In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:
Answer : D
Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a follow-up of audit recommendations when developing engagement work schedules. Does the CAEs decision violate the Standards?
Answer : C
An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?
Answer : C
Which of the following procedures would be most helpful in providing additional evidence when an auditor suspects that an unidentified employee is submitting and approving invoices for payment?
Answer : A
Insurance companies often receive electronic hospitalization claims directly from hospitals. Which of the following control procedures would be most effective in detecting fraud in such an environment?
Answer : B
During an audit of executive travel, an auditor noted that the president's travel expense reimbursements were approved by an executive secretary who reported to the president. The organization's reimbursement policy requires all travel expense reimbursements to be approved by the traveler's supervisor, but it does not address the president's reimbursements. Which of the following represents the auditor's best recommendation in this situation?
Answer : B
Which of the following, if observed, would not indicate the need to extend the search for other indicators of fraud in a purchasing department?
Answer : C
Which of the following does not represent a difficulty in using red flags as fraud indicators?
Answer : D
Which of the following might alert an auditor to the possibility of fraud in a division?
I. The division is not scheduled for an external audit this year.
II. Sales have increased by 10 percent.
III. A significant portion of management's compensation is directly tied to reported net income of the division.
Answer : B
The most common motivation for management fraud is the existence of:
Answer : C
Which of the following conditions is the strongest indicator of possible fraud?
Answer : A
Which sampling plan requires no additional sampling once the first error is found?
Answer : D
After partially completing an internal control review of the accounts payable department, an auditor suspects that some type of fraud has occurred. To ascertain whether the fraud is present, the best sampling approach would be to use.
Answer : C
Which of the following processes real-transaction data through auditor-developed test programs?
Answer : C
Which of the following would provide the best audit evidence regarding the effectiveness of an applied research department?
Answer : B