QUALIFIED INTERNAL AUDITOR

The number of customer visit is higher this year than last year.

The number of new customers to the number of prospects contacted is higher this year than last
year.

The revenue per salesperson is higher this year than last year.

Shampoo Daily’s unit sales rate was lower last year than this year.

The supplier decided to stop providing supplies to ‘Play-on, since price reduction would make
his other customers bargaining for reduced prices as well.

The supplier charged lower prices for short periods but increases prices of supplies gradually.

The supplier worked through the suppliers’ union to maintain existing price levels.

The supplier agreed with ‘Play-on’ prices but substituted a lower grade supplies.

Assessing the systems of flowcharts.

Assessing the programme flowchart for any evidence of control procedures placed into the
computer programmes.

Performing a "walk-through" of the transaction processing and obtaining Xerox of all documents
used.

Interviewing the cashier.

Evaluation

Verification

Observation

Analysis

A copy of a sales invoice to the customer in the client’s records.

A credit approval document supported by the customer's audited financial statements.

A customer's purchase order in the client’s records in relation to the credit sale.

A positive acknowledgement received from the customer.

Purchase orders, purchase detail reports, and bid quotes.

Purchase requisitions, purchase orders, and bid quotes.

Purchase requisitions, journal voucher entries, purchase detail reports.

Purchase detail reports, purchase orders, and purchase requisitions.

Tracing a sample of credit memos to the accounts receivable subsidiary ledger.

Reviewing authorization of credit terms.

Preparing an aging analysis.

Reconciling the accounts receivable subsidiary ledgers with the control account.

Bids are solicited based on general requests.

A sufficient number of vendors were selected to ensure competition.

Incoming bids are first returned to the buyer for control purposes.

None of the above

Hire an IT trainee from an IT firm

Raise the matter in the board meeting

Ask indirect questions to the operator to get more factual information

Wait until it is more likely that the risk actually exists

A tick mark legend

A descriptive heading.

An expression of an audit opinion.

A complete flowchart of the system of internal controls for the area being reviewed.

Use a short sentence with one idea rather than a longer sentence with several ideas.

Highlight the point through the use of nonparallel structure.

Use passive rather than active voice.

Place the point in the middle rather than at the beginning or end of the paragraph.

Can be prepared using a flexible format, thereby increasing overall audit efficiency.

Allows auditors to counter arguments and provide additional information meeting audiences’
requirements

Can be delivered in an informal manner without preparation.

Reduce the amount of testing required to support audit findings.

Ask the manager of the maintenance department to assume the resulting risk.

Withhold conclusions about payroll internal control in the maintenance department.

Include this finding in the current audit report.

Instruct the employees to sign their time cards.

The use of change analysis and trend analysis of buyer or vendor activity.

The use of purchase orders for all purchases.

The receipt of an invoice to put new vendors on the master file.

Periodic vendor surveys regarding potential buyer conflict of interest or ethics violations.

The internal auditor should select a stratified sample of all hourly and salaried payroll
transactions for an entire reporting period, perform the necessary activities, and then compare
the result with that obtained from the service provider.

The internal auditor should submit a set of test data to the external service provider during an
annual audit and compare the service provider’s processing with the his own computations on
the same test data.

The internal auditor should select a random sample of all hourly payroll transactions for the
reporting period, re-compute pay and withholding items, and compare the result with that
obtained from the service bureau.

The internal auditor should select a discovery sampling of all payroll transactions for an entire
reporting period and then and analyse findings.

Provide an opinion whether the financial statements has been prepared fairly

To ensure inclusion of only historical data in the audit procedures

To emphasise on outputs rather than inputs

Look for economy in audit activities in order to ensure substantial profits are earned.

What types of transaction has been attempted?

Who the authorized personnel for access into the system?

Which terminal is in use to make the attempt?

What type of data has been searched for?

Operational audit of the HR function in order to hire and fire.

Compliance audit of overtime policy.

Performance audit of the production department.

Financial control audit over payroll procedures.

Perform an analytical review of interest income as a percentage of the investment portfolio in
comparison with a group of peer financial institutions.

Perform an analytical review that involves developing a chart to compare interest income plotted
over the past ten years.

Take a random sample of loans made during the period and compare the riskiness of the loans
with that of a random sample of loans made two years ago.

Develop a multiple regression time series analysis of income over the past five years, including
such factors as interest rate in the economy, size of loan portfolio, and dollar amount of new
loans each year.

He should concentrate in designing the control procedures.

He should only concentrate on establishing policies for controls.

He should appraise the effectiveness of the internal controls.

He should focus on the procedures for the planning process.

The labour rate of “A-grade” employees at a major rival’ plant.

The average actual cost per pound of a specific product at the company's most efficient plant
becomes the benchmark for the company's other plants.

The company setting a benchmark of $50,000 for employee training programmes at each of the
company's plants.

The percent of customer orders delivered on time at the company's most efficient plant
becomes the benchmark for the company’s other plants.

The internal auditor should decide the amount of necessary review work.

The internal auditor may Allow management to decide when to review, since it is management’s
ultimate responsibility.

The internal auditor should decide to conduct follow-up work only if management requests the
auditor's assistance.

Write a follow-up audit report with all findings and their significance to the operations.

An annual report summary of the department's audit work schedule and financial budget.

Significant interim changes to the approved audit work schedule and financial budget.

An audit senior in charge of the audit was offered a permanent position in the auditee's
department. The offer was made in between the completion of an audit and issuance of audit
report.

An audit plan was approved by senior management and the board. Subsequent to the approval,
senior management informed the audit director not to perform an audit of a division because
the division's activities were very sensitive.

The incidence of fraud of a material amount has been established to a reasonable certainty.

Irregular transactions have been identified and are under investigation.

Internal auditor has been tipped off regarding suspicious activities.

The review of all suspected fraud related transactions is complete.

The internal auditing department's charter.

The internal auditing department's policies and procedures manual.

The annual plan for the internal auditing department.

Job descriptions for the various staff positions.

Attributes sampling.

Discovery sampling.

Targeted sampling.

Variables sampling.

Interviews

Questionnaires

Forensic analysis

Computer

Process all personnel agency invoices via a purchase order through the purchasing department.

Verify new vendors to firms listed in a professional association catalogue and/or verify the
vendor name and address through the telephone book.

Monitor the closeness of the relationships of recruiters with specific vendors.

Require all employees to sign an annual conflict of interest statement.

Takeover results in new management strategies.

A sales-personnel has been reporting higher sales figure than average.

Quick growth through entering new markets.

An Internal Revenue Service audit of tax returns.

The small size of the sample relative to the population makes sampling risk unacceptable.

The failure to stratify the population according to sales volume results in bias.

The systematic selection of returns during the three months is not sufficiently random.

The error rates during these busiest months may not be representative of the whole year.

Continuous and negatively skewed.

Continuous and positively skewed.

Continuous and symmetrically skewed.

Continuous and evenly distributed between the mean and median.

Indicate another sample is needed.

Prove there are no errors in accounts payable.

Indicate the null hypothesis is false

Fail to prove the error rate is above 1%.

The response rate is typically higher.

Interviewers can increase a respondent’s understanding of questions.

Survey designers can use a wider variety of types of questions.

They are less expensive since mailing costs are avoided.

The auditor notes strong indicators of a specific fraud involving an operating expenses account.

The company has relatively stable operations that have not changed much over the past year.

The auditor would like to identify large, unusual, or nonrecurring transactions during the year.

The operating expenses vary in relation to other operating expenses, but not in relation to
revenue.

This is a directive auditing tool.

This is a preventive auditing tool.

This is a detective auditing tool.

This is a corrective auditing tool.

special investigations into suspected fraud

to confirm that the final result is correct

to evaluate the system of internal control that are mainly concerned with the financial
statements and accounting

to give an opinion on overall fairness of the financial statements and accounting

The audit firm has been involved in maintaining the accounting records, or undertaking
valuations that are incorporated in the financial statements

The audit firm is acting as a legal advocate for the client in litigation

Marshal is an influential finance director of a company that is being audited

The audit firm is working for long time for its client

Identification

Assessment

Migration

Review

The internal audit activity ensure that the operational objectives are in line with organisation’s
corporate goals.

The internal audit activity should review operations and plans to ensure consistency with
organisational values.

The internal audit activity should be independent in determining the scope of internal auditing,
performing work, and communicating results

The internal audit activity should control and review the overall usefulness of the quality of the
audit planning.

Internal document obtained from the auditee.

External document obtained directly from an external source.

Internal document are susceptible to careful internal review procedures.

Internal document that has been circulated through an outside party.

Cancelled cheque issued in payment of the procured goods.

Production department's original requisition for the goods.

Receiving memorandum documenting the receipt of the goods.

Supplier's invoice for the purchased goods.

Comparing the items on the schedule with the accounts payable ledger or unpaid voucher file.

Comparing the balance on the schedule with the balances of prior years.

Comparing confirmations received from selected creditors with the accounts payable ledger.

Examining supplier’s invoices in support of selected items on the schedule.

Examination of the shipping documents supporting recorded transfers to and from the warehouse.

Obtaining written confirmation from management.

Physically observing the inventory in the warehouse.

Examination of warehouse receipts contained in the auditee's records.

Reminder lists

Flowcharts

Questionnaires

Research reported in professional journals

Apply the retail method of inventory valuation.

Compare physical inventory counts to perpetual records.

Develop inventory estimates based on the gross profit percentage method.

Analyse current and previous inventory turnover rates.

Ascertain the length of processing time between the receipts of the supplier’s invoice to the
payment date for the related disbursement.

Interview the accounts payable manager to ascertain the procedures and standards for
processing supplier invoices.

Compare the supplier’s invoice due date with the payment date as indicated on the cancelled
check.

Compare the date stamped on the invoice for receipt with the corresponding payment date for
the expenditure.

In order to determine that customer shipments were billed.

In order to determine that sales that are billed were also shipped.

In order to determine that shipments to customers were also recorded as receivables.

In order to determine that the subsidiary accounts receivable ledger was updated.

To provide the auditee a place to make responses to audit recommendations.

To make the audit report more readable by providing a place to append exhibits.

To provide the principal evidential support for the internal auditor's report.

To provide a place to summarise overall audit recommendations.

By stating, ‘Your bookkeeper has failed to reconcile the bank statement each month.’

By stating, ‘The bank statements have not been reconciled each month.’

By stating, ‘Unfortunately, your bookkeeper has not taken the time to reconcile the bank
statement each month.’

By stating, ‘You have apparently failed to inform your bookkeeper that the bank statements
should be reconciled on a timely basis.’

Delivering a lecture on the findings.

Showing a series of slides or overheads that graphically depict the findings; limit verbal
commentary.

Using slides/overheads to support a discussion of major points.

Handing out copies of the report, asking the participants to read the report, and asking for
questions.

The majority of travel advances in the organisation exceed the prescribed maximum.

Travel advances are not controlled in accordance with existing policy.

The prescribed maximum travel advance is too low.

76% of all travel advances exceed the management prescribed maximum.

Compare monthly balances and use change and trend analysis.

Require additional monitoring by headquarters whenever improper segregation of duties exists
at remote units.

Determine if any employees have high personal debt.

Determine if any employees are leading expensive lifestyles.

A check for completeness of input, such as a computer sequence check.

A check for correct master files, such as a header label.

A check for input accuracy, such as a check of detail reports.

A check for accuracy of file maintenance, such as review of exception reports.

A determination that Financial statements are presented in accordance with GAAP.

A determination that desired benefits are being achieved.

A determination that the entity has complied with laws and regulations.

A determination that resources are managed economically and efficiently.

Individuals who are not employees have no access privileges.

Revoked access privileges are cancelled on a weekly cycle.

Access privileges are activated promptly after they are authorised.

A systems programmer keeps records of all additions/deletions of access changes.

Use a safe-deposit box to receive all donations.

Carry out periodic internal audits of the organisation's cash receipts by tracing deposits to the
original posting in the cash receipts records.

Require that all donations be made by cheque.

Require issuance of a confirmation receipt to all donors, with the receipt issued by the person
who opens and deposits the cash receipts.

Make inquiries of the chief financial officer, legal counsel, or grant administrators.

Review prior year working papers and enquire of officials as to changes.

Review applicable grant agreements.

Discuss the matter with the audit committee and make inquiries as to the nature of the
requirements and the audit committee's objectives for the audit.

Imposition of corrective measures.

Participation with auditees to improve methods.

Fraud investigation

Implementation of policies and procedures.

The rate of absenteeism.

The goal of becoming a leading manufacturer.

The number of insurance claims processed per day.

The rate of customer complaints.

Internal auditing department's written charter.

Mission statement of the audit committee.

Engagement memo issued prior to each audit assignment.

Purpose statement within applicable audit reports.

Review and approval of audit programmes.

Assurance that the external auditor will rely on the work of the internal auditing department
whenever possible.

Review and endorsement of all internal audit reports prior to their release.

Support for appropriate follow-up of recommendations made by the internal auditing department.

To close the open audit issues as soon as possible.

To effect savings as early as possible.

To indicate concurrence with the audit findings.

To ensure that the auditor performance is evaluated.

Developing audit programmes.

Review of risk factors.

Developing plan based on workload requirements.

Identifying auditable locations.

Stop-and-go sampling.

Discovery sampling.

Variables sampling.

Attributes sampling.

By being willing to prosecute.

By avoiding whistle-blowers.

By overlooking inefficiencies in the judicial system

By accepting the lack of integrity in the system

Managers regularly assume upon subordinates' duties.

Managers dealing in matters outside their profit centre’s scope.

Managers not complying with corporate directives and procedures.

Managers subject to formal performance reviews on a regular basis.

Intentional deception.

Taking dishonest advantage.

Perpetration for the benefit or detriment of the organisation.

Negligence on the part of executive management.

$196,000

$199,000

$199,800

204,000

A decrease in population standard deviation.

An increase in population standard deviation

A decrease in required sample size.

An increase in required sample size

Standard error of the mean.

Non-sampling error.

Achieved precision.

Point estimate of the arithmetic mean.

Trend analysis.

Ratio analysis.

Unobtrusive measures or observations.

Rating scales.

Adequacy of the system of internal control

Significance of the area being examined

Precision with which the results of analytical audit procedures can be predicted.

Preparation of employee questionnaire policy

Shifts some of the responsibilities away from the auditors towards others such as work teams.

Allocated additional responsibilities to internal audit.

Reduces the level of collaboration required between managers and internal auditor.

Allows assessment to be carried out without any internal audit involvement whatsoever,
therefore allowing them to focus their attention on other areas of the organisation.

Examining financial and operating information

Review of the economy, efficiency and effectiveness of operations

Review of compliance with laws, regulations and other external requirements

Confirming that the final result (the sum) is correct

Independence, objectivity, and nature of the work

Independence, communication of findings, and the resolution of problems affecting the risks
accepted by management

Independence, objectivity and proficiency

Engagement planning, engagement execution, and progress monitoring

The same rules might not be suitable for every company

There are some aspects of corporate governance that cannot be regulated easily

Companies do not have the choice of ignoring the rules

The most suitable corporate governance practices can differ between companies

Inherent risk

Control risk

Defective risk

Detection risk

Review the extent to which the organisation complies with applicable laws and regulations.

In this engagement internal auditors sometimes assist clients by working in an advisory capacity

This audit are usually voluntary and may be necessary when an organisation intends to carry out
a large financial transaction.

This is a one off investigations into a person, business or financial transaction.

Effectiveness

Economy

Efficacy

Compliance