(1). An internal auditor recommended that an organization implement a computerized control in its sales system in order to prevent sales representatives from executing contracts in excess to their delegated authority levels. A follow-up review found that the sales system had not been modified, but a process had been implemented to obtain written approval by the vice president of sales for all contracts in excess of $1 million. The chief audit executive (CAE) would be justified in reporting in this situation to the organizations board under which of the following circumstances?

1. In the opinion of CAE, the level of residual risk assumed by senior management is too high

2. Testing of compliance with the new process finds that all new contracts in excess of $ 1million have been approved by the vice-presidential sales

3. The cost of modifying sales system to include a preventive control is less than $100,000

a) 1 only b) 3 only c) 1 and 3 only d) 1, 2 and 3.

(2). An internal auditor completed a test of 30 randomly selected accounts. For the five accounts selected, the auditor was unable to find supporting documentation in the normal place of storage. Which of the following next steps would be most appropriate for the internal auditor to take?

a) Conclude that the test failed because at least 17 percent of the sample items were not supported

b) Select five new accounts to replace the ones that were missing supporting documentation

c) Expand the sample size to 60 to determine whether the error rate remains the same (stop and go)

d) Contact management to determine whether the supporting documentation can be located elsewhere.

(3). An internal auditor develops an engagement observation related to an organizations accumulation of large travel advances. The auditor observes that the organizations procedure do not require justification for travel advances greater than a specific amount. Which of the following best describes the organizations procedure?

a) A criterion of the organizations accumulation of large travel advances

b) A condition of the organizations accumulation of large travel advances

c) A consequence of the organizations accumulation of large travel advances

d) A cause of the organizations accumulation of large travel advances.