The internal auditor is asked to conduct an investigation involving a suspected fraud. According to the Standards, which of the following statements regarding the investigation process is false?
A. The auditor should use anonymous surveys of coworkers to assess the character and behavior of the suspect.
B. The auditor must give consideration to the risk of unidentified co-conspirators whether indications exist or not.
C. The auditor should not limit the collection of information by prejudging its relevance to the investigation.
D. The auditor must consider the risk that audit procedures may inadvertently violate the rights of the suspect.
Which of the following statements regarding the use of external contracted services by the chief audit executive (CAE) is false?
A. The CAE's responsibility is not impaired by engaging an external expert.
B. The external expert could have a prior relationship with the audit client.
C. The audit report should not disclose the use of contracted services.
D. The expert should be directed by the objectives and scope of work.
An organization does not have a formal risk management function. According to the Standards, which of the following are conditions where the internal audit activity (IAA) may provide risk management consulting?
1.
There is a clear strategy and timeline to migrate risk management responsibility back to management.
2.
The IAA has the final approval on any risk management decisions.
3.
The IAA does not give objective assurance on any part of the risk management framework for which it is responsible.
4.
The nature of services provided to the organization is documented in the internal audit charter.
A. 1, 2, and 3 only
B. 1, 2, and 4 only
C. 1, 3, and 4 only
D. 2, 3, and 4 only
An organization has acquired a new line of business. None of the organization's internal auditors have the required expertise to perform an internal audit of the new business line; therefore, the chief audit executive (CAE) has contracted the services of an external audit firm to perform the engagement. The CAE has assigned a member of the internal audit team to assist the external team with the engagement. According to the Standards, which of the following statements is true regarding supervision of the engagement?
A. The CAE may rely upon the external firm's auditor in charge to supervise the engagement.
B. The external firm's auditor in charge must defer to the judgment of the CAE for any disputes.
C. The CAE is not responsible for the quality of an audit performed by an external firm.
D. The CAE should not assign an inexperienced staff member to assist with the engagement.
The chief audit executive (CAE) of a new organization is in the process of determining the manner in which audit reports will be distributed and to whom. According to the Standards, which of the following is the most appropriate course of action for the CAE to take to develop this distribution process?
A. The process should be determined in meetings with the external auditor and senior management to ensure alignment with external reporting.
B. The CAE should meet with senior management for their input, but finalize the distribution of all reports with the board.
C. The CAE should independently implement the report distribution, using best judgment to ensure that all relevant stakeholders are informed.
D. The CAE should request that senior management and the board meet to determine the most appropriate reporting method.
During the audit of a large decentralized supply chain function, the chief audit executive (CAE) receives serious allegations of fraud concerning the vice president responsible for this function. The CAE engages a third party to provide forensic audit services and lead the investigation portion of the engagement. As part of this team, which of the following would be an appropriate role for the investigator?
1.
Authenticate the original approval signatures on contracts.
2.
Interview personnel to understand the supply chain processes.
3.
Provide certified copies of relevant original documents for the audit file.
4.
Identify variances in pixels on original electronic documents.
A. 1 and 2 only
B. 1 and 4 only
C. 2 and 3 only
D. 3 and 4 only
The chief audit executive (CAE) manages a large internal audit activity (IAA) reporting functionally to the audit committee and administratively to the chief risk officer. During the CAE's recent unplanned medical leave, several internal audit reports were completed and waiting for CAE approval, however, no formal delegation of authority was in place to anticipate this situation. In order to preserve the independence of the IAA, which of the following would be the most appropriate individual to review and approve these reports during the CAE's absence?
A. External auditor.
B. Chief risk officer.
C. Engagement lead auditor.
D. Audit committee chair.
A manufacturing organization is considering a merger with a similar firm, and requests that the chief audit executive (CAE) perform a due diligence audit. During the preliminary survey, the CAE notes that inventory management is a high risk area. In consultation with the external auditors and legal advisors, the CAE learns that they share those concerns. Which of the following is the CAE's best course of action?
A. Perform an independent audit of the merging firm's inventory management practices to verify the concerns and to provide relevant and reliable results to management for their consideration and action.
B. Advise management that internal audit, external audit, and legal advisors all have concerns about inventory management and, given the high materiality of inventory, management should not proceed with the merger.
C. Coordinate a review of inventory management with external auditors and legal advisors and ensure each group focuses on their area of expertise to ascertain the extent of the problems, if any.
D. Coordinate with the merging firm's internal audit department to better understand the inventory management function and whether the concerns are well-founded.
Which of the following topics must the internal audit staff discuss with management during the exit conference?
1.
Issues identified during the audit.
2.
Evaluation criteria used to select controls for testing.
3.
Staff who were interviewed during the audit.
4.
The reporting process for the draft and final report.
A. 1 and 3 only
B. 1 and 4 only
C. 2 and 3 only
D. 2 and 4 only
Which of the following is an advantage to using the questionnaire approach when conducting risk and control self assessments?
A. Responses can easily be quantified and analyzed.
B. Follow-up for clarification is efficient.
C. It is educational for participants.
D. It allows for in-depth probing of issues.
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