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14 Cards in this Set

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1. One of the purposes of the Standards is to:

a. Establish the criteria for certification as a Certified Internal Auditor.
b. Specify the content of the internal auditing department’s charter.
c. Serve as the guide in determining the reliance that can be placed on the organization’s system of internal control.
d. Establish a basis for measuring and guiding internal auditing operations.
1. D
2. According to the Standards, objectivity in internal auditing does not necessarily involve:

a. An independent mental attitude.
b. Position in the organization.
c. Avoidance of operating responsibilities.
d. Avoidance of conflict of interest.
e. Periodic rotation of auditors whenever possible.
2. B
3. Management asked the director of internal auditing to perform an audit of the organization’s advanced components design division. Because the operations of this division are highly complex and technical, the director hired an outside consulting firm to perform this review. Management endorsed this arrangement and agreed to accept the findings of the consultants. According to the Standards, who should be held responsible for the quality of this audit?

a. The outside consulting firm’s management.
b. The director of internal auditing.
c. The management of the organization.
d. The supervisor of the consulting team.
e. Both a and d.
3. B
4. According to the Standards, supervisory review of audit projects should be conducted:

a. At irregular intervals on a surprise basis.
b. At regular intervals and without regard to staff qualifications.
c. Continually, to assure conformity with internal auditing departmental policies.
d. Only for major audit projects.
4. C
5. Which of the following statements describes the responsibilities of the internal auditing department with respect to fraud?

a. Detecting irregularities which would be disclosed by the application of appropriate auditing procedures.
b. Providing an entity with its primary defense against fraud.
c. Detecting irregularities that affect the financial statements.
d. Detecting irregularities that result from undetected weaknesses in the system of internal control.
e. Both b and d.
5. A
6. The standard relating to the exercise of due professional care calls for:

a. Use of reasonable audit skill and judgment in performing the audit.
b. Review of working papers by the director of internal auditing.
c. Compliance reviews of specified areas requiring special attention.
d. Issuance of reports in written form to auditees and executive management.
6. A
7. The Standards states that internal auditors are responsible for:

a. Establishing the systems designed to promote compliance with policies, plans, procedures, laws, and regulations.
b. Setting operating standards for use in determining whether an activity is utilizing its resources in an economical and efficient manner.
c. Identifying and analyzing deviations from operating standards and communicating the results to those individuals responsible for corrective action.
d. Assisting operating personnel in the interpretation and implementation of control procedures.
e. Appraising the economy and efficiency with which resources are employed.
7. E
8. According to the Standards, the process of examining and evaluating information should include all of the following actions except:

a. Collecting information on matters related to audit objectives.
b. Obtaining sufficient, competent, and relevant evidence.
c. Flowcharting operating systems.
d. Selecting audit procedures in advance.
e. Supervising the auditing work performed.
8. C
9. According to the Standards, the internal auditor’s responsibilities include:

a. Taking corrective action when deficiency findings are reported.
b. Revising auditee department procedures when changes in conditions make them no longer applicable.
c. Following up to ascertain that appropriate action is taken on reported audit findings.
d. Providing top management with assurance that employees have been adequately trained for their tasks.
9. C
10. According to the Standards, the number of auditors needed by an internal auditing department and the essential skills and disciplines required, would be determined from its:

a. Written policies and procedures.
b. Approved long-range audit plans and work schedules.
c. Formal written charter, approved by the board.
d. Financial budget for the current year.
10.B
II. Discussion Problem. SIAS No. 2 provides interpretations of the standards on communicating audit results. It gives a number of instructions not previously found in the original Standards. Concerning matters included in SIAS No. 2:

a. Contrast interim and summary reports.
a. Interim reports are prepared during an audit to give progress information on audit results. Summary reports provide top management and the board with accomplishment of audit plans.
SIAS No. 2 provides interpretations of the standards on communicating audit results. It gives a number of instructions not previously found in the original Standards. Concerning matters included in SIAS No. 2: b. Define five attributes of a satisfactory report.
b. A satisfactory report should be objective, clear, concise, constructive, and timely.
. SIAS No. 2 provides interpretations of the standards on communicating audit results. It gives a number of instructions not previously found in the original Standards. Concerning matters included in SIAS No. 2:c. What subjects should reports present and which subject is
optional? Please discuss.
c. Reports should include scope, purpose, and results of the audit. The scope identifies what was audited and what was not audited. The purpose sets forth the audit objectives. The results are most usually findings of fact. A reader would want to know these things at the very least. An audit opinion, however, is optional. Many auditing organizations do not believe in providing overall opinions on the results of audits.
SIAS No. 2 provides interpretations of the standards on communicating audit results. It gives a number of instructions not previously found in the original Standards. Concerning matters included in SIAS No. 2:d. Must reports contain recommendations to correct reported deficient conditions? Should auditees be bound by the recommendations auditors offer? Please explain.
d. According to SIAS No. 2, recommendations are optional. They may or may not be included. But when they are included in the report, the auditees should not be made to feel obligated to accept them as stated. Audit reports describe deficient conditions, and these the auditees must correct. But how to correct them is a management decision; auditors should not usurp that decision. The auditors’ sole concern should be whether the unsatisfactory condition has been corrected. The auditee’s method may in fact be superior to what the auditor recomme3nded. Obviously, auditees know more about their day-to-day activities than do the internal auditors.