Solve this 15 MCQ mocktest,submit your answers
Independence of the Internal Audit Activity:
1- Independence permits internal auditors to render impartial and unbiased judgments. The best way to achieve independence is through
A. Supervision within the organization.
B. Organizational knowledge and skills.
C. Individual knowledge and skills.
D. A dual-reporting relationship.
2- Which of the following facts, by themselves, could contribute to a lack of independence of the internal
audit activity?
1. The CEO accused the new auditor of not operating “in the best interests of the
organization.”
2. The majority of audit committee members come from within the organization.
3. The internal audit activity’s charter has not been approved by the board.
A. 1 only.
B. 2 and 3 only.
C. 2 only.
D. 1, 2, and 3
3- Which action is not consistent with functional reporting?
A. The board should have the final authority to approve the internal audit risk assessment.
B. The board should approve the CAE’s performance evaluation.
C. Organizational independence is effectively achieved when the CAE reports functionally to the
board.
D. The CAE should meet with the board, with management present, to reinforce the independence
of the internal audit activity.
4- According to the International Professional Practices Framework, the independence of the internal
audit activity is achieved through
A. Staffing and supervision.
B. Organizational status and objectivity.
C. Continuing professional development and due professional care.
D. Human relations and communications.
5- The board is most likely to participate in approving
A. Staff promotions and salary increases.
B. Engagement communication observations, conclusions, and recommendations.
C. Appointment of the chief audit executive.
D. Engagement work programs.
6- The organizational level to which the internal audit activity reports
A. Requires only the board’s annual approval of the engagement work schedule, staffing plan, and
financial budget.
B. Is best when reporting is only made to the board of directors.
C. Must be sufficient to permit the accomplishment of the activity’s responsibilities.
D. Is guaranteed when the charter specifically defines the activity’s independence.
7- An external quality assessment team was evaluating the independence of an internal audit activity.
The internal audit activity performs engagements concerning all of the elements included in its scope.
Which of the following reporting responsibilities is most likely to threaten the internal audit activity’s
independence? Reporting to the
A. President.
B. Chief financial officer.
C. Executive vice president.
D. Audit committee.
8- In some cultures, and organizations, managers insist that an internal audit activity is not needed to
provide a critical assessment of the organization’s operations. This kind of management attitude will
most probably have an adverse effect on the internal audit activity’s
A. Operating budget variance.
B. Effectiveness.
C. Performance appraisals.
D. Policies and procedures.
9- The reporting structure that is most likely to allow the internal audit activity to accomplish its
responsibilities is to report administratively to the
A. Chief executive officer and functionally to the board of directors.
B. Board and functionally to the chief executive officer.
C. Chief executive officer and functionally to the external auditor.
D. Controller and functionally to the chief financial officer.
10- When evaluating the independence of an internal audit activity, a quality assurance review team
performing an external assessment considers several factors. Which of the following factors has
the least amount of influence when judging an internal audit activity’s independence?
A. Relationship between engagement records and engagement communications.
B. The extent of internal auditor training in communications skills.
C. Impartial and unbiased judgments.
D. Criteria used in making internal auditors’ assignments.
11- Which of the following describes the chief audit executive’s optimal reporting line to enhance the
independence of the internal audit activity?
A. Administrative reporting to the chief financial officer.
B. Administrative reporting to the board.
C. Functional and administrative reporting to the president of the organization.
D. Functional reporting to the audit committee.
12- A charter is being drafted for a newly formed internal audit activity. Which of the following best
describes an appropriate organizational position to be incorporated into the charter?
A. The chief audit executive is a member of the board.
B. The chief audit executive is a staff officer reporting to the chief financial officer.
C. The chief audit executive reports to an administrative vice president.
D. The chief audit executive reports to the chief executive officer but has access to the board.
13- A formal document (charter) approved by the board that defines the internal audit activity’s
purpose, authority, and responsibility enhances its
A. Proficiency.
B. Independence.
C. Relationship with management.
D. Exercise of due professional care.
14- To avoid being the apparent cause of conflict between an organization’s senior management
and the board, the chief audit executive should
A. Strengthen the independence of the internal audit activity through organizational position.
B. Discuss all reports to senior management with the board first.
C. Communicate all engagement results to both senior management and the board.
D. Request board approval of policies that include internal audit activity relationships with the
board.
15- An organization is in the process of establishing its new internal audit activity. The controller has
no previous experience with internal auditors. Due to this lack of experience, the controller advised
the applicants that the CAE will be reporting to the external auditors. However, the new chief audit
executive will have free access to the controller to report anything important. The controller will then
convey the CAE’s concerns to the board of directors. The internal audit activity will
A. Not be independent because the organization did not specify that the applicants must be certified
internal auditors.
B. Not be independent because the CAE reports to the external auditors.
C. Be independent because the CAE has direct access to the board.
D. Not be independent because the controller has no experience with internal auditors.
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