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- 1. Multiple Choice
When internal auditors perform an assurance engagement, they consider
How the assurance procedures can identify all significant risks.
Whether the engagement needs to be supervised to ensure achievement of objectives.
The cost of assurance in relation to the potential benefits to be obtained.
Conformance with the organization’s code of conduct rather than The IAA’s Code of Ethics.
- 2. Multiple Choice
While auditing accounts receivable using analytical procedures, the internal auditors discovered the actual accounts receivable numbers were not within the limits of their projected results. Which of the following describes the best response in exercising due professional care under this situation?
Confirm that all results of the analytical procedures are documented in the audit workpapers.
Investigate unexpected results from the analytical procedures and make sure that they are adequately explained.
Notify the CAE that the analytical procedures have uncovered fraud in the organization.
Revise the limits of the projected results according to the needs and expectations of the client.
- 3. Multiple Choice
Internal auditors must continue to expand their professional knowledge and abilities. For example, a practicing internal auditor may
Choose to complete at least 2 hours of an optional subject such as ethics training.
Complete 30 hours of CPE annually or 60 hours over 2 years.
Use the Competency Framework to plan professional development.
Demonstrate professional development by supervising internal quality assessments.
- 4. Multiple Choice
In exercising due professional care, internal auditors must consider which of the following?
1. The relative complexity, materiality, or significance of matters to which assurance procedures are applied
2. The extent of assurance procedures necessary to ensure that all significant risks will be identified
3. The probability of significant errors, irregularities, or noncompliance
1, 2, and 3.
1 and 2 only.
1 and 3 only.
2 and 3 only.
- 5. Multiple Choice
Due professional care calls for
Detailed reviews of all transactions related to a particular function.
Infallibility and extraordinary performance when the system of internal control is known to be weak.
Testing in sufficient detail to give absolute assurance that noncompliance does not exist.
Consideration of the possibility of material irregularities during every engagement.
- 6. Multiple Choice
In an assurance engagement performed with due professional care (DPC), internal auditors must
Use technology-based data analysis.
Not guarantee that all significant risks are identified.
Apply care and skill beyond mere competence and reasonable prudence.
Consider the cost and benefits of the consultation.
- 7. Multiple Choice
A certified internal auditor performed an assurance engagement to review a department store’s cash function. Which of the following actions will be deemed lacking in due professional care?
Because of a highly developed system of internal control over the cash function, the final engagement communication assured senior management that no irregularities existed.
A flowchart of the entire cash function was developed, but only a sample of transactions was tested.
The final engagement communication included a well-supported recommendation for the reduction in staff, although it was known that such a reduction would adversely affect morale.
Organizational records were reviewed to determine whether all employees who handle cash receipts and disbursements were bonded.
- 8. Multiple Choice
An internal auditor judged an item to be material when planning an assurance engagement. However, the assurance engagement may exclude the item if it is subsequently determined that
Adverse effects related to the item are very unlikely to occur.
Sufficient staff is not available.
Related information is unreliable.
Recurring income is unaffected.
- 9. Multiple Choice
Internal auditors who fail to maintain their proficiency through continuing education could be found to be in violation of
The International Standards for the Professional Practice of Internal Auditing.
Both the International Standards for the Professional Practice of Internal Auditing and The IIA’s Code of Ethics.
The IIA’s Code of Ethics.
None of the answers are correct.
- 10. Multiple Choice
An internal auditor observes that a new receivables clerk has physical access to accounting records. Accordingly, the auditor notes in the engagement working papers that controls over receipts are inadequate. Has the auditor exercised due professional care?
Yes, the engagement working papers were annotated.
Yes, irregularities were noted.
Yes, alertness to conditions most likely indicative of irregularities was shown.
No, reasonable care was not taken.
- 11. Multiple Choice
Due professional care implies reasonable care and competence, not infallibility or extraordinary performance. Thus, which of the following is unnecessary?
The consideration of the possibility of material irregularities.
The conduct of extensive examinations.
The conduct of examinations and verifications to a reasonable extent.
The reasonable assurance that compliance does exist.
- 12. Multiple Choice
The internal audit activity can perform an important role in preventing and detecting significant fraud by being assigned all but which one of the following tasks?
Review large, abnormal, or unexplained expenditures.
Review sensitive expenses, such as legal fees, consultant fees, and foreign sales commissions.
Review every control feature pertaining to petty cash receipts.
Review contributions by the organization that appear to be unusual.
- 13. Multiple Choice
Which of the following statements with regard to continuing professional development of internal auditors is false?
Internal auditors are required to continue expanding their knowledge and abilities throughout their careers.
Participating in conferences, seminars, training programs, online and classroom courses, and webinars contribute to continuing professional development.
Practicing and nonpracticing CIAs must complete 40 hours of continuing professional education (CPE) annually, including at least 2 hours of ethics training.
CIAs may earn CPE hours by translating, authoring, or contributing to publications.
- 14. Multiple Choice
An internal auditor must exercise due professional care in performing engagements. Due professional care includes
Establishing direct communication between the chief audit executive and the board.
Accumulating sufficient information so that the internal auditor can give absolute assurance that irregularities do not exist.
Evaluating established operating standards and determining whether those standards are adequate.
Establishing suitable criteria of education and experience for filling internal auditing positions.
- 15. Multiple Choice
Assurance engagements must be performed with proficiency and due professional care. Accordingly, the Standards require internal auditors to
1. Consider the probability of significant noncompliance
2. Perform assurance procedures with due professional care so that all significant risks are identified
3. Weigh the cost of assurance against the benefits
2 and 3 only.
1 and 3 only.
1, 2, and 3.
1 and 2 only.
- 16. Multiple Choice
With regard to the exercise of due professional care, an internal auditor should
Emphasize the potential benefits of an engagement without regard to the cost.
Select procedures that are likely to provide absolute assurance that irregularities do not exist.
Consider whether criteria have been established to determine whether goals are achieved, not whether those criteria are adequate.
Consider the relative materiality or significance of matters to which assurance procedures are applied.
- 17. Multiple Choice
During a consulting engagement, an internal auditor should exercise due professional care by considering which of the following?
1. Needs and expectations of engagement clients
2. Relative complexity and extent of work needed
3. Cost of the consulting engagement
1 and 2.
1 and 3.
1, 2, and 3.
2 and 3.
- 18. Multiple Choice
An internal auditor judged an item to be immaterial when planning an assurance engagement. However, the assurance engagement may still include the item if it is subsequently determined that
Miscellaneous income is affected.
Related information is reliable.
Sufficient staff is available.
Adverse effects related to the item are likely to occur.
- 19. Multiple Choice
Which of the following statements is true with respect to due professional care?
An item should not be mentioned in an engagement communication unless the internal auditor is absolutely certain of the item.
An internal auditor has no responsibility to recommend improvements.
An engagement communication should never be viewed as providing an infallible truth about a subject.
An internal auditor should perform detailed tests of all transactions before communicating results.
- 20. Multiple Choice
Certified internal auditors may obtain CPE credits through a variety of qualifying activities except
Performing external quality assessments.
Performing internal audit engagements as a CAE.
Delivering oral presentations.
Participating as a subject matter expert volunteer.
- 21. Multiple Choice
To ensure that due professional care has been taken at all times during an engagement, the internal auditor should always
Consider the possibility of nonconformance or irregularities at all times during an engagement.
Communicate any noncompliance or irregularity discovered during an engagement promptly to the audit committee.
Ensure that all audit tests are fully documented.
Ensure that all financial information related to the audit is included in the audit plan and examined for nonconformance or irregularities.
- 22. Multiple Choice
An internal auditor has some suspicion of, but no information about, potential misstatement of financial statements. The internal auditor fails to exercise due professional care by
Not testing for possible misstatement because the engagement work program had already been approved by engagement management.
Identifying potential ways in which a misstatement could occur and ranking the items for investigation.
Informing the engagement manager of the suspicions and asking for advice on how to proceed.
Expanding the engagement work program, without the engagement client’s approval, to address the highest ranked ways in which a misstatement may have occurred.
- 23. Multiple Choice
According to The IIA, continuing professional development (CPD) activities for CIAs may include
Earning an advanced degree in any field.
Participating in conferences, online and classroom courses, and webinars.
Completion of at least 40 hours of continuing professional education (CPE) annually by nonpractitioners.
Up to 8 hours of ethics training of which 4 hours are mandatory for nonpracticing CIAs.
- 24. Multiple Choice
The due professional care standard requires an internal auditor to
Consider irregularities whether or not material.
Conduct examinations and verifications to the extent needed to achieve objectives.
Be certain that compliance exists.
Perform extensive examinations in all internal audits.
- 25. Multiple Choice
Fact Pattern: A staff internal auditor performed a portion of an engagement to review an organization’s marketing function. In particular, the internal auditor evaluated the function’s effective and efficient use of resources to identify
1. Underused facilities
2. Overstaffing or understaffing
3. Nonproductive work
4. Procedures that were not cost justified
To test for underused facilities, the internal auditor performed a complete walk-through of all spaces assigned to the marketing function and evaluated the use of both space and capital equipment. The internal auditor analyzed reports on space usage for the last year and concluded that facilities were neither underused nor used at maximum capacity.
To test for overstaffing or understaffing, the internal auditor compared current staffing levels with a staffing analysis recently completed by an independent contractor. Because the staffing analysis used work standards and service demands to provide factual and reliable information on staffing requirements, the internal auditor was able to conclude that staffing levels were optimal.
To test for nonproductive work, the internal auditor interviewed an employee from each level and, based upon their responses, concluded that no significant amount of nonproductive work was being performed. Thus, the internal auditor concluded that additional engagement work to search for procedures that were not cost-justified would not be necessary.
In reference to requirements 3 and 4, due professional care
Was not exercised because the internal auditor failed to apply reasonable care and competence regarding requirement 3.
Was not exercised because the internal auditor failed to apply reasonable care and competence regarding requirement 4.
Was exercised because the internal auditor applied reasonable care and competence in both areas.
Was not exercised because the internal auditor failed to apply reasonable care and competence regarding both requirements 3 and 4.
- 26. Multiple Choice
Internal auditors must apply the care and skill of a reasonably prudent and competent internal auditor. For example, in an assurance engagement, an internal auditor must
Consider the use of technology-based analysis.
Perform assurance procedures that identify all significant risks.
Not consider cost when exercising due professional care.
Communicate results in accordance with the expectations of clients.
- 27. Multiple Choice
The IIA’s due professional care standard applies to internal auditors’ work. It
Implies that they are expected to give absolute assurance that noncompliance does not exist.
States that they must consider the probability of any fraud.
Requires consideration of the materiality of the matters subject to an assurance engagement.
Implies infallibility in certain matters.
- 28. Multiple Choice
Internal auditors are responsible for continuing their education to maintain their proficiency. Which of the following is true regarding the continuing education requirements of the practicing internal auditor?
In-house programs meet continuing professional education requirements only if they have been preapproved by The IIA.
CIAs have formal requirements that must be met in order to continue as CIAs.
Attendance, as an officer or committee member, at formal IIA meetings does not meet the criteria of continuing professional development.
Practicing certified internal auditors are required to obtain 40 hours of continuing professional education every 2 years.
- 29. Multiple Choice
The IIA’s due professional care standard requires internal auditors to
Ignore the relative costs of assurances regarding material matters.
Consider the adequacy of risk management and control but not board-level governance processes.
Conduct examinations as would a reasonably prudent and competent auditor.
Address fraud and errors rather than noncompliance with regulations.
- 30. Multiple Choice
Fact Pattern: A staff internal auditor performed a portion of an engagement to review an organization’s marketing function. In particular, the internal auditor evaluated the function’s effective and efficient use of resources to identify
1. Underused facilities
2. Overstaffing or understaffing
3. Nonproductive work
4. Procedures that were not cost justified
To test for underused facilities, the internal auditor performed a complete walk-through of all spaces assigned to the marketing function and evaluated the use of both space and capital equipment. The internal auditor analyzed reports on space usage for the last year and concluded that facilities were neither underused nor used at maximum capacity.
To test for overstaffing or understaffing, the internal auditor compared current staffing levels with a staffing analysis recently completed by an independent contractor. Because the staffing analysis used work standards and service demands to provide factual and reliable information on staffing requirements, the internal auditor was able to conclude that staffing levels were optimal.
To test for nonproductive work, the internal auditor interviewed an employee from each level and, based upon their responses, concluded that no significant amount of nonproductive work was being performed. Thus, the internal auditor concluded that additional engagement work to search for procedures that were not cost-justified would not be necessary.
In reference to requirements 1 and 2, due professional care
Was not exercised because the internal auditor failed to apply reasonable care regarding requirement 1.
Was not exercised because the internal auditor failed to apply reasonable care regarding requirement 2.
Was not exercised because the internal auditor failed to apply reasonable care regarding requirements 1 and 2.
Was exercised because the internal auditor applied reasonable care and competence in both areas.
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