A medium-sized publicly owned organization operating in Country X has grown to a size that the governing authority believes warrants the establishment of an internal audit activity. Country X has legislated internal audit requirements for government-owned organizations. The organization changed the bylaws to reflect the establishment of the internal audit activity. The governing authority decided that the chief audit executive (CAE) must be a certified internal auditor and will report directly to the newly established audit committee. Which of the items discussed above will contribute the most to the new CAEs independence?

A.The establishment of the internal audit activity is documented in the bylaws.

B.Country X has legislated internal auditing requirements.

C.The CAE will report to the audit committee.

D.The CAE is to be a certified internal auditor.

The CAE should report functionally to the board. The board is responsible for which of the following activities?

Internal communication and information flows

Approval of the internal audit risk assessment and related audit plan

Approval of annual compensation and salary adjustments for the CAE

A.1 and 2 only.

B.2 and 3 only.

C.1 and 3 only.

D.1, 2, and 3.

A formal document (charter) approved by the board that defines the internal audit activitys purpose, authority, and responsibility enhances its

A.Exercise of due professional care.

B.Proficiency.

C.Relationship with management.

D.Independence.

Assessing individual objectivity of internal auditors is the responsibility of

A.The chief executive officer.

B.The board.

C.The audit committee.

D.The chief audit executive.

Which of the following actions is required of the CAE and internal auditors themselves in regard to the objectivity of internal auditors?

A.Maintain.

B.Delegate.

C.Assess.

D.Define.

An internal auditor has a conflict of interest whenever

A.An improper act results.

B.An improper or unethical act results.

C.The internal auditors act is not in the organizations best interest.

D.A relationship appears not to be in the organizations best interest.

When faced with an imposed scope limitation, the chief audit executive needs to

A.Refuse to perform the engagement until the scope limitation is removed.

B.Communicate the potential effects of the scope limitation to the board.

C.Increase the frequency of engagements concerning the activity in question.

D.Assign more experienced personnel to the engagement.

An internal auditor who had been supervisor of the accounts payable section should not perform an assurance review of that section

A.Because a reasonable period of time in which to establish independence cannot be determined.

B.Until at least 1 year has elapsed.

C.Until after the next annual review by the external auditors.

D.Until it is clear that the new supervisor has assumed the responsibilities.

The internal audit activity should be free to audit and report on any activity that also reports to its administrative head if it considers such coverage to be appropriate for its audit plan. Any limitation in scope or reporting of results of these activities should be brought to the attention of the

A.Chief executive officer.

B.Chief financial officer.

C.External auditor.

D.Board and senior management

The internal audit activity collectively must possess or obtain certain competencies. Internal audit staff should be competent in

A.The use of the International Professional Practices Framework.

B.Finance.

C.General management principles.

D.Marketing.

The internal audit activity collectively must possess or obtain certain competency in

A.Contract law.

B.Information technology controls.

C.Management principles.

D.Marketing.

A chief audit executive (CAE) has been requested by the audit committee to conduct an engagement at a chemical factory as soon as possible. The engagement will include reviews of health, safety, and environmental (HSE) management and processes. The CAE knows that the internal audit activity does not possess the HSE knowledge necessary to conduct such an engagement. The CAE must

A.Begin the engagement and incorporate HSE training into next years planning to prepare for a follow-up engagement.

B.Suggest to the audit committee that the factorys own HSE staff conduct the engagement.

C.Seek permission from the audit committee to obtain appropriate support from an HSE professional.

D.Defer the engagement and tell the audit committee that it will take several months to train internal audit staff for such an engagement.

An internal audit activitys (IAAs) quality assurance and improvement program (QAIP)

A.Encompasses all aspects of the IAAs operations except consulting.

B.Includes analysis of the execution of the internal audit plan.

C.Must have a full external independent assessment every 3 years.

D.Should be developed and maintained by the board.

An internal audit activitys (IAAs) quality assurance and improvement program (QAIP)

A.Has three components: assessment, communication, and disclosure of nonconformance.

B.Is based on the mandatory elements of The IIAs guidance.

C.Must conduct an internal self-assessment at least once every 3 years.

D.Primarily addresses compliance with The IIA Code of Ethics.

The interpretation related to quality assurance given by the Standards is that

A.External assessments can provide senior management and the board with independent assurance about the quality of the internal audit activity.

B.Appropriate follow-up to an external assessment is the responsibility of the chief audit executives immediate supervisor.

C.The internal audit activity is primarily measured against The IIAs Code of Ethics.

D.Supervision is limited to the planning, examination, evaluation, communication, and follow-up process.

Due professional care calls for

A.Detailed reviews of all transactions related to a particular function.

B.Infallibility and extraordinary performance when the system of internal control is known to be weak.

C.Consideration of the possibility of material irregularities during every engagement.

D.Testing in sufficient detail to give absolute assurance that noncompliance does not exist.

With regard to the exercise of due professional care, an internal auditor should

A.Consider the relative materiality or significance of matters to which assurance procedures are applied.

B.Emphasize the potential benefits of an engagement without regard to the cost.

C.Consider whether criteria have been established to determine whether goals are achieved, not whether those criteria are adequate.

D.Select procedures that are likely to provide absolute assurance that irregularities do not exist.

Assurance engagements must be performed with proficiency and due professional care. Accordingly, the Standards require internal auditors to

Consider the probability of significant noncompliance

Perform assurance procedures with due professional care so that all significant risks are identified

Weigh the cost of assurance against the benefits

A.1 and 2 only.

B.1 and 3 only.

C.2 and 3 only.

D.1, 2, and 3.

Periodic internal assessments of the internal audit activity primarily serve the needs of

A.The board of directors.

B.The internal audit activitys staff.

C.The chief audit executive (CAE).

D.Senior management.

The internal audit activitys quality assurance and improvement program is the responsibility of

A.External auditors.

B.The chief audit executive.

C.The board.

D.The audit committee.