Chapter 13

Which of the following is not likely to be an assurance engagement objective?

A. Evaluated the design adequacy of the payroll input process.

B. Guarantee the accuracy of recorded inventory balances.

C. Assess compliane with health and safety laws and regulations

D. Determine the operating effectiveness of fixed asset controls

A process objective stating "All contracts must me approved by an officer of the company before being consummated" is an example of what type of objective?

A. Strategic
B. Reporting
C. Operations
D. Compliance

Analytical procedures can be applied during which phase(s) of an assurance engagement?

A. Plan and perfom phases
B. Perform Phase.
C. Communicate phase
D. Plan phase

Which of the following auditee-prepared documents will likely be of greatest assistance to the internal auditor in their assessment of process desing adequacy?

A. Organization charts and job descriptions
B. Narrative memoranda listing key tasks for portions of the process
C. Detailed flowchars depicting the flow of the process
D. Policies and procedures manual

Which of the following controls is not likely to be an entity-level control?

A. All employees must recieve ongoing training to ensure they maintain their competence

B. All cash disbursement transactions must be approved before they are paid

C. All employees must comply with the Code of Ethics and Business Conduct

D. An organizationwide risk assessment is conducted annually

Which of the following is not typically a key element of flowcharts or narrative memoranda?

A. Overall process of objectives.
B. Key outputs from the process
C. Key risks and controls
D. Key inputs to the process.

Which of the following external risks is least lkely to impact the accuracy of the financial reporting?

A. The standard setting body in the organization's country isseus a financial accounting standard

B. A recent judicial court case increase the likelihood that pending litigation will result in an unfavorable outcome

C. Changes in standard industry contracts now allow for netting of payables and receivables

D. Competitor pressures cause the organization to pursue new sales channels

Which of the following groups' risk tolerance levels are least relevant when conducting an assurance engagement?

A. Process-level management
B. The internal audit function
C. Senior management
D. Vendors and customers

Which of the following controls is likeley to be least relevant when evaluating the desing adequacy of a cash collections process?

A. Calculating the amount of cash received

B. Documenting the rationale for selecting the bank account into which the deposit will be made

C. Matching the total deposits to the amounts credited to customers' A/R balances

D. Segregating the preperation of deposit slips from the adjustment of customer account balances

An internal auditor determiens that the process is not designed adequately to reduce the underlying risks to an acceptable level. Which of the following should the internal auditor do next?

A. Wirte the audit report, there's no reason to test the operating effectiveness of cotnrols that are not designed adequately.

B. Test compensating cotnrols in other (adjacent) processes to see if the impact of the desing inadequacy is reduced to an acceptable level

C. Test the existing key controls anyway to prove that, despite the design inadequy, the process is still meeting the process objectives.

D. Postpone the engagement until the design inadequacy has been rectified

In an internal auditor identifies na exception while testing, which of the foloowing may be appropriate?

A. Test additional items to determine whether the exception is an isolated occurrence or indicative of a control deficiency

B. Gain an understanding of the root cause, that is, the reason the exception occurred.

C. Draft an observation for the audit report.

D. All of the above

Which of the folllowing is an appropriate conclusion that can be drawn when the internal auditor idnetifies an observation from testing controls?

A. The process objectives cannot be achieved.

B. The area may be vulnerable to fraud

C. Certain risk are not effectively mitigated

D. Overall, the process is not operating effectively

Once an observation is identified by the internal auditor, it should be:

A. Documented in the working papers.
B. Included in the final audit report
C. Scheduled for follow-up
D. Discussed with the audit committee