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AUI3702 Questions & Solutions pack
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AUI3702 QUESTIONS AND ANSWERS2014 S1 ASSIGNMENT1
Which one of the following types of audit tests would be the most persuasive if an internal
auditor wanted assurance of the existence of inventory stored in a warehouse?
1. Physically inspecting the inventory in the warehouse.
2. Obtaining written confirmation from management as to the existence of the inventory.
3. Examination of the warehouse receipts contained in the auditee's records.
4. Examination of the shipping documents supporting recorded transfers to and from the warehouse.
Which one of the following is the best source for an internal audit team to use in identifying
common external risks faced by a company?
1. Questionnaires.
2. Current research reported in professional journals and textbooks.
3. Flowcharts.
4. Review lists or reminder lists.
Working papers should include …
1. All working papers prepared during a previous audit.
2. Documentation substantiating the examination and evaluation of the adequacy and
effectiveness of the system of internal control.
3. Copies of all procedures that were reviewed during the internal audit.
4. Copies of all source documents examined in the course of the internal audit.
An internal auditor found that the supervisor does not properly approve employee time records in
one department. Which one of the following errors can result from this?
1. Duplicate pay cheques might be issued.
2. The wrong hourly rate could be used to calculate gross wages.
3. Employees might be paid for hours they did not work.
4. Payroll cheques might not be distributed to the appropriate payees.
Which one of the following is an audit objective?
1. Recalculate each month's bank reconciliation.
2. Analyse the pattern of any cash shortages.
3. Observe the deposit of the day's cash receipts.
4. Evaluate whether cash receipts are adequately safeguarded.
1
,Which of the following conduct violates the integrity principle of the Code of Ethics?
1. The internal auditors perform a detailed risk assessment and identify the key controls with regard to
credit sales before they decided on the tests to be performed.
2. An internal auditor is assigned to an audit of controls in the procurement section, which is headed
by his father.
3. While auditing the controls over wage pay-outs, an auditor finds that some controls have been
circumvented. She discusses her finding of a possible fraud with her colleague in the canteen over
lunch.
4. The internal auditor uses an unrevised audit programme, used three years ago, to conduct
an organisation-wide audit on credit sales.
Observation is considered a reliable audit procedure, but one that is limited in usefulness. However, it is
used in a number of different engagement situations. Which of the following statements is true
regarding observation as an engagement technique?
1. It is the most effective audit method to use in filling out internal control
questionnaires.
2. It is the most persuasive technique for determining if fraud has occurred.
3. It is rarely sufficient to satisfy any assertion other than existence.
4. It is the most persuasive methodology to learn how transactions are really processed during the period
under review.
An internal auditor has set an engagement objective of determining whether mail room staff is fully
productive. Which of the following engagement techniques will best meet this objective?
1. Inquiry.
2. Observation.
3. Analytical review entailing comparison between this mail room staff‘s
productivity levels with similar organisations.
4. Inspection of documents.
Which of the following does not describe one of the functions of the audit working papers?
1. Facilitates third-party reviews.
2. Aids in the professional development of the operating staff.
3. Aids in the planning, performance and review of audits.
4. Provides the principal support for audit communications.
2
, Which of the following are elements included in the control environment described in the COSO
internal control framework?
1. Integrity and ethical values, management‘s philosophy and operating style, and
human policies.
2. Organisational structure, commitment to competence and planning.
3. Competence of personnel, backup facilities, laws and regulations.
4. Risk assessment, assignment of responsibility and human resource practices.
The policies and procedures helping to ensure that management directives are executed and
actions are taken to address risks to the achievement of objectives describes...
1. Control activities.
2. Risk assessments.
3. Control environments.
4. Monitoring.
In a final audit report, which attribute should be addressed by the recommendation?
1. Condition.
2. Cause.
3. Effect.
4. Criteria.
According to the IIA Standards, final engagement communication should be distributed to those
members of the organisation who are able to ensure that engagement results are given due
consideration. For higher-level members of the organisation, that requirement can be usually satisfied
with...
1. Oral reports.
2. Interim reports.
3. Summary reports
4. Final written reports only.
Which option best describes why, during an internal audit assignment, an internal auditor
compares the inventory turnover rate of a company with established industry standards?
1. To evaluate the accuracy of internal financial reports of the company.
2. To test the company's controls designed to safeguard assets.
3. To assess the reasonableness of the disclosed performance (profits) of the company
and to determine where additional audit work may be needed.
4. To determine whether the company is complying with established procedures regarding
inventory levels.
3
, An internal auditor has set an audit objective of determining whether all cash receipts are deposited
daily. To achieve this objective, the internal auditor interviewed the supervisor, who assured him that
all cash receipts are deposited as soon as is reasonably possible. The assurance of the supervisor can
be used as evidence that is...
1. Sufficient but not reliable or relevant.
2. Sufficient, reliable and relevant.
3. Not sufficient, reliable or relevant.
4. Relevant but not sufficient or reliable.
The identification of damaged and obsolete inventory is important when valuing inventory. The best
auditing procedure to discover damaged inventory included in closing inventory is to...
1. Compare the physical quantities of slow-moving items with corresponding quantities of the previous
year.
2. Review management's inventory certificate for accuracy.
3. Test the overall fairness of the inventory values by comparing the company's inventory
turnover ratio with the industry average.
4. Inspect inventory during the physical inventory count.
Statistical sampling differs from other sampling methods in the sense that...
1. An auditor does not have to exercise professional judgement when applying statistical
sampling as he/she must when applying other sampling methods.
2. Statistical sampling produces representative samples, whereas the other methods do not.
3. Statistical sampling can deliver absolute assurance, which is not possible with other sampling
methods.
4. Statistical sampling is based on the theory of probability, which is not the case with other
sampling methods.
Which form of audit evidence would the internal auditor consider to be the most reliable?
1. A sales invoice of the organisation together with a delivery note signed by the customer.
2. Direct confirmation from a debtor of his account balance after the internal auditor
has mailed the account personally to the debtor.
3. A crossed cheque and bank statement submitted by the auditee to the internal auditor upon his
request during the audit.
4. A pay sheet prepared by the wage clerk and checked and approved by the accountant.
The main reason for issuing an internal audit report is to...
1. Give auditees an opportunity to respond to the matters addressed by the report.
2. Report to interested parties on audit findings and recommendations.
4
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