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Free IIA-IAP Exam Braindumps (page: 5)

Page 4 of 26
PDF with 100 Questions

A newly hired internal auditor has been asked to examine the sales of a specific product over the last four years.
Which of the following analytical review techniques should the auditor employ?

  1. Ratio analysis.
  2. Trend analysis.
  3. External benchmarking.

Answer(s): B

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Analytical Techniques:

Trend Analysis involves examining data over a period to identify patterns, shifts, or anomalies.

This technique is appropriate for longitudinal data like sales over four years.

Reasoning:

Option B (Trend analysis) is correct as it helps the auditor analyze sales performance over time and identify patterns or deviations.

Option A (Ratio analysis) compares related metrics, such as profitability or liquidity, but does not focus on changes over time.

Option C (External benchmarking) involves comparing performance to external standards or competitors, not internal historical data.

Application in Audit:

Trend analysis allows the auditor to assess growth, seasonal patterns, or irregularities in sales data, providing actionable insights.



Which of the following is an element of a well-formed audit recommendation?

  1. Factual evidence identified during the engagement.
  2. Measures to prevent recurrence of the condition.
  3. Factors that allowed the condition to exist.

Answer(s): B

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Audit Recommendations:

According to the IIA Standards, a recommendation must be actionable, specific, and designed to address the root cause of an identified issue.

Reasoning:

Option B is correct because effective recommendations focus on preventing recurrence by addressing root causes or implementing control measures.

Option A (factual evidence) supports findings but does not constitute the recommendation itself.

Option C (factors allowing the condition) provides context for findings but does not include actionable measures to resolve or prevent the issue.

Key Components of a Recommendation:

Recommendations should propose practical solutions to mitigate risks, improve processes, or enhance controls.

Measures to prevent recurrence align with the goal of sustainable improvements.



Which of the following best describes a compliance audit engagement?

  1. The auditor reviews controls of the oil shale mining process to assess adherence to safety regulations established by local authorities.
  2. The auditor analyzes the economic activity of the organization as measured and reported using international accounting standards.
  3. The auditor conducts a review to provide assurance that the external service provider of maintenance for the organization has an effective risk management process.

Answer(s): A

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Compliance Auditing:

Definition: Compliance audits assess adherence to external laws, regulations, or internal policies and procedures.

Standard 2130 - Control: Internal audit must evaluate the adequacy and effectiveness of controls to ensure compliance with applicable laws and regulations.

Reasoning:

Option A is correct because assessing adherence to safety regulations is a compliance activity focused on legal and regulatory conformity.

Option B (analyzing economic activity) relates more to financial auditing or accounting standards compliance, not regulatory compliance.

Option C (reviewing an external service provider's risk management process) aligns with a risk or assurance engagement, not compliance.

Impact of Compliance Audits:

Ensuring adherence to legal requirements protects the organization from regulatory penalties and enhances operational integrity.



Which of the following is a purpose of an embedded audit module?

  1. It enables continuous monitoring of transaction processing.
  2. It identifies program code that may have been inserted for unauthorized purposes.
  3. It verifies the correctness of account balances on a master file.

Answer(s): A

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Embedded Audit Modules:

Definition: Embedded audit modules are software components integrated into systems to monitor transactions in real-time or at regular intervals.

They support continuous auditing by flagging anomalies or predefined conditions.

Reasoning:

Option A is correct because embedded audit modules facilitate continuous monitoring by evaluating transactions as they occur.

Option B relates to detecting unauthorized program code, a task better suited to software integrity checks or penetration testing.

Option C (verifying account balances) is a manual or batch review task unrelated to embedded audit modules.

Benefits of Embedded Audit Modules:

Real-time insights into compliance, fraud detection, and operational inefficiencies.

Enhance audit efficiency and effectiveness in high-transaction environments.






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