EMT Practice Test

1. Question Content...

---

Question1: Which of the following techniques would best assist an internal auditor in evaluating the efficiency of a wholesale grocery distributor`s process to fill and package orders for shipping?

Question2: What is the additional advantage of facilitated workshops, in comparison with structured interviews, used when testing the effectiveness of entity-level controls?

Question3: 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.

Question4: Which of the following are components of the COSO enterprise risk management framework?
1. Objective setting.
2. External environment.
3. Data collection.
4. Control activities.

Question5: Which of the following statements accurately describes an internal auditor's responsibility with regard to due professional care?

Question6: The audit committee is concerned that the small size of the internal audit activity (IAA) makes it impractical to achieve full conformance with the Standards. To address this concern, which of the following actions is most appropriate for the CAE to take?

Question7: Which of the following is not an appropriate activity for internal auditors to perform?

Question8: According to the Standards, for how long should internal auditors who have previously performed or had management responsibility for an operation wait to become involved in future internal audit activity with that same operation?

Question9: Which of the following is an example of a management control technique?

Question10: Which of the following would be considered a preventive control?

Question11: Which of the following control methods is effective in reducing the risk of purchasing-scheme fraud?
1. Periodically reviewing the vendor list for unusual vendors and addresses.
2. Segregating duties for amount purchasing, receiving, shipping, and accounting.
3. Validating sequential integrity of purchase orders.
4. Verifying the validity of invoices with post office box addresses.

Question12: The last quality assessment of the internal audit activity identified three areas for improvement: the achievement of audit engagement objectives, quality of work, and staff development. According to IIA guidance, which of the following should be the chief audit executive's primary focus to achieve these recommended improvements?

Question13: An internal audit charter, approved by the board, restricts the internal audit activity to providing assurance only on the reliability of financial information and the effectiveness of internal accounting controls. Which of the following statements is true regarding the extent to which the external auditor may rely on the internal audit activity's work?

Question14: According to IIA guidance, which of the following statements regarding the internal audit charter is true?

Question15: During an internal audit, the internal auditor compares the employee turnover rate in the area being audited with the employee turnover rate in the organization as a whole.
This is an example of which of the following analytical auditing procedures?

Question16: A chief audit executive (CAE) learns that the brother-in-law of a senior auditor who audits the procurement process was hired as the head of the procurement department six months prior. Which of the following is the most appropriate action for the CAE to take?

Question17: Which of the following controls is not appropriate for sales in a manufacturing organization?

Question18: 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?

Question19: Which segregation of duties would best reduce the risk of payroll fraud?

Question20: According to IIA guidance, which of the following is the best example of a system application control?

Question21: During an audit, the client questions the internal audit activity's authority to perform procedures over fraud allegations. According to HA guidance, which of the following would provide the most relevant support to respond to the client's concerns?

Question22: When conducting an interview, an internal auditor is most likely to ask open-ended questions in order to:

Question23: Which of the following are generally recognized as essential elements of a corporate social responsibility program?

Question24: According to The IIA's Code of Ethics, which of the following actions violates the principle of confidentiality?

Question25: Which of the following best explains why integrity is a necessary personal quality for internal auditors at all levels?

Question26: 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.

Question27: An internal auditor who is carrying out an engagement to review controls related to corporate tax reporting must possess which of the following competencies?
1. Proficiency in analyzing key IT risks and controls.
2. The ability to recognize significant deviations from good business practices.
3. Knowledge of key indicators of fraud in tax reporting.
4. The ability to recognize the existence of problems related to tax accounting.

Question28: An internal auditor is evaluating techniques management uses to mitigate risks within a particular product division. Which of the following is an example of risk reduction?

Question29: Which of the following is the best way to detect fraud?

Question30: Which of the following would provide the best evidence of errors in the quantities of items received from suppliers?

Question31: Which of the following would not be a red flag for fraud?

Question32: 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.

Question33: Which of the following would most likely be considered a red flag for fraud?

Question34: According to IIA guidance, which of the following individuals would best be considered independent for the purpose of participating in an external assessment of the quality assurance and improvement program for an internal audit activity (IAA)?

Question35: Which of the following is an example of a directive control?

Question36: Which of the following statements best explains why internal auditors map processes?
1. To obtain audit evidence to support auditor's observations.
2. To determine scope and objectives of the audit.
3. To facilitate the identification of ownership and responsibility for key risks.
4. To identify potential efficiency improvements.

Question37: According to the Standards, which of the following is not a consideration when exercising due professional care for an assurance engagement?

Question38: Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?

Question39: A manufacturing line supervisor joins the internal audit activity for a two-year rotational job assignment and is assigned to an accounts receivable audit. With regard to this assignment, which of the following should be the primary concern of the audit manager?

Question40: A government agency's policy states that board members' travel and hospitality expenses must be audited annually. Which of following people or groups is most appropriate to perform this audit?

Question41: Which of the following would be considered a violation of The IIA's mandatory guidance on independence?

Question42: A staff auditor, nearly finished with an audit engagement, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing engagement, and there is pressure to complete the current engagement. The auditor notes the problem and forwards the information to the chief audit executive, but performs no further follow-up.
Which of the following statements is true about the auditor's actions?

Question43: A former line supervisor from the Financial Services Department has completed six months of a two-year development opportunity with the internal audit activity (IAA). She is assigned to a team that will audit the organization's payroll function, which is managed by the Human Resources Department. Which of the following statements is most relevant regarding her independence and objectivity with respect to the payroll audit?

Question44: While attending a conference, an internal auditor won an all-expense paid trip sponsored by a vendor of the internal auditor's organization.
Which of the following actions are most appropriate for the auditor to take?

Question45: According to IIA guidance, which of the following are macro-level audit activities performed for an assurance engagement of the purchasing department?
1. Obtain and review all purchasing-related audit reports issued within the past year.
2. Meet with the quality assurance group to discuss its previous reports of any purchasing-related findings.
3. Review a memo written by the purchasing manager that outlines ongoing problems with the purchasing software.
4. Request a copy of the report from a purchasing audit conducted last year by an external service provider.

Question46: An organization's chief audit executive (CAE) determines that the internal audit staff does not have the requisite skills to conduct an audit of the financial derivatives area. Which of the following would be the best course of action for the CAE to follow?

Question47: 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?

Question48: When developing the organization's first risk universe, which of the following would the chief audit executive be least likely to consider?

Question49: 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.

Question50: A fraud investigation was completed by management, and a proven fraud was communicated to relevant authorities. According to MA guidance, which of the following roles would be most appropriate for the internal audit activity to undertake after the investigation?

Question51: 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?

Question52: 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.

Question53: An internal audit charter should do which of the following?

Question54: Which of the following would provide the best guidance to a chief audit executive who is setting internal audit staff requirements?

Question55: 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?

Question56: Which of the following is the most common way that occupational fraud is detected?

Question57: Which of the following is the most significant disadvantage of using checklists to evaluate internal controls?

Question58: A credit card company detects potential errors in credit card numbers by checking whether all entered numbers contain the correct amount of digits. This is an example of which of the following IT controls?

Question59: 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?

Question60: An internal audit manager of a furniture manufacturing organization is planning an audit of the procurement process for kiln-dried wood. The procurement department maintains six procurement officers to manage 24 different suppliers used by the organization.
Which of the following controls would best mitigate the risk of employees receiving kickbacks from suppliers?

Question61: Which of the following best ensures an internal audit activity has the ability to render impartial and unbiased assessments?

Question62: Management of a publicly-held organization requires the internal audit activity to be involved with quarterly financial statements, which are made public and used internally. Which of the following explanations of management's decision is least plausible?

Question63: According to IIA guidance, which of the following best describes internal auditors' responsibility regarding fraud?

Question64: A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

Question65: Which of the following combinations of conditions is most likely a red flag for fraud?

Question66: According to IIA guidance, which of the following is least compliant with the requirements regarding an internal auditor's need for objectivity?

Question67: According to IIA guidance, which of the following best describes processes and tools typically used in ongoing internal assessments?

Question68: According to IIA guidance, which of the following is ultimately responsible for seeing that the internal control system of an organization's social responsibility program is effective?

Question69: During an account receivables audit, an internal auditor found a significant number of input errors resulting in a $500, 000 balance understatement.
Which of the following is the most important question the internal auditor should ask to develop an appropriate recommendation for this finding?

Question70: According to IIA guidance, which of the following must the internal auditor consider to meet the requirements for due professional care?

Question71: 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?

Question72: An internal auditor is reviewing the accounts receivable when she discovers account balances more than three years old. The auditor was previously supervising the area during this time, and she subsequently advises the chief audit executive (CAE) of a potential conflict.
Which of the following is the most appropriate course of action for the CAE to take?

Question73: Suspecting fraud, the chief financial officer (CFO) asked the internal audit activity to investigate a significant increase in travel related expenditures. Work was performed by a qualified internal auditor. Following the completion of the engagement, the chief audit executive (CAE) reported to the CFO that no violations were found and no fraud had occurred.
According to the Standards, which of the following principles did the CAE violate?

Question74: Which of the following statements is true regarding the use of non-statistical sampling in auditing control tests?

Question75: Which of the following is a second line of defense in effective risk management and control?

Question76: A chief audit executive (CAE) is reviewing the internal audit activity's performance and is concerned that the average number of revisions to findings is steadily rising, making it increasingly difficult to trace the finding to the supporting evidence and workpapers. According to MA guidance, which of the following elements of the internal audit activity's quality assurance and improvement program would provide the CAE with the most helpful insight into the cause of this problem?

Question77: According to IIA guidance, which of the following statements is true when an internal auditor performs consulting services that improve an organization's operations?

Question78: According to the COSO internal control framework, which of the following best describes the use of continuous auditing programs by the internal audit activity?

Question79: Which of the following best demonstrates the authority of the internal audit activity?

Question80: According to COSO, which of the following is not considered one of the components of an organization's internal environment?

Question81: Which of the following situations is most likely to impair internal audit objectivity?

Question82: Which of the following controls could an internal auditor reasonably conclude is effective by observing the physical controls of a large server room?

Question83: 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.

Question84: 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.

Question85: A headquarters-based internal auditor has been sent to a major overseas subsidiary to conduct various engagements. Initially, the internal auditor spends time to become familiar with local customs and organization's practices while embarking on the first engagement. Which of the following competencies does the internal auditor exercise?

Question86: Which of the following is an activity that an internal auditor must not perform?

Question87: According to The IIA's Code of Ethics, which of the following is true?

Question88: An internal auditor makes a series of observations when performing an analytical review of division operations. The auditor notes the following things: the current ratio is increasing and the quick ratio is decreasing, sales and current liabilities have remained constant, and the number of day sales in inventory is increasing. Which conclusion should the auditor draw from this data?

Question89: Which of the following is most likely to be considered a control weakness?

Question90: Which of the following decisions made during the testing phase of a compliance audit requires the most judgment by an internal auditor?

Question91: According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the internal audit activity?

Question92: According to The MA Code of Ethics, which of the following is one of the rules of conduct for objectivity?

Question93: 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?

Question94: Which of the following techniques would provide the most compelling evidence that a safety hazard exists within a manufacturing facility?

Question95: Which of the following documents is most appropriate in promoting the objectivity of the internal audit activity?

Question96: An internal auditor notes that employees are able to download files from the internet. According to IIA guidance, which of the following strategies would best protect the organization from the risk of copyright infringement and licensing violations resulting from this practice?

Question97: According to the HA Code of Ethics, which of the following statements best describes the principle of competency?

Question98: Management would like to self-assess the overall effectiveness of the controls in place for its 200-person manufacturing department. Which of the following client-facilitated approaches is likely to be the most efficient way to accomplish this objective?

Question99: Why is it important for the chief audit executive to periodically review the audit charter and present the results to senior management and the board?

Question100: 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?

Question101: Which of the following offers the best evidence that the internal audit activity has achieved organizational independence?

Question102: Which of the following is an example of a risk avoidance strategy?

Question103: Which of the following scenarios would represent the greatest threat to the authority of the internal audit activity (IAA)?

Question104: According to The IIA's Code of Ethics, which of the following statements is true?

Question105: An assurance mapping exercise helps an organization do which of the following?
1. Provide assurance to stakeholders that risks are managed and reported, and regulatory and legal obligations are met.
2. Fulfill best practices in the industry.
3. Identify and address any gaps in the risk management process.
4. Identify fraud.