QUESTION: 5

Which of the following would provide the best guidance to a chief audit executive who is setting internal audit staff requirements?

A review of audit staff education and training records.
Information about the audit staff size and composition of comparable organizations.
Results from discussions of audit needs with executive management and the audit committee.
The results of the audit staff's most recent performance reviews.

Answer(s): C

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An organization's chief audit executive (CAE) determines that the internal audit staff does not have the requisite skills to conduct an audit of the financial derivatives area. Which of the following would be the best course of action for the CAE to follow?

Outsource the audit engagement to a qualified external auditing firm without burdening the audit committee with the decision.
Determine the requisite knowledge needed, and obtain the proper training for auditors, even if the training will significantly push back the project's timeframe as outlined by the audit committee.
Notify the audit committee of the problem, and assign the most competent auditors on staff to perform the audit engagement.
Employ the skills of a financial derivatives expert to consult on the project, and supplement the consulting with a local seminar on financial derivatives.

Answer(s): D

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QUESTION: 7

Management of a publicly-held organization requires the internal audit activity to be involved with quarterly financial statements, which are made public and used internally. Which of the following explanations of management's decision is least plausible?

Management may be concerned about its reputation in the financial markets.
Management is following best-practice protocol, as stipulated by the Standards, which states that internal auditors must review quarterly financial statements.
Management may be concerned about potential penalties that could occur if quarterly financial statements are misstated.
Management may perceive that having quarterly financial information examined by the internal auditors enhances the information's value to internal decision making.

Answer(s): B

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QUESTION: 8

Which of the following scenarios exemplifies a potential internal control weakness?

The same employee who receives cash from customers prepares a prelisting of cash receipts.
The same employee who records cash receipts in the accounts receivable subsidiary ledger ensures that the ledger automatically updates the information.
The same employee who restrictively endorses checks received from customers prepares the bank's check deposit slips.
The same employee who makes deposits at the bank prepares the monthly bank reconciliation.

Answer(s): D

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QUESTION: 5

QUESTION: 6

QUESTION: 7

QUESTION: 8