Internal Auditing Exam Bank
Course Introduction
Internal Auditing introduces students to the principles and practices of evaluating and improving the effectiveness of risk management, control, and governance processes within organizations. The course covers the internal audit process, including planning, conducting, and reporting audits, as well as standards and ethics in internal auditing. Students will learn to assess internal controls, identify weaknesses, and recommend improvements, gaining practical skills in risk assessment, evidence collection, and audit documentation. Case studies and practical exercises illustrate real-world internal auditing scenarios across various industries, preparing students for roles that support organizational accountability and integrity.
Recommended Textbook
Auditing A Risk Based Approach to Conducting a Quality Audit 10th Edition by Karla Johnstone
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17 Chapters
1898 Verified Questions
1898 Flashcards
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Chapter 1: Auditing: Integral to the Economy
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100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/21875
Sample Questions
Q1) According to the AICPA, which of the following is not a safeguard to the auditing profession?
A) Education.
B) Professional standards.
C) External reviews.
D) Legislation concerning competency requirements.
Answer: D
Q2) Audit quality is driven, in part, by the audit firm's culture.
A)True
B)False
Answer: True
Q3) What is the management of a company is responsible for?
A) Hiring the auditor.
B) Preparing the financial statements.
C) The audit workpapers.
D) Ensuring auditor independence.
Answer: B
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Page 3
Chapter 2: The Auditors Responsibilities Regarding Fraud
and Mechanisms to Address Fraud: Regulation and Corporate Governance
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120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/21876
Sample Questions
Q1) Audit committees of publicly traded companies must establish whistleblowing mechanisms within the company.
A)True
B)False
Answer: True
Q2) According to COSO studies, the majority of the frauds took place at companies that were listed on the Over-The-Counter (OTC) market, rather than those listed on the NYSE or NASDAQ.
A)True
B)False
Answer: True
Q3) An audit must be performed by persons who can make sound judgments relating to complex accounting issues.
A)True
B)False Answer: True
Q4) Rationalization is one element of the Fraud Triangle. A)True
B)False
Answer: True Page 4
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Page 5
Chapter 3: Internal Control Over Financial Reporting:
Responsibilities of Management and the External Auditors
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104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/21877
Sample Questions
Q1) Monitoring of the internal controls involves assessment by appropriate personnel of the design and operation of controls on a timely basis and taking necessary actions.
A)True
B)False
Answer: True
Q2) Which of the following is an example of a physical control to safeguard assets?
A) Hiring only trustworthy cashiers.
B) Separation of duties.
C) Locks on the warehouse doors.
D) Safety audits on the production-line.
Answer: C
Q3) An auditor needs to understand a company's internal controls in order to anticipate the types of material misstatements that may occur.
A)True
B)False
Answer: True
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Chapter 4: Professional Liability, Auditor Judgment
Frameworks, and Professional Responsibilities
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/21878
Sample Questions
Q1) In which of the following situations would a CPA be considered independent?
A) A CPA has obtained an auto loan from a banking client.
B) A CPA has obtained a 90-day signature loan from a client.
C) A CPA has obtained a loan for investment purposes from a client.
D) A CPA has obtained an interest-free loan from a banking client.
Q2) Rights theory focuses on evaluating actions in terms of the fundamental rights of the parties involved.
A)True
B)False
Q3) Independence in mental attitude is required of auditor on all audit engagements. Which statement best describes the highest goal for independence?
A) To comply with the AICPA Professional Code of Conduct.
B) To be independent in fact and appearance.
C) To be an advocate for shareholders.
D) To be in compliance with SEC regulations.
Q4) An individual does not need to agree to uphold the code of professional conduct in order to become licensed as a CPA.
A)True
B)False
Page 7
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Chapter 5: Professional Auditing Standards and the Audit
Opinion Formulation Process
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) The purpose of the audit program is to list the audit procedures to be followed in gathering audit evidence and to help those in charge of the audit to monitor the progress and supervise the work.
A)True
B)False
Q2) The standards of the PCAOB consist of seven principles.
A)True
B)False
Q3) Which of the following assertions would the auditor usually consider most relevant for accounts payable?
A) Existence.
B) Valuation.
C) Disclosure.
D) Completeness.
Q4) Audit procedures can be classified as risk assessment procedures, test of controls or substantive tests.
A)True
B)False
Page 8
Q5) Write the three general auditing standards of the PCAOB.
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Chapter 6: A Framework for Audit Evidence
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) The auditor utilizes the same audit program and the same procedures each year for each client in order to ensure that nothing is missed in the current year audit.
A)True
B)False
Q2) Evidence can be directly or indirectly relevant to an assertion. A)True
B)False
Q3) Audit standards of proper documentation. Discuss the audit standards that must be applied to the auditor's documentation. Give five examples the types of documentation will be found in the audit work papers.
Q4) One strategy used by auditors in testing assertions is to perform directional testing to find overstatements or understatements.
A)True B)False
Q5) Relevance and reliability of evidence make up the appropriateness of audit evidence.
A)True B)False
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Chapter 7: Planning the Audit: Identifying and Responding
to the Risks of Material Misstatement
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92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/21881
Sample Questions
Q1) The usual length of a brainstorming session is about four hours.
A)True
B)False
Q2) Clearly trivial and not material are terms that can be used interchangeably.
A)True
B)False
Q3) Which of the following best describes the amount of misstatement an auditor is willing to accept and still judge that an account balance is not materially misstated?
A) Tolerable misstatement.
B) Performance materiality.
C) A clearly trivial amount.
D) Significant risk.
Q4) If materiality judgments change during the audit opinion formulation process, what happens to previous audit decisions that were based on the evidence obtained using the initial material setting?
A) They need to be reassessed.
B) They need to be noted in the footnotes.
C) No action is required.
D) None of the above.
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Chapter 8: Specialized Audit Tools: Sampling and
Generalized Audit Software
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114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/21882
Sample Questions
Q1) While auditors may use either statistical or non-statistical sampling, some auditors restrict the use of non-statistical sampling for what reason?
A) It is less effective.
B) It is less objective.
C) It is less efficient.
D) It is less risky.
Q2) Which one of the following is not a typical step used to implement an attribute sampling plan?
A) Define the attributes of interest and what constitutes failure(s).
B) Select and test the sample items.
C) Evaluate the sample results.
D) Define the non-statistical sampling method that is most effective and efficient.
Q3) Stratification of the population into several homogeneous subpopulations generally creates audit efficiency.
A)True
B)False
Q4) Sampling and non-sampling risk.
Discuss what is meant by "sampling risk" and "nonsampling risk".
Page 11
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Chapter 9: Auditing the Revenue Cycle
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Which of the following must exist prior to the recognition of revenue by a company from the sale of a product?
A) The cash is realized on the sale of the product.
B) A price is discussed based upon the customer's resale of the product.
C) The customer is given the option to return the product at any time.
D) The product is adequately delivered to the customer.
Q2) Internal control over the revenue cycle.
White Floyd, Inc., a retail store, is concerned about the lack of control procedures over the recording of sales transactions. The company is concerned that the transactions might not be recorded accurately and valued properly in accordance with GAAP. Recommend control procedures to help ensure that transactions are recorded accurately and valued properly.
Q3) Negative confirmations are considered to be more persuasive than positive confirmations.
A)True
B)False
Q4) Accounts receivable presentation and disclosure.
Develop a list of substantive tests to test whether pledged, discounted, assigned, and related-party accounts receivable are properly disclosed.
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Chapter 10: Auditing Cash and Marketable Securities
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101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/21884
Sample Questions
Q1) Which of the following controls over cash would an auditor expect to observe?
A) Reconciliation of the general ledger to the subsidiary ledger.
B) Checks permanently marked "for deposit only" with the proper routing information.
C) Internal audits of marketable securities held in the company's lockbox.
D) Authorization privileges given only to those employees using the accounting system.
Q2) The recording of a marketable security depends, in large part, on management's intention with the investment.
A)True
B)False
Q3) The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.
A)True
B)False
Q4) Working capital may be tied to certain debt covenants causing cash to be considered significant for audit purposes.
A)True
B)False
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Chapter 11: Auditing Inventory, Goods and Services, and
Accounts Payable: the Acquisition and Payment Cycle
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102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/21885
Sample Questions
Q1) The tracing of a sample of receiving reports through the recording process tests the completeness assertion.
A)True
B)False
Q2) One reason the inventory observation is performed is for the purpose of determining the accuracy of client counting procedures.
A)True
B)False
Q3) A purchase order identifies the quantity and description of products that have been received.
A)True
B)False
Q4) Which of the following signals a potential fraud that may occur for the overstatement of inventory accounts?
A) Reserves for contingencies are reducing rapidly.
B) Inventory amounts are growing faster than sales.
C) Repairs and maintenance accounts have significant credit entries.
D) The purchase of manufacturing equipment is occurring at a rapid rate.
Page 14
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Chapter 12: Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal
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97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/21886
Sample Questions
Q1) Relevant assertions for long-lived assets
List the five management assertions relevant for long-lived assets and explain how each one is relevant.
Q2) If no control deficiencies are identified, how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?
A) The extent of testing will be more.
B) The extent of testing will be less.
C) The extent of testing will be the same in the two settings.
D) The extent of testing is not affect by control deficiencies.
Q3) Which one of the following approaches does not represent how the auditor will become aware of risks associated with long-lived assets?
A) Obtaining knowledge of the client business.
B) Reviewing the business plan related to major acquisitions.
C) Reviewing the minutes of board of directors' meetings.
D) All represent how the auditor will become aware of risks associated with long-lived assets and related expenses.
Q4) Fraud Risks.
List potential fraud schemes related to long-lived assets.
Page 15
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Chapter 13: Auditing Debt Obligations and Stockholders
Equity Transactions
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) In those audits where there is a heightened risk of fraud related to debt obligations, which of the following will the auditor not typically perform?
A) Search public records to identify debt obligations.
B) Vouch and trace loan proceeds and debt payments.
C) Send confirmations to lenders and creditors, including confirmation of compliance with any debt covenants.
D) Obtain photocopies of supporting documents.
Q2) Which of the following is not important documentation for substantive procedures for debt obligations?
A) Copies of the debt agreements.
B) The client's articles of incorporation.
C) A summary of the calculations supporting the compliance debt covenance.
D) Identification of the specific items tested.
Q3) A typical control for stockholders' equity transactions is for the board of directors to approve all stock transactions (including options and warrants).
A)True
B)False
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Page 16
Chapter 14: Activities Required in Completing a Quality Audit
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) The auditor is responsible for evaluating the likelihood of a client continuing as a going concern for a reasonable period of time. What is considered to be a reasonable time period?
A) One year from the audit report date.
B) One year from the last day of field work.
C) One year from the balance sheet date.
D) Two years from the balance sheet date.
Q2) If an omission of an important audit procedure is discovered, the auditor should immediately issue a disclaimer of opinion for the audit.
A)True
B)False
Q3) Which of the following is not a typical analytical procedure for the completion of the audit?
A) Ratio analysis.
B) Common-size analysis.
C) Changes from the prior year.
D) All of the above would typically be used.
Q4) Management representation letters.
Describe the purpose of the management representation letter.
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Chapter 15: Audit Reports on Financial Statements
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) If the firm auditing a company realizes that it is not independent with respect to the client, it will issue disclaimer of opinion based on the inherent GAAP violation imposed by the audit firm.
A)True
B)False
Q2) After the balance sheet date but prior to the audit report date the client decides to acquire Bargain Company to obtain a significant increase in revenues. The auditor would probably give a report that includes the statement: "except for the acquisition of Bargain Company..".
A)True
B)False
Q3) Which one of the following is an instance where the auditor would add a paragraph after the opinion paragraph?
A) There is serious doubt that the client can continue as a going concern.
B) Management's disclosures are not adequate.
C) There are significant uncertainties that are not properly disclosed in the footnotes.
D) There is a material dollar misstatement in the financial statements.
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18
Chapter 16: Advanced Topics Concerning Complex Auditing Judgments
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) If an acquired company remains intact after it has been acquired, it is defined as which of the following types of segments?
A) Financing segment.
B) Investing segment.
C) Operating segment.
D) Non-operating segment.
Q2) Which of the following statements is true of external auditing?
A) Major focus areas are processes, including risks, controls, and effectiveness and efficiency of processes.
B) External auditors perform both assurance and consulting services for public companies.
C) Primary scope of services performed includes audits of financial statements.
D) The primary client for a public company is upper management.
Q3) In assessing the fair value of Level 1 assets, the auditor can perform an analysis of the volume of trading activity as part of obtaining audit evidence.
A)True
B)False
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Page 19
Chapter 17: Other Services Provided by Audit Firms
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Which of the following is not an AICPA standard of reporting for attestation engagements?
A) The practitioner must identify the subject matter or the assertion being reported on and state the character of the engagement in the report.
B) The practitioner must state the practitioner's conclusion about the subject matter or the assertion in relation to the criteria against which the subject matter was evaluated in the report.
C) The practitioner must obtain sufficient evidence to provide a reasonable basis for the conclusions that is expressed in the report.
D) The practitioner must state all of the practitioner's significant reservations about the engagement, the subject matter, and if applicable, the assertion related thereto in the report.
Q2) Which of the following procedures is an inappropriate agreed-upon procedure?
A) Comparison of documents, schedules, or analyses.
B) Performance of mathematical computations.
C) Confirmation of specific information with third parties.
D) Evaluation of the competency or objectivity of another party.
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Page 20