An internal auditor would most likely judge an error in an account balance to be material if the error involves:
A. A data input function.
B. A large percentage of net income.
C. An unverified routine transaction.
D. An unusual transaction for the company.
What conclusion can be reached by comparing a random sample of vendor invoices to purchase orders?
A. No duplicate invoices were received.
B. No duplicate payments were made.
C. Invoices were for authorized purchases.
D. Authorized invoices were paid.
When comparing an organization's current performance to that of the prior year, an internal auditor found that:
Total labor costs had increased.
More overtime costs had been incurred.
The total number of workers had increased.
Net income was 10 percent lower.
Based solely on this information, which of the following is a valid conclusion?
A.
Net income per worker decreased.
B.
Wage rates increased.
C.
Worker efficiency decreased.
D.
Total labor hours increased.
An internal auditor prepared a workpaper that consisted of a list of employee names and identification numbers as well as the following statement:
"A statistical sample of 40 employee personnel files was selected to verify that they contain all
documents required by company policy 501 (copy attached). No exceptions were noted."
The auditor did not place any audit verification symbols on this workpaper.
Which of the following changes would most improve the auditor's workpaper?
A. Use of audit verification symbols to show that each file was examined.
B. Removal of the employee names to protect their confidentiality.
C. Justification for the sample size.
D. Listing of the actual documents examined for each employee.
Which of the following results from computer assisted audit techniques provides the most significant indication that additional audit work is needed?
A. Several exact matches were found when vendor and employee addresses were compared.
B. The sum of credit entries on the bank statement did not equal the sum of collections for the same period.
C. Sorting the check register file by vendor name identified missing sequences of check numbers.
D. Matching the accounts payable transaction file with the purchase order request file resulted in many differences between the person requesting the purchase order and the person authorizing payment.
New credit policies have been implemented in an automated order-entry system to improve the collection of receivables. Sales management has compiled several examples that show decreased sales and delayed order entry, and contends that these examples are a direct result of the new credit-policy constraints. Sales management's data and information provide:
A. Feedback control data.
B. Irrelevant and argumentative information.
C. Evidence that the new credit policies do not meet the stated corporate objective to improve collections.
D. A statistically valid conclusion about the impact of the new credit policies on customer goodwill.
An internal auditor for a large bank is reviewing the collectability of a loan that is secured by real property. The best evidence of the loan's collectability would be:
A. A recent independent appraisal of the value of the real property.
B. A document showing the loan committee's approval of the loan.
C. The borrower's confirmation of the loan balance.
D. A properly completed and signed loan application form.
The work papers for an audit of hazardous-materials handling and disposal at an engineering research facility provide evidence that the following procedures were performed.
Drums of hazardous waste not yet shipped off-site were inventoried. The physical count agreed with
the company's inventory records.
A sample of hazardous-waste shipments received at the disposal site was compared to bills of lading and company records. No errors were detected.
The audit staff observed engineering personnel during the handling of hazardous materials. No
company policy violations were noted.
The reconciliation of waste drums to the inventory records provides evidence that:
A. Hazardous-waste materials were being disposed of as prescribed by company policy.
B. The amount of hazardous materials being used was accurately recorded.
C. Records of drums shipped to the waste disposal site were being maintained.
D. All hazardous-waste drums in inventory were accounted for.
During a review of a division's operations, an internal auditor notes that sales and customer base are unchanged, while inventory and gross margin have increased significantly. Which of the following audit procedures would be most relevant in substantiating management's assertion that the gross margin increase is due to increased efficiency in manufacturing operations?
A. Obtain a physical count of inventory.
B. For a sample of products, compare costs-per-unit this year to those of last year, test cost build- ups, and analyze standard cost variances.
C. Take a physical inventory of equipment to determine if there were significant changes.
D. Select a sample of finished goods inventory and trace raw materials cost back to purchase prices in order to determine the accuracy of the recorded raw materials price.
Which of the following items of evidence is most valid to support a finding that a public utility's repair crews are sometimes required to work under unsafe conditions?
A. Videotapes of repair crews working in a situation that is unsafe.
B. Audio taped testimonials from repair crew members who were required to work under unsafe conditions.
C. Reports showing increases in the number of days of sick leave for individuals on repair crews.
D. Written and signed descriptions from repair crew members of the unsafe conditions that they have had to endure.
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