QUESTION: 221 Exam Topic: 3, Volume C

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

The department managed long-term investments, including investment in derivatives and other financial instruments, to maximize return.
The department manager sets a tone of honesty and integrity in all business dealings and this tone is emulated by department personnel.
Many department functions were duplicated or verified by other department employees as part of the department's normal procedures.
Audit tests designed to verify compliance with control procedures detected a general failure to follow standard procedures for transaction authorization.

Answer(s): A

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QUESTION: 222 Exam Topic: 3, Volume C

A bank uses a risk analysis matrix to quantify the relative risk of auditable entities. The analysis involves rating auditable entities on risk factors using a scale of 1 to 10, with 10 representing the greatest risk. A partial list of risk factors and the ratings given to three of the bank's departments is provided below:

Which of the following statements regarding risk in the department is true?

As compared to departments A and C, department B has a stronger control system to compensate for the greater complexity of the department's transactions and dollar value of its assets.
The internal audit activity should schedule audits of department B more often than audits of department C because of the relative control strength of department C as compared to department
The nature of department A's control structure may be justified by the nature of the department's assets and the complexity of its transactions.
The relative ranking of the departments in order of their risk, from greatest to least risk, is: A; C;

Answer(s): C

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QUESTION: 223 Exam Topic: 3, Volume C

A chief audit executive (CAE) is evaluating four potential audit engagements based on the following factors: the engagement's ability to reduce risk to the organization, the engagement's ability to save the organization money, and the extent of change in the area since the last engagement. The CAE has scored the engagements for each factor from low to high, assigned points, and calculated an overall ranking. The results are shown below with the points in parentheses:
Risk Reduction
Cost Savings
Changes
High (3)
Medium (2)
Low (1)
High (3)
Low (1)
High (3)
Low (1)
High (3)
Medium (2)
Medium (2)
Medium (2)
High (3)
If the organization has asked the CAE to consider the cost savings factor to be twice as important as any other factor, which engagements should the CAE pursue?