تويت
Part 1 Sample Exam Questions Collapse All
• According to the International Professional Practices Framework, the independence of the internal audit activity is achieved through:
A. Staffing and supervision.
B. Continuing professional development and due professional care.
C. Human relations and communications.
D. Organizational status and objectivity.
Correct Answer: Dclose
A. Incorrect. Staffing and supervision relate to the professional proficiency of the internal audit activity.
B. Incorrect. Continuing professional development and due professional care relate to the professional proficiency of the internal auditor.
C. Incorrect. Human relations and communications relate to the professional proficiency of the internal auditor.
D. Correct. According to Practice Advisory 1110-1, organizational status and objectivity permit members of the internal audit activity to render the impartial and unbiased judgments essential to the proper conduct of engagements.
Part 2 Sample Exam Questions Collapse All
• A company’s accounts receivable turnover rate decreased from 7.3 to 4.3 over the last three years. What is the most likely cause for the decrease?
A. An increase in the discount offered for early payment.
B. A more liberal credit policy.
C. A change in net payment due from 30 to 25 days.
D. Increased cash sales.
Correct Answer: Bclose
A. Incorrect. This should have the opposite effect.
B. Correct. With a liberal credit policy, customers would be taking longer to pay (365/4.3 compared to 365/7.3).
C. Incorrect. This should have the opposite effect.
D. Incorrect. This is irrelevant, since cash sales will have no impact.
An important difference between a statistical and a judgmental sample is that with a statistical sample:
A. No judgment is required because everything is computed according to a formula.
B. A smaller sample can be used.
C. More accurate results are obtained.
D. Population estimates with measurable reliability can be made.
Correct Answer: Dclose
A. Incorrect. Judgment is needed for confidence levels and sample unit definition.
B. Incorrect. A statistical sample may result in either a smaller or larger sample.
C. Incorrect. There is no way to determine which method would produce greater accuracy.
D. Correct. The only way to have measured reliability (stated in terms of confidence intervals) is to use a statistical sample.
Which of the following statements is correct regarding audit engagement workpaper documentation for a fraud investigation?
I. All incriminating evidence should be included in the workpapers.
II. All important testimonial evidence should be reviewed to ensure that it provides sufficient basis for the conclusions reached.
III. If interviews are held with a suspected perpetrator, written transcripts or statements should be included in the workpapers.
A. I only.
B. II only.
C. II and III only.
D. I, II, and III.
Correct Answer: Dclose
I. Correct.
II. Correct.
III. Correct. All workpapers should contain pertinent information to support observations and recommendations.
Part 3 Sample Exam Questions Collapse All
• A means of limiting production delays caused by equipment breakdown and repair is to:
A. Schedule production based on capacity planning.
B. Plan maintenance activity based on an analysis of equipment repair work orders.
C. Pre-authorize equipment maintenance and overtime pay.
D. Establish a preventive maintenance program for all production equipment.
Correct Answer: Dclose
A. Incorrect. Scheduling production based on capacity utilization ignores other important factors such as demands.
B. Incorrect. Budgeting maintenance department activities based on previous work orders will not prevent equipment breakdowns. and repairs.
C. Incorrect. Standing authorizations of work orders and overtime will not address the problem posed.
D. Correct. A preventive maintenance program will reduce equipment breakdowns and repairs.
If a country uses trade quotas to overcome chronic trade deficits, the most likely outcome would be that:
A. Unemployment and productivity rates will rise.
B. Unemployment rates will rise and productivity rates will decline.
C. Unemployment rates will decline and productivity rates will rise.
D. Unemployment and productivity rates will decline.
Correct Answer: Dclose
A. Incorrect. See answer "D".
B. Incorrect. See answer "D".
C. C. Incorrect. See answer "D".
D. Correct. With trade quotas, home jobs will be saved; hence, unemployment will decline. Since jobs will be saved for inefficient industries (less efficient than foreign competitors), productivity rates will decline because they will not be specializing in those goods with which they have a comparative advantage.
The difference between the required rate of return on a given risky investment and that of a risk-free investment with the same expected return is the:
A. Risk premium.
B. Coefficient of variation.
C. Standard error of measurement.
D. Beta coefficient.
Correct Answer: Aclose
A. Correct. The risk premium is the portion of expected return attributed to the increased risk.
B. Incorrect. The coefficient of variation represents the standard deviation of an investment's returns divided by the mean returns.
C. Incorrect. The standard error represents a measure of variability in the investment's returns.
D. Incorrect. The beta coefficient represents the sensitivity of the investment's returns to the market returns.
Which of the following would be of greatest concern to an auditor reviewing a policy regarding the sale of a company’s used personal computers to outside parties?
A. Whether deleted files on the hard disk drive have been completely erased.
B. Whether the computer has viruses.
C. Whether all software on the computer is properly licensed.
D. Whether there is terminal emulation software on the computer.
Correct Answer: Aclose
A. Correct. While most delete programs erase file pointers, they do not remove the underlying data. The company must use special utilities that fully erase the data. This is important because of the potential for confidential data on the microcomputers.
B. Incorrect. This could create a liability for the company if a virus destroyed the purchasing party’s data or programs. However, the purchasing party should use anti-virus software to detect and eliminate any viruses. This concern, while important, is not as serious as the one in answer “A”.
C. Incorrect. The purchasing party has a responsibility to insure that all their software is properly licensed. If the company represented that all the software was properly licensed, this could create a liability. However, this liability is not as serious as the implication from answer “A”.
D. Incorrect. Terminal emulation software is widely available.
Part 4 Sample Exam Questions Collapse All
• In the Boston Consulting Group (BCG) growth-share matrix, which strategy in the matrix describes large generation of cash and heavy investment needed to grow and maintain competitive positioning but net cash flow is usually modest?
A. Cash cows.
B. Question marks.
C. Dogs.
D. Stars.
Correct Answer: Dclose
A. Incorrect. A cash cow generates more cash than it requires, providing funds to the corporation to invest in other ventures.
B. Incorrect. Question marks deserve attention to determine if the venture is viable or not. The business is located in a growing industry but has not achieved a strong competitive position.
C. Incorrect. Dogs describe a business situated in a low growth or declining industry and if not positioned strongly will be divested.
D. Correct. Stars describe a business with a strong competitive position in the industry. The industry is robust and SBUs are highly attractive. Net cash flow is modest since investment is heavy although stars generate large amounts of cash.
In which of the following industry environments are franchising and horizontal mergers commonly used strategies?
A. Emerging industries.
B. Declining industries.
C. Fragmented industries.
D. Mature industries.
Correct Answer: Cclose
A. Incorrect. See answer “C”.
B. Incorrect. See answer “C”.
C. Correct. Strategies such as chaining, franchising, and horizontal mergers are commonly used in fragmented industries, because there are low barriers to entry. Companies in fragmented industries face many opportunities for differentiation but each opportunity for competitive advantage is small.
D. Incorrect. See answer “C”.
Which of the following costs does management need to consider when introducing a new product or substituting a new product for an existing one?
I. Costs of retraining employees.
II. Costs of acquiring new ancillary equipment.
III. Write-offs due to undepreciated investment in old technology.
IV. Capital requirements for changeover.
A. I and III only.
B. I, II, and IV only.
C. II, III, and IV only.
D. I, II, III, and IV.
Correct Answer: Dclose
I. Correct.
II. Correct.
III. Correct.
IV. Correct. Costs that management should consider would include costs of retraining employees; costs of acquiring new ancillary equipment; write-offs of undepreciated investments in the old technology; capital requirements and research and development costs of the changeover; and costs of modifying interrelated stages of production or related aspects of the business.
Which of the following theories includes the assertion that employees may be motivated by achievement of acceptance or esteem in the workplace?
A. Equity theory.
B. Expectancy theory.
C. Needs hierarchy theory.
D. Goal-setting theory.
correct Answer: Cclose
A. Incorrect. The equity theory focuses on the balance between inputs and outcomes.
B. Incorrect. The basis of the expectancy theory is that employees are only motivated to provide inputs if they believe a given level of outcome will result.
C. Correct. The need theory suggests that employees have needs that they are motivated to satisfy in the workplace.
D. Incorrect. The goal-setting theory is based upon the belief that employees have desires and aspirations, which result in goals that direct their behavior.
• According to the International Professional Practices Framework, the independence of the internal audit activity is achieved through:
A. Staffing and supervision.
B. Continuing professional development and due professional care.
C. Human relations and communications.
D. Organizational status and objectivity.
Correct Answer: Dclose
A. Incorrect. Staffing and supervision relate to the professional proficiency of the internal audit activity.
B. Incorrect. Continuing professional development and due professional care relate to the professional proficiency of the internal auditor.
C. Incorrect. Human relations and communications relate to the professional proficiency of the internal auditor.
D. Correct. According to Practice Advisory 1110-1, organizational status and objectivity permit members of the internal audit activity to render the impartial and unbiased judgments essential to the proper conduct of engagements.
Part 2 Sample Exam Questions Collapse All
• A company’s accounts receivable turnover rate decreased from 7.3 to 4.3 over the last three years. What is the most likely cause for the decrease?
A. An increase in the discount offered for early payment.
B. A more liberal credit policy.
C. A change in net payment due from 30 to 25 days.
D. Increased cash sales.
Correct Answer: Bclose
A. Incorrect. This should have the opposite effect.
B. Correct. With a liberal credit policy, customers would be taking longer to pay (365/4.3 compared to 365/7.3).
C. Incorrect. This should have the opposite effect.
D. Incorrect. This is irrelevant, since cash sales will have no impact.
An important difference between a statistical and a judgmental sample is that with a statistical sample:
A. No judgment is required because everything is computed according to a formula.
B. A smaller sample can be used.
C. More accurate results are obtained.
D. Population estimates with measurable reliability can be made.
Correct Answer: Dclose
A. Incorrect. Judgment is needed for confidence levels and sample unit definition.
B. Incorrect. A statistical sample may result in either a smaller or larger sample.
C. Incorrect. There is no way to determine which method would produce greater accuracy.
D. Correct. The only way to have measured reliability (stated in terms of confidence intervals) is to use a statistical sample.
Which of the following statements is correct regarding audit engagement workpaper documentation for a fraud investigation?
I. All incriminating evidence should be included in the workpapers.
II. All important testimonial evidence should be reviewed to ensure that it provides sufficient basis for the conclusions reached.
III. If interviews are held with a suspected perpetrator, written transcripts or statements should be included in the workpapers.
A. I only.
B. II only.
C. II and III only.
D. I, II, and III.
Correct Answer: Dclose
I. Correct.
II. Correct.
III. Correct. All workpapers should contain pertinent information to support observations and recommendations.
Part 3 Sample Exam Questions Collapse All
• A means of limiting production delays caused by equipment breakdown and repair is to:
A. Schedule production based on capacity planning.
B. Plan maintenance activity based on an analysis of equipment repair work orders.
C. Pre-authorize equipment maintenance and overtime pay.
D. Establish a preventive maintenance program for all production equipment.
Correct Answer: Dclose
A. Incorrect. Scheduling production based on capacity utilization ignores other important factors such as demands.
B. Incorrect. Budgeting maintenance department activities based on previous work orders will not prevent equipment breakdowns. and repairs.
C. Incorrect. Standing authorizations of work orders and overtime will not address the problem posed.
D. Correct. A preventive maintenance program will reduce equipment breakdowns and repairs.
If a country uses trade quotas to overcome chronic trade deficits, the most likely outcome would be that:
A. Unemployment and productivity rates will rise.
B. Unemployment rates will rise and productivity rates will decline.
C. Unemployment rates will decline and productivity rates will rise.
D. Unemployment and productivity rates will decline.
Correct Answer: Dclose
A. Incorrect. See answer "D".
B. Incorrect. See answer "D".
C. C. Incorrect. See answer "D".
D. Correct. With trade quotas, home jobs will be saved; hence, unemployment will decline. Since jobs will be saved for inefficient industries (less efficient than foreign competitors), productivity rates will decline because they will not be specializing in those goods with which they have a comparative advantage.
The difference between the required rate of return on a given risky investment and that of a risk-free investment with the same expected return is the:
A. Risk premium.
B. Coefficient of variation.
C. Standard error of measurement.
D. Beta coefficient.
Correct Answer: Aclose
A. Correct. The risk premium is the portion of expected return attributed to the increased risk.
B. Incorrect. The coefficient of variation represents the standard deviation of an investment's returns divided by the mean returns.
C. Incorrect. The standard error represents a measure of variability in the investment's returns.
D. Incorrect. The beta coefficient represents the sensitivity of the investment's returns to the market returns.
Which of the following would be of greatest concern to an auditor reviewing a policy regarding the sale of a company’s used personal computers to outside parties?
A. Whether deleted files on the hard disk drive have been completely erased.
B. Whether the computer has viruses.
C. Whether all software on the computer is properly licensed.
D. Whether there is terminal emulation software on the computer.
Correct Answer: Aclose
A. Correct. While most delete programs erase file pointers, they do not remove the underlying data. The company must use special utilities that fully erase the data. This is important because of the potential for confidential data on the microcomputers.
B. Incorrect. This could create a liability for the company if a virus destroyed the purchasing party’s data or programs. However, the purchasing party should use anti-virus software to detect and eliminate any viruses. This concern, while important, is not as serious as the one in answer “A”.
C. Incorrect. The purchasing party has a responsibility to insure that all their software is properly licensed. If the company represented that all the software was properly licensed, this could create a liability. However, this liability is not as serious as the implication from answer “A”.
D. Incorrect. Terminal emulation software is widely available.
Part 4 Sample Exam Questions Collapse All
• In the Boston Consulting Group (BCG) growth-share matrix, which strategy in the matrix describes large generation of cash and heavy investment needed to grow and maintain competitive positioning but net cash flow is usually modest?
A. Cash cows.
B. Question marks.
C. Dogs.
D. Stars.
Correct Answer: Dclose
A. Incorrect. A cash cow generates more cash than it requires, providing funds to the corporation to invest in other ventures.
B. Incorrect. Question marks deserve attention to determine if the venture is viable or not. The business is located in a growing industry but has not achieved a strong competitive position.
C. Incorrect. Dogs describe a business situated in a low growth or declining industry and if not positioned strongly will be divested.
D. Correct. Stars describe a business with a strong competitive position in the industry. The industry is robust and SBUs are highly attractive. Net cash flow is modest since investment is heavy although stars generate large amounts of cash.
In which of the following industry environments are franchising and horizontal mergers commonly used strategies?
A. Emerging industries.
B. Declining industries.
C. Fragmented industries.
D. Mature industries.
Correct Answer: Cclose
A. Incorrect. See answer “C”.
B. Incorrect. See answer “C”.
C. Correct. Strategies such as chaining, franchising, and horizontal mergers are commonly used in fragmented industries, because there are low barriers to entry. Companies in fragmented industries face many opportunities for differentiation but each opportunity for competitive advantage is small.
D. Incorrect. See answer “C”.
Which of the following costs does management need to consider when introducing a new product or substituting a new product for an existing one?
I. Costs of retraining employees.
II. Costs of acquiring new ancillary equipment.
III. Write-offs due to undepreciated investment in old technology.
IV. Capital requirements for changeover.
A. I and III only.
B. I, II, and IV only.
C. II, III, and IV only.
D. I, II, III, and IV.
Correct Answer: Dclose
I. Correct.
II. Correct.
III. Correct.
IV. Correct. Costs that management should consider would include costs of retraining employees; costs of acquiring new ancillary equipment; write-offs of undepreciated investments in the old technology; capital requirements and research and development costs of the changeover; and costs of modifying interrelated stages of production or related aspects of the business.
Which of the following theories includes the assertion that employees may be motivated by achievement of acceptance or esteem in the workplace?
A. Equity theory.
B. Expectancy theory.
C. Needs hierarchy theory.
D. Goal-setting theory.
correct Answer: Cclose
A. Incorrect. The equity theory focuses on the balance between inputs and outcomes.
B. Incorrect. The basis of the expectancy theory is that employees are only motivated to provide inputs if they believe a given level of outcome will result.
C. Correct. The need theory suggests that employees have needs that they are motivated to satisfy in the workplace.
D. Incorrect. The goal-setting theory is based upon the belief that employees have desires and aspirations, which result in goals that direct their behavior.
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