Question 1

As a matter of policy, the chief audit executive routinely rotates internal audit staff assignments and periodically interviews the staff to discuss the potential for conflicts of interest. These actions help fulfill which of the following internal audit mandates?

Options :

A : Organizational independence.

B : Professional objectivity.

C : Due professional care.

D : Individual proficiency.

Answer: B

Question 2

After being terminated due to downsizing, an internal auditor finds a different job with an organization in the same industry. Which of the following actions would violate the IIA Code of Ethics?

Options :

A : To determine audit priorities in the new job, the auditor uses the audit risk approach that the auditor-s previous employer used, without receiving permission to do so.

B : At the new organization, the auditor is asked to develop forms to implement probability-proportional-to-size sampling. Although unsure of how to perform this type of sampling, the auditor proceeds without asking for assistance.

C : In preparing for an audit at the previous organization, the auditor had conducted a great deal of research on the Internet at home to identify best practices for the management of a treasury function. The auditor has retained much of the research and uses it to conduct an audit of the new employer-s treasury function.

D : In the first week at the new organization, the auditor discovers a high fraud risk surrounding the organization-s database and suggests that the information technology department implement a new password system to prevent fraudulent actions before they occur.

Answer: B

Question 3

A chief audit executive (CAE) reports functionally to the CEO and administratively to the chief financial officer, both of whom serve on the company's board of directors. According to IIA guidance, which of the following would offer the greatest protection for the independence of the internal audit activity?

Options :

A : Appoint the CAE as a member of the board.

B : Move the CAE-s functional reporting to an executive who is not on the board.

C : Obtain full board approval of the internal audit activity-s annual audit plan.

D : Move the CAE-s functional reporting to the audit committee.

Answer: D

Question 4

An internal audit charter, approved by the board, restricts the internal audit activity to providing assurance only on the reliability of financial information and the effectiveness of internal accounting controls. Which of the following statements is true regarding the extent to which the external auditor may rely on the internal audit activity's work?

Options :

A : The external auditor may make full use of the work, as the audit charter is very specific as to the work the internal audit activity may undertake.

B : The external auditor may use the work, as the board has approved the charter, thus taking responsibility for any deficiencies.

C : The external auditor must disregard the work, as the scope of the charter may introduce bias and result in a lack of due professional care.

D : The external auditor may use the work with caution, due to the internal audit activity-s scope and responsibility restrictions.

Answer: D

Question 5

Non-statistical sampling does not require which of the following?

Options :

A : The sample to be representative of the population.

B : The sample to be selected haphazardly.

C : A smaller sample size than if selected using statistical sampling.

D : Projecting the results to the population.

Answer: C

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