As part of an operational audit, an auditor compared records of current inventory with usage during the prior two-year period and determined that the spare parts inventory was excessive. What step should the auditor perform first?
A. Determine the effects of a stock-out on the organization's profitability.
B. Determine whether a clear policy exists for setting inventory limits.
C. Determine who approved the purchase orders for the spare parts.
D. Determine whether purchases were properly recorded.
A post-audit questionnaire sent to audit clients is an effective mechanism for:
A. Substantiating audit observations.
B. Promoting the internal audit activity.
C. Improving future audit engagements.
D. Validating process flow.
During a systems development audit, software developers indicated that all programs were moved from the development environment to the production environment and then tested in the production environment. What should the auditor recommend?
I. Implement a test environment to ensure that testing is not performed in the production environment.
II. Require developers to move modified programs from the development environment to the test environment and from the test environment to the production environment.
III.
Eliminate access by developers to the production environment.
A.
I only
B.
III only
C.
I and II only
D.
I and III only
An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?
A. Examine the seven loans to determine if there is a pattern. Summarize amounts and include in the engagement final communication.
B. Report the amounts to the loan committee and leave it up to them to correct. Take no further follow-up action at this time and do not include the items in the engagement final communication.
C. Follow up with the appropriate vice president and include the vice president's acknowledgment of the situation in the engagement final communication.
D. Determine the amount of the differences and make an assessment as to whether the dollar differences are material. If the amounts are not material, not in violation of government regulations, and can be rationally explained, omit the observation from the engagement final communication.
Which of the following would not be an appropriate step for an internal auditor to perform during an assessment of compliance with an organization's privacy policy?
A. Determine who can access databases containing confidential information.
B. Evaluate the organization's privacy policy to determine if appropriate information is covered.
C. Analyze access to permanent files and reports containing confidential information.
D. Evaluate the government's security measures related to confidential information received from the organization.
When conducting a performance appraisal of an internal auditor who has been a below-average performer, it is not appropriate to:
A. Notify the internal auditor of the upcoming appraisal several days in advance.
B. Use objective, impartial language.
C. Use generalizations.
D. Document the appraisal.
An organization contracted a third party to construct a new facility that was estimated to cost $25 million. Which of the following is the most pertinent reason for the organization to audit the contractor's records?
A. The contract includes a right-to-audit clause.
B. The contractor will be paid on a cost-plus basis.
C. The estimated cost is high.
D. The contractor has subcontracted much of the work.
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.
The scope of a consulting engagement performed by internal auditors should:
A. Be sufficient to address the objectives agreed upon with the client.
B. Exclude areas that might be the subject of subsequent assurance engagements.
C. Be limited to activities within the current operating period.
D. Be preapproved in conjunction with the annual plan of consulting engagements.
The following are potential sources of evidence regarding the effectiveness of a division's total quality management program. The least persuasive evidence would be a comparison of:
A. Employee morale before and after program implementation.
B. Scrap and rework costs before and after program implementation.
C. Customer returns before and after program implementation.
D. Manufacturing and distribution costs per unit before and after program implementation.
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