c. "erving as consultants to suppliers d. 2iscussing audit plans or results with external parties 4. 2uring the course of an audit% an auditor discovers that a cler is embezzling company funds. !lthough this is the first embezzlement ever encountered and the organization has a security department% the auditor decides to personally interrogate the suspect. $f the auditor is violating the *ode of ,thics% the rule violated is most liely a.
11. 2uring an audit% ! *$! learned that certain individuals in the organization were involved in industrial espionage for the benefit of the organization. !ccording to the *ode of ,thics% identify the auditor's course of action. a. #eport the facts to the appropriate individual within the organization b. @o action is re&uired because this condition is not detrimental to the organization c. @ote the condition in the woring papers but refrain from reporting it because it benefits the organization d. #eport the condition to the appropriate government regulatory agency 1. ! *$! is found to have committed a very serious violation of the *ode of ,thics of The $$!. Which of the following describes the disciplinary action most liely to be imposed by The $$!? The *$! will a. 3e re&uired to tae up to -6 hours of appropriate continuing professional education courses b. 3e re&uired to retae the *$! examination c.
