I II. True or False (10X2 = 20 Points)

1. Embezzlement is the unlawful conversion of assets by an individual entrusted with them.

A. True

B. False

2. Both internal and external auditors certify that the financial statements present fairly, in all material respects, the financial position of the Company.

A. True

B. False

3. All publicly traded companies in the United States are legally mandated to follow COSO ERM in their risk assessment process.

A. True

B. False

4. The International Standards for the Professional Practice of Internal Auditing prescribe that the Chief Audit Executive must report to the Chief Executive Officer in all areas of work.

A. True

B. False

5. The IIA Internal Audit Standards prescribe that the internal audit activity must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk.

A. True

B. False

6. Receiving Stock Options by a Chief Audit Executive is specifically prohibited by IIA Code of Ethics.

A. True

B. False

7. A well designed and operated internal control can provide an absolute assurance regarding the achievement of an entity's objectives.

A. True

B. False

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8. Forensic auditing differs from internal auditing because forensic auditing relies more heavily on investigative skills

A. True

B. False

9. Segregation of duties is a detective internal control.

A. True

B. False

10. Internal Audit is the most common method by which occupational frauds are initially detected.

A. True

B. False

I III. Essay Question (30 Points)

Discuss why internal auditors often fail to detect frauds. You should discuss, in detail, a minimum of three reasons.

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