Free Certified Internal Auditor Exam Questions 2024

Question #1

A high-volume retailer of consumer goods has used point-of-sale data to record sales and update inventory records for several years. When price changes are scheduled, corporate headquarters downloads a price change file to a computer server system at each store. Each store's assistant manager is responsible for checking the server for downloads and running the program that updates the store's price file at the authorized price update time. In comparison with having headquarters initiate the price update cen

A. ecrease the risk that customers will be undercharged consistently for sales items

B. ecrease the risk that item prices will sometimes be inaccurate

C. ncrease the risk that customers will be undercharged consistently for sales items

D. ncrease the risk that item prices will sometimes be inaccurate

View answer

Correct Answer: D

Question #2

In which industry structure is differentiation absent, and all sellers charge the same price?

A. onopoly

B. onopolistic competition

C. ligopoly

D. ure competition

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Correct Answer: D

Question #3

If cost estimates in an economic order quantity (EOQ) model are varied to determine how much the changes affect the optimal EOQ, such analysis would be called a

A. orecasting model

B. ensitivity analysis

C. ritical path analysis

D. ecision analysis

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Correct Answer: B

Question #4

Managerial attitudes toward global operations are viewed by researcher HowardPerl mutteras a key to understanding multinational firms. An ethnocentric attitude is indicatedby:

A. n identification with the nationality of the host country

B. ollaboration between the firm's subsidiaries and the firm's central administration

C. high volume of information flow in the form of orders and advice to subsidiaries

D. staffing emphasis on finding and developing the best people in the world for key positions anywhere in the firm

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Correct Answer: C

Question #5

The director of internal auditing for a large company has established an excellent reputation because of her strong professional credentials and tactful but firm handling of auditor-auditee relationships. With regard to auditees, she must rely upon what sources of power?

A. xpert and coercive

B. eferent and reward

C. eferent and expert

D. egitimate and coercive

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Correct Answer: C

Question #6

In some regions of the world, business is conducted more often through personal relationship building than through legal contracts. This is an example of a

A. ultural factor

B. ommercial factor

C. echnical factor

D. egal factor

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Correct Answer: A

Question #7

Price skimming involves

A. etting a low introductory price

B. etting a high introductory price

C. etting different freight charges for customers in different zones

D. sing markups tied closely to the price paid for a product

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Correct Answer: B

Question #8

Globalization and localization are shaping the competitive structure of industries. The scenario contributing to the most competitive environment is when:

A. lobal forces dominate

B. ocal forces dominate

C. ix of global and local forces dominate

D. either global nor local forces dominate

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Correct Answer: C

Question #9

With regard to inventory management, an increase in the frequency of ordering will normally

A. educe the total ordering costs

B. ave no impact an total ordering costs

C. educe total carrying costs

D. ave no impact on total carrying costs

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Correct Answer: C

Question #10

The purpose of the economic order quantity model is to:

A. inimize the safety stock

B. inimize the sum of the order costs and the holding costs

C. inimize the inventory quantities

D. inimize the sum of the demand costs and the backlog costs

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Correct Answer: B

Question #11

Which of the following types of audit evidence is best defined as the proof of a fact without reliance on presumptions for support?

A. irect

B. ircumstantial

C. onclusive

D. orroborative

E. he answer is pending

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Correct Answer: E

Question #12

Market-based pricing involves

A. dding a standard markup to the cost of the product

B. etermining the price at which the product' will earn a target profit

C. asing prices on the product's perceived value

D. asing prices on competitors' prices

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Correct Answer: C

Question #13

An entity often factors its accounts receivable. The finance company requires an 8% reserve and charges a 1.5% commission on the amount of the receivable. The remaining amount to be advanced is further reduced by an annual interest charge of 16%. What proceedsrounded to the nearest dollar) will the entity receive from the finance company at the time a US $110, 000 account that is due in 60 days is turned over to the finance company?

A. S $81, 950

B. S $83, 630

C. S $96, 895

D. S $99, 550

View answer

Correct Answer: C

Question #14

Although bureaucracy is often perceived negatively by the public, bureaucracy is a feature of nearly every large company. Which of the following is a sign that a bureaucracy is dysfunctional?

A. diversity of jobs

B. ules that obscure responsibility

C. large number of rules necessary for day to day operations

D. bedience to authority

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Correct Answer: B

Question #15

To enhance the independence of both the internal and external audit functions, audit committees should be composed of

A. rotating subcommittee of the board of directors or its equivalent

B. combination of external members of the board of directors and company officers

C. embers from all important constituencies, specifically including representatives from banking, labor, regulatory agencies, shareholders, and officers

D. nly external members of the board of directors or other similar oversight committees

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Correct Answer: D

Question #16

Which of the following is not true with regard to the internal audit charter?

A. t defines the authorities and responsibilities of the internal audit activity

B. t specifies the minimum resources needed for the internal audit activity

C. t provides a basis for evaluating the internal audit activity

D. t should be approved by senior management and the board

View answer

Correct Answer: B

Question #17

The company uses a planning system that focuses first on the amount and timing of finished goods demanded and then determines the derived demand for raw material, components, and subassemblies at each of the prior stages of production. This system is referred to as

A. conomic order quantity

B. aterial requirements planning

C. inear programming

D. ust-in-time purchasing

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Correct Answer: B

Question #18

A chief audit executive (CAE) of a major retailer has engaged an independent firm of information security specialists to perform specialized internal audit activities. The CAE can rely on the specialists' work only if it is

A. erformed in accordance with the terms of the contract

B. arried out in accordance with the Standards

C. erformed under the supervision of the information technology department

D. arried out using standard review procedures for retailers

View answer

Correct Answer: B

Question #19

Which of the following concepts is not consistent with a successful authoritarian organization?

A. ach subordinate should only have one superior

B. uperiors may have as many subordinates as possible within the superior's span of control

C. esponsibility may be delegated

D. he hierarchy of authority should be precisely defined

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Correct Answer: C

Question #20

The network below describes the interrelationships of several activities necessary to complete a project. The arrows represent the activities. The numbers between the arrows indicate the number of months to complete each activity. The shortest time to complete the project is

A. months

B. months

C. months

D. 4 months

View answer

Correct Answer: C

Question #21

Client satisfaction surveys provide the engagement client with an opportunity to

A. rovide further information on the issues identified during the engagement

B. espond to the internal audit report findings

C. uggest ways to improve the audit process

D. erform a self assessment to supplement the internal audit report findings

View answer

Correct Answer: C

Question #22

A global firm establishes a cost-based price for the firm's product in each country. The most likely negative outcome is that this pricing strategy will

A. et too high a price in countries where the firm's costs are high

B. verprice the product in some markets and underprice the product in others

C. reate a gray market

D. esult in dumping

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Correct Answer: A

Question #23

The use of probability proportional to size (PPS) sampling is not efficient if

A. ank accounts are being audited

B. ach item is of equal importance

C. he number of sampling units is large

D. tatistical inferences are to be made

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Correct Answer: B

Question #24

During a systems development audit, software developers indicated that all programs were moved from the development environment to the production environment and then tested in the production environment. What should the auditor recommend?I). Implement a test environment to ensure that testing is not performed in the production environment.II). Require developers to move modified programs from the development environment to the test environment and from the test environment to the production environment.III

A. only

B. II only

C. and II only

D. and III only

View answer

Correct Answer: D

Question #25

The bullwhip, or whiplash, effect on inventories begins when retailers face uncertain demand from consumers caused by randomness in buying habits. It can be avoided by

A. he need to purchase or manufacture goods in cost-efficient batches

B. hanges in price that may encourage purchases in anticipation of future increases

C. hortages that may lead to rationing by suppliers or manufacturers and hoarding by manufacturers or retailers

D. haring of information and coordination among the organizations in the supply chain

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Correct Answer: D

Question #26

A firm that moves from not exporting on a regular basis to establishing plants in foreign countries has

A. lobalized

B. ationalized

C. localized

D. nternationalized

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Correct Answer: D

Question #27

According to the International Professional Practices Framework, which of the following describes a key objective of the risk management process that would also be a key responsibility of the internal audit activity?

A. etermine the level of risk acceptable to the organization, including the acceptance of risks designed to accomplish the organization's strategic plans

B. esign and implement risk mitigation activities to reduce risk to levels that have been determined to be acceptable

C. eceive periodic reports of the results of the risk management processes

D. onduct ongoing monitoring activities to periodically reassess risk and the effectiveness of the controls to manage risk

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Correct Answer: D

Question #28

Which of the following hiring procedures provides the most control over the accuracy of information submitted on an employment application?

A. pplicants are required to submit unofficial copies of their transcripts along with the application as verification of their educational credentials

B. he hiring organization calls the last place of employment for each finalist to verify the employment length and position held

C. etters of recommendation that attest to the applicants character must be mailed directly to the hiring organization rather than being submitted by the applicant

D. pplicants are required to sign a statement that the information on the application is true and correct as a confirmation of its truth

View answer

Correct Answer: B

Question #29

For an industry to be genuinely global, it must be involved in which of the following significant activities?I). LicensingII). ExportIII). Direct Investment

A. )

B. I)

C. )

D. ll

View answer

Correct Answer: B

Question #30

In what order should the following actions be taken by an internal auditor when planning to analyze data using computer assisted audit techniques?I). Define the procedures to be undertaken.II). Define the output requirements.III). Set the objectives.IV). Obtain access to appropriate data.

A. II, II, I, IV

B. I, III, IV, I

C. II, IV, I, II

D. V, III, II, I

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Correct Answer: A

Question #31

Which method of expanding into international markets is most likely the riskiest?

A. local storage and sale arrangement

B. ocal component assembly

C. irect investment

D. oint venture

View answer

Correct Answer: C

Question #32

One drawback of business process reengineering BPR), sometimes referred to as business process analysis, is

A. mproved efficiency in the business processes analyzed

B. xcess of cast over the benefit

C. eduction of operational efficiency

D. mployee resistance to change

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Correct Answer: D

Question #33

If sales are accounted for using the installment method, which of the following is(are) only recognized in proportion to the cash collected on the sales during the period?

A. ales

B. ales and cost of sales

C. ales and cost of sales and selling expenses

View answer

Correct Answer: B

Question #34

Which of the following types of internal audit consulting engagements is an example of a facilitation service?I). Conducting control self assessment workshops.II). Participating on standing committees.III). Reviewing regulatory compliance.IV). Benchmarking.V). Estimating savings from outsourcing processes.

A. and IV only

B. , III, and IV only

C. I, III, and V only

D. , II, III, IV, and V

View answer

Correct Answer: A

Question #35

One method for dealing with the uncertainty of demand forecasts used in linear programming is to extend the model solution to include

A. ensitivity analysis

B. oal seeking

C. ranch and bound solutions

D. onlinear programming

View answer

Correct Answer: A

Question #36

To comply with the matching principle, the cost of labor services of an employee who participates in the manufacturing of a product normally should be charged to the income statement in the period in which the

A. ork is performed

B. mployee is paid

C. roduct is completed

D. roduct is sold

View answer

Correct Answer: D

Question #37

An audit of a company's accounts payable found that the individuals responsible for maintaining the vendor master file could also enter vendor invoices into the accounts payable system. During the exit conference, management agreed to correct this problem. When performing a follow-up engagement of accounts payable, the auditor should expect to find that management has

A. ransferred the individuals who maintained the vendor master file to another department to ensure that responsibilities are appropriately segregated

B. ompared the vendor and employee master files to determine if any unauthorized vendors have been added to the vendor master file

C. hanged the access control system to prevent employees from both entering invoices and approving payments

D. odified the accounts payable system to prevent individuals who maintain the vendor master file from entering invoices

View answer

Correct Answer: D

Question #38

The STEP model is consistent with which organizational philosophy?

A. elf-managed teams

B. pen-book management

C. mpression management

D. roup development

View answer

Correct Answer: B

Question #39

To assure that the technical proficiency of internal auditors is appropriate for the audit engagements to be performed, a chief audit executive should

A. onsider the scope of work and level of responsibility when establishing criteria for education and experience in filling internal auditing positions

B. nsure that each newly hired auditor is qualified in all of the disciplines needed to accomplish the department's audit mission

C. versee a training program that matches the actual training provided with the interests of individual auditors

D. equire all of the audit staff to pursue a minimum number of Continuing Professional Education hours each year

View answer

Correct Answer: A

Question #40

Ina product's life cycle, the first symptom of the decline stage is a decline in the

A. irm's inventory levels

B. roduct's sales

C. roduct's production cost

D. roduct's prices

View answer

Correct Answer: B

Question #41

If the amount to be received in 4 years is US $137, 350, and given the correct factor from the 10% time-value-¬of-money table below, what is the current investment?

A. S $30, 034

B. S $43, 329

C. S $93

D. S $201, 094

View answer

Correct Answer: C

Question #42

The creation of regional free trade zones is a global phenomenon. Trade barriers are lowered in these areas, and other steps are taken to promote economic cooperation. For example, a common currency has been adopted by the nations of:

A. AFT

B. ercosul

C. PE

D. he European Union

View answer

Correct Answer: D

Question #43

On January 2, Year 1, Kine Co. granted Morgan, its preside -I t. share options to buy 1.000 shares of Kine's US $10 per ordinary stock. The options call for a price of US$20 per share and are exercisable for 3 years following the grant date. Morgan exercised the options on December 31, Year 1. The market price of the shares was US $50 on January 2, Year 1, and US $70 on the following for December 31. The market price of the shares is followed because the fair value of the option is not reliable measurable,

A. S $ 20, 000

B. S $30, 000

C. S $50, 000

D. S $70, 000

View answer

Correct Answer: A

Question #44

An internal audit activity encounters a scope limitation from senior management that will affect its ability to meet its goals and objectives for a potential engagement client.The nature of the scope limitation should be

A. oted in the audit workpapers, but the engagement should be carried out as scheduled, with any necessary adjustments made based on the scope limitation

B. ommunicated to the external auditors so that they can investigate the area in more detail

C. ommunicated, preferably in writing, to the board

D. ommunicated to management, stating that the limitation will not be accepted because it would impair the audit activity's independence

View answer

Correct Answer: C

Question #45

When interrogating an individual who is suspected of fraud, it is appropriate to

A. ell the individual that any information disclosed in the interrogation will not be disclosed outside of the company

B. tart the interview with questions to which the interviewer already knows the answer

C. iscontinue questioning once the individual has confessed to the fraud

D. repare a list of questions prior to the interrogation and strictly adhere to the list

View answer

Correct Answer: B

Question #46

The effective-interest method and the straight-line method of amortizing a bond discount differ in that the effective-interest method results in

A. igher total interest expense over the term of the bonds

B. scalating annual interest expense over the term of the bonds

C. onstant annual interest expense over the term of the bonds

View answer

Correct Answer: B

Question #47

The gross profit amount from Year 3 sales to be deferred to future years would be

A. S $2, 000

B. S $3

C. S $8, 000

D. S $10, 000

View answer

Correct Answer: C

Question #48

Which of the following would not compromise an internal auditor's objectivity?

A. reparing bank reconciliations

B. eviewing procedures before they are implemented

C. uditing an activity for which the auditor had responsibility in the past year

D. roviding both advisory services and audit services for a project

View answer

Correct Answer: B

Question #49

When compared to individuals, groups have advantages and disadvantages for decision making. Which of the following is true regarding group decisions? Advantages Disadvantages:

A. ncreased personalDisagreements do not accountability surface because of pressures to conform

B. ncreased Takes more time to acceptance ofarriveat a decision by participants

C. akes less time to Lack of personal arrive at adecisionalaccountability

D. ncreased diversity Reduced acceptance ofexpertise decisionby participants

View answer

Correct Answer: B

Question #50

Which of the following project scheduling techniques is commonly used in total quality management for simplifying work processes?

A. antt charts

B. lowcharting

C. rogram evaluation and review technique

D. ritical path method

View answer

Correct Answer: B

Question #51

An internal auditor performs an analytical procedure to compare the gross margins of various divisional operations with those of other divisions and with the individual division's performance in previous years. The internal auditor notes a significant increase in the gross margin at one division_ The internal auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. The most likely cause of the increase in

A. n increase in the number of competitors selling similar products

B. decrease in the number of suppliers of the material used in manufacturing the product

C. n overstatement of year-end inventory

D. n understatement of year-end accounts receivable

View answer

Correct Answer: C

Question #52

Which of the following actions taken by management would most likely improve an organization's moral climate?

A. aking changes in organizational policies

B. romoting changes in employee attitudes

C. valuating the organization's moral climate

D. odeling appropriate behavior in the workplace

View answer

Correct Answer: D

Question #53

Which of the following measurements could an auditor use in an audit of the efficiency of a motor vehicle inspection facility?

A. he total number of cars approved

B. he ratio of cars rejected to total cars inspected

C. he number of cars inspected per inspection agent

D. he average amount of fees collected per cashier

View answer

Correct Answer: C

Question #54

A substantial duplication of functions characterizes which of the following structures?

A. imple structure

B. ivisional structure

C. achine bureaucracy

D. rofessional bureaucracy

View answer

Correct Answer: B

Question #55

Based upon the data derived from the regression analysis, 420 maintenance hours in a month would mean the maintenance costs rounded to the nearest U dollar) would be budgeted at

A. $3, 780

B. $3, 600

C. $3, 790

D. $3, 746

View answer

Correct Answer: D

Question #56

Which of the following leases ordinarily should be classified as a finance lease by the lessee?

A. ease A only

B. ease B only

C. eases A, C and D

D. eases C and D only

View answer

Correct Answer: C

Question #57

A small engineering consulting firm accepts special projects from customers in a variety of fields. Its choice of an organic organizational design was most likely based on its:

A. ack of concern for self-fulfillment of employees

B. reference for formal communication

C. doption of directive leadership style

D. articipative decision making processes

View answer

Correct Answer: D

Question #58

Which of the following items should be addressed in an organization's privacy statement?I). Intended use of collected information.II). Data storage and security.III). Network/infrastructure authentication controls IV). Data retention policy of the organization.V). Parties authorized to access information.

A. and II only

B. and IV only

C. , II, and V only

D. I, III, IV, and V only

View answer

Correct Answer: C

Question #59

Which of the following would not be characteristic of control self assessment implemented by an audit department?

A. n auditor usually facilitates the discussion during the workshop phase while another records comments for subsequent use

B. uditors and business unit employees work as a team

C. uditors perform traditional audit tests to identify control weaknesses

D. articipants discuss the control weaknesses that hinder the achievement of objectives

View answer

Correct Answer: C

Question #60

A firm is most likely to leave a declining industry because

A. he remaining pockets of demand include price-insensitive buyers

B. t is the only part of a vertically integrated business that is affected

C. uyers have high switching costs

D. obility barriers are high

View answer

Correct Answer: B

Question #61

Organizational charts often represent the formal structure of an organization. Often the organizational chart represents a pyramid with the chief executive on the top and the operating workforce on the bottom. Which of the following would not be included in a typical organizational chart?

A. he span of control and the number of organizational levels

B. ommunication channels

C. romotional or career tracks

D. nformal influence or friendships

View answer

Correct Answer: D

Question #62

Which of the following is a source of communication breakdown within an organization due to a sense of superiority by members of a particular culture?

A. erceptual problem

B. tereotyping

C. thnocentrism

D. ncertainty avoidance

View answer

Correct Answer: C

Question #63

The carrying costs associated with inventory management include

A. nsurance costs, shipping costs, storage costs, and obsolescence

B. torage costs, handling costs, capital invested, and obsolescence

C. urchasing costs, shipping costs, setup costs, and quantity discounts lost

D. bsolescence, setup costs, capital invested, and purchasing costs

View answer

Correct Answer: B

Question #64

The structure of an organization generally follows its overall strategy. At one end are loosely structured, organic organizations. At the other end are highly centralized, tightly controlled, mechanistic organizations. Consider the overall strategy of a company that is a pioneer in the combination of laser and robotic technologies. The company's scientists and engineers hold many patents. They are continually looking for ways to improve their products as well as to introduce new ones. Identify the most appr

A. echanistic

B. mitative

C. rganic

D. ureaucratic

View answer

Correct Answer: C

Question #65

An audit manager allowed a work group to make a decision about whether to adopt a new work procedure. In allowing the group to make the decision, the manager should be aware that groups tend to make:

A. ery conservative decisions and do not want to assume risk

B. aster decisions than do individuals because groups have more expertise than does any one person

C. ecisions that are less accurate than those made by individuals

D. iskier decisions than do individuals, and individual responsibility for the group's decision is lessened

View answer

Correct Answer: D

Question #66

If a series of profit lines for and Y are drawn on the graph, the mix of G and Y that will result in the maximum profit can be determined from

A. he last point in the feasible solution region touched by a profit line

B. ny point on the boundary of the feasible solution region touched by a profit line

C. he first paint an the feasible solution region boundary that intersects a profit line

D. ny point on the demand constraint that intersects a profit line

View answer

Correct Answer: A

Question #67

Internal auditors exercise judgment about the type and amount of information to be collected. The primary purpose of this judgment is to

A. liminate the risk of drawing incorrect conclusions

B. inimize the cost of the audit engagement

C. omply with the Standards

D. rovide a sound basis for audit observations and recommendations

View answer

Correct Answer: D

Question #68

A company purchased a new machine on an installment payment plan and is to make equal annual payments beginning one year from the date of purchase. Using an interest rate of 10%, the cost of the machine can be determined by multiplying one payment by the

A. uture value of one currency unit

B. uture value of an annuity due of one currency unit

C. resent value of one currency unit

D. resent value of an ordinary annuity of one currency unit

View answer

Correct Answer: D

Question #69

Auditors 1, 2, and 3 work out of various offices. Each must be assigned to one, and only one, of three audit locations (A, B, or C). The cost of sending each auditor to each location is listed below Audit Locations Auditor 1 Auditor 2 Auditor 3 A $200 $400 $200 B $300 $300 $200 C $400 $600 $500 The minimum cost with which this assignment can be accomplished is

A. 800

B. 900

C. 1,000

D. 1,100

View answer

Correct Answer: B

Question #70

A cash flow hedge mitigates risk exposure due to variability in cash flows associated with which of the following?

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: B

Question #71

A corporation reported salaries expense of US $190, 000 for December of the current year. The following data are from its records:The amount of cash payments for salaries during December of the current year was

A. S $154, 000

B. S $166, 000

C. S $214, 000

D. S $226, 000

View answer

Correct Answer: B

Question #72

To ensure that due professional care has been taken during an audit engagement, an internal auditor should always

A. nsure that all financial information related to the engagement is included in the audit plan and examined for irregularities

B. ocument all audit tests completely

C. onsider the possibility of noncompliance or irregularities at all times during an engagement

D. otify the audit committee of any noncompliance or irregularity discovered during an engagement

View answer

Correct Answer: C

Question #73

An inventory planning method that minimizes inventories by arranging to have raw materials and subcomponents arrive immediately preceding their use is called

A. safety stock planning system

B. n economic order quantity model

C. just-in-time inventory system

D. master budgeting system

View answer

Correct Answer: C

Question #74

Listed below are selected line items from the cost-of-quality report for Company B forWhat is Company B's total prevention and appraisal cost for last month?

A. S $786

B. S $1, 154

C. S $1, 940

D. S $2, 665

View answer

Correct Answer: C

Question #75

A problem with the effectiveness of teams is the concept known as:

A. rainstorming

B. ocial loafing

C. ynergy

D. ole playing

View answer

Correct Answer: B

Question #76

Under a total quality management TOM) approach,

A. easurement occurs throughout the process, and errors are caught and corrected at the source

B. uality control is performed by highly trained inspectors at the end of the production process

C. pper management assumes the primary responsibility for the quality of the products and services

D. large number of suppliers are used in order to obtain the lowest possible prices

View answer

Correct Answer: A

Question #77

A firm sells its product in a foreign market for a much higher price than in its home market.The reason is most likely

A. rice elasticity of demand

B. umping

C. ray market activity

D. rice escalation

View answer

Correct Answer: D

Question #78

Which of the following audit findings would have the least impact (either positive or negative) on a department's control environment?

A. he department makes long-term investment risk decisions to maximize return on investment

B. he department manager sets and demonstrates a tone of honesty and integrity in all business dealings

C. ny department functions are duplicated or verified by other department employees

D. eficiencies were found in the appropriate authorization of transactions

View answer

Correct Answer: A

Question #79

A starting point for developing competitive strategies is customer value analysis (CVA).According to theCVA approach.

A. ustomer value equals customer benefits

B. ad competitors rather than good competitors should be targeted

C. trong competitors should be avoided even when they have exploitable weaknesses

D. istant competitors are the usual threats

View answer

Correct Answer: B

Question #80

While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the life cycle?

A. ntroduction stage

B. rowth stage

C. aturity stage

D. ecline stage

View answer

Correct Answer: B

Question #81

Which of the following is a unique reporting problem associated with the determination of the results of operations for an interim period?

A. dvertising and similar costs expensed in one interim period may benefit other interim periods in the same annual period

B. ost of goods sold for an interim period reflects only the amount of product cost applicable to sales revenue recognized in the interim period

C. epreciation for an interim period represents an estimate

D. n extraordinary loss occurring in the second quarter must be prorated over the last three interim periods of the year

View answer

Correct Answer: A

Question #82

A retail company uses a computer program that matches electronic vendor invoices with the applicable purchase orders and receiving information, which are also maintained electronically. If an invoice does not match the other items within predefined ranges, a report is generated and sent to the accounts payable department for further investigation. All of the applicable documents are electronically marked, cross referenced, and retained in open files. Both an integrated test facility and a systems control au

A. se generalized audit software to read the electronically marked unmatched items

B. se generalized audit software to read the purchase orders and trace to applicable receiving and vendor invoice files

C. se the SCARF to identify unusual items

D. ubmit test data to identify attributes of unmatched items

View answer

Correct Answer: A

Question #83

Why have many European Union countries not adopted ISO 14000 standards?

A. dhering to ISO 14000 standards will not reduce monitoring and inspection by regulatory agencies

B. ndividual European Union countries' standards are typically more strict than ISO 14000 standards

C. egulators are permitted to use voluntary audits as a basis for punitive action

D. SO 14000 standards will not make it easier to do business across borders

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Correct Answer: B

Question #84

A daily report which lists unsuccessful attempts to log on to a computer system is a

A. orrective control

B. reventive control

C. etective control

D. ompensating control

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Correct Answer: C

Question #85

A trucking company contracted a third party to construct a new vehicle maintenance facility. One of the trucking company's auditors was assigned to look for contractor overcharges. After reviewing the contract, the auditor recommended that an audit of the construction contract not be performed. What is the most likely reason for the auditor's recommendation?

A. he contract did not include a right to audit clause

B. he contractor was engaged on a fixed price basis

C. he contractor's billing system included comprehensive edit routines to detect overbilling

D. he trucking company's accounts payable system compared amounts billed with contract terms to detect potential overcharges

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Correct Answer: B

Question #86

The top three sales representatives for a company consistently include non-allowable charges on their expense reports. Line management is reluctant to deny reimbursement of the charges for fear of losing the sales representatives. This situation has the greatest negative impact on which of the following internal control components?

A. onitoring

B. ontrol environment

C. nformation and communication

D. ontrol activities

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Correct Answer: B

Question #87

Groups have often evolved by self-set standards of performance and behavior, usually based on the personal and social backgrounds of the individuals on the job. This establishment of a group culture is referred to as developing:

A. ole models

B. ohesiveness

C. onformity

D. orms

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Correct Answer: D

Question #88

Following a decision to change the composition of several work teams, management encounters significant resistance to the change from members of the teams. The most likely reason for the resistance is:

A. ossible inefficiencies of the new arrangement

B. he breakup of existing teams

C. nderstaffing for the tasks involved

D. he selection of a more costly approach to performing the assigned tasks

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Correct Answer: B

Question #89

The internal auditor of a bank has developed a multiple regression model which has been used for a number of years to estimate the amount of interest income from commercial loans. During the current year, the auditor applies the model and discovers that the R2 value has decreased dramatically, but that the model otherwise seems to be working correctly. Which of the following conclusions is justified by the change?

A. hanging to a cross sectional regression analysis should cause the R2 to increase

B. egression analysis is no longer an appropriate technique to estimate interest income

C. ome new factors, not included in the model, are causing interest income to change

D. linear regression analysis would increase the model's reliability

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Correct Answer: C

Question #90

All of the following are objectives of pricing except

A. mage oriented objectives

B. rofit maximization

C. tabilization

D. roduction maximization

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Correct Answer: D

Question #91

Which of the following is the best measure of productivity to use to evaluate several departments in a large retail store?

A. umber of customers served per employee per day

B. evenue per square foot

C. umber of units sold per department per day

D. verage number of units stocked per month per department

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Correct Answer: B

Question #92

In the standard regression equation y = a + bx, how is the letter b best described?

A. ndependent Variable

B. ependent Variable

C. onstant coefficient

D. ariable coefficient

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Correct Answer: D

Question #93

The estimated demand for pretzels at the next home football game using a deterministic approach based on the most likely outcome is

A. , 000 pretzels

B. , 400 pretzels

C. , 000 pretzels

D. , 000 pretzels

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Correct Answer: C

Question #94

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. only

B. II only

C. , III, and IV only

D. I, III, and IV only

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Correct Answer: D

Question #95

During an operational audit of a chain of pizza delivery stores, an auditor determined that cold pizzas were causing customer dissatisfaction. A review of oven calibration records for the last six months revealed that adjustments were made on over 40 percent of the ovens.Based on this, the auditor

A. as enough evidence to conclude that improperly functioning ovens are the cause

B. eeds to conduct further inquiries and reviews to determine the impact of the oven variations on the pizza temperature

C. as enough evidence to recommend the replacement of some of the ovens

D. ust search for another cause since approximately 60 percent of the ovens did not require adjustment

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Correct Answer: B

Question #96

A new production team has been formed by taking experienced high achievers from existing teams within the factory. The members of the new team have not been required to learn any new skills, and the machines used are identical to those used in their former teams. The team's production supervisor is a longtime employee of the organization but has not previously worked with any members of the new team. Despite the abilities and previous individual achievements of the individual team members, management is sur

A. ncrease pressure on the team through higher goals and reprimands

B. eplace the individuals on the team

C. rovide opportunities for the team members to socialize with each other

D. o nothing now because it is too soon to draw any conclusions

View answer

Correct Answer: C

Question #97

Which of the following is true regarding the most recent traitist approach to leadership?

A. he most recent traitist approach to leadership attempts to identify traits possessed by leaders

B. he most recent traitist approach to leadership has produced such a long list of leadership traits that, in effect, the approach identifies nothing

C. he most recent traitist approach to leadership is based on scholarship, dependability, and social participation

D. he most recent traitist approach to leadership is based on social skills, judgment, maturity, and emotional control

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Correct Answer: D

Question #98

An organization must manage its flows of raw materials, components, finished goods, services, or information through intermediaries to ultimate consumers. These flows may occur across the functions in an organization's

A. upply chain

B. alue chain

C. ogistic chain

D. ntegrated chain

View answer

Correct Answer: B

Question #99

While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the life cycle?

A. ntroduction stage

B. rowth stage

C. aturity stage

D. ecline stage

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Correct Answer: B

Question #100

A company began work on a long-term construction contract in Year 1. The contract price was US $3, 000, 000. Year-end information related to the contract is as followsIf the company uses the percentage-of-completion method of accounting for this contract, the profit to be recognized in Year 1 is

A. S $(100, 000)

B. S $(100, 000)

C. S $(200, 000)

D. S $(350, 000)

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Correct Answer: D

Question #101

In preparing to facilitate a control self assessment session, an auditor would be least likely to ensure that

A. ey stakeholders are represented in the group

B. n independent content expert is available to help settle disagreements

C. ackground research is completed to familiarize the auditor with relevant issues

D. anagement is consulted on the issues and priorities

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Correct Answer: B

Question #102

A chief audit executive used risk assessment to prepare the audit work schedule. Which of the following would be the least appropriate reason to modify the schedule?

A. eed for coordination of audit activities with the external auditors

B. equest for postponement since the audit would be too complicated

C. hange in the relative risk of auditable activities during the year

D. udget constraints or expansions

View answer

Correct Answer: B

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