Question 1

Which of the following internal control weaknesses would an auditor most likely detect while reviewing a flowchart that depicts the purchasing function of an organization?

Options :

A : Payments to suppliers are made before goods are received.

B : Payments for goods received have not been authorized at the appropriate level.

C : Purchasing policies have not been updated.

D : The organization is not taking advantage of quantity discounts available from its suppliers.

Answer: A

Question 2

An internal auditor is performing an internal control assessment at a manufacturing company. The auditor observed that the accounts payable clerks have the ability to create new vendors without management's review and approval. How should the auditor document this observation?

Options :

A : The observation doesn't affect the adequacy of the internal controls because the existing process controls ensure that invoices are promptly and accurately paid.

B : The observation is an internal control weakness; therefore, additional testing should be performed to determine whether secondary mitigating controls exist or whether the control should be redesigned.

C : The observation is a sign of adequate internal controls; however, effectiveness testing should be performed to ensure that the controls are operating as designed and intended.

Answer: B

Question 3

Why should organizations require assurance engagement clients to reply promptly and outline the corrective action that has been implemented on reported observations?

Options :

A : D.To ensure that the engagement work schedule is kept up to date.

B : A.To remove items from the pending list as soon as possible.

C : B.To effect savings or to institute compliance as early as possible.

D : C.To indicate concurrence with the engagement observations.

Answer: C

Question 4

Assessments of the independence of an organization's external auditors shouldI. Be carried out only when the external auditor is appointed.II. Be carried out when the external auditor is appointed and regularly thereafter.III. Not include any participation by the internal audit activity.IV. Include participation by the internal audit activity.

Options :

A : II and IV only.

B : II and III only.

C : I and IV only.

D : I and III only.

Answer: A

Question 5

Internal auditors must be objective in performing their work. Assume that the chief audit executive received an annual bonus as part of that individual's compensation package. The bonus may impair the CAE's objectivity if

Options :

A : The bonus is based on monetary amounts recovered or recommended future savings as a result of engagements.

B : All of the answers are correct.

C : The bonus is administered by the board of directors or its salary administration committee.

D : The scope of internal auditing is evaluating control rather than account balances.

Answer: A

Free IIA-IAP Mock Exam – Practice Online Confidently

Buying Options: