Auditing Principles & Procedures Flashcards
7 cards from real GAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing Principles & Procedures flashcards as text
What is the significance of a 'carve-out' in a GAP program audit context?
Answer: A specific exclusion from GAP coverage that auditors verify was properly disclosed to the customer
Carve-outs are coverage exclusions that auditors must confirm were disclosed to the customer at the point of sale, ensuring transparency and consumer protection compliance.
During an audit, an F&I manager is unable to produce a signed customer opt-out form for a customer who claims they declined GAP coverage. What is the most appropriate audit finding?
Answer: A documentation deficiency finding, as required records cannot be substantiated
Inability to produce required documentation such as a signed opt-out form results in a documentation deficiency finding, as the dealer cannot substantiate the transaction as required.
Which of the following best describes the 'control environment' within a dealership as it relates to GAP auditing?
Answer: The overall tone, policies, and ethical standards set by management that influence compliance
The control environment encompasses the management culture, ethical standards, and organizational policies that form the foundation for all other internal controls.
A GAP auditor is testing whether dealers are verifying that customers have comprehensive and collision insurance before enrolling them in GAP. What type of control test is this?
Answer: Test of controls to evaluate whether a key eligibility requirement procedure is operating effectively
Testing whether a specific required procedure (insurance verification) is being performed is a test of controls designed to evaluate whether the control is operating as intended.
When preparing an audit work program for a GAP dealer review, which element should be established first?
Answer: The audit objectives aligned with program requirements and risk areas
Audit objectives must be established first because they define the scope and purpose of the review, guiding all subsequent procedures including sampling and fieldwork.
A GAP administrator conducts quarterly dealer audits. A dealer passes three consecutive quarters but fails the fourth. What does this pattern most likely suggest?
Answer: A potential breakdown in dealer internal controls or compliance practices requiring investigation
A sudden compliance failure after consecutive passes suggests a deterioration in internal controls or a change in dealer practices that warrants further investigation.
Which document type would an auditor examine to verify that a GAP administrator has proper authority to offer the product in a given state?
Answer: The administrator's state insurance license or certificate of authority
An administrator must hold a valid state insurance license or certificate of authority to legally offer GAP products, and auditors verify this to confirm regulatory compliance.