Question 1

The audit committee is concerned that the small size of the internal audit activity (IAA) makes it impractical to achieve full conformance with the Standards. To address this concern, which of the following actions is most appropriate for the CAE to take?

Options :

A : The CAE should agree with the audit committee and implement only those standards appropriate to the size of the IAA.

B : The CAE should request the audit committee to review the Standards to identify specifically which are creating the greatest concern.

C : The CAE should seek sufficient funding to increase audit resources to meet the minimum requirements of the Standards.

D : The CAE should explain that conformance with the Standards is essential and not dependent upon the size of the IAA.

Answer: D

Question 2

Which of the following is most likely to function as a directive control?

Options :

A : Security dogs.

B : Alert employees.

C : Insurance claims.

D : Cycle counts

Answer: B

Question 3

A computer system automatically locks a user's account after three unsuccessful attempts to log on.

Which type of control does this scenario represent?

Options :

A : Corrective control.

B : Preventive control.

C : Detective control.

D : Compensating control.

Answer: B

Question 4

An internal auditor plans to use an analytical review to verify the correctness of various operating expenses in a division. The use of an analytical review as a verification technique would not be a preferred approach if.

Options :

A : The auditor notes strong indicators of a specific fraud involving this account.

B : The company has relatively stable operations which have not changed much over the past year.

C : The auditor would like to identify large, unusual, or non-recurring transactions during the year.

D : The operating expenses vary in relation to other operating expenses, but not in relation to revenue.

Answer: A

Question 5

An internal auditor is reviewing tender documents for a maintenance contract. She notices that the bidder who won a recent tender has been winning tenders for the past decade despite many other qualified and well-established maintenance companies participating in the tender bids. The price offers from this bidder are consistently slightly lower than other bidders' prices, and this bidder always submits their bid just before the deadline. How should the auditor respond to these findings?

Options :

A : Seize the laptops of employees related to the tender to secure a chain of custody

B : Carry out a forensic examination of tender documents and submitted offers to identify signs of falsification.

C : Conduct a guilt-admission interview with the procurement specialist who has most likely leaked prices of other bidders.

D : Consult the organizational fraud response plan and notify her supervisor of the potential red flags.

Answer: D

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