QUESTION: 1 Exam Topic: 1, Volume A

Which of the following would be a red flag that indicates the possibility of inventory fraud?

The controller has assumed responsibility for approving all payments to certain vendors.
II. The controller has continuously delayed installation of a new accounts payable system, despite a corporate directive to implement it.
III. Sales commissions are not consistent with the organization's increased levels of sales.
IV. Payments to certain vendors are supported by copies of receiving memos, rather than originals.
I and II only
II and III only
I, II, and IV only
I, III, and IV only

Answer(s): C

QUESTION: 2 Exam Topic: 1, Volume A

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:

Has enough evidence to conclude that improperly functioning ovens are the cause.
Needs to conduct further inquiries and reviews to determine the impact of the oven variations on the pizza temperature.
Has enough evidence to recommend the replacement of some of the ovens.
Must search for another cause since approximately 60 percent of the ovens did not require adjustment.

Answer(s): B

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