If an organization's chief audit executive wants to implement continuous auditing, what is the
appropriate order in which key steps should be undertaken?
I. Identify business applications that require access.
II. Implement steps to continuously assess risks and controls.
III. Define objectives of continuous auditing.
IV. Manage and report results.

A.

III, I, IV, II.

B.

II, I, III, IV.

C.

 III, I, II, IV.

D.

II, III, I, IV.

In which of the following situations would it be most appropriate to employ the services of a
forensic specialist?

A.

Detection of unauthorized changes to source documents.

B.

Review for misapplication of general computer controls over accounts receivable.

C.

Investigation of ghost employees in a large business.

D.

Verification of fixed assets in a manufacturing company

The following is an excerpt from an audit engagement workpaper:
A Company
Accounts Receivable
Date
Objective. To determine if the computer system is correctly recording all accounts receivable
transactions.
Procedures: Judgmental selection of a sample of all accounts receivable balances greater than
$50,000 for positive confirmation of balances.
Conclusion: Based on the results of testing wherein all but three confirmations were returned, the
accounts receivable balance is fairly presented in all material respects.
Which of the following is true regarding the workpaper?

A.

 It is not appropriate to judgmentally select a sample when testing accounts receivable.

B.

A conclusion should be reached only for the results of overall testing, not for individual
procedures.

C.

The audit procedures used are not consistent with the audit objective.

D.

The format of the workpaper does not conform to the standard format for workpapers.

Which of the following trends found on financial reports would most likely indicate a possible
problem?

A.

A material decrease in the receivables turnover.

B.

A material increase in inventory turnover.

C.

A material increase in daily sales compared to total outstanding receivables.

D.

A material increase in the acid-test ratio.

Which of the following situations would best support the decision of a chief audit executive (CAE)
to defer follow-up activity at a branch office until the next audit engagement?

A.

An audit of the branch office is routinely scheduled every three years.

B.

On-site follow-up of a remote branch may not be feasible due to travel costs.

C.

Branch office management states that correction of the audit issue may take longer than
expected.

D.

The CAE and management agree that the corrective action taken to date is sufficient.

When conducting research, which of the following is most important?

A.

Using computer databases or the Internet to find all relevant sources.

B.

Providing documentation of the reference sources.

C.

Presenting only those facts that support the conclusion.

D.

Presenting all contrary views to balance the opinion.

Productivity statistics are provided quarterly to a company's board of directors. An auditor checked
the ratios and other statistics in the four most recent reports. The auditor used scratch paper and
copies of the board reports to verify the accuracy of computations and compared the data used in
the computations with supporting documents. The auditor wrote a note describing this work for the
workpapers and then discarded the scratch paper and report copies. The auditor's note stated.
“The ratios and other statistics in the quarterly board reports were checked for the last four
quarters, and appropriate supporting documents were examined. All amounts appear to be
appropriate.”
In this situation:

A.

Four quarters is not a large enough sample on which to base a conclusion.

B.

The auditor's workpapers are not sufficient to facilitate an efficient review of the auditor's work.

C.

The auditor should have included the scratch paper in the workpapers.

D.

The auditor should have considered whether the information in the board report was compiled
efficiently

Which of the following is an example of the verification of internal documentary evidence?

A.

Reviewing a carrier's bill of lading.

B.

Reconciling a vendor's month-end statement.

C.

Vouching a copy of a sales invoice to receivables.

D.

Recalculating a customer's purchase order.

The balanced scorecard approach differs from traditional performance measurement approaches
because it adds which of the following measures?
I. Financial measures.
II. Internal business process measures.
III. Client satisfaction measures.
IV. Innovation and learning measures.

A.

I only

B.

II and IV only

C.

III and IV only

D.

II, III, and IV only

An auditor prepared a workpaper that consisted of a list of employee names and identification
numbers as well as the following statement:
“A statistical sample of 40 employee personnel files was selected to verify that they contain all
documents required by company policy 501 (copy attached). No exceptions were noted.”
The auditor did not place any audit verification symbols on this workpaper. Which of the following
changes would most improve the auditor's workpaper?

A.

Use of audit verification symbols to show that each file was examined.

B.

Removal of the employee names to protect their confidentiality.

C.

Justification for the sample size.

D.

Listing of the actual documents examined for each employee