EMT Practice Test

1. Question Content...

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Question1: According to IIA guidance, which of the following scenarios demonstrates an internal auditor exercising due professional care?
When auditing investments, the auditor identified instruments with which he was unfamiliar. He decided not to select that type of investment in his sample, as he did not have the knowledge needed to

Question2: An organization invests its savings in a volatile stock with the potential for high gains rather than a mutual fund with a lower expected return and lower volatility. This best describes which of the following risk concepts?

Question3: Which of the following would be the most appropriate first step for the board to take when developing an effective system of governance?

Question4: Which of the following best demonstrates the authority of the internal audit activity?

Question5: A new internal audit activity is creating its first charter. According to IIA guidance, which of the following objectives would be appropriate for inclusion in the charter?

Question6: Which two of the following are preventive controls in a check disbursement process?
1. Daily reconciliation of the bank account used for check disbursements and prompt follow-up of un- reconciled items.
2. Segregation of the following duties: establishing new vendors, approving checks, and reconciling the bank account.
3. An activity report detailing who accesses the check disbursement system and the nature of any action taken in the system.
4. Evidence of strong access controls ensuring that authorized individuals have access only to the functions related to their responsibilities.

Question7: What is the purpose of a secondary control?

Question8: Given the highly technical and legal nature of privacy issues, which of the following statements best describes the internal audit activity's responsibility with regard to assessing an organization's privacy framework?

Question9: Which of the following is an example of collusion?

Question10: Which of the following statements is true about The IIA Global Internal Audit Competency Framework?

Question11: Which of the following best describes the risk contained in an initial public offering for a new stock?

Question12: According to COSO, which of the following is not considered one of the components of an organization's internal environment?

Question13: A new internal audit activity is creating its first charter. According to IIA guidance, which of the following objectives would be appropriate for inclusion in the charter?

Question14: A large trucking organization wants to reduce traffic accidents by improving its system of internal controls.
Which of the following controls is correctly classified?
1. Review of speeding violations to identify repetitive locations and drivers is an example of a preventive control.
2. Defensive driver training is an example of a directive control.
3. The installation of tracking devices in delivery vehicles is an example of a corrective control.
4. Providing a vehicle driver handbook is an example of a detective control.

Question15: According to the HA Code of Ethics, which of the following statements best describes the principle of competency?

Question16: According to the COSO enterprise risk management framework, which of the following best describes the activity that helps ensure risk responses are carried out effectively?

Question17: According to IIA guidance, which of the following external groups is most likely to represent a liability risk, based on activities associated with the organization's corporate social responsibility program?

Question18: What should the internal auditor's role be in assessing the organization's ethical climate?

Question19: According to The IIA's Code of Ethics, which of the following actions violates the principle of confidentiality?

Question20: In which of the following functions would fraud be most likely to occur?

Question21: Which of the following items should the chief audit executive disclose to senior management regarding the results of the internal audit activity's quality assessments?

Question22: Which of the following is a weakness of observation as audit evidence?

Question23: Which of the following is an example of a risk management avoidance response?

Question24: Which of the following is most likely to enhance an internal auditor's objectivity?

Question25: During an audit engagement, the internal auditor discussed a risk mitigation recommendation with the manager of the area under review. The manager disagreed with the risk assessment and recommendation. The two failed to come up with an alternative solution, and the auditor decided to proceed with including the original recommendation in the engagement report. Which of the following is especially important in dealing with this type of situation?

Question26: A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annua snowfall for the coming winter. Which of the following best describes this type of risk?

Question27: According to The MA Code of Ethics, which of the following is one of the rules of conduct for objectivity?

Question28: Which of the following is most likely to function as a directive control?

Question29: A furniture manufacturer has installed a new fire sprinkler system at its central warehouse and canceled the existing fire insurance policy on that property. What change of risk response strategy does this course of action most likely reflect?

Question30: Which segregation of duties would best reduce the risk of payroll fraud?

Question31: Sometimes, internal audit staff may partner with operating managers to rank risks. Which of the following outcomes may be the most beneficial aspects of this strategy?
1. Reappraising risks levels.
2. Providing accurate information to management.
3. Marketing the internal audit activity.
4. Planning safeguards for assets in high-risk areas.

Question32: The chief audit executive (CAE) has assigned an internal auditor to an upcoming engagement. Which of the following requirements would most likely indicate that the internal auditor was assigned to an assurance engagement?

Question33: Which of the following actions best demonstrates that an internal auditor is exercising due professional care?

Question34: A chief audit executive (CAE) is selecting an internal audit team to perform an audit engagement that requires a high level of knowledge in the areas of finance, investment portfolio management, and taxation. If neither the CAE nor the existing internal audit staff possess the required knowledge, which of the following actions should the CAE take?

Question35: According to IIA guidance, which of the following roles would be appropriate for an internal auditor regarding fraud risk?
1. Identification.
2. Mitigation.
3. Remediation.
4. Reduction.

Question36: An internal auditor uses a predefined macro provided in a popular spreadsheet application to verify the present value of the organization's investments. Which of the following is the most appropriate course of action regarding the auditor's use of this functionality?

Question37: Faced with a complex, highly technical construction audit engagement, the chief audit executive (CAE) considered complementing the current internal audit resources by engaging the services of a civil engineer.
Which of the following should the CAE consider in determining whether the engineer possesses the necessary skills to perform the engagement?
1. Professional certification, license, or other recognition of the engineer's competence in the relevant discipline.
2. Experience of the engineer in the type of work being considered.
3. Compensation or other incentives that the engineer may receive.
4. The extent of other ongoing services that the engineer may be performing for the organization.

Question38: According to IIA guidance, which of the following is an area in which the internal auditor should be proficient?

Question39: Reviewing prior audit reports and supporting workpapers before an engagement starts enables an internal auditor to do which of the following?
1. To understand better the activity and processes that will be audited.
2. To identify the audit procedures that will be used during the engagement.
3. To ensure that matters of greatest vulnerability will be addressed.
4. To use the information obtained as evidence in the current engagement.

Question40: What is the primary benefit to the internal audit activity for undertaking an internal quality assessment?

Question41: Evidence discovered during the course of an engagement suggests that multiple incidents of fraud have occurred. There do not appear to be sufficient controls in place to prevent reoccurrence. Which of the following is the internal auditor's most appropriate next step?

Question42: Which of the following is the most common method of fraud detection?

Question43: An organization is facing a financial downturn and needs to impose major budget reductions to all departments. According to MA guidance, which of the following actions is most appropriate for the board to take to evaluate the potential impact on the internal audit activity?

Question44: An internal auditor completed an audit of a bank's loan department and found all significant risks to be managed adequately through effective internal controls. Which of the following would be an appropriate conclusion to report to management?

Question45: Non-statistical sampling does not require which of the following?

Question46: If the skills and competencies are not present within the internal audit activity to complete an ad-hoc assurance engagement, which of the following is an acceptable resolution?

Question47: According to IIA guidance, which of the following statements is true regarding the reporting of results from an external quality assessment of the internal audit activity?

Question48: Which of the following is an activity that an internal auditor must not perform?

Question49: Which of the following factors should be considered when determining the appropriate combination of manual techniques and computer-assisted audit techniques (CAATs) to be used during an audit?
1. Acceptance of CAATs findings by entity management.
2. Computer knowledge and expertise of the auditor.
3. Time constraints.
4. Level of audit risk.

Question50: The management at a national consumer goods organization implements a fair work and pay practice as well as a policy to treat employees equitably and consistently. Which common characteristics of fraud will the practice and policy most likely reduce?

Question51: Which of the following are components of the ISO 31000 risk management process?
1. Setting the context.
2. Risk treatment.
3. Risk avoidance.
4. Communication.

Question52: Which of the following best ensures the independence of the internal audit activity?
1. The CEO and audit committee review and endorse any changes to the approved audit plan on an annual basis.
2. The audit committee reviews the performance of the chief audit executive (CAE) periodically.
3. The internal audit charter requires the CAE to report functionally to the audit committee.

Question53: A government agency maintains a system of internal control, according to the COSO model, and has made a change to its employee performance reviews and rewards program. This change relates to which of the following components of COSO's internal control framework?

Question54: The security department uncovered what appears to be a complex fraud in the accounting department. The CEO has requested the internal audit activity to investigate the fraud. If the internal audit staff lacks the expertise to conduct the investigation, how should the chief audit executive proceed?

Question55: According to the International Professional Practices Framework, which of the following are allowable activities for an internal auditor?
1. Advocating the establishment of a risk management function.
2. Identifying and evaluating significant risk exposures during audit engagements.
3. Developing a risk response for the organization if there is no chief risk officer.
4. Benchmarking risk management activities with other organizations.
5. Documenting risk mitigation strategies and techniques.

Question56: When auditing the award of a major contract, which of the following should an internal auditor suspect as a red flag for a bidding fraud scheme?
1. Subsequent change orders increase requirements for low-bid items.
2. Material contract requirements are different on the actual contract than on the request for bids.
3. A high percentage of employees are charged to indirect accounts.
4. Losing bidders are hired as subcontractors.

Question57: Which of the following actions should the internal audit activity take during an audit engagement when examining the effectiveness of risk management processes?

Question58: According to IIA guidance, which of the following must internal auditors consider to conform with the requirements for due professional care during a consulting engagement?
1. The cost of the engagement, as it pertains to audit time and expenses in relation to the potential benefits.
2. The needs and expectation of clients, including the nature, timing, and communication of engagement results.
3. The application of technology-based audit and other data analysis techniques, where appropriate.
4. The relative complexity and extent of work needed to achieve the engagement's objectives.

Question59: An internal auditor is using a spreadsheet application to review a cash flow forecast prepared by management.
Which of the following correctly identifies the type of evidence this information represents?

Question60: In which of the following scenarios would the chief audit executive (CAE) be required to decline the assignment?

Question61: Which of the following is an example of a directive control?

Question62: A new director was hired to lead the internal audit activity at a small start-up company. Which of the following assignments would impair the director's independence?

Question63: Which of the following is not an objective of internal control?

Question64: Which of the following responsibilities would fall under the role of the chief audit executive, rather than internal audit staff or the audit manager?

Question65: Which of the following statements accurately describes the responsibility of the internal audit activity regarding IT governance?
1. The internal audit activity does not have any responsibility because IT governance is the responsibility of the board and senior management of the organization.
2. The internal audit activity must assess whether the IT governance of the organization supports the organization's strategies and objectives.
3. The internal audit activity may assess whether the IT governance of the organization supports the organization's strategies and objectives.
4. The internal audit activity may accept requests from management to perform advisory services regarding how the IT governance of the organization supports the organization's strategies and objectives.

Question66: According to IIA guidance, which of the following describes the primary reason to implement environmental and social safeguards within an organization?