Which of the following would be an appropriate improvement to controls over large quantities of consumable material that are charged to expense when placed in bins which are accessible to production workers?

A. Relocate bins to the inventory warehouse.

B. Require management to compare the cost of consumable items used to the budget.

C. Lock the bins during normal working hours.

D. None of the above actions are needed for items of minor cost and size.

Which of the following is true of engagement recommendations?

I. Specific suggestions for implementation must be included.

II. The internal auditor's observations and conclusions may serve as the basis.

III. Actions to correct existing conditions or improve operations may be included.

IV.

Approaches to correcting or enhancing performance may be suggested.

A.

I only

B.

III only

C.

I, III, and IV only

D.

II, III, and IV only

As part of an operational audit of the shipping department, an auditor selected a sample of 45 daily shipping logs from the department's files. On 44 of the days, the log contained a sufficient number of shipments to meet the department's daily quota. Based on this test, the auditor concluded that the shipping department was effective at meeting its quotas. Which of the following is true about the auditor's conclusion?

A. The number of items selected for testing is inadequate to justify the conclusion.

B. The shipping department is effective in meeting its responsibilities.

C. This conclusion would negate any need to perform tests of efficiency.

D. None of the above.

Recommendations should be included in the audit report in order to:

A. Provide management with options for addressing audit findings.

B. Ensure that audit findings are resolved in the manner suggested by the auditor.

C. Minimize the amount of time required to correct audit findings.

D. Ensure that audit findings are addressed by management.

As a result of a recent discovery of false information on employment applications, an internal auditor has reviewed hiring procedures. Which of the following represents a weakness in the control system?

I. Applicants are not required to have their signed applications legally authenticated.

II. Applicants' educational information is not validated with the educational institution before employment is offered.

III.

Information related to applicants' long-term work history is not validated before employment is offered.

A.

III only

B.

I and II only

C.

II and III only

D.

I, II, and III

Which of the following potential performance measures should an auditor recommend excluding from a performance scorecard?

A. Number of employees.

B. Market share.

C. Number of customer complaints.

D. Training dollars per employee.

Which of the following is a red flag associated with fictitious revenues?

A. Slow growth or unusually low profitability.

B. Unusual decrease in the number of days' sales in receivables.

C. Substantial increase in receivables turnover.

D. Significant transactions with related parties.

As part of a preliminary survey of the purchasing function, an internal auditor reads the department's policies and procedures manual and concludes that the manual describes the processing steps clearly and contains an appropriate internal control design. The next engagement objective is to evaluate the operating effectiveness of internal controls. Which procedure would fulfill this objective most effectively?

A. Perform a design test.

B. Perform a compliance test.

C. Perform a systems test.

D. Perform an efficiency test.

Which of the following would most likely include recommendations for process improvements?

1.

Due diligence engagement.

2.

Forensic investigation.

3.

Internal audit engagement.

4.

Consulting engagement.

A. 1, 2, and 3 only

B. 1, 2, and 4 only

C. 1, 3, and 4 only

D. 2, 3, and 4 only

What is the primary purpose of creating a preliminary draft audit report?

A. To save time during final report writing.

B. To meet the Standards requirement for developing a draft report prior to issuing a final report.

C. To use as a tool for communicating with management of the area under review.

D. To require that management implements solutions to issues identified during the engagement.