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CHAPTER 3
1. Which of the following is not an appropriate 4. Who is responsible for establishing the strategic
governance role for an organization’s board of objectives of an organization ?
directors?
a. The board of directors
a. Evaluating and approving strategic objectives.
b. Senior management
b.Infuencing the organization’s risk-taking
philosophy. c. Consensus among all levels of management
c. Providing assurance directly to third d. The board and senior management jointly
parties that the organization’s governance 5. Who is ultimately responsible for identifying new
processes are effective. or emerging key risk areas that should be
d. Establishing broad boundaries of conduct, covered by the organization's governance
outside of which the organization should not process?
operate. a. the board of directors
2. Which of the following are typically governance b. senior management
responsibilities of senior management?
c. risk owners
I. Delegating risk tolerance levels to risk
managers. d. the internal audit function
II. Monitoring day-to-day performance of 6. The Internal Audit function should not:
specific risk management activities
a. Assess the organization's governance and risk
III. Establishing a governance committee of the management processes
board.
b. Provide advice about how to improve the
IV. Ensuring that sufficient information is organization's governance and risk management
gathered to support reporting to the board. processes.
3. ABC utility company sells electricity to 7. Which of the following would not be considered
residential customers and is a member of an a First line of defense in the Three Lines of
industry association that provides guidance to Defense model?
electric utilities, lobbies on behalf for the a. A divisional controller conducts a peer
industry and facilitates sharing among its review of compliance with financial control
members. From ABC's perspective, what type of standards.
stakeholder is the industry association?
b. An accounts payable clerk reviews supporting
a. Directly involved the operation of the documents before processing an invoice for
company. payment.
b. Interested in the success of the company. c. An accounting supervisor conducts a monthly
c. Influences the company review to ensure all reconciliations were
completed properly.
d. Not a stakeholder
d. A production line worker inspects finished
goods to ensure the company's quality standards
are met.
8. Which of the following would be considered a 11. Which of the following is not a role of the
first line of defense in the Three Lines of Defense internal audit function in best practice
model? governance activities ?
a. An accounts payable supervisor conducting a. support the board in enterprise wide risk
a weekly review to ensure all payments were assessment
issued by the required payment date
b. ensure the timely implementation of audit
b. A divisional compliance and ethics officer recommendations
conducting a review of employee training
records to ensure that all marketing and sales c. monitor compliance with the corporate code
staff have completed the required FCPA training of conduct
c. The external audit team observes the counting d. discuss areas of significant risks
of inventory on December 31 12. Which of the following statements regarding
d. An internal audit team conducting an corporate governance is not correct?
engagement to provide assurance on the a. corporate control mechanisms include
company's Sarbanes-Oxley compliance with internal and external mechanisms
internal controls over financial reporting
b. the compensation scheme for management is
part of the corporate control mechanisms
9. Which of the following would be considered a c. the dilution of shareholders' wealth resulting
second line of defense in the Three Lines of from employee stock options or employee
Defense Model? stock bonuses is an accounting issue rather
a. An accounts payable supervisor conducting a than a corporate governance issue
weekly review to ensure all payments were d. the internal audit function of a company
issued by the required payment date has more responsibility than the board for
b. A divisional compliance and ethics officer company's corporate governance.
conducting a review of employee training 13. What types of business events tend to drive new
records to ensure that all marketing and sales legislation and guidance?
staff have completed the required FCPA
training a. economic downturns
2. Which of the following are "mandatory guidance" a. the audit committee has requested assurance on the
in The IIA's IPPE? treasury function's compliance with a new policy on
use of financial instruments
I. Implementation Guides
II. The code of ethics b. treasury management has not instituted any risk
III. The definition of internal auditing management policies
IV. The Standards c. the independent outside auditors have requested
a. I, II, and IV to see the engagement report and working papers.
b. Objectivity a. I only
b. I and II d. I, II, III, and IV
c. I and III 10. Which of the following are required of the internal
audit function per the Standards?
d. I, II, and III
a.Evaluate the effectiveness of the audit committee
8. According to the standards, which of the following annually?
must the internal audit manager think about when
considering appropriate due care while planning an b. Issue an overall opinion on the adequacy of the
assurance engagement? organization's system, of internal controls
annually
a. the opportunity to cross-train internal audit staff
c.Obtain an annual representation from management
b. the cost of assurance in relationship to acknowledging management's responsibility for the
potential benefits design and implementation of internal controls to
c. job openings in the area that may be of interest to prevent illegal acts.
internal auditors assigned to the engagement d.Assess whether the IT governance of the
d. the potential to deliver consulting services to the organization sustains and supports the organization's
auditee strategies and objectives
9. Which of the following types of IPPF guidance 11. Which of the following is a core principle for the
require(s) an exposure? professional practice of internal auditing?