lOMoARcPSD|11070406

lOMoARcPSD|11070406

OPERATIONS AUDITING – 3 RD
EXAMINATION PART 1

1. In which of the following situations is the internal auditor likely to be considered

independent?
a. The internal audit position is new to the entity. The first internal auditor was previously
the assistant to the financial controller.
b. The internal auditor reports directly to the financial controller, who refers matters to
the head of the finance department.
c. The same internal auditor is responsible for the review of each department each year
to ensure efficient use of audit time.
d. The head of the internal audit may report matters directly to the audit
committee.

2. Internal audit definition, audit objectives must be carried out in unbiased manner and
free from influence of management.
a. Systematic approach
b. Designed to add value
c. Assurance and consulting activity
d. Independence

3. Which of the following is not a category of fraud?

a. Conspiracy
b. Known and recorded internally
c. Known and recorded publicly
d. Undiscovered

4. Which of the following is not a component of risk management?

a. Risk strategy
b. Evaluation technology
c. Risk management function
d. Governance
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5. Statement 1: Corporate governance framework is there to encourage the efficient use

of resources and equally to require accountability for the stewardship of those
resources.
Statement 2: Corporate Governance is concerned with holding the balance between
economic and social goals and between individual and communal goals.
a. False, True
b. True, True
c. False, False
d. True, False

6. Internal auditors should review the means of physically safeguarding assets from
losses arising from
a. under usage of physical facilities
b. procedures that are not cost justified
c. exposure to the elements
d. misapplication of accounting principles

7. Assessing individual objectivity of internal auditors is the responsibility of

a. The audit committee.
b. The chief executive officer.
c. The board.
d. The chief audit executive.

8. The consideration of the implementation of a control involves assessing that the

control exists and that:
a. The control was properly designed.
b. The control is documented.
c. All personnel are trained to operate the control.
d. The entity is consistently using it.
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9. The internal audit activity is effectively managed when:

Statement 1. The results of the internal audit activity’s work achieve the purpose and
responsibility included in the internal audit charter.
Statement 2. The internal audit activity conforms with the Definition of Internal Auditing
and the Standards.
Statement 3. The individuals who are part of the internal audit activity demonstrate
conformance with the Code of Ethics and the Standards.
a. 1 & 2
b. 2 & 3
c. 1 & 3
d. 1, 2 & 3

10. A dynamic process for taking all reasonable steps to find out and deal with the risk
that impact on our objectives
a. Management
b. Risk management
c. Board
d. Control Environment

OPERATIONS AUDITING – 3RD EXAMINATION PART 2

1. Mr. Astronomo is engaged to do internal services for DUMAS Co., while he is

independent to the engagement, he, however, performed the audit not in accordance
with the international standard for the professional practice in internal auditing. Mr.
Astronomo therefore violated the behavior of
a. Integrity
b. Confidentiality
c. Competence
d. Objectivity

2. The requirement that companies must comply with laws and regulations including
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company laws, tax laws and environmental protection regulations is incorporated in

what internal control objective?
a. Effective operations.
b. Compliance.
c. Financial reporting.
d. Government reporting.

3. Obtaining property by deception and false accounting

a. Bribery
b. Forgery
c. Conspiracy
d. Theft

4. Statement 1: Theft is the act of representing a false instrument with the intention of
using it to induce someone to accept it as genuine.
Statement 2: A bribe is any money, gift or consideration paid or received as an
inducement or reward for favour or request from an authority.
a. True, False
b. False, False
c. False, True

5. A pivotal role and accountable to stakeholders.

a. The Management
b. The Chief Audit Executive
c. The Shareholders & Stakeholders
d. The Board of Directors

6. It is concerned with holding the balance between economic and social goals and
between individual and communal goals. It aims to align as nearly as possible the
interests of individuals, corporations and society. It is there to encourage the efficient
use of resources and equally to require accountability for the stewardship of those
resources.
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a. Fraud
b. Corporate governance
c. Risk management
d. None of the choices

7. All of the following are classifications of risks according to Ernst and Young, except
a. Operational Risk
b. Information Risk
c. Strategic Risk
d. Financial Risk

8. A false accounting which is a criminal offense

a. Means
b. Concealment
c. Opportunities
d. Motive

9. Which of the following is necessary to determine what would constitute a disaster for
an organization?
a. Risk Analysis
b. Contingent facility contract analysis
c. File and back up requirement analysis
d. Vendor supply agreement analysis

10. The auditor's primary consideration is whether, and how, a specific control prevents,
or detects and corrects, material misstatements:
a. In account balances.
b. In disclosures.
c. In classes of transactions, account balances or disclosures.
d. In classes of transactions.
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OPERATIONS AUDITING – 3RD EXAMINATION PART 3

1. All are principles of corporate governance, which is not?

a. Quality assurance manuals
b. Safeguard integrity in financial reporting.
c. Structure the board to add value.
d. Recognize and manage risk.

2. Which of the following is not one of the components of internal control according to
COSO?
a. Control procedures.
b. Communication processes related to stakeholders.
c. Risk assessment process.
d. Monitoring of controls.

3. Statement 1: A risk may be an uncertainty of outcome within a range of exposures

arising from a combination of the impact and probability of potential events.
Statement 2: A risk may be an uncertainty of an event not occurring that could have an
impact on the achievement of objectives.
a. True, True
b. True, False
c. False, False
d. False, True

4. A tool used by businesses to promote risk management in teams, projects, through

processes and generally throughout the organizational.
a. Enterprises –Wide Risk Management
b. Control Environment
c. Control Risk Self-Assessment
d. Safeguard of Asset
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5. In a two-tier structure of corporate governance:

a. Members of the supervisory board are appointed by the executive board.
b. CEO and chair of the board are split.
c. Non-executives are responsible for the day-to-day operations.
d. The chair of the non-executive board is also chair of the executive board.

6. Statement 1. Internal auditors must establish an understanding with consulting

engagement clients about objectives, scope, respective responsibilities, and other client
expectations. For significant engagements, this understanding must be documented.
Statement 2. Internal auditors must incorporate knowledge of controls gained from
consulting engagements into evaluation of the organization’s control processes.
a. False, False
b. True, True
c. True , False
d. None of the above

7. All of the following are the principles of risk management except

a. Risk management should be based on the best available information.
b. Risk management should take into account the organization’s culture.
c. Risk management should implicitly address uncertainty.
d. Risk management should be transparent and inclusive.

8. Risk assessment involves considering threats to the organization’s objectives in the

areas of
a. Operations, financial reporting and compliance with laws and regulations
b. Marketing, financial reporting and compliance
c. Financial reporting, performance and marketing
d. Compliance with laws and regulations, operations and performance

9. All of the following are components of internal control except:

a. Management reports.
b. Risk assessment process.
c. Monitoring.
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d. The information system.

10. All the following describe internal control, according to COSO, except:
a. It is designed to provide reasonable assurance regarding the achievement of
objectives of efficient operations.
b. It is a process effected by people.
c. It is designed to provide reasonable assurance regarding the achievement of
objectives of compliance with capital structure strategy.

d. It is designed to provide reasonable assurance regarding the achievement of

objectives in reliability of financial reporting

OPERATIONS AUDITING – 3RD EXAMINATION PART 4

1. The overall responsibility for ensuring the management of risks is with the
a. Senior officer
b. Internal Audit
c. Board
d. Management

2. To determine a positive control environment, the auditor should consider which of the
following control environment actions for integrity and ethical values?
a. Encourage independence from management.
b. Review the nature of business risk accepted.
c. Remove incentives and temptations that prompt personnel to engage in
fraudulent or unethical behaviour.
d. Create formal or informal job descriptions or other means of defining tasks that
comprise particular jobs.

3. Which of the following gives the internal auditor the authority to investigate fraud
a. Audit committee
b. Management
c. Standards
d. Code of ethics
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4. The auditor’s primary consideration is whether, and how, a specific control prevents,
or detects and corrects:
a. Material misstatements in classes of transactions, account balances or
disclosures.
b. Financial statement fraud.
c. Illegal acts.
d. Defalcation by employees.

5. To determine a positive control environment, the auditor should consider which of the
following control environment actions for integrity and ethical values?
a. Create formal or informal job descriptions or other means of defining tasks that
comprise particular jobs.
b. Remove incentives and temptations that prompt personnel to engage in
fraudulent or unethical behaviour.
c. Encourage independence from management.
d. Review the nature of business risk accepted.

6. Means ensuring timely, accurate disclosure on all material matters, including the
financial situation, performance, ownership & corporate governance.
a. Corporate Governance
b. Fairness
c. Transparency
d. Accountability

7. Means action and decisions of the board may be assessed and be given measure
a. Accountability
b. Transparency
c. Fairness
d. Responsibility

8. Which of the following is not something performed by the company’s board?

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a. Day to day supervision of the sales manager.

b. Oversees management and ensures the quality of information provided to
shareholders and to financial markets through the financial statements.
c. Defines the company’s strategy.
d. Appoints the corporate officers responsible for managing the company and
implementing this strategy.

9. According to best practice, the audit committee:

a. Is responsible for designing
b. Oversees the accounting department
c. Selects the auditor
d. Nominates the executive board

10. Which of the following makes for an effective control environment with regards to
commitment to competence?
a. Assure independence from management.
b. Reduce pressure to meet unrealistic performance targets.
c. Its culture is one in which quality and competence are openly valued
d. Increase interaction between senior management and operating management.