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IQNExam QIAQualified Internal AuditorVersion: 6.0[ Total Questions: 80 ]What evidence is appropriate to determine that recorded purchase transactions were validand 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: DWhich of the following audit procedures would be most effective in determining whethervendor invoices are being processed on a timely basis whilemaximizingthe company's useof cash?A. Determine the length of processing time between the receipt of the vendor's invoice tothe payment date for the related disbursement.B. Interview the accounts payable manager to determine the procedures and standards forprocessing vendor invoices.C. Compare the vendor's invoice due date with the payment date as indicated on thecancelled check.D. Compare the date stamped on the invoice for receipt with the corresponding paymentdate for the disbursement.Answer: CIn 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 logdesigned tosummariesunauthorizedsystem access attempts?A. A list ofauthorizedusers.B. The type of event or transaction attempted.Question No : 1Question No : 2Question No : 3IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 2C. 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: CAudits vary in their degree of objectivity. Of the following, which is likely to be the mostobjective?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: AAuditorsrealizethat at times corrective action is not taken even when agreed to by theappropriate parties. This should lead an internal auditor toA. Decide the extent of necessary follow-up work.B. Allow management to decide when to follow-up, since it is management’s ultimateresponsibility.C. Decide to conduct follow-up work only if management requests the auditor's assistance.Question No : 4Question No : 5Question No : 6IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 3D. Write a follow-up audit report with all findings and their significance to the operations.Answer: AWhich of the following is a particular activity of internal audit function?A. Special investigations, for instance, into suspected fraudB. Confirm that the final result (the sum) is correctC. To evaluate the system of internal control that are mainly concerned with the financialstatements and accountingD. To give an opinion on overall fairness of the financial statements and accountingAnswer: AA Qualified Internal Auditor directs the audit function for a large city and is planning theaudit schedule for the next year. The city has a number of different funds, some that arerestricted in use by government grants and some that require compliance reports to thegovernment. One of the programs for which the city has received a grant is job retrainingand placement. The grantspecifies certain conditions a participant in the program mustmeet 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 theapplicable laws and regulations?

A. Make inquiries of the city's chief financial officer, legal counsel, or grant administrators.B. Review prior year working papers and enquire of officials as to changes.C. Review applicable grant agreements.D. Discuss the matter with the audit committee and make inquiries as to the nature of therequirements and the audit committee's objectives for the audit.Answer: DQuestion No : 7Question No : 8IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 4Anorganizationuses a service bureau to process its hourly payroll transactions. The internalauditor is concerned that the hourly payroll for the year has been processed correctly and,in particular, the computation of employee withholding for pension contributions is inaccordance with the union contract, which specifies charges each quarter.Which of the following audit procedures would best accomplish the audit objective?A. Select a random sample of all hourly payroll transactions for the reporting period, recomputepay and withholding items, and compare the result with that obtained from theservice bureau.B. Select a stratified sample of all hourly and salaried payroll transactions for an entirereporting period, perform the necessary activities, and then compare the result with thatobtained from the service bureau.C. Select a discovery sampling of all payroll transactions for an entire reporting period andthen follow up on any findings.D. Submit a set of test data to the service bureau during an annual audit and compare theservice bureau's processing with the auditor's predetermined computations on the sametest data.Answer: DThe auditor wants to understand the actual flow of data regarding cash processing. Themost convincing evidence would be obtained byA. Reviewing the systems flowchart.B. Performing a "walk-through" of the processing and obtaining copies of all documentsused.C. Reviewing the programming flowchart for evidence of control procedures placed into thecomputer programs.D. Interviewing the treasurer.Answer: BQuestion No : 9Question No : 10

Question No : 11IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 5In a variables sampling application, which of the following factors will vary directly with achange in confidence level from 90% to 95%?A. Standard error of the mean.B. Non-sampling error.C. Achieved precision.D. Point estimate of the arithmetic mean.Answer: CHow does CSA differ from traditional methods of auditing?A. Shifts some of the responsibilities away from the auditors towards others such as workteams.B. Allocated additional responsibilities to internal audit.C. Reduces the level of collaboration required between managers and internal auditor.D. Allows assessment to be carried out without any internal audit involvement whatsoever,therefore allowing them to focus their attention on other areas of theorganization.Answer: AYour assurance firm is auditor of Happy Goods. The audit manager has just becomeengaged to the managing director’s daughter, who he met through a mutual friend. Themanaging director owns 51% of the shares in Happy Goods. Which of the threat is notthere in this case?A. Intimidation threatB. Familiarity threatC. Self-interest threatD. Advocacy threatAnswer: DQuestion No : 12Question No : 13Question No : 14IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 6One concern of a user of a computer service centre is that one firm's transactions mayaccidentally be used in the process of updating a second firm's master files. The controlprocedure that would best provide assurance of the integrity of the master files duringupdating processes is a check forA. Completeness of input, such as a computer sequence check.B. Correct master files, such as a header label.C. Input accuracy, such as a check of detail reports.D. Accuracy of file maintenance, such as review of exception reports.Answer: BWhich of the following documents would provide the most persuasive evidence concerningthe existence and valuation of a receivable?

A. A credit approval document supported by the customer's audited financial statements.B. A copy of a sales invoice to the customer in the auditee's records.C. A positive confirmation received directly from the customer.D. A customer's purchase order in the auditee's records related to the credit sale.Answer: CDue to the small number of staffs, one remote unit's petty cash custodian also hadresponsibility for the imprest fund checking account reconciliation. The cashier concealed adiversion of funds by altering the beginning balance on the monthly reconciliations sent tothe group office.A possible audit test to detect this would be toA. Compare monthly balances and use change and trend analysis.B. Require additional monitoring by headquarters whenever improper segregation of dutiesexists at remote units.C. Determine if any employees have high personal debt.D. Determine if any employees are leading expensive lifestyles.Question No : 15Question No : 16IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 7Answer: AThe internal audit activity evaluates and contributes to the improvement of riskmanagement, control, and governance systems. Which of the following statements isassociated with the improvement of governance?A. The internal audit activity should ascertain the extent to which operating and programgoals and objectives have been established and conform to those of theorganization.B. The internal audit activity should review operations and programs to ensure consistencywithorganizationalvalues.C. The internal audit activity should be free from interference in determining the scope ofinternal auditing, performing work, and communicating results.D. The internal audit activity should adopt a process to control and assess the overalleffectiveness of the quality program.Answer: BWhich of the following is an example of an efficiency measure?A. The rate of absenteeism.B. The goal of becoming a leading manufacturer.C. The number of insurance claims processed per day.D. The rate of customer complaints.Answer: CAn operational audit is being performed to evaluate the productivity of telephone salesrepresentatives relative to last year. Theorganizationsells two similar products, one of

which is priced 20% higher than the other. Prices did not change during the two yearssubject to the audit, and the gross profit percentage is the same for both products. Thesales representatives are paid a base salary plus a commission.Question No : 17Question No : 18Question No : 19IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 8Which one of the following items represents the best evidence that theorganization’ssalesrepresentatives are more productive this year than last year?A. The revenue per representative is higher this year than last year.B. The number of sales calls is higher this year than last year.C. The ratio of the number of new customers to the number of prospects contacted ishigher this year than last year.D. Unit sales increased at a higher rate this year than last year.Answer: AWhich of the following is not an activity of internal audit function?A. Examining financial and operating informationB. Review of the economy, efficiency and effectiveness of operationsC. Review of compliance with laws, regulations and other external requirementsD. Confirming that the final result (the sum) is correctAnswer: DTo identify shortages of specific items in an inventory of expensive goods held for retailsale, the most appropriate audit work step is toA. Apply the retail method of inventory valuation.B. Compare physical inventory counts to perpetual records.C. Develop inventory estimates based on the gross profit percentage method.D. Analyzecurrent and previous inventory turnover rates.Answer: BWhich of the following activities is not included in determining the audit schedule?Question No : 20Question No : 21Question No : 22IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 9A. Developing auditprograms.B. Assessing risk factors.C. Planning workload requirements.D. Identifying auditable locations.Answer: AWhich of the following is an example of intimidation threat to independence of the auditor?A. The audit firm has been involved in maintaining the accounting records, or undertakingvaluations that are incorporated in the financial statements

B. The audit firm is acting as a legal advocate for the client in litigationC. Xenia Taliotis is an influential finance director of Winner PlcD. The audit firm is working for long time for its clientAnswer: CAn audit of accounts payable was made to determine if the error rate was within the statedpolicy of 0.5%. One hundred of the 10,000 accounts payable transactions were randomlyselected using a 95% confidence level. No errors were found.With 95% certainty, one can conclude that the sample resultsA. 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: DThe internal auditors of a financial institution are auditing the institution's investing andQuestion No : 23Question No : 24Question No : 25IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 10lending activities. During the last year, the institution has adopted new policies andprocedures for monitoring investments and the loan portfolio. The auditors know that theorganisation has invested in new types of financial instruments during the year and isheavily involved in the use of financial derivatives to appropriately hedge risksThe audit committee has expressed concern that the financial institution has been takingon higher-risk loans in pursuit of short term profit goals.Which of the following audit procedures would provide the least amount of information toaddress this audit concern?A. Perform an analytical review of interest income as a percentage of the investmentportfolio in comparison with a group of peer financial institutions.B. Take a random sample of loans made during the period and compare the riskiness ofthe 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 interestincome 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 dollaramount of new loans each year.Answer: CWhich of the following audit committee activities would be of the greatest benefit to theinternal auditing department?A. Review and approval of auditprograms.B. Assurance that the external auditor will rely on the work of the internal auditingdepartment 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 auditingdepartment.Answer: DQuestion No : 26Question No : 27IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 11An internal auditor plans to use an analytical review to verify the correctness of variousoperating expenses in a division.The use of an analytical review as a verification technique would not be a preferredapproach ifA. 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 pastyear.C. The auditor would like to identify large, unusual, or nonrecurring transactions during theyear.D. The operating expenses vary in relation to other operating expenses, but not in relationto revenue.Answer: AIn planning a system of internal operating controls, the role of the internal auditor is toA. 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: BA company with 14,344 customers determines that the mean and median accountsreceivable balances for the year are $15,412 and $10,382, respectively.From this information, the auditor can conclude that the distribution of the accountsreceivable balances is continuous andA. Negatively skewed.B. Positively skewed.C. Symmetrically skewed.Question No : 28Question No : 29IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 12D. Evenly distributed between the mean and median.Answer: BThe primary concern in a program results audit is a determination thatA. Financial statements are presented in accordance with International Financial ReportingStandards.

B. Desired benefits are being achieved.C. The entity has complied with laws and regulations.D. Resources are managed economically and efficiently.Answer: BWhich of the following areas are addressed by attribute standards?A. Independence, objectivity, and nature of the workB. Independence, communication of findings, and the resolution of problems affecting therisks accepted by managementC. Independence, objectivity and proficiencyD. Engagement planning, engagement execution, and progress monitoringAnswer: CThe consultative approach to auditingemphasizesA. Imposition of corrective measures.B. Participation with auditees to improve methods.C. Fraud investigation.D. Implementation of policies and procedures.Question No : 30Question No : 31Question No : 32IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 13Answer: BAn audit team developed a preliminary questionnaire with the following response choices:I.Probably not a problem.II.Possibly a problem.III.Probably a problem.The questionnaire illustrates the use ofA. Trend analysis.B. Ratio analysis.C. Unobtrusive measures or observations.D. Rating scales.Answer: DIn order to ensure the proper addition/deletion ofauthorizationsin an operational audit ofdata access security, an internal auditor would verify thatA. Individuals who are not employees have no access privileges.B. Revoked access privileges are cancelled on a weekly cycle.C. Access privileges are activated promptly after they areauthorized.D. A systemsprogramkeeps records of all additions/deletions of access changes.Answer: CWhich of the following is not an argument for principles-based approach to corporategovernance?Question No : 33Question No : 34Question No : 35

IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 14A. The same rules might not be suitable for every companyB. There are some aspects of corporate governance that cannot be regulated easilyC. Companies do not have the choice of ignoring the rulesD. The most suitable corporate governance practices can differ between companiesAnswer: CThe appropriate sampling plan to use to identify at least one irregularity, assuming somenumber of such irregularities exist in a population, and then to discontinue sampling whenone irregularity is observed isA. Stop-and-go sampling.B. Discovery sampling.C. Variables sampling.D. Attributes sampling.Answer: BThe control self-assessment (CSA) is aA. Directive auditing tool.B. Preventive auditing tool.C. Detective auditing tool.D. Corrective auditing tool.Answer: BWhich of the following investigative tools is most effective when large volumes of evidenceneed to beanalyzed?A. InterviewsQuestion No : 36Question No : 37Question No : 38IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 15B. QuestionnairesC. Forensic analysisD. ComputerAnswer: DData gathered in support of an audit conclusion can be rated on a continuum of reliability.The most reliable form of evidence would be anA. Internal document obtained from the auditee.B. External document obtained directly from an outside source.C. Internal document subject to rigorous internal review procedures.D. Internal document that has been circulated through an outside party.Answer: BAn example of an internal non-financial benchmark isA. Thelaborrate of comparably skilled employees at a major competitor's plant.

B. The average actual cost per pound of a specific product at the company's most efficientplant becomes the benchmark for the company's other plants.C. The company setting a benchmark of $50,000 for employee training programs at each ofthe company's plants.D. The percent of customer orders delivered on time at the company's most efficient plantbecomes the benchmark for the company’s other plants.Answer: DAn internal auditor would trace copies of sales invoices to shipping documents in order todetermine that:Question No : 39Question No : 40Question No : 41IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 16A. Customer shipments were billed.B. Sales that are billed were also shipped.C. Shipments to customers were also recorded as receivables.D. The subsidiary accounts receivable ledger was updated.Answer: BExperience has shown that certain conditions in anorganizationare symptoms of possiblemanagement fraud.Which of the following conditions would not be considered as an indicator of possiblefraud?A. Managers regularly assume subordinates' duties.B. Managers dealing in matters outside their profit centre’s scope.C. Managers not complying with corporate directives and procedures.D. Managers subject to formal performance reviews on a regular basis.Answer: DThe purchasing manager of a manufacturing company was concerned with the rising pricesof some direct materials provided by a supplier. The purchasing manager told the supplierto either maintain the current prices or withdraw as a supplier for the company's directmaterials. Thesupplier devised a plan to circumvent the purchasing manager's intentwithout actually violating the purchasing manager's mandate.Which one of the following is the probable action taken by the supplier?A. The supplier maintained prices in the short run but later returned to a pattern ofincreasing prices.B. The supplier decided to stop providing the direct materials to the manufacturingcompany, since holding the line on prices would have a negative impact.C. The supplier maintained prices but substituted a lower grade of direct materials.

D. The supplier worked through the president of the manufacturing company to force thepurchasing manager to cancel the mandate.Question No : 42Question No : 43IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 17Answer: CWhich of the following documents would provide the best evidence that a purchasetransaction 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: CWhy shouldorganizationsrequire auditees to promptly reply and outline the corrective actionthat 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: BDuring an audit of sales representatives’ travel expenses, it was discovered that 152 of 200travel advances issued to sales representatives in the past year exceeded the prescribedmaximum 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.Question No : 44Question No : 45Question No : 46IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 18C. The prescribed maximum travel advance is too low.D. 76% of all travel advances exceed the management prescribed maximum.Answer: BDuring an audit, the internal auditor should consider the following factor(s) in determiningthe extent to which analytical procedures should be used, ExceptA. 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: DWhich technique is most appropriate for testing the quality of the pre-audit of paymentvouchers described in an internal control questionnaire (ICQ)?A. AnalysisB. EvaluationC. VerificationD. ObservationAnswer: CFollow-up activity may be required to ensure that corrective action has taken place forcertain findings. The internal audit department's responsibility to perform follow-up activitiesas required should be defined in theA. Internal auditing department's written charter.B. Mission statement of the audit committee.Question No : 47Question No : 48Question No : 49IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 19C. Engagement memo issued prior to each audit assignment.D. Purpose statement within applicable audit reports.Answer: AReporting to senior management and the board is an important part of the auditor'sobligation.Which of the following items is not required to be reported to senior management and/orthe 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'sdepartment.B. An annual report summary of the department's audit work schedule and financialbudget.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 theapproval, senior management informed the audit director not to perform an audit of adivision because the division's activities were very sensitive.Answer: AA personnel department is responsible for processing placement agency fees for newhires. A recruiter established some bogus placement agencies and, when interviewingwalk-in applicants, the recruiter would list one of the bogus agencies as referring thecandidate.A possible means of detection or deterrence is toA. Process all personnel agency invoices via a purchase order through the purchasingdepartment.

B. Verify new vendors to firms listed in a professional association catalogue and/or verifythe vendor name and address through the telephone book.C. Monitor the closeness of the relationships of recruiters with specific vendors.Question No : 50Question No : 51IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 20D. Require all employees to sign an annual conflict of interest statement.Answer: BViba, who is audit senior on the in progress audit of Weave plc, has recently placed her CVwith a recruitment agent. She has had no feedback from the agent, with whom she has ameeting on Friday. The agency is currently carrying an advert for financial controller atWeave plc, but the advert does not give the company’s name.This represents:A. A self-interest threatB. An intimidation threatC. A management threatD. No threatAnswer: DInternal auditing is responsible for reporting fraud to senior management or the board whenA. The incidence of fraud of a material amount has been established to a reasonablecertainty.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: AWhen making a presentation to management, the auditor wants to report findings and tostimulate action.Question No : 52Question No : 53Question No : 54IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 21These objectives are best accomplished byA. Delivering a lecture on the findings.B. Showing a series of slides or overheads that graphically depict the findings; limit verbalcommentary.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 askingfor questions.

Answer: CIn an audit of the procurement system, which of the following procedures would an auditorperform to determine whether competitive bidding procedures were adequate?I. Bids are solicited based on properly approved requests.II. A sufficient number of vendors were selected to ensure competition.III. Incoming bids are first returned to the buyer for control purposes.A. I and III.B. II and III.C. I, II, and III.D. I and II.Answer: DWhich of the following techniques is best foremphasizinga point in a writtencommunication?A. Place the point in the middle rather than at the beginning or end of the paragraph.B. Use passive rather than active voice.C. Highlight the point through the use of nonparallel structure.D. Use a short sentence with one idea rather than a longer sentence with several ideas.Answer: DQuestion No : 55Question No : 56IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 22Which of the following is not a component of audit risk?A. Inherent riskB. Control riskC. Defective riskD. Detection riskAnswer: CWhich of the following is not a stage of risk management process?A. IdenticationB. AssessmentC. MigrationD. ReviewAnswer: CWhich of the following control procedures would provide the greatest assurance that alldonations to a non-profitorganizationare immediately deposited totheorganization’saccount?A. Use a lockbox to receive all donations.B. Perform periodic internal audits of theorganization’scash receipts by tracing deposits tothe original posting in the cash receipts records.C. Require that all donations be made by cheque.D. Require issuance of a confirmation receipt to all donors, with the receipt issued by theperson who opens and deposits the cash receipts.

Answer: AQuestion No : 57Question No : 58Question No : 59IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 23The requirements for staffing level, education and training, and audit research should beincluded inA. The internal auditing department's charter.B. The internal auditing department's policies and procedures manual.C. The annual plan for the internal auditing department.D. Job descriptions for the various staff positions.Answer: CAn internal audit director has noticed that staff auditors are presenting more oral reports tosupplement written reports.The best reason for the increased use of oral reports by the auditors is that theyA. Reduce the amount of testing required to support audit findings.B. Can be delivered in an informal manner without preparation.C. Can be prepared using a flexible format, thereby increasing overall audit efficiency.D. Permit auditors to counter arguments and provide additional information that theaudience may require.Answer: DIn order for internal auditors to be able torecognizepotential fraud, they must be aware ofthe basic characteristics of fraud. Which of the following is not a characteristic of fraud?A. Intentional deception.B. Taking unfair or dishonest advantage.C. Perpetration for the benefit or detriment of theorganization.Question No : 60Question No : 61Question No : 62IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 24D. Negligence on the part of executive management.Answer: DThe objective of aprogramresults audit requires the auditor toA. Place an emphasis on outputs rather than inputs.B. Look for cost savings or waste.C. Include only historical data in the audit.D. Render an opinion on the fairness of financial presentation.Answer: AManagement is legally required to prepare a shipping document for all movement ofhazardous materials. The document must be filed with bills of lading. Management expects100% compliance with the procedure.

Which of the following sampling approaches would be most appropriate?A. Attributes sampling.B. Discovery sampling.C. Targeted sampling.D. Variables sampling.Answer: BEach individualwork papershould, at a minimum, containA. 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.Question No : 63Question No : 64Question No : 65IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 25D. A descriptive heading.Answer: DInternal auditors must exercise due care if they are to meet their responsibilities for frauddetection. Thus, the existence of certain conditions should raise red flags and arouseauditors' 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: BThe following are potential sources of evidence regarding the effectiveness of the division'stotal quality managementprogram. Assume that, all comparisons are for similar timeperiods and duration and current items are compared with similar items before theimplementation of the total quality managementprogram.The least persuasive evidence would be a comparison ofA. 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: AQuestion No : 66Question No : 67Question No : 68IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 26An audit team has been assigned to review ‘the customer satisfaction measurementsystem’ that the industrial products division implemented two years ago. This systemconsists 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 whomade purchases in the prior 12 months. The survey is three pages long and its 30questions use a mixture of response modes (e.g., some questions are open-ended, somemultiple choice, and others use a response scale). The customer service office mails thesurvey 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 isconducted. When the survey was last conducted, 45 of the questionnaires were notreturned.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: DAn auditor selected a random sample of 100 items from a population of 2,000 items. Thetotal dollars in the sample were $10,000, and the standard deviation was $10. If theachieved precision based on this sample was plus or minus $4,000, the minimumacceptable value of the population would beA. $204,000B. $196,000C. $199,000D. $199,800Answer: BAccounts payable schedule verification may include the use of analytical evidence.Question No : 69Question No : 70IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 27Which of the following is most appropriately described as analytical evidence?A. Comparing the items on the schedule with the accounts payable ledger or unpaidvoucher file.B. Comparing the balance on the schedule with the balances of prior years.C. Comparing confirmations received from selected creditors with the accounts payableledger.D. Examining vendors' invoices in support of selected items on the schedule.Answer: BWhich of the following tests can help the auditor to evaluate the adequacy of thecompany'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: BTo test compliance with a policy regarding sales returns recorded during the most recentyear, an auditor systematically selected 5% of the actual returns recorded in March andApril. Returns during these two busiest months of the year represented about 25% of totalannual returns.Error projections from this sample have limited usefulness becauseA. The small size of the sample relative to the population makes sampling riskunacceptable.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 wholeyear.Question No : 71Question No : 72IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 28Answer: DDuring the audit of inventories, an internal auditor specified a precision of 5% instead of the4% 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 sizeD. An increase in required sample sizeAnswer: CWhich of the following statements conveys negative information in such a way thatafavorableresponse 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 statementeach month.D. You have apparently failed to inform your book keeper that the bank statements shouldbe reconciled on a timely basis.Answer: BDuring an interview with a data input clerk to discuss acomputerizedsystem used to trackemployee training requirements and compliance, an auditor identifies a potentiallysignificant weakness in the system.Question No : 73Question No : 74

Question No : 75IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 29The auditor shouldA. Not mention the weakness, directly or indirectly, to avoid making the clerkuncomfortable.B. Ask indirect questions that will help get more factual information relating to the potentialweakness.C. Ask the clerk about the weakness and determine immediately if the finding should bereported.D. Conduct a second interview after determining whether the weakness actually exists.Answer: BWhich of the following is the best source for an audit team to use to identify common risksfaced by a company?A. Checklists or reminder listsB. FlowchartsC. QuestionnairesD. Research reported in professional journals and text booksAnswer: DAn internal auditor found that employees in the maintenance department were not signingtheir time cards. This situation also existed during the last audit.The auditor shouldA. 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 cardsAnswer: AQuestion No : 76Question No : 77IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 30Computer fraud is discouraged byA. Being willing to prosecute.B. Ostracizingwhistle-blowers.C. Overlooking inefficiencies in the judicial system.D. Accepting the lack of integrity in the system.Answer: AWhich of the following types of tests would be the most persuasive if an internal auditorwanted assurance of the existence of inventory stored in a warehouse?A. Examination of the shipping documents supporting recorded transfers to and from thewarehouse.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: CPurchases from two new vendors increased dramatically after a new buyer was hired. Thebuyer was obtaining kickbacks from the two vendors based on sales volume.A possible means of detection isA. 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: DQuestion No : 78Question No : 79Question No : 80IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 31IQN QIA : Practice TestA Composite Solution With Just One Click - Certification Guaranteed 32