Question 1

During a payroll audit of a large organization, an auditor noted that the assistant personnel director is responsible for many aspects of the computerized payroll system, including adding new employees in the system; entering direct-deposit information for employees; approving and entering all payroll changes; and providing training for system users. After discussions with the director of personnel, the auditor concluded that the director was not comfortable dealing with information technology issues and felt obliged to support all actions taken by the assistant director. The auditor should:

Options :

A : Continue to follow the engagement program because the engagement scope and objectives have already been discussed with management.

B : Review the engagement program to ensure testing of direct deposits to employee bank accounts is adequately covered.

C : Recommend to the chief audit executive that a fraud investigation be started.

D : Test a sample of payroll changes to ensure that they were approved by the assistant director before being processed.

Answer: B

Question 2

An internal auditor makes a series of observations when performing an analytical review of division operations. The auditor notes the following things: the current ratio is increasing and the quick ratio is decreasing, sales and current liabilities have remained constant, and the number of day sales in inventory is increasing.

Which conclusion should the auditor draw from this data?

Options :

A : Cash or accounts receivable has decreased.

B : The gross margin has decreased.

C : The division produced fewer items this year than in prior years.

D : The gross margin has increased.

Answer: A

Question 3

Management has implemented a segregation-of-duties policy for handling inventory. Which of the following fraud risks would be more concerning to an internal auditor following the implementation of this new policy?

Options :

A : The risk of collusion between parties.

B : The risk of falsified reconciliations.

C : The risk of low-liquidity inventory.

Answer: B

Question 4

Which of the following is correct regarding the implementation of a quality assurance and improvement program for the internal audit function?

Options :

A : The board has the primary responsibility for implementation of a robust quality assurance and improvement program for internal audit.

B : An internal audit function that is fully complying with internal assessment of quality can confidently claim it is performing in conformity with the International Professional Practices Framework.

C : The chief audit executive can establish a formal quality assurance and improvement program that is led by an audit manager.

D : A quality assurance and improvement program is applicable depending on the size and complexity of the audit function.

Answer: C

Question 5

An organization's sales professionals are potentially abusing the use of cellular phones, resulting in an alarming increase in telephone expenses. Which of the following controls is least likely to curb this abuse?

Options :

A : Developing periodic reports to management that show type, length, and number of calls per sales professional, with related totals and comparisons.

B : Requiring sales professionals to pay monthly cellular phone bills and subsequently submit only business calls for reimbursement using an expense report process.

C : Requiring sales managers to approve monthly bills prior to payment, explain budget variances, and explain increases from previous periods.

D : Requiring authorization of the cellular phone bill payment by the manager of the telecommunications department.

Answer: D

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