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IQN
Exam QIA
Qualified Internal Auditor
Version: 6.0
[ Total Questions: 80 ]
What evidence is appropriate to determine that recorded purchase transactions were
valid
and at the best price?
A. Purchase requisitions, journal voucher entries, and bid quotes.
B. Purchase requisitions, purchase orders, and bid quotes.
C. Receiving reports, purchase orders, and purchase requisitions.
D. Purchase orders, receiving reports, and bid quotes.
Answer: D
Which of the following audit procedures would be most effective in determining whether
vendor invoices are being processed on a timely basis whilemaximizingthe company's
use
of cash?
A. Determine the length of processing time between the receipt of the vendor's invoice
to
the payment date for the related disbursement.
B. Interview the accounts payable manager to determine the procedures and standards
for
processing vendor invoices.
C. Compare the vendor's invoice due date with the payment date as indicated on the
cancelled check.
D. Compare the date stamped on the invoice for receipt with the corresponding
payment
date for the disbursement.
Answer: C
In addition to controls over access, processing, program changes, and other functions,
acomputerizedsystem needs to establish an audit trail of information.
Which of the following information would generally not be included in an audit trail log
designed tosummariesunauthorizedsystem access attempts?
A. A list ofauthorizedusers.
B. The type of event or transaction attempted.
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C. The terminal used to make the attempt.
D. The data in the program sought.
Answer: A
Working papers serve the following purpose for the internal auditor:
A. Provide the auditee a place to make responses to audit recommendations.
B. Make the audit report more readable by providing a place to append exhibits.
C. Provide the principal evidential support for the internal auditor's report.
D. Provide a place to summarise overall audit recommendations.
Answer: C
Audits vary in their degree of objectivity. Of the following, which is likely to be the most
objective?
A. Compliance audit of company's overtime policy.
B. Operational audit of the personnel function hiring and firing procedures.
C. Performance audit of the marketing department.
D. Financial control audit over payroll procedures.
Answer: A
Auditorsrealizethat at times corrective action is not taken even when agreed to by the
appropriate parties. This should lead an internal auditor to
A. Decide the extent of necessary follow-up work.
B. Allow management to decide when to follow-up, since it is managements ultimate
responsibility.
C. Decide to conduct follow-up work only if management requests the auditor's
assistance.
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D. Write a follow-up audit report with all findings and their significance to the operations.
Answer: A
Which of the following is a particular activity of internal audit function?
A. Special investigations, for instance, into suspected fraud
B. Confirm that the final result (the sum) is correct
C. To evaluate the system of internal control that are mainly concerned with the financial
statements and accounting
D. To give an opinion on overall fairness of the financial statements and accounting
Answer: A
A Qualified Internal Auditor directs the audit function for a large city and is planning the
audit schedule for the next year. The city has a number of different funds, some that are
restricted in use by government grants and some that require compliance reports to the
government. One of the programs for which the city has received a grant is job
retraining
and placement. The grantspecifies certain conditions a participant in the program must
meet in order to be eligible for the funding.
The auditor must determine the applicable laws and regulations.
Which of the following procedures would be the least effective in learning about the
applicable laws and regulations?
A. Make inquiries of the city's chief financial officer, legal counsel, or grant
administrators.
D. The audit firm is working for long time for its client
Answer: C
An audit of accounts payable was made to determine if the error rate was within the
stated
policy of 0.5%. One hundred of the 10,000 accounts payable transactions were
randomly
selected using a 95% confidence level. No errors were found.
With 95% certainty, one can conclude that the sample results
A. Indicate another sample is needed.
B. Prove there are no errors in accounts payable.
C. Indicate the null hypothesis is false.
D. Fail to prove the error rate is above 0.5%.
Answer: D
The internal auditors of a financial institution are auditing the institution's investing and
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lending activities. During the last year, the institution has adopted new policies and
procedures for monitoring investments and the loan portfolio. The auditors know that the
organisation has invested in new types of financial instruments during the year and is
heavily involved in the use of financial derivatives to appropriately hedge risks
The audit committee has expressed concern that the financial institution has been
taking
on higher-risk loans in pursuit of short term profit goals.
Which of the following audit procedures would provide the least amount of information
to
address this audit concern?
A. Perform an analytical review of interest income as a percentage of the investment
portfolio in comparison with a group of peer financial institutions.
B. Take a random sample of loans made during the period and compare the riskiness of
the loans with that of a random sample of loans made two years ago.
C. Perform an analytical review that involves developing a chart to compare interest
income plotted over the past ten years.
D. Develop a multiple regression time series analysis of income over the past five years,
including such factors as interest rate in the economy, size of loan portfolio, and dollar
amount of new loans each year.
Answer: C
Which of the following audit committee activities would be of the greatest benefit to the
internal auditing department?
A. Review and approval of auditprograms.
B. Assurance that the external auditor will rely on the work of the internal auditing
department whenever possible.
C. Review and endorsement of all internal audit reports prior to their release.
D. Support for appropriate follow-up of recommendations made by the internal auditing
department.
Answer: D
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An internal auditor plans to use an analytical review to verify the correctness of various
operating expenses in a division.
The use of an analytical review as a verification technique would not be a preferred
approach if
A. The auditor notes strong indicators of a specific fraud involving this account.
B. The company has relatively stable operations that have not changed much over the
past
year.
C. The auditor would like to identify large, unusual, or nonrecurring transactions during
the
year.
D. The operating expenses vary in relation to other operating expenses, but not in
relation
to revenue.
Answer: A
In planning a system of internal operating controls, the role of the internal auditor is to
A. Design the controls.
B. Appraise the effectiveness of the controls.
C. Establish the policies for controls.
D. Create the procedures for the planning process.
Answer: B
A company with 14,344 customers determines that the mean and median accounts
receivable balances for the year are $15,412 and $10,382, respectively.
From this information, the auditor can conclude that the distribution of the accounts
receivable balances is continuous and
A. Negatively skewed.
B. Positively skewed.
C. Symmetrically skewed.
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D. Evenly distributed between the mean and median.
Answer: B
The primary concern in a program results audit is a determination that
A. Financial statements are presented in accordance with International Financial
Reporting
Standards.
B. Desired benefits are being achieved.
C. The entity has complied with laws and regulations.
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Answer: C
Which of the following documents would provide the best evidence that a purchase
transaction has actually occurred?
A. Cancelled cheque issued in payment of the procured goods.
B. Ordering department's original requisition for the goods.
C. Receiving memorandum documenting the receipt of the goods.
D. Supplier's invoice for the procured goods.
Answer: C
Why shouldorganizationsrequire auditees to promptly reply and outline the corrective
action
that has been implemented on reported deficiencies?
A. To close the open audit issues as soon as possible.
B. To effect savings as early as possible.
C. To indicate concurrence with the audit findings.
D. To ensure that the auditor performance is evaluated.
Answer: B
During an audit of sales representatives travel expenses, it was discovered that 152 of
200
travel advances issued to sales representatives in the past year exceeded the
prescribed
maximum amount allowed.
Which of the following statements is a justifiable audit opinion?
A. The majority of travel advances in theorganizationexceed the prescribed maximum.
B. Travel advances are not controlled in accordance with existing policy.
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C. The prescribed maximum travel advance is too low.
D. 76% of all travel advances exceed the management prescribed maximum.
Answer: B
During an audit, the internal auditor should consider the following factor(s) in
determining
the extent to which analytical procedures should be used, Except
A. Adequacy of the system of internal control.
B. Significance of the area being examined.
C. Precision with which the results of analytical audit procedures can be predicted.
D. Preparation of employee questionnaire policy.
Answer: D
Which technique is most appropriate for testing the quality of the pre-audit of payment
vouchers described in an internal control questionnaire (ICQ)?
A. Analysis
B. Evaluation
C. Verification
D. Observation
Answer: C
Follow-up activity may be required to ensure that corrective action has taken place for
certain findings. The internal audit department's responsibility to perform follow-up
activities
as required should be defined in the
A. Internal auditing department's written charter.
B. Mission statement of the audit committee.
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C. Engagement memo issued prior to each audit assignment.
D. Purpose statement within applicable audit reports.
Answer: A
Reporting to senior management and the board is an important part of the auditor's
obligation.
Which of the following items is not required to be reported to senior management and/or
the board?
A. Subsequent to the completion of an audit, but prior to the issuance of an audit report,
the audit senior in charge of the audit was offered a permanent position in the auditee's
department.
B. An annual report summary of the department's audit work schedule and financial
budget.
C. Significant interim changes to the approved audit work schedule and financial
budget.
D. An audit plan was approved by senior management and the board. Subsequent to
the
approval, senior management informed the audit director not to perform an audit of a
division because the division's activities were very sensitive.
Answer: A
A personnel department is responsible for processing placement agency fees for new
hires. A recruiter established some bogus placement agencies and, when interviewing
walk-in applicants, the recruiter would list one of the bogus agencies as referring the
candidate.
A possible means of detection or deterrence is to
A. Process all personnel agency invoices via a purchase order through the purchasing
department.
B. Verify new vendors to firms listed in a professional association catalogue and/or
verify
the vendor name and address through the telephone book.
C. Monitor the closeness of the relationships of recruiters with specific vendors.
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D. Require all employees to sign an annual conflict of interest statement.
Answer: B
Viba, who is audit senior on the in progress audit of Weave plc, has recently placed her
CV
with a recruitment agent. She has had no feedback from the agent, with whom she has
a
meeting on Friday. The agency is currently carrying an advert for financial controller at
Weave plc, but the advert does not give the companys name.
This represents:
A. A self-interest threat
B. An intimidation threat
C. A management threat
D. No threat
Answer: D
Internal auditing is responsible for reporting fraud to senior management or the board
when
A. The incidence of fraud of a material amount has been established to a reasonable
certainty.
B. Suspicious activities have been reported to internal auditing.
C. Irregular transactions have been identified and are under investigation.
D. The review of all suspected fraud related transactions is complete.
Answer: A
When making a presentation to management, the auditor wants to report findings and to
stimulate action.
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These objectives are best accomplished by
A. Delivering a lecture on the findings.
B. Showing a series of slides or overheads that graphically depict the findings; limit
verbal
commentary.
C. Using slides/overheads to support a discussion of major points.
D. Handing out copies of the report, asking the participants to read the report, and
asking
for questions.
Answer: C
In an audit of the procurement system, which of the following procedures would an
auditor
perform to determine whether competitive bidding procedures were adequate?
D. Variables sampling.
Answer: B
Each individualwork papershould, at a minimum, contain
A. An expression of an audit opinion.
B. A tick mark legend.
C. A complete flowchart of the system of internal controls for the area being reviewed.
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D. A descriptive heading.
Answer: D
Internal auditors must exercise due care if they are to meet their responsibilities for
fraud
detection. Thus, the existence of certain conditions should raise red flags and arouse
auditors' professional scepticism concerning possible fraud.
Which of the following is most likely to be considered an indication of possible fraud?
A. A new management team installed as the result of a takeover.
B. Rapid turnover of financial executives.
C. Rapid expansion into new markets.
D. An Internal Revenue Service audit of tax returns.
Answer: B
The following are potential sources of evidence regarding the effectiveness of the
division's
total quality managementprogram. Assume that, all comparisons are for similar time
periods and duration and current items are compared with similar items before the
implementation of the total quality managementprogram.
The least persuasive evidence would be a comparison of
A. Employee morale over the two time periods.
B. Scrap and rework costs over the two time periods.
C. Customer returns over the two time periods.
D. Manufacturing and distribution costs per unit over the two time periods.
Answer: A
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An audit team has been assigned to review the customer satisfaction measurement
system that the industrial products division implemented two years ago. This system
consists of the division's customer service office conducting an annual mail survey. A
survey is sent to 100 purchasing departments randomly selected from all customers
who
made purchases in the prior 12 months. The survey is three pages long and its 30
questions use a mixture of response modes (e.g., some questions are open-ended,
some
multiple choice, and others use a response scale). The customer service office mails the
survey in September and tabulates the results for questionnaires returned by October
15.
Only one mail is sent. If the customer does not return the questionnaire, no follow-up is
conducted. When the survey was last conducted, 45 of the questionnaires were not
returned.
Which of the following is not an advantage of face-to-face interviews over mail surveys?
A. The response rate is typically higher.
B. Interviewers can increase a respondent's comprehension of questions.
C. Survey designers can use a wider variety of types of questions.
D. They are less expensive since mailing costs are avoided.
Answer: D
An auditor selected a random sample of 100 items from a population of 2,000 items.
The
total dollars in the sample were $10,000, and the standard deviation was $10. If the
achieved precision based on this sample was plus or minus $4,000, the minimum
acceptable value of the population would be
A. $204,000
B. $196,000
C. $199,000
D. $199,800
Answer: B
Accounts payable schedule verification may include the use of analytical evidence.
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Which of the following is most appropriately described as analytical evidence?
A. Comparing the items on the schedule with the accounts payable ledger or unpaid
voucher file.
B. Comparing the balance on the schedule with the balances of prior years.
C. Comparing confirmations received from selected creditors with the accounts payable
ledger.
D. Examining vendors' invoices in support of selected items on the schedule.
Answer: B
Which of the following tests can help the auditor to evaluate the adequacy of the
company's allowance for doubtful accounts?
A. Reconciling the accounts receivable subsidiary ledgers with the control account.
B. Preparing an aging analysis.
C. Reviewingauthorizationof credit terms.
D. Tracing a sample of credit memos to the accounts receivable subsidiary ledger.
Answer: B
To test compliance with a policy regarding sales returns recorded during the most recent
year, an auditor systematically selected 5% of the actual returns recorded in March and
April. Returns during these two busiest months of the year represented about 25% of
total
annual returns.
Error projections from this sample have limited usefulness because
A. The small size of the sample relative to the population makes sampling risk
unacceptable.
B. The failure to stratify the population according to sales volume results in bias.
C. The systematic selection of returns during the two months is not sufficiently random.
D. The error rates during the two busiest months may not be representative of the whole
year.
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Answer: D
During the audit of inventories, an internal auditor specified a precision of 5% instead of
the
4% contained in the preliminary audit program.
What would be the impact of the change in precision?
A. A decrease in population standard deviation.
B. An increase in population standard deviation.
C. A decrease in required sample size
D. An increase in required sample size
Answer: C
Which of the following statements conveys negative information in such a way that
afavorableresponse from the auditee may still be achieved?
A. Your bookkeeper has failed to reconcile the bank statement each month.
B. The bank statements have not been reconciled each month.
C. Unfortunately, your bookkeeper has not taken the time to reconcile the bank
statement
each month.
D. You have apparently failed to inform your book keeper that the bank statements
should
be reconciled on a timely basis.
Answer: B
During an interview with a data input clerk to discuss acomputerizedsystem used to
track
employee training requirements and compliance, an auditor identifies a potentially
significant weakness in the system.
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The auditor should
A. Not mention the weakness, directly or indirectly, to avoid making the clerk
uncomfortable.
B. Ask indirect questions that will help get more factual information relating to the
potential
weakness.
C. Ask the clerk about the weakness and determine immediately if the finding should be
reported.
D. Conduct a second interview after determining whether the weakness actually exists.
Answer: B
Which of the following is the best source for an audit team to use to identify common
risks
faced by a company?
A. Checklists or reminder lists
B. Flowcharts
C. Questionnaires
D. Research reported in professional journals and text books
Answer: D
An internal auditor found that employees in the maintenance department were not
signing
their time cards. This situation also existed during the last audit.
The auditor should
A. Include this finding in the current audit report.
B. Ask the manager of the maintenance department to assume the resulting risk.
C. Withhold conclusions about payroll internal control in the maintenance department.
D. Instruct the employees to sign their time cards
Answer: A
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Computer fraud is discouraged by
A. Being willing to prosecute.
B. Ostracizingwhistle-blowers.
C. Overlooking inefficiencies in the judicial system.
D. Accepting the lack of integrity in the system.
Answer: A
Which of the following types of tests would be the most persuasive if an internal auditor
wanted assurance of the existence of inventory stored in a warehouse?
A. Examination of the shipping documents supporting recorded transfers to and from
the
warehouse.
B. Obtaining written confirmation from management.
C. Physically observing the inventory in the warehouse.
D. Examination of warehouse receipts contained in the auditee's records.
Answer: C
Purchases from two new vendors increased dramatically after a new buyer was hired.
The
buyer was obtaining kickbacks from the two vendors based on sales volume.
A possible means of detection is
A. Periodic vendor surveys regarding potential buyer conflict of interest or ethics
violations.
B. The receipt of an invoice to put new vendors on the master file.
C. The use of purchase orders for all purchases.
D. The use of change analysis and trend analysis of buyer or vendor activity.
Answer: D
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