APP Auditing Principles & Procedures 3

Question 1

Under the COSO internal control framework, which component directly addresses an organization's ethical values and the oversight responsibility of management?

Accepted Answer

Control Environment

Answer

The Control Environment is the foundation of COSO and encompasses the tone at the top, ethical values, and management's commitment to competence and oversight.

Question 2

A procurement auditor is conducting a risk-based audit. Which area should receive the highest audit priority?

Accepted Answer

High-dollar, complex contracts in areas with weak controls

Answer

Risk-based auditing directs resources toward high-dollar, complex areas with weak controls because these represent the greatest potential for material error or fraud.

Question 3

Which audit procedure is specifically designed to detect fictitious vendors in the purchasing system?

Accepted Answer

Comparing vendor master file addresses to employee addresses

Answer

Matching vendor addresses to employee addresses is a key test for shell vendor fraud, where employees create fictitious suppliers using their own or related addresses.

Question 4

What is the meaning of 'segregation of duties' in the context of a purchasing cycle audit?

Accepted Answer

Ensuring that no single person controls all phases of a transaction

Answer

Segregation of duties prevents fraud and error by ensuring authorization, custody, and record-keeping functions are performed by different individuals.

Question 5

An audit of contract management reveals that a vendor's performance has not been formally evaluated in over two years. Which risk does this oversight most directly create?

Accepted Answer

Underperforming vendors may continue receiving contract renewals

Answer

Without regular performance evaluations, poor-performing vendors may go undetected and continue being awarded renewals, wasting organizational resources.

(APP) Accredited Purchasing Practitioner Certification Practice Test

(APP) Accredited Purchasing Practitioner Certification Practice Test

APP Auditing Principles & Procedures 3