Which of the following procedures would be most helpful in providing additional evidence when an auditor suspects that an unidentified employee is submitting and approving invoices for payment?
A. Use generalized audit software to identify invoices from vendors with post office box numbers or other unusual features. Select a sample of those invoices and trace to supporting documents such as receiving reports.
B. Select a sample of payments made during the year and investigate each one for approval.
C. Select a sample of receiving reports representative of the period under investigation and trace to approved payment. Note any items not properly processed.
D. Select a sample of invoices paid during the past month and trace them to appropriate vendor accounts.
An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?
A. Use an integrated test facility (ITF) to compare individual sales transactions with test transactions submitted through the ITF and investigate all differences.
B. Interview the three individual store managers to determine if their explanations about the observed differences are the same, and then compare their explanations to that of the section manager.
C. Schedule a surprise inventory audit to include a physical inventory and investigate areas of inventory shrinkage.
D. Select a sample of individual store prices and compare them with the sales entered on the cash register for the same items.
Which of the following is used to identify and prioritize critical business applications to determine those that must be restored and the order of restoration in the event that a disaster impairs information systems processing?
A. Contingent facility contract analysis.
B. System backup analysis.
C. Vendor supply agreement analysis.
D. Risk analysis.
In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:
A. Activities and cost drivers.
B. Information processing procedures.
C. Current product cost structures.
D. Internal control alternatives.
Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a follow-up of audit recommendations when developing engagement work schedules. Does the CAE's decision violate the Standards?
A. No, because the Standards do not specify whether follow-up is needed.
B. No, because when there is evidence of sufficient motivation by the client, there is no need for follow-up action.
C. Yes, because scarcity of resources is not a sufficient reason to omit follow-up action.
D. Yes, because the Standards require the auditors to determine whether the client has appropriately implemented all of the auditor's recommendations.
An auditor analyzed a payroll system's data files for unusual activity, such as excessive overtime hours, unusual fluctuations in pay rates, and excessive vacation time. The application controls being verified by this analysis are:
A. Edit and validation controls.
B. Rejected and suspense item controls.
C. Controls over update access to the database.
D. Programmed balancing controls.
During the development of a purchasing system, an auditor reviewed the payment authorization program. Which of the following actions should the auditor recommend for a situation in which the quantity invoiced is greater than the quantity received?
A. Issue an exception report.
B. Pay the amount billed and adjust the inventory account for the difference.
C. Return the invoice to the vendor for correction.
D. Authorize payment of the full invoice, but maintain an open purchase order record for the missing goods.
What is the most important risk in determining the validity of construction delay claims?
A. Contractor claims may be submitted prior to completion of the work.
B. Contractor claims may include costs considered in the fixed-price portion of the work.
C. Contractor claims may include subcontractor estimates of balances due to the subcontractor.
D. Contractor claims may be understated.
During an audit of a branch bank, an internal auditor learned that a series of system failures had resulted in a four-day delay in processing customers' scheduled payroll direct deposits. The first failure was that of a disk drive, followed by software and other minor failures. Which of the following controls should the auditor recommend to avoid similar delays in processing?
A. Contingency planning.
B. Redundancy checks.
C. Process monitoring.
D. Preventive maintenance.
A code of ethics within the internal auditing profession is necessary in order to:
A. Reduce the likelihood that members of the profession will be sued for substandard work.
B. Ensure that all members of the profession perform at approximately the same level of competence.
C. Provide guidance to internal auditors in their service to others.
D. Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization.
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