An internal auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation. The primary deficiency with the above process is that:
A. The auditor failed to consider the importance of the information offered.
B. A questionnaire was used in a situation where a structured interview should have been used.
C. The use of a questionnaire precluded the auditor from documenting other information.
D. The engagement program was incomplete.
Which of the following is not an advantage of face-to-face interviews over electronic surveys?
A. The response rate is typically higher.
B. Interviewers can increase a respondent's comprehension of questions.
C. Survey designers can use a wider variety of question types.
D. They are less expensive to distribute and compile data.
An internal auditor is checking the accuracy of a computer-printed inventory listing to determine whether the total dollar value of inventory is significantly overstated. Because there is no time or resources to check all items in the warehouse, a sample of inventory items must be used. If the sample size is fixed, which of the following would be the most accurate sampling approach?
A. Select those items that are most easily inspected.
B. Employ simple random sampling.
C. Sample so that the probability of a given inventory item being selected is proportional to the number of units sold for that item.
D. Sample so that the probability of a given inventory item being selected is proportional to its book value.
Which of the following is a common error made in designing multiple-choice questions in a survey questionnaire?
A. Unipolar rather than bipolar labels are used for the response categories.
B. The alternative response categories for the questions are not mutually exclusive.
C. Likert scaling is used instead of semantic differential scaling.
D. The question itself uses terms that are very familiar to the respondent.
An internal auditor is designing a sampling plan to test the accuracy of daily production reports over the past three years. All of the reports contain the same information except that Friday reports also contain weekly totals and are prepared by managers rather than by supervisors. Production normally peaks near the end of a month. If the auditor wants to select two reports per month using an interval sampling plan, which of the following techniques reduces the likelihood of bias in the sample?
A. Estimating the error rate in the population.
B. Using multiple random starts.
C. Increasing the confidence level.
D. Increasing the precision.
An internal auditor is using mean-per-unit sampling to estimate the value of health benefit claims for a period. The auditor's desired precision is $20, 000. If the achieved precision is $10, 000, which of the following conditions is implied?
A. The value of claims is overstated.
B. The value of claims is understated.
C. The standard deviation is smaller than expected.
D. The standard deviation is larger than expected.
A production division received 45 responses to a customer-service survey distributed to 100 purchasing departments randomly selected from all customers who made purchases in the prior 12 months. Which of the following is the most likely reason that the division manager would be concerned about nonresponse bias in this situation?
A. The sample means and standard errors are more difficult to compute.
B. Those who did not respond may be systematically different from those who did.
C. The sample size is too small.
D. Confidence intervals are narrower.
Which of the following might alert an internal auditor to the possibility of fraud in a division?
1.
The division is not scheduled for an external audit this year.
2.
Sales have increased by 10 percent.
3.
A significant portion of management's compensation is directly tied to reported net income of the division.
A. 1 only
B. 3 only
C. 1 and 2 only
D. 1, 2, and 3
Which of the following, if observed, would not indicate the need to extend the search for other indicators of fraud in a purchasing department?
A. The standard of living of one of the purchasing agents has increased.
B. The internal control structure has significant weaknesses.
C. The purchasing agents have convinced management to adopt a policy of paying vendors on a more timely basis in order to avoid incurring penalty charges.
D. The cost of goods procured seems to be excessive in comparison with previous years.
An internal auditor has taken an attributes sample of a bank's existing loan portfolio. Out of a sample of 60 loans, the auditor found:
Four that were not properly collateralized.
Five that were not in compliance with bank policies (other than lack of collateralization).
Four that were part of a related-party group, but were set up as separate loan entities.
Of the 60 loans selected in the sample, these errors were noted on a total of 10 loans.
Several loans had multiple problems.
Which of the following conclusions can the auditor reach from these observations?
1.
There is sufficient evidence that fraudulent activity is taking place by one or more of the bank's lending officers.
2.
The financial statements will be misstated as a result of these actions.
3.
There are significant noncompliance audit findings that should be reported.
A. 3 only
B. 1 and 2 only
C. 1 and 3 only
D. 2 and 3 only
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