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NEW QUESTION NO: 10
An internal auditor is planning an assurance engagement. The auditor first reviews the department's business objectives. What is the next step?
A. Evaluate potential risks.
B. Review control activities.
C. Set the scope of the engagement.
D. Establish risk management roles.
Answer: A

NEW QUESTION NO: 11
Which of the following would be the least important reason for a company to merge with another company?
A. To diversify risk.
B. To increase stock prices.
C. To reduce labor costs.
D. As a response to new government policy.
Answer: B

NEW QUESTION NO: 12
If an auditor used nonstatistical sampling instead of statistical sampling to estimate the value of inventory, which of the following would be true?
A. The precision would be larger.
B. The risk of incorrect acceptance would be higher.
C. The confidence level could not be quantified.
D. The projected value of inventory would be less reliable.
Answer: C

NEW QUESTION NO: 13
An organization contracted a third party to construct a new facility that was estimated to cost $25 million.
Which of the following is the most pertinent reason for the organization to audit the contractor's records?
A. The contractor will be paid on a cost-plus basis.
B. The contract includes a right-to-audit clause.
C. The estimated cost is high.
D. The contractor has subcontracted much of the work.
Answer: A

NEW QUESTION NO: 14
Which of the following best defines an engagement conclusion?
A. An opinion that must be included in the engagement final communication.
B. An auditor's professional judgment of the situation which was reviewed.
C. An auditor's determination of the cause of an engagement observation.
D. A recommendation for corrective action.
Answer: B

NEW QUESTION NO: 15
The chief audit executive of a large publicly held bank is using a risk based approach to update the annual audit plan. Which of the following sources of information will have the least impact on the plan?
A. Recent changes to the bank's strategic plan.
B. Continuous changes in the prime lending rate set by the country's central bank.
C. The 12 month forecast of commercial property values.
D. Regulatory changes impacting capitalization for all publicly traded banks.
Answer: B

NEW QUESTION NO: 16
An auditor is using an internal control questionnaire as part of a preliminary survey. Which of the following is the best reason for the auditor to interview management regarding the questionnaire responses?
A. Interviewing is the least costly audit technique when a large amount of information is involved.
B. Interviewing is the only audit procedure which does not require confirmation of the information that is obtained.
C. Interviews are the most efficient way to upgrade the information to the level of objective evidence.
D. Interviews provide the opportunity to insert questions to probe promising areas.
Answer: D

NEW QUESTION NO: 17
In preparing to facilitate a control self-assessment session, an auditor would be least likely to ensure that:
A. Background research is completed to familiarize the auditor with relevant issues.
B. An independent content expert is available to help settle disagreements.
C. Management is consulted on the issues and priorities.
D. Key stakeholders are represented in the group.
Answer: B

NEW QUESTION NO: 18
According to IIA guidance, which of the following is true about the supervising internal auditor's review notes?
* They are discussed with management prior to finalizing the audit.
* They may be discarded after working papers are amended as appropriate.
* They are created by the auditor to support her fieldwork in case of questions.
* They are not required to support observations issued in the audit report.
A. 2 and 4 only
B. 1 and 3 only
C. 2 and 3 only
D. 1 and 4 only
Answer: A

NEW QUESTION NO: 19
According to IIA guidance, which of the following actions might place the independence of the internal audit function in jeopardy?
A. Having no active role or involvement in the risk management process.
B. Coordinating and managing the risk management process.
C. Participating with management in identifying and evaluating risks.
D. Auditing the risk management process for reasonableness.
Answer: B

NEW QUESTION NO: 20
Which of the following is the best problem-solving technique to use when analyzing performance and cost?
A. Brainstorming.
B. Value analysis.
C. Component analysis.
D. Attribute listing.
Answer: B