QUESTION: 41

According to ISO 31000, which of the following statements is correct?

The board is responsible for setting the organizational attitude through tone at the top.
The internal audit activity will provide assurance over operating effectiveness but not over the design of risk management activities
The internal audit activity can give objective assurance on any part of the risk management framework for which it is responsible.
The framework is designed to be effective for organizations no matter how small.

Answer(s): D

Explanation:

According to ISO 31000, the risk management framework is scalable and applicable to organizations of all sizes, including small entities. The framework's principles are designed to be flexible and adaptable, ensuring they can be effectively implemented regardless of the organization's size. Scalability: The principles and guidelines of ISO 31000 can be tailored to fit the specific context, resources, and complexity of any organization, making it a universal standard. Flexibility: The framework supports organizations in integrating risk management practices into their operations at a level that suits their size and complexity. Effectiveness: Regardless of the organization's size, the framework aims to enhance risk management practices and support better decision-making.

Reference:

"ISO 31000: Risk Management Guidelines," which outlines the applicability and flexibility of the framework for all organizations .

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QUESTION: 42

Which requirement should the chief audit executive consider when communicating results of the quality assurance and improvement program to the board of a large organization?

The internal assessment results should be discussed once every five years
The rating conclusions and the impact from results of the external assessment should be explained
The results of the external assessment should be discussed every seven years.
The qualifications and independence of the internal assessment team should be discussed

Answer(s): B

Explanation:

When communicating the results of the quality assurance and improvement program (QAIP) to the board of a large organization, the chief audit executive (CAE) should explain the rating conclusions and the impact of the results from the external assessment. This ensures transparency and helps the board understand the effectiveness and areas for improvement in the internal audit function. Rating Conclusions: These provide a summary of the overall quality and performance of the internal audit function.
Impact Discussing the impact helps the board understand how the results affect the internal audit's ability to fulfill its responsibilities and improve its processes. Transparency: Clear communication of these aspects helps build trust and provides a basis for informed decision-making by the board.

Reference:

"Internal Audit Quality Assurance and Improvement Program," which emphasizes the importance of explaining rating conclusions and impacts to the board .

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QUESTION: 43

Which of the following is applicable to both a job order cost system and a process cost system'?

Total manufacturing costs are determined at the end of each period.
Costs are summarized in a production cost report for each department
Three manufacturing cost elements are tracked: direct materials, direct labor, and manufacturing overhead.
The unit cost can be calculated by dividing the total manufacturing costs for the period by the units produced during the period.

Answer(s): C

Explanation:

Both job order cost systems and process cost systems track three manufacturing cost elements: direct materials, direct labor, and manufacturing overhead. These cost elements are essential in calculating the total production cost and determining the cost per unit. Direct Materials: The raw materials directly used in the production of goods. Direct Labor: The wages of workers who are directly involved in manufacturing the products. Manufacturing Overhead: Indirect costs associated with production, such as utilities, maintenance, and depreciation of equipment.

Reference:

"Cost Accounting: A Managerial Emphasis," which details the tracking of manufacturing costs in different costing systems .

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QUESTION: 44

What is the primary reason that audit supervision includes approval of the engagement report?

To ensure the objectives of the area under review are met
To ensure senior management supports the reports conclusions
To ensure report style and grammar are appropriate.
To ensure report findings are substantiated

Answer(s): D

Explanation:

The primary reason for audit supervision, including the approval of the engagement report, is to ensure that the findings presented in the report are substantiated by adequate and appropriate evidence. This step is crucial to maintain the credibility and reliability of the audit process and its outcomes.
Substantiation of Findings: Ensuring that findings are substantiated helps in providing a clear and defensible basis for the conclusions and recommendations made in the report.

Audit Quality: This step ensures the quality and integrity of the audit process, confirming that the evidence collected during the audit is sufficient and appropriate to support the findings. Credibility: By substantiating findings, the report gains credibility, which is essential for the stakeholders who rely on the audit report for decision-making.

Reference:

"Internal Audit Standards and Procedures," which outlines the importance of evidence substantiation in audit reports .

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