Question 1

An organization's health-care insurance costs have been rising approximately 10 percent per year for several years Which of the following analytical review procedures would best evaluate the reasonableness of the increase in health-care costs?

Options :

A : Develop a comparison of the costs incurred with similar costs incurred by other organizations

B :

Obtain the government index of health-care costs for the comparable period of time and compare the rate of increase with that of the cost per employee incurred by the organization

C :

Obtain a bid from another health-care administrator to provide the same administrative services as the current health-care administrator

D :

Review all claims and compare with appropriate procedures to ensure that overpayments have not occurred

Answer: B

Question 2

The internal audit activity is responsible for which of the following actions related to an organization’s internal controls9

Options :

A : Mitigating risks affecting achievement of organizational objectives.

B : Enabling opportunities affecting achievement of organizational objectives.

C : Analyzing and advising regarding costs versus benefits of control activities.

D : Attesting to fairness of financial statements

Answer: C

Question 3

The internal audit activity is currently working on several engagements, including a consulting engagement on the management process in the human resources department. Which of the following actions should the chief audit executive take to most efficiently and effectively ensure the quality of the engagement?

Options :

A : Assign an experienced manager to monitor the whole engagement process.

B : Employ fieldwork peer review to enhance the work quality.

C : Require internal auditors to follow a standardized work program.

D : Personally supervise the engagement

Answer: B

Question 4

Organizations that adopt just-in-time purchasing systems often experience which of the following?

Options :

A : A slight increase in carrying costs.

B : A greater need for inspection of goods as the goods arrive

C : A greater need for linkage with a vendors computerized order entry system.

D : An Increase in the number of suitable suppliers

Answer: C

Question 5

Which of the following is most likely to be considered a control weakness?

Options :

A : Vendor invoice payment requests are accompanied by a purchase order and receiving report.

B : Purchase orders are typed by the purchasing department using prenumbered forms

C : Buyers promptly update the official vendor listing as new supplier sources become known.

D : Department managers initiate purchase requests that must be approved by the plant superintendent

Answer: C

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