An internal auditor provided the following statement about division A's performance during the
month: "Because supplies of raw material X were scarce, division A's profits declined by 15
percent."
Which of the following can be validly concluded from the auditor's statement?
I. Division A's production level declined by 15 percent.
II. Division A could have sold more products than it produced.
III. Division A usually sells all of the products that it produces.

A.

I only

B.

II only

C.

III only

D.

I and II only

As part of an operational audit of the shipping department, an auditor selected a sample of 45
daily shipping logs from the department's files. On 44 of the days, the log contained a sufficient
number of shipments to meet the department's daily quota. Based on this test, the auditor
concluded that the shipping department was effective at meeting its quotas. Which of the following
is true about the auditor's conclusion?

A.

The number of items selected for testing is inadequate to justify the conclusion.

B.

 The shipping department is effective in meeting its responsibilities.

C.

This conclusion would negate any need to perform tests of efficiency.

D.

None of the above

An internal audit activity implemented an integrated test facility to test payroll processing. The
auditors identified the key controls and processing steps built into the computer program and
developed test data to test them. The auditors submitted test transactions throughout the year and
did not find any differences in their test results. The auditors can conclude that:

A.

The system is properly capturing the hours worked by employees during the year and the hours
have been properly submitted to payroll and processed correctly.

B.

All employees were correctly paid during the year and their pay was correctly computed.

C.

The computer application and its control procedures were processing payroll transactions
correctly during the past year.

D.

All of the above.

A code of ethics within the internal auditing profession is necessary in order to:

A.

Reduce the likelihood that members of the profession will be sued for substandard work.

B.

Ensure that all members of the profession perform at approximately the same level of
competence.

C.

Provide guidance to internal auditors in their service to others.

D.

Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of
their organization.

An auditor is scheduled to audit payroll controls for a company which has recently outsourced its
processing to an information service bureau. What action should the auditor take, considering the
outsourcing decision?

A.

Review the controls over payroll in both the company and the service bureau.

B.

Review only the company's controls over data sent to and received from the service bureau.

C.

Review only the controls over payments to the service bureau based on the contract.

D.

Cancel the engagement because the processing is being performed outside of the organization

An internal auditor is reviewing a new automated human resources system. The system contains a
table of pay rates which are matched to the employee job classifications. The best control to
ensure that the table is updated correctly for only valid pay changes would be to:

A.

Limit access to the data table to management and line supervisors who have the authority to
determine pay rates.

B.

Require a supervisor in the department, who does not have the ability to change the table, to
compare the changes to a signed management authorization.

C.

Ensure that adequate edit and reasonableness checks are built into the automated system.

D.

Require that all pay changes be signed by the employee to verify that the change goes to a
bona fide employee.

What is the most important risk in determining the validity of construction delay claims?

A.

Contractor claims may be submitted prior to completion of the work.

B.

Contractor claims may include costs considered in the fixed-price portion of the work.

C.

Contractor claims may include subcontractor estimates of balances due to the subcontractor.

D.

Contractor claims may be understated.

During an audit of a branch bank, an internal auditor learned that a series of system failures had
resulted in a four-day delay in processing customers' scheduled payroll direct deposits. The first
failure was that of a disk drive, followed by software and other minor failures. Which of the
following controls should the auditor recommend to avoid similar delays in processing?

A.

Contingency planning.

B.

Redundancy checks.

C.

Process monitoring.

D.

Preventive maintenance.

An auditor analyzed a payroll system's data files for unusual activity, such as excessive overtime
hours, unusual fluctuations in pay rates, and excessive vacation time. The application controls
being verified by this analysis are:

A.

Edit and validation controls.

B.

Rejected and suspense item controls.

C.

Controls over update access to the database.

D.

Programmed balancing controls.

During the development of a purchasing system, an auditor reviewed the payment authorization
program. Which of the following actions should the auditor recommend for a situation in which the
quantity invoiced is greater than the quantity received?

A.

Issue an exception report

B.

Pay the amount billed and adjust the inventory account for the difference.

C.

Return the invoice to the vendor for correction.

D.

Authorize payment of the full invoice, but maintain an open purchase order record for the
missing goods.