Which of the following is an appropriate role for the board in governance?

A.

Preparing written organizational policies that relate to compliance with
laws,regulations,ethics,and conflicts of interest.

B.

Ensuring that financial statements are understandable,transparent,and reliable.

C.

Assisting the internal audit activity in performing annual reviews of governance.

D.

Working with the organization's attorneys to develop a strategy regarding current
litigation,pending litigation,or regulatory proceedings governance.

After several years in the engineering department,an engineer was transferred to the
internal audit department. One month later,the new auditor was assigned to an assurance
engagement for the engineering department. When the auditor's former engineering
supervisor suggested a change in the sample selection method,the auditor consulted with
the audit supervisor. They determined that the suggested method would not be as
representative and that the original selection method should be used. In this situation,the auditor:

A.

Maintained an independent mental attitude and is therefore objective.

B.

Has subordinated professional judgment,and objectivity is therefore impaired.

C.

Does not have objectivity since the auditor recently transferred from the engineering department.

D.

Does not have independent organizational status since the auditor recently transferred
from the engineering department.

Auditors 1,2,and 3 work out of various offices. Each must be assigned to one,and only
one,of three audit locations (A,B,or C). The cost of sending each auditor to each location is
listed below:
Audit Locations
Auditor 1
A
B
C
Auditor 2
$200
$300
$400
Auditor 3
$400
$300                                                                                                                                                         $600
$200
$200
$500
The minimum cost with which this assignment can be accomplished is:

A.

$800

B.

$900

C.

$1,000

D.

$1,100

Which of the following represents the most effective governance structure?
I.
Operating
Executive
Internal
Management
Management
Auditing
Responsibility for risk
Oversight role
Advisory role
II.
Oversight role
Responsibility for risk

Advisory role
III.
Responsibility for risk
Advisory role
Oversight role
IV.
Oversight role
Advisory role
Responsibility for risk

A.

I Only

B.

II

C.

III

D.

IV

In developing an appropriate work program for an audit engagement,the most important
factor for an audit supervisor to consider isthe:

A.

Availability of records and data.

B.

Potential impact of risks.

C.

 Audit personnel's knowledge and experience.

D.

Time required to complete the engagement.

Which of the following characteristics could indicate high risk?

A.

Management decisions are made by a committee of mid to higher level management personnel.

B.

The company is not in a rapidly growing industry.

C.

The company's profitability is lower than the industry norm.

D.

Management turnover has been very low.

Which of the following is an example of sharing risk?

A.

An organization redesigned a business process to change the risk pattern.

B.

An organization outsourced a portion of its services to a third-party service provider.

C.

An organization sold an unprofitable business unit to its competitor.

D.

In order to spread total risk,an organization used multiple vendors for critical materials.

A charitable organization provides substantial grants for important medical research.
Assuming marginal controls are in place,which of the following possible frauds or misuses
of organization assets should be considered the area of greatest risk?

A.

Senior executives are using company travel and entertainment funds for activities that
might be considered questionable.

B.

Purchases of office supplies are made from fictitious vendors.

C.

Grants are made to organizations associated with senior executives.

D.

A payroll clerk has added a fictitious employee.

According to the International Professional Practices Framework,which of the following is
the appropriate division of responsibilities for the coordination of internal and external audit efforts?

I.Oversight of Work
Coordination of Activities
Chief audit executive
Senior management
II.Board
Chief audit executive
III.Chief financial officer
Chief audit executive
IV.Board
Chief financial officer

A.

I

B.

II.

C.

III.

D.

IV.

According to the Standards,the organizational status of the internal audit activity:

A.

Must be sufficient to permit the accomplishment of its audit responsibilities.

B.

Is best when the reporting relationship is direct to the board of directors.

C.

Requires the board's annual approval of the audit schedules,plans,and budgets.

D.

Is guaranteed when the charter specifically defines its independence.