CGAP MCQ 5 — Questions and Answers
Question 1: The IIA's definition of internal auditing emphasizes which primary purpose?
- Detecting and prosecuting fraud
- Adding value and improving an organization's operations (Correct answer)
- Preparing financial statements for external users
- Setting government accounting standards
Correct answer: Adding value and improving an organization's operations
The IIA defines internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.
Question 2: A government auditor identifies a material weakness in internal control. Under GAGAS, the auditor must:
- Withdraw from the engagement
- Report the material weakness in writing and modify the audit opinion as appropriate (Correct answer)
- Report it only verbally to the audit committee
- Wait until the next audit cycle to report it
Correct answer: Report the material weakness in writing and modify the audit opinion as appropriate
Material weaknesses must be communicated in writing, and their existence typically leads to an adverse or qualified opinion on internal control.
Question 3: Which sampling method gives every item in the population an equal probability of selection?
- Judgmental sampling
- Cluster sampling
- Simple random sampling (Correct answer)
- Systematic sampling with a random start
Correct answer: Simple random sampling
Simple random sampling ensures every item has an equal and independent chance of being selected, meeting the definition of statistical sampling.
Question 4: In a government financial audit, 'those charged with governance' typically refers to:
- External auditors and their supervisors
- The board, audit committee, or legislative oversight body (Correct answer)
- Program managers responsible for grant funds
- The entity's accounting and finance staff
Correct answer: The board, audit committee, or legislative oversight body
Those charged with governance include the body responsible for oversight of the entity's strategic direction, financial reporting, and accountability.
Question 5: Under the Yellow Book, continuing professional education (CPE) requirements for government auditors include a minimum of how many hours per two-year period?
- 40 hours
- 60 hours
- 80 hours (Correct answer)
- 120 hours
Correct answer: 80 hours
GAGAS requires auditors who perform government audits to complete at least 80 hours of CPE every two years, with at least 20 hours in each year.
Question 6: When evaluating audit evidence, which characteristic ensures the evidence actually supports the audit objective being tested?
- Sufficiency
- Reliability
- Relevance (Correct answer)
- Competence
Correct answer: Relevance
Relevance means the evidence has a logical relationship to and bears on the audit objective or criterion being evaluated.
Question 7: A government auditor is performing a follow-up review on prior audit recommendations. The primary purpose of this follow-up is to:
- Identify new fraud schemes
- Assess whether management has implemented corrective actions (Correct answer)
- Re-audit the same transactions from the prior period
- Satisfy peer review requirements
Correct answer: Assess whether management has implemented corrective actions
Follow-up reviews determine whether management has taken effective corrective action to address previously reported findings and recommendations.
CGAP MCQ 5
The IIA's definition of internal auditing emphasizes which primary purpose?