INTERNAL AUDITING & CONTROLS REVIEW QUESTIONS MODULE 4 MULTIPLE CHOICE

Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. a) Which of the following correctly identifies the phases of the internal auditing process? 1) Risk assessment, planning, reporting, and monitoring 2) Risk assessment, planning, interviewing, and reporting 3) Planning, examination, interviewing and reporting 4) Planning, examination, reporting, and monitoring b) Which of the following is part of the internal audit planning phase? 1) Risk-based planning, long-term planning, and short-term planning 2) Long-term planning, short-term planning, and report preparation 3) Gain knowledge of the organization, risk-based planning, and long-term planning 4) Long-term planning, short-term planning, and engagement planning c) Which of the following is part of the four-step approach to preparing a long-term audit plan? 1) Gain knowledge of the business 2) Plan the audit engagement 3) Determine the frequency of audits 4) Determine and allocate resources d) Which of the following best describes risk assessment factors to be considered in a long-term audit plan? 1) Likelihood of occurrence and impact of potential negative consequences 2) Likelihood of occurrence and costs associated with risk management 3) Knowledge of business and impact of potential negative consequences 4) Knowledge of business and costs associated with risk management

e) Which of the following best describes the difference in perspectives of the audit universe that the management auditor must take into account when preparing a long-term plan? 1) The functional approach defines the universe by activities such as payroll, purchasing, and so on, while the organizational approach defines the universe by units such as division, geographic location, department, etc. 2) The organizational approach defines the universe by activities such as payroll, purchasing, and so on, while the functional approach defines the universe by units such as division, geographic location, department, etc. 3) The controllability approach defines the universe by the ability of those in the organization to control specific risks, while the organizational approach defines the universe by units such as division, geographic location, department, etc. 4) The functional approach defines the universe by activities such as payroll, purchasing, and so on, while the practical approach defines the universe by evaluation of the nature and complexity of the engagement assignment, time constraints, and available resources.

f) Which of the following factors must a management auditor take into account when preparing a long-term plan? 1) The goals that the entity has set for itself and the needs of the external auditor 2) The goals that the entity has set for itself and activity reports 3) The audit committees guidelines and the external auditors work 4) The audit committees guidelines and the internal audit charters guidelines g) Which of the following activities are included in the examination phase of the management auditing process? 1) Discussing the audit plan with auditee management, analyzing the audit results, and selecting observations to be reported 2) Testing operations, reviewing audit files, and analyzing results 3) Obtaining specific knowledge of the auditee, testing operations, and analyzing results 4) Discussing the audit plan with auditee management, testing operations, and analyzing results h) Which of the following factors must a management auditor assess to determine the likelihood of a significant control weakness? 1) The potential impact of internal control risk, the potential impact of inherent risk, and the potential impact of audit procedures risk 2) The potential impact of internal control risk, and the combined effect of inherent risk and audit procedures risk 3) The potential impact of audit procedures risk, and the combined effect of inherent risk and internal control risk 4) The potential impact of internal control risk, the potential impact of inherent risk, and the combined effect of inherent risk and internal control risk i) In preparing a long-term audit plan, management auditors must decide what to audit and how often. Which of the following factors enables the auditors to decide what to audit and how often? 1) The changes that have occurred in the organizations environment since the last audit 2) The possibility that an activity may not recur 3) The overall risk connected to each activity 4) The timing of the last audit

Solutions to multiple choice questions:

a) 4

b) c) d) e) f) g) h) i)

4 3 1 1 2 2 4 3