Question 1

Which of the following actions should the audit committee take to promote organizational independence for the internal audit activity?

Options :

A : Delegate final approval of the risk-based internal audit plan to the chief audit executive (CAE).

B : Approve the annual budget and resource plan for the internal audit activity.

C : Assist the CAE with hiring objective and competent internal audit staff.

D : Encourage the CAE to communicate and coordinate with the external auditor.

Answer: A

Question 2

An internal auditor is reviewing the accounts receivable when she discovers account balances more than three years old. The auditor was previously supervising the area during this time, and she subsequently advises the chief audit executive (CAE) of a potential conflict.

Which of the following is the most appropriate course of action for the CAE to take?

Options :

A : Replace the auditor with another audit staff member.

B : Continue with the present auditor, as more than one year has passed.

C : Withdraw the audit team and outsource the financial audit of the division.

D : Work with the division-s management to resolve the situation.

Answer: A

Question 3

Which of the following is the primary engagement responsibility of an entry-level internal auditor?

Options :

A : Leadership.

B : Documentation.

C : Analysis.

D : Reporting.

Answer: C

Question 4

Which of the following control features consists of a set of authorization codes that distinguishes among actions such as reading, adding, and deleting records?

Options :

A : Internally encrypted passwords

B : System access privileges.

C : Logon passwords

D : Protocol controls.

Answer: B

Question 5

When forming an opinion on the adequacy of management's systems of internal control, which of the following findings would provide the most reliable assurance to the chief audit executive?

* During an audit of the hiring process in a law firm, it was discovered that potential employees' credentials were not always confirmed sufficiently. This process remained unchanged at the following audit.

* During an audit of the accounts payable department, auditors calculated that two percent of accounts were paid past due. This condition persisted at a follow up audit.

* During an audit of the vehicle fleet of a rental agency, it was determined that at any given time, eight percent of the vehicles were not operational. During the next audit, this figure had increased.

* During an audit of the cash handling process in a casino, internal audit discovered control deficiencies in the transfer process between the slot machines and the cash counting are

a. It was corrected immediately.

Options :

A : 1 and 3 only

B : 1 and 4 only

C : 2 and 3 only

D : 2 and 4 only

Answer: B

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