Which of the following audit steps would be most effective to review proper recording of and
accountability over physical assets?
I. Physically inspect all assets on the organization's property.
II. Select a sample department and physically inspect assets in the department.
III. Select a sample from the organization's records of physical assets and physically locate each
asset.
IV. Identify assets at a sample of locations and trace to the organization's records.

A.

 I only

B.

I and IV only

C.

II and III only

D.

III and IV only

Which of the following audit techniques provides for continuous monitoring and analysis of
computer transactions for detailed auditing?

A.

Integrated test facility.

B.

 Parallel simulation.

C.

Test data.

D.

Embedded audit routines

Access control software on an organization's mainframe computer records detailed information
concerning both successful and unsuccessful log-on attempts to applications. Which of the
following audit tools would be best suited to review the access information that has been
recorded?

A.

Generalized audit software.

B.

Flowcharting.

C.

Integrated test facility.

D.

Test data.

Which of the following would provide the greatest assurance of the accuracy of a computer
program's computation of freight charges for catalog sales?

A.

Use discovery sampling, selecting transactions from invoices which should have freight charges
added to them.

B.

Use either test data or parallel simulation to test the computer application.

C.

Use difference estimation, selecting transactions from invoices which should have freight
charges added to them.

D.

Use generalized audit software to select a monetary-unit sample of invoices that have been
billed to customers.

If an auditor used nonstatistical sampling instead of statistical sampling to estimate the value of
inventory, which of the following would be true?

A.

The confidence level could not be quantified.

B.

The precision would be larger.

C.

The projected value of inventory would be less reliable.

D.

The risk of incorrect acceptance would be higher.

In a sampling application, the group of items about which the auditor wants to estimate some
characteristic is called the.

A.

Population.

B.

Attribute of interest.

C.

Sample.

D.

Sampling unit.

An internal auditor would most likely use attributes sampling when testing which of the following?

A.

Accounts receivable balances.

B.

Correct coding of accounts payable disbursement vouchers.

C.

Year-end inventory value.

D.

Fixed asset book value.

An audit department has received anonymous information that an employee has allegedly been
able to steal and cash checks sent to the organization by customers. What is the most efficient
way for an auditor to determine how this type of fraud could occur and who might be the
perpetrator?

A.

Confirm accounts receivable.

B.

Confirm accounts payable.

C.

Review the endorsements and banks of deposit on customers' canceled checks.

D.

Flowchart and analyze key controls in the cash receipts process.

If an auditor expects to find numerous discrepancies between recorded values and audited values
of sample selections, which sampling technique would be most appropriate?

A.

Attributes sampling.

B.

Probability-proportional-to-size sampling.

C.

Difference estimation sampling.

D.

Discovery sampling

During an audit of a retail organization, an internal auditor found a scheme in which the warehouse
director and the purchasing agent diverted approximately $500,000 of goods to their own
warehouse, then sold the goods to third parties. The fraud was not found earlier since the
warehouse director updated the perpetual inventory records and then forwarded receiving reports
to the accounts payable department for processing. Which of the following procedures would have
most likely led to the discovery of the missing materials and the fraud?

A.

Select a random sample of receiving reports and trace to the recording in the perpetual
inventory records. Note differences and investigate by type of product.

B.

Select a random sample of purchase orders and trace to receiving reports and to the records in
the accounts payable department.

C.

Take an annual physical inventory, reconciling amounts with the perpetual inventory records.
Note the pattern of differences and investigate.

D.

Select a random sample of sales invoices and trace to the perpetual inventory records to see if
inventory was on hand. Investigate any differences.