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An organization is planning to develop and implement a new computerized purchase order system in one of its manufacturing subsidiaries. The vice president of manufacturing has requested that internal auditors participate on a team consisting of representatives from finance, manufacturing, purchasing, and marketing. This team will be responsible for the implementation effort. Eager to take on this high profile project, the chief audit executive assigns a senior internal auditor to the project to assist \"as needed.\" Assuming the senior internal auditor performed all of the following activities, which one will impair objectivity if the internal auditor is asked to review the purchase order system on a post-engagement basis? A. B. C. D. Helping to identify and define control objectives. Testing for compliance with system development standards. Evaluate risk exposures of systems and programming standards. Drafting operating procedures for the new system. Maintaining individual objectivity of internal auditors is the responsibility of A. B. C. D. The chairperson of the board of directors. The chairperson of the audit committee. The external assessment team. The chief audit executive. In which of the following situations does an internal auditor potentially lack objectivity? A.An internal auditor reviews the procedures for a new electronic data interchange (EDI) connection to a major customer before it is implemented. B.A former purchasing assistant performs a review of internal controls over purchasing 4 months after being transferred to the internal auditing department. C.An internal auditor recommends standards of control and performance measures for a contract with a service organization for the processing of payroll and employee benefits. D.A payroll accounting employee assists an internal auditor in verifying the physical inventory of small motors. A treasury department employee transferred to the internal audit activity of the same organization last month. The chief financial officer of the organization has suggested that, because of the employee's significant knowledge in this area, it would be a good idea for the employee to immediately begin an engagement to evaluate the treasury department. In this circumstance, the employee should A. B. C. D. Accept the engagement and begin work immediately. Discuss the need for such an engagement with the employee's former superior, the CFO. Suggest that the engagement be performed by another member of the internal audit staff. Offer to prepare an engagement work program but suggest that interviews with the employee's former co-workers be conducted by other members of the internal audit staff. The Standards require that internal auditors possess which of the following skills? 1. Internal auditors should understand human relations and be skilled in dealing with people. 2. Internal auditors should be able to recognize and evaluate the materiality and significance of deviations from good business practices. 3. Internal auditors should be experts on subjects such as economics, commercial law, taxation, finance, and information technology. 4. Internal auditors should be skilled in oral and written communication. A. 2 only. B. 1 and 3 only. C. 3 and 4 only. D. 1, 2, and 4 only. 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. B. C. D. Begin the engagement and incorporate HSE training into next year's planning to prepare for a follow-up engagement. Suggest to the audit committee that the factory's own HSE staff conduct the engagement. Seek permission from the audit committee to obtain appropriate support from an HSE professional. Defer the engagement and tell the audit committee that it will take several months to train internal audit staff for such an engagement. In exercising due professional care, internal auditors must consider which of the following? 1. The relative complexity, materiality, or significance of matters to which assurance procedures are applied 2. The extent of assurance procedures necessary to ensure that all significant risks will be identified 3. The probability of significant errors, irregularities, or noncompliance A. 1 and 2 only. B. 2 and 3 only. C. 1 and 3 only. D. 1, 2, and 3. The chief audit executive should develop and maintain a quality assurance and improvement program that covers all aspects of the internal audit activity and continuously monitors its effectiveness. All of the following are included in a quality program except A. B. C. D. Annual appraisals of individual internal auditors' performance. Periodic internal assessment. Supervision. Periodic external assessments. Quality program assessments may be performed internally or externally. A distinguishing feature of an external assessment is its objective to A. Identify tasks that can be performed better. B. Determine whether internal audit services meet professional standards. C. Set forth the recommendations for improvement. D. Provide independent assurance. The IIA Rules of Conduct set forth in The IIA's Code of Ethics A. Describe behavior norms expected of internal auditors. B. Are guidelines to assist internal auditors in dealing with engagement clients. C. Are interpreted by the Principles. D. Apply only to particular conduct specifically mentioned. The IIA's Code of Ethics requires internal auditors to perform their work with A. B. C. D. Honesty, diligence, and responsibility. Timeliness, sobriety, and clarity. Knowledge, skills, and competencies. Punctuality, objectivity, and responsibility