Question 1

Which of the following activities represents the greatest risk to a post-merger manufacturing organization and is therefore most likely to be the subject of an internal audit engagement?

Options :

A : A.Combining imprest funds.

B : C.Combining legal functions.

C : D.Combining marketing functions.

D : B.Combining purchasing functions.

Answer: D

Question 2

Internal controls are designed to provide reasonable assurance that

Options :

A : Management’s planning, organizing, and directing processes are properly evaluated.

B : The internal auditing department’s guidance and oversight of management’s performance is accomplished economically and efficiently.

C : Material errors or fraud will be prevented, or detected and corrected, within a timely period by employees in the course of performing their assigned duties.

D : Management’s plans have not been circumvented by worker collusion.

Answer: C

Question 3

It would be appropriate for an internal audit activity to use consultants with expertise in health-care benefits when the internal audit activity isI. Conducting an audit of the organization's estimate of its liability for post retirement benefits, which include health care benefits.II. Comparing the cost of the organization's health care program with that of other programs offered in the industry.III. Training its staff to conduct an audit of health care costs in a major division of the organization.

Options :

A : I, II, and III.

B : I and III only.

C : I only.

D : II and III only.

Answer: A

Question 4

When sampling methods are used, the concept of sufficiency of information means that the samples selected provide

Options :

A : A.Reasonable assurance that they are representative of the sampled population.

B : B.The best information that is reasonably obtainable.

C : C.Reasonable assurance that the information has a logical relationship to the engagement objective.

D : D.Absolute assurance that a sample is representative of the population.

Answer: A

Question 5

Confirmations are a highly regarded form of information. Confirmation is most effective in addressing the existence assertion for the

Options :

A : C.Inventory held on consignment.

B : B.Sale of merchandise during regular course of business.

C : A.Addition of a milling machine to a machine shop.

D : D.Granting of a patent for a special process developed by the organization.

Answer: A

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