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
When conducting a GAP program compliance audit, which document serves as the primary benchmark for evaluating dealer adherence?
Answer: The GAP administrator's program guidelines and contractual obligations
The GAP administrator's program guidelines and contractual obligations define the standards against which dealer compliance is measured during an audit.
A GAP audit reveals that a dealer sold GAP coverage on a vehicle with a loan-to-value ratio exceeding the program maximum. What is the most likely audit outcome?
Answer: The coverage is flagged as potentially voidable and referred for administrative review
Coverage issued outside program eligibility parameters is typically flagged as potentially voidable and referred to the administrator for review and corrective action.
Which of the following best describes a 'desk audit' in the context of GAP compliance?
Answer: A review of submitted documents and records without visiting the dealer location
A desk audit involves reviewing documentation, contracts, and records remotely without conducting an in-person visit to the dealership.
During a GAP audit, an auditor finds that several customer contracts lack the required arbitration clause. Which regulatory area is most directly implicated?
Answer: Consumer protection and disclosure requirements
Missing arbitration clauses in consumer contracts implicate consumer protection laws and disclosure requirements that govern how financial products are presented to buyers.
What is the primary purpose of an 'exception report' generated during a GAP program audit?
Answer: To identify transactions or records that fall outside established program parameters
Exception reports highlight transactions or records that deviate from established program standards, allowing auditors to focus corrective action where it is most needed.
Which sampling method is most appropriate when an auditor suspects concentrated errors in a specific category of GAP contracts, such as those for used vehicles?
Answer: Judgmental (purposive) sampling focused on the suspect category
Judgmental sampling allows the auditor to focus resources on the specific risk area where errors are suspected, making it most appropriate in this scenario.
A GAP administrator is reviewing audit findings before issuing a final report to a dealer. What should the administrator do if the dealer provides new evidence that contradicts a finding?
Answer: Evaluate the new evidence and revise the finding if warranted before finalizing the report
Auditing best practices require evaluating any new evidence provided during the review process and revising findings accordingly before the final report is issued.