OPERATIONS AUDITING

QUIZ #1

1.) In applying the standards of conduct set forth in the Code of Ethics, internal auditors are expected to:
a. Exercise their individual judgment.
Correct. The IIA’s Code of Ethics contains basic principles, such as integrity, which require individual
judgment to apply.
b. Compare them to standards in other professions.
c. Be guided by the desires of the auditee.
d. Use discretion in deciding whether to use them or not.

2.) The IIA’s Code of Ethics includes which of the following two essential components?
a. Definition of internal auditing and administrative directives.
b. Principles and Rules of Conduct.
Correct. The IIA’s Code of Ethics extends beyond the definition of internal auditing to include two
essential components:
1. Principles that are relevant to the profession and practice of internal auditing.
2. Rules of Conduct that describe behavior norms expected of internal auditors. These rules are an aid to
interpreting the Principles into practical applications and are intended to guide the ethical conduct of
internal auditors.
c. Integrity and objectivity.
d. Confidentiality and competency.

3.) The IIA’s definition of internal auditing emphasizes the effectiveness of which of the following?
a. Value, cost, and benefit propositions.
b. Inherent risk, residual risk, and total risk.
c. Risk management, control, and governance processes.
Correct. The definition of internal auditing states the fundamental purpose, nature, and scope of internal
auditing. Internal auditing is an independent, objective assurance and consulting activity designed to add
value and improve an organization’s operations. It helps an organization accomplish its objectives by
bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk
management, control, and governance processes.
d. Purpose, nature, and scope of work.
4.) Which of the following adds value to the others?
a. Governance processes.
b. Risk management processes.
c. Internal audit activities.
Correct. Internal audit activities add value to the organization (and its stakeholders) when they provide
objective and relevant assurance and contribute to the effectiveness and efficiency of governance, risk
management, and control processes.
d. Control processes.

5.) Which of the following statements best describes internal auditing?

A. An activity located within an entity, primarily to detect fraud.
B. An accounting function located within an entity.
C. An activity located within an entity that determines the fiscal integrity of a financial report.
D. An independent and objective assurance activity within an entity.

6.) According to the recent definition of internal audit provided by the Institute of Internal Auditors, the
principal benefit to management of there being an internal audit function is that:
A. It aids management in the areas of risk management, control and governance processes.
B. Management is provided with assurance that the organization is complying with legal requirements.
C. Management is provided with assurance that fraudulent activities will be detected.
D. External audit costs are reduced.

7.) According to the Institute if Internal Auditors, the best description of internal auditing is that it:
A. certifies the reliability and integrity of financial and operating information.
B. furnishes management with information needed to effectively discharge its responsibilities.
C. appraises the economy and efficiency with which resources are used.
D. reviews the means of safeguarding assets and verifies the existence of those assets.

8.) Which of the following is not a main goal of internal auditing?

A. Add value to an organization's operations.
B. Help an organization accomplish its objectives.
C. Provide reliable information to external users.
D. Improve the effectiveness of risk management of an organization.

9.) Which of the following is not explicitly a part of the definition of internal auditing contained on the
IIA's website?
A. Internal auditing is an objective assurance activity.
B. Internal auditors should help external auditors complete the annual financial statement audit.
C. Internal auditing should help an organisation accomplish its objectives.
D. Internal auditing is designed to add value and improve an organisation's operations.

10.) According to the IIA Standards, the authority of the internal auditing department is limited to that
granted by:
A. senior management and the Internal Auditing Standards.
B. the board of directors and the financial controller.
C. the audit committee and the chief financial officer.
D. management and the board of directors.

11.) The expectation that an internal auditor does not accept bribes or gifts that may impair judgment is
based on the principle of:
A. integrity.
B. objectivity.
C. confidentiality.
D. competency.

12.) The internal auditing department provides information about control and quality of performance to:
A. a level in the entity sufficient to ensure acceptance of all recommendations.
B. management and the board.
C. any member of the entity upon request.
D. outside agencies for regulatory and financial compliance
13.) The chief audit executive is responsible for properly managing the internal audit so that (choose the
exception)
A. Audit work fulfills the general purposes and responsibilities described in the audit charter.
B. Resources of the internal audit activity are efficiently and effectively employed.
C. The internal audit activity conforms with the definition of Internal Auditing and the Standards.
D. None of the above.

14.) Determining the engagement objectives have been met is ultimately the responsibility of the
A. Internal Auditor
B. Audit Committee
C. Internal Audit Supervisor
D. Chief Audit Executive

15.) The chief audit executive should establish a program for selecting and developing the human
resources of the internal audit activity by
A. Developing written job descriptions for each level of the audit staff.
B. Selecting qualified and competent individuals.
C. Training and providing continual educational opportunities for each internal auditor.
D. All of the above.

16.) The purpose, authority and responsibility of the internal audit department should be defined in a
formal written document known as
A. Memorandum of Agreement
B. Contract
C. Internal Audit Charter
D. None of the above.

17.) Which of the following is not included in the internal audit charter?
A. Risk assessment of the internal audit activity.
B. Responsibility of the internal audit activity
C. Purpose of the internal audit activity
D. Authority of the internal audit activity

18.) The audit committee is a subcommittee of the board of directors composed of executive directors.
A. True
B. False
C. Awit
D. Data is insufficient

19.) The chief audit executive should submit _______ to senior management for approval and to the
board of directors for its information.
A. Physically
B. Online
C. Annually
D. Every five years

20.) The internal audit reports both to the Board of Directors and Senior Management. The internal audit
group reports ___________ to the Board of Directors, and ____________ to the Senior Management.
A. directly : administratively
B. administratively : directly
C. secretly : functionally
D functionally : regularly