CIA Auditing Principles & Procedures 2

Question 1

Which type of audit evidence is generally considered the most reliable?

Accepted Answer

Externally generated documents obtained directly by the auditor

Answer

Evidence obtained directly from external sources is most reliable because it is independent of client influence.

Question 2

What is the primary purpose of audit working papers?

Accepted Answer

To support the audit opinion and document work performed

Answer

Working papers document the evidence gathered and procedures performed to support the auditor's conclusions.

Question 3

In insurance auditing, a 'walkthrough' procedure is used primarily to:

Accepted Answer

Verify that internal controls operate as described

Answer

A walkthrough traces one or a few transactions through the system to confirm controls function as described in documentation.

Question 4

When an auditor identifies a discrepancy in reserve calculations, the most appropriate first step is to:

Accepted Answer

Obtain an explanation from management and gather corroborating evidence

Answer

Auditors must investigate discrepancies by seeking management explanations and additional evidence before drawing conclusions.

Question 5

Which audit procedure is best suited for verifying the existence of an insurance company's investment portfolio?

Accepted Answer

Confirmation with custodians or brokers holding the securities

Answer

Direct confirmation with the custodian or broker independently verifies that the investments physically exist.

(CIA) Certified Insurance Appraiser Practice Test