An auditor is scheduled to audit payroll controls for a company which has recently outsourced its processing to an information service bureau. What action should the auditor take, considering the outsourcing decision?
A. Review the controls over payroll in both the company and the service bureau.
B. Review only the company's controls over data sent to and received from the service bureau.
C. Review only the controls over payments to the service bureau based on the contract.
D. Cancel the engagement because the processing is being performed outside of the organization.
An internal auditor is reviewing a new automated human resources system. The system contains a table of pay rates which are matched to the employee job classifications. The best control to ensure that the table is updated correctly for only valid pay changes would be to:
A. Limit access to the data table to management and line supervisors who have the authority to determine pay rates.
B. Require a supervisor in the department, who does not have the ability to change the table, to compare the changes to a signed management authorization.
C. Ensure that adequate edit and reasonableness checks are built into the automated system.
D. Require that all pay changes be signed by the employee to verify that the change goes to a bona fide employee.
An internal auditor provided the following statement about division A's performance during the month: "Because supplies of raw material X were scarce, division A's profits declined by 15 percent."
Which of the following can be validly concluded from the auditor's statement?
I. Division A's production level declined by 15 percent.
II. Division A could have sold more products than it produced.
III.
Division A usually sells all of the products that it produces.
A.
I only
B.
II only
C.
III only
D.
I and II only
As part of an operational audit of the shipping department, an auditor selected a sample of 45 daily shipping logs from the department's files. On 44 of the days, the log contained a sufficient number of shipments to meet the department's daily quota. Based on this test, the auditor concluded that the shipping department was effective at meeting its quotas. Which of the following is true about the auditor's conclusion?
A. The number of items selected for testing is inadequate to justify the conclusion.
B. The shipping department is effective in meeting its responsibilities.
C. This conclusion would negate any need to perform tests of efficiency.
D. None of the above.
An internal audit activity implemented an integrated test facility to test payroll processing. The auditors identified the key controls and processing steps built into the computer program and developed test data to test them. The auditors submitted test transactions throughout the year and did not find any differences in their test results. The auditors can conclude that:
A. The system is properly capturing the hours worked by employees during the year and the hours have been properly submitted to payroll and processed correctly.
B. All employees were correctly paid during the year and their pay was correctly computed.
C. The computer application and its control procedures were processing payroll transactions correctly during the past year.
D. All of the above.
An auditor decides to perform an inventory turnover analysis for both raw materials inventory and finished goods inventory. The analysis would be potentially useful in:
I. Identifying products for which management has not been attuned to changes in market demand.
II. Identifying potential problems in purchasing activities.
III.
Identifying obsolete inventory.
A.
III only
B.
I and II only
C.
II and III only
D.
I, II, and III
Which of the following would constitute a violation of the IIA Code of Ethics?
A. An internal auditor, who has recently joined the organization, has accepted an assignment to audit the electronics manufacturing division. The auditor previously served as senior auditor for the external audit of that division and has audited many electronics companies during the past two years.
B. An internal auditor has accepted an assignment to audit the warehousing function six months from now. The auditor has no expertise in that area but has signed up for courses in warehousing that will be completed before the assignment begins.
C. An internal auditor has no ambitions for promotion and has not engaged in training or other professional development activities during the last three years. The auditor's performance assessments indicate consistent quality of work.
D. An internal auditor discovered an internal financial fraud during the year, and the financial statements were adjusted to properly reflect the loss associated with the fraud. The auditor discussed the fraud with the external auditor during the external auditor's review of the working papers detailing the incident.
A governmental auditor was assigned to determine reasons why the students in one region scored significantly higher on education evaluation tests than did the students in another region. Previous research showed that there is a direct correlation between public financial support and student results. Which of the following is most likely to explain the difference in the regional results?
A. The more successful region spends 30 percent more money on education than does the other region.
B. A higher percentage of the general tax fund is spent on education in the more successful region than in the other region.
C. The more successful region spends more money per student on education than does the other region.
D. The more successful region has increased educational spending by an average of 10 percent each year for the last three years, whereas the other region's increase averaged only three percent.
Which of the following will be an appropriate course of action when an auditor disagrees with a client about a well-documented audit finding?
A. Include both the audit finding and the client's position in the audit report.
B. Defer reporting the item and plan to perform more detailed work during the next audit.
C. Change the finding so that it is acceptable to the client.
D. Address the issue with senior management and the board for resolution prior to issuing the final report.
The chief audit executive (CAE) determined that based on management's oral response, the action taken regarding an audit observation was sufficient when weighted against the relative importance of the audit recommendation. Which of the following is the most appropriate step for the internal auditor to take next?
A. Initiate a follow-up audit to ensure that action has really been taken.
B. Follow-up with management until a written response is obtained.
C. Escalate the issue to the board and get their position on the issue.
D. Note in the permanent file that follow-up needs to be performed as part of the next engagement.
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