FAC Finance and Accounting Auditing & Risk Review 4

Question 1

Which statistical sampling method gives every item in the population an equal probability of selection and is commonly used in audit sampling?

Accepted Answer

Random sampling

Answer

Random sampling (simple random sampling) gives every item in the population an equal and independent chance of selection, making it a fundamental method in audit sampling.

Question 2

Which component of the fraud triangle represents an employee's ability to rationalize dishonest actions as acceptable?

Accepted Answer

Rationalization

Answer

Rationalization is the cognitive process by which a fraudster justifies their behavior, such as believing they are 'borrowing' money or that the company owes them.

Question 3

A 'key risk indicator' (KRI) in operational risk management is used to:

Accepted Answer

Provide early warning signals that risk levels are changing

Answer

Key risk indicators are metrics that signal increasing risk exposure before an adverse event occurs, enabling proactive risk management.

Question 4

In an accounts payable audit, which procedure would BEST detect unrecorded liabilities at year-end?

Accepted Answer

Reviewing invoices received after year-end for pre-year-end goods/services

Answer

Reviewing subsequent period invoices for goods or services received before year-end identifies cutoff errors where liabilities were not recorded in the correct period.

Question 5

Which internal audit standard requires that the internal audit function be independent from the activities it audits?

Accepted Answer

IIA Standard 1100

Answer

IIA Standard 1100 addresses Independence and Objectivity, requiring that the internal audit activity be independent from the operational activities it is assigned to review.

(FAC) Finance and Accounting Certification Practice Test

(FAC) Finance and Accounting Certification Practice Test

FAC Finance and Accounting Auditing & Risk Review 4