IIA-CIA-Part2

IIA-CIA-Part2 practice questions, page 13 of 39, with answer review and explanations.

Question 61

In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:

  1. Activities and cost drivers.
  2. Information processing procedures.
  3. Current product cost structures.
  4. Internal control alternatives.

Question 62

Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a follow-up of audit recommendations when developing engagement work schedules. Does the CAEs decision violate the Standards?

  1. No, because the Standards do not specify whether follow-up is needed.
  2. No, because when there is evidence of sufficient motivation by the client, there is no need for follow-up action.
  3. Yes, because scarcity of resources is not a sufficient reason to omit follow-up action.
  4. Yes, because the Standards require the auditors to determine whether the client has appropriately implemented all of the auditor's recommendations.

Question 63

An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?

  1. Use an integrated test facility (ITF) to compare individual sales transactions with test transactions submitted through the ITF and investigate all differences.
  2. Interview the three individual store managers to determine if their explanations about the observed differences are the same, and then compare their explanations to that of the section manager.
  3. Schedule a surprise inventory audit to include a physical inventory and investigate areas of inventory shrinkage.
  4. Select a sample of individual store prices and compare them with the sales entered on the cash register for the same items.

Question 64

Which of the following procedures would be most helpful in providing additional evidence when an auditor suspects that an unidentified employee is submitting and approving invoices for payment?

  1. Use generalized audit software to identify invoices from vendors with post office box numbers or other unusual features. Select a sample of those invoices and trace to supporting documents such as receiving reports.
  2. Select a sample of payments made during the year and investigate each one for approval.
  3. Select a sample of receiving reports representative of the period under investigation and trace to approved payment. Note any items not properly processed.
  4. Select a sample of invoices paid during the past month and trace them to appropriate vendor accounts.

Question 65

Insurance companies often receive electronic hospitalization claims directly from hospitals. Which of the following control procedures would be most effective in detecting fraud in such an environment?

  1. Use integrated test facilities to test the accuracy of processing in a manner that is transparent to data processing.
  2. Develop monitoring programs to identify unusual types of claims or an unusual number of claims by demographic class for investigation by the claims department.
  3. Use generalized audit software to match the claimant identification number with a master list of valid policyholders.
  4. Develop batch controls over all items received from a particular hospital and process those claims in batches.