The results of an internal control questionnaire revealed that all investment activity exceeding $10, 000 must be approved by the assistant treasurer. A sample of these transactions with a five- percent acceptable error rate found that 98 of the 100 items tested included the assistant treasurer's approval. Based on this data, the auditor should:
A. Confirm all investment activity with the firm's broker since errors in approval had occurred.
B. Decide not to perform further testing of investment authorizations.
C. Contact the corporate finance department to verify all of the investments held.
D. Perform an analytical review of investment transactions in comparison with prior years to identify significant fluctuations.
In which of the following situations would fishbone diagrams be most useful?
A. The problem is complicated and the root cause is unknown.
B. Team members cannot effectively communicate with each other.
C. The team is too small for brainstorming to be effective.
D. The team consists of experts who can resolve problems without much difficulty.
Which of the following is characteristic of embezzlement?
A. Favors from a supplier that is attempting to gain advantage when selling its products.
B. Unlawful conversion of assets that are in the possession of an employee.
C. Misrepresentation of material facts in order to mislead others to part with something of value.
D. Stealing of material of value by unknown persons from outside the organization.
A chief audit executive (CAE) of a major retailer has engaged an independent firm of information security specialists to perform specialized internal audit activities. The CAE can rely on the specialists' work only if it is:
A. Performed in accordance with the terms of the contract.
B. Carried out in accordance with the Standards.
C. Performed under the supervision of the information technology department.
D. Carried out using standard review procedures for retailers.
During an audit of a major contract, an internal auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?
A. Defective pricing.
B. Cost mischarging.
C. Fictitious vendor.
D. Bid rotation.
After completing a net present value (NPV) calculation on a proposed project, an analyst explores the change in NPV with changes in the interest rate. This additional analysis is referred to as:
A. Decision analysis.
B. Simula-tion.
C. Sensitivity analysis.
D. Variance analysis.
Once the cause of a problem has been identified, the next step is to:
A. Select a solution.
B. Generate alternative solutions.
C. Identify the problem.
D. Consider the reaction of competitors to various courses of action.
Which of the following is true of a horizontal flowchart as compared to a vertical flowchart?
A. It provides more room for written descriptions that parallel the symbols.
B. It brings into sharper focus the assignment of duties and independent checks on performance.
C. It is usually longer.
D. It does not provide as broad a picture at a glance.
A retail sales company has discontinued a product that normally sold for $100. During the first month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced by an additional 40 percent. What was the overall discount from the original selling price?
A. 60 percent.
B. 52 percent.
C. 48 percent.
D. 30 percent.
A company produces a product that consists of materials X, Y, and Z. The product is mixed so that:
The quantity of material X used is one-third more than that of material Y.
The quantity of material Y used is one-fourth less than that of material Z.
If the company used 24, 000 units of material Z during a period, what is a reasonable estimate of the amount of material X used?
A. 8, 000
B. 18, 000
C. 24, 000
D. 32, 000
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