QUESTION: 109

An internal auditor audited a department store's cash function. Which of the following actions would indicate a lack of due professional care by the auditor?

Based on a well-designed system of internal controls over the cash function, the audit report assured senior management that no irregularities existed.
A flowchart of the entire cash function was developed but only samples of transactions were tested.
The audit report included a well-supported recommendation for a reduction in staff even though such a reduction might adversely impact morale.
The auditor informed appropriate authorities within the organization about suspected wrongdoing but did not inform external authorities.

Answer(s): A

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QUESTION: 110

In order to save time, an audit manager no longer required that a standard internal control questionnaire be completed for each audit engagement. Does this represent a violation of the Standards?

Yes, because internal control should be evaluated on every engagement and the internal control questionnaire is the mandated approach to evaluate controls.
Yes, because internal control should be evaluated on every engagement and the internal control questionnaire is the most efficient method to do so.
No, because auditors may omit necessary procedures if there is a time constraint, based on audit judgment.
No, because auditors are not required to complete internal control questionnaires on every engagement.

Answer(s): D

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The chief commodity trader for a large energy company learns from a friend that a competitor will likely fail its upcoming regulatory audit and will be forced to temporarily decrease production. If the information is true, the trader has short-term opportunities to make trades that will financially benefit the trader's company and will lead to a substantial increase in the trader's performance bonus. However, if the information is not true, making the trades will significantly increase the company's risk of being caught in a long position. From an ethical perspective, which of the following would be the most appropriate course of action for the trader to take?

Make the trade because the company and the trader will both benefit.
Have another trader on staff make the trade in order to avoid a conflict of interest.
Disclose the information to the risk oversight committee but proceed with the trade to capitalize on the opportunity.
Defer the decision to management and risk the loss of the trading opportunity.

Answer(s): D

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QUESTION: 112

An internal auditor pays to participate in the company's annual golf tournament, which is held outside of normal business hours. The auditor wins the putting contest and is awarded an all-expense-paid weekend vacation. According to the IIA Code of Ethics regarding objectivity, the auditor's best course of action would be to

Refuse the prize because the amount is significant.
Accept the prize because the event was held outside of normal business hours.
Refuse the prize because it represents an impairment to objectivity.
Accept the prize because the auditor received no special treatment.

Answer(s): D

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QUESTION: 109

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QUESTION: 112

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