Free Certified Internal Auditor MCQ Questions and Answers — Questions and Answers
Question 1: When an auditor suspects that an unnamed employee is submitting and approving bills for payment, which of the following processes would be most useful in supplying additional proof?
- Use generalist audit software to find vendor bills containing post office box numbers or other strange details. Choose a representative sample of those invoices and link them to any supporting documentation, such as receiving reports (Correct answer)
- Choose a sample of the payments made throughout the year and examine each to see if it is acceptable
- Select a sample of invoices paid during the past month and trace them to appropriate vendor
- Trace a sample of receiving reports to the authorized payment for the period that is the subject of the investigation. Note any elements that weren't handled properly
Correct answer: Use generalist audit software to find vendor bills containing post office box numbers or other strange details. Choose a representative sample of those invoices and link them to any supporting documentation, such as receiving reports
This approach is most effective because it uses data analytics to identify red flags, such as post office box numbers, which can indicate shell companies or fictitious vendors. By then linking these suspicious invoices to supporting documentation like receiving reports, the auditor can verify if the services or goods were legitimately received and properly authorized, directly addressing the suspicion of fraudulent billing.
Question 2: Which of the following should an internal auditor look out for during an audit of the award of a significant contract?
- A high percentage of employees are charged to indirect accounts
- Subsequent change orders increase requirements for low-bid items
- Material contract requirements are different on the actual contract than on the request for (Correct answer)
- Losing bidders are not given feedback
Correct answer: Material contract requirements are different on the actual contract than on the request for
A significant discrepancy between the requirements stated in the Request for Proposal (RFP) and those in the final awarded contract is a major red flag. This could indicate favoritism, lack of transparency, or even fraud, as it suggests the contract terms were altered after the bidding process, potentially to benefit a specific vendor or circumvent fair competition.
Question 3: Which of the following categories of audit evidence best exemplifies the ability to establish a fact without relying on supporting assumptions?
- Direct (Correct answer)
- Circumstantial
- Conclusive
- Corroborative
Correct answer: Direct
Direct evidence establishes a fact without the need for inference or additional assumptions. For example, observing an inventory count directly proves the existence of inventory at that moment. In contrast, circumstantial evidence requires logical deduction to connect it to the fact in question, and corroborative evidence supports other evidence but doesn't stand alone as direct proof.
Question 4: A chief audit executive's main concern when reading a report written by an internal auditor who has a friend who works in the sector being audited would be to guarantee which of the following?
- The report is simple to read and presents the findings logically
- The report is fair, impartial, and unbiased (Correct answer)
- The report avoids superfluous detail, repetition, and wordiness and is written in clear sentences
- The report is free from errors and misstatements
Correct answer: The report is fair, impartial, and unbiased
When an auditor has a personal relationship with someone in the audited sector, the primary concern is a potential threat to objectivity and independence. The chief audit executive must ensure that the auditor's report remains fair, impartial, and unbiased, free from any influence that the personal relationship might exert, to maintain the credibility and integrity of the audit findings.
Question 5: Which of the following claims about work paper reviews is accurate?
- Workpapers should be initialed and dated by the reviewer as evidence of supervisory review (Correct answer)
- After completion, the client should approve the engagement workpapers.
- Work papers that pertain to legal issues should be reviewed to ensure that all audit opinions and details are recorded
Correct answer: Workpapers should be initialed and dated by the reviewer as evidence of supervisory review
Initialing and dating workpapers by the reviewer is a standard auditing practice and a crucial element of quality control. It provides clear documentation that the work has been reviewed, indicating supervisory oversight and accountability. This step helps ensure that audit procedures were properly performed, conclusions are supported, and the audit meets professional standards.
Question 6: Which of the following is a benefit that computer-assisted audit techniques give to the audit process?
- Ease of access to systems
- Ease of training for auditors
- Ability of auditors to deploy software solutions quickly
- Ability of auditors to analyze large amounts of data (Correct answer)
Correct answer: Ability of auditors to analyze large amounts of data
Computer-assisted audit techniques (CAATs), such as data analytics software, significantly enhance an auditor's ability to process and analyze vast quantities of data quickly and efficiently. This allows for more comprehensive testing, identification of trends or anomalies, and a deeper understanding of business processes than manual methods could achieve, thereby improving audit effectiveness and efficiency.
Question 7: Which of the following statements about individual versus collective decision-making is accurate?
- More thorough information is evaluated during individual decision-making
- Making decisions on one's own boosts the decision's perceived credibility
- Individual decision making generates more alternatives
- Individual decision making is more conservative (Correct answer)
Correct answer: Individual decision making is more conservative
Research often suggests that individuals tend to be more conservative or risk-averse when making decisions alone, as they bear sole responsibility for the outcome. Group decision-making, conversely, can sometimes lead to a 'risky shift' where groups make more extreme decisions than individuals would, due to diffused responsibility or group polarization.
Free Certified Internal Auditor MCQ Questions and Answers
When an auditor suspects that an unnamed employee is submitting and approving bills for payment, which of the following processes would be most useful in supplying additional proof?