AUE2601 Oct/Nov 2012 exam paper — questions

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  1. Question 1.1 · Reporting lines, independence and the audit committee · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Select the alternative that correctly completes this statement: the fact that internal auditors customarily have a dual relationship with executive management and the audit committee means that...Show the full question

  2. Question 1.2 · The internal audit process and fieldwork · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Choose the alternative describing the characteristics of internal audit's working papers.Show the full question

  3. Question 1.3 · Definition, role and responsibilities of internal audit · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Compared with the objectives of external auditors, the objectives of internal auditors focus more on which of the following?Show the full question

  4. Question 1.4 · The internal audit process and fieldwork · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Identify the purpose that working papers serve for the internal auditor.Show the full question

  5. Question 1.5 · International Professional Practices Framework (IPPF) and standards · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) According to the International Standards for the Professional Practice of Internal Auditing (Standards), due professional care calls for which of the following?Show the full question

  6. Question 1.6 · Reporting lines, independence and the audit committee · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Identify the most important benefit provided by the audit committee to the internal auditor.Show the full question

  7. Question 1.7 · Internal audit and other assurance functions · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Internal and external audit work should be coordinated to ensure adequate audit coverage and to eliminate unnecessary duplication of effort. Which one of the following alternatives involves the coordination of audit effort?Show the full question

  8. Question 1.8 · The internal audit process and fieldwork · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) During the internal audit of sales representatives' travel expenses, the internal auditor calculates the average travel expenses per day for each of the sales representatives, and then examines the detailed receipts for the sales representatives who have high daily averages. These audit procedures represent the use of which of the following types of audit evidence?Show the full question

  9. Question 1.9 · Definition, role and responsibilities of internal audit · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Identify the element of authority attributed to the internal audit activity that should be included in its charter.Show the full question

  10. Question 1.10 · The internal audit process and fieldwork · 1.5 marks

    For this question on internal auditing, choose the one alternative you consider most correct for each of the ten subsections listed below. Write down the subsection number together with the letter of your chosen alternative (for example 1.1 A, 1.2 B), answering the subsections in numerical order. Each subsection counts 1½ marks. (Questions adapted from Vallabhaneni: CIA Exam Review) Working papers should be disposed of when they are of no further use. Regarding retention policies, choose the correct statement.Show the full question

  11. Question 2.1(a) · International Professional Practices Framework (IPPF) and standards · 4 marks

    The International Professional Practices Framework (IPPF) contains three mandatory elements, namely (a) the Definition of Internal Auditing, (b) the Code of Ethics, and (c) the International Standards for the Professional Practice of Internal Auditing (Standards). Briefly define and explain the term 'the Definition of Internal Auditing'.Show the full question

  12. Question 2.1(b) · International Professional Practices Framework (IPPF) and standards · 3 marks

    The International Professional Practices Framework (IPPF) contains three mandatory elements, namely (a) the Definition of Internal Auditing, (b) the Code of Ethics, and (c) the International Standards for the Professional Practice of Internal Auditing (Standards). Briefly define and explain the term 'the Code of Ethics'.Show the full question

  13. Question 2.1(c) · International Professional Practices Framework (IPPF) and standards · 4 marks

    The International Professional Practices Framework (IPPF) contains three mandatory elements, namely (a) the Definition of Internal Auditing, (b) the Code of Ethics, and (c) the International Standards for the Professional Practice of Internal Auditing (Standards). Briefly define and explain the term 'the International Standards for the Professional Practice of Internal Auditing (Standards)'. (Question adapted from TUT Exam, February 2012.)Show the full question

  14. Question 2.2.1 · International Professional Practices Framework (IPPF) and standards · 3 marks

    The International Professional Practices Framework (IPPF) contains three mandatory elements, namely (a) the Definition of Internal Auditing, (b) the Code of Ethics, and (c) the International Standards for the Professional Practice of Internal Auditing (Standards). With reference to the Institute of Internal Auditors (IIA) Code of Ethics, conclude and explain, giving reasons for your conclusion, whether the following scenario is permissible: Martin, an internal audit manager, engages in the preparation of income tax forms during the tax season. He prepared the personal tax return, for a fee, for one of the company's divisional managers.Show the full question

  15. Question 2.2.2 · International Professional Practices Framework (IPPF) and standards · 3 marks

    The International Professional Practices Framework (IPPF) contains three mandatory elements, namely (a) the Definition of Internal Auditing, (b) the Code of Ethics, and (c) the International Standards for the Professional Practice of Internal Auditing (Standards). With reference to the Institute of Internal Auditors (IIA) Code of Ethics, conclude and explain, giving reasons for your conclusion, whether the following scenario is permissible: James, a senior internal auditor, told his friend to start looking for a new job, as an audit of the executive office indicated that the friend's division was going to be closed down in about six months.Show the full question

  16. Question 2.2.3 · International Professional Practices Framework (IPPF) and standards · 3 marks

    The International Professional Practices Framework (IPPF) contains three mandatory elements, namely (a) the Definition of Internal Auditing, (b) the Code of Ethics, and (c) the International Standards for the Professional Practice of Internal Auditing (Standards). With reference to the Institute of Internal Auditors (IIA) Code of Ethics, conclude and explain, giving reasons for your conclusion, whether the following scenario is permissible: An internal auditor disclosed confidential, engagement-related information that was potentially damaging to the organisation, in response to a court order. (Question adapted from Gleim CIA Review.)Show the full question

  17. Question 3.1 · Reporting lines, independence and the audit committee · 3 marks

    Dreams Discovered Ltd is a company that manufactures and sells children's toys. You have just been appointed as the Chief Audit Executive (CAE) of the company's newly established internal audit activity. A disagreement has arisen between the board and the Chief Executive Officer (CEO) as to which of them the CAE should report to, and they have asked you to advise them on this matter. As the newly appointed CAE of Dreams Discovered Ltd, discuss the benefits and drawbacks of having the CAE report to the Audit Committee.Show the full question

  18. Question 3.2 · Reporting lines, independence and the audit committee · 3 marks

    Dreams Discovered Ltd is a company that manufactures and sells children's toys. You have just been appointed as the Chief Audit Executive (CAE) of the company's newly established internal audit activity. A disagreement has arisen between the board and the Chief Executive Officer (CEO) as to which of them the CAE should report to, and they have asked you to advise them on this matter. As the newly appointed CAE of Dreams Discovered Ltd, discuss the benefits and drawbacks of having the CAE report to the CEO instead.Show the full question

  19. Question 3.3 · Reporting lines, independence and the audit committee · 4 marks

    Dreams Discovered Ltd is a company that manufactures and sells children's toys. You have just been appointed as the Chief Audit Executive (CAE) of the company's newly established internal audit activity. A disagreement has arisen between the board and the Chief Executive Officer (CEO) as to which of them the CAE should report to, and they have asked you to advise them on this matter. Based on the guidance provided in the IIA Standards, recommend which type of reporting line for the CAE at Dreams Discovered Ltd would be preferred in order to safeguard independence.Show the full question

  20. Question 4.1 · Internal auditor roles, qualifications and characteristics · 6 marks

    Picture that you recently attended a conference organised jointly by the Association of Certified Fraud Examiners and the Institute of Internal Auditors, held under the theme 'The diverse roles of internal auditors in today's world'. Your Chief Audit Executive has now asked you to put together a short presentation to share what you learned at the conference with your colleagues, and has requested that the presentation deal with, at minimum, fraud, control and governance processes. With reference to the conference theme on the diverse roles of internal auditors, explain what role the internal auditor plays in governance processes, applying the guidance found in IIA Standard 2110 - Governance.Show the full question

  21. Question 4.2 · Internal auditor roles, qualifications and characteristics · 7 marks

    Picture that you recently attended a conference organised jointly by the Association of Certified Fraud Examiners and the Institute of Internal Auditors, held under the theme 'The diverse roles of internal auditors in today's world'. Your Chief Audit Executive has now asked you to put together a short presentation to share what you learned at the conference with your colleagues, and has requested that the presentation deal with, at minimum, fraud, control and governance processes. Continuing your presentation on the roles of internal auditors, explain what role an internal auditor fulfils as a control function within an organisation.Show the full question

  22. Question 4.3 · Internal auditor roles, qualifications and characteristics · 6 marks

    Picture that you recently attended a conference organised jointly by the Association of Certified Fraud Examiners and the Institute of Internal Auditors, held under the theme 'The diverse roles of internal auditors in today's world'. Your Chief Audit Executive has now asked you to put together a short presentation to share what you learned at the conference with your colleagues, and has requested that the presentation deal with, at minimum, fraud, control and governance processes. As part of the same presentation, define the different types of control that exist, providing an example of each type.Show the full question

  23. Question 4.4 · Internal auditor roles, qualifications and characteristics · 2 marks

    Picture that you recently attended a conference organised jointly by the Association of Certified Fraud Examiners and the Institute of Internal Auditors, held under the theme 'The diverse roles of internal auditors in today's world'. Your Chief Audit Executive has now asked you to put together a short presentation to share what you learned at the conference with your colleagues, and has requested that the presentation deal with, at minimum, fraud, control and governance processes. Explain what role the internal auditor plays specifically in the deterrence of fraud.Show the full question

  24. Question 4.5 · Internal auditor roles, qualifications and characteristics · 4 marks

    Picture that you recently attended a conference organised jointly by the Association of Certified Fraud Examiners and the Institute of Internal Auditors, held under the theme 'The diverse roles of internal auditors in today's world'. Your Chief Audit Executive has now asked you to put together a short presentation to share what you learned at the conference with your colleagues, and has requested that the presentation deal with, at minimum, fraud, control and governance processes. Given that the internal auditor bears responsibility for the deterrence of fraud, discuss what specific steps the internal auditor can take to fulfil this responsibility.Show the full question

  25. Question 5.1 · Internal auditor roles, qualifications and characteristics · 4 marks

    As part of your company's initiative to become more involved in the community, you have been invited to act as a guest speaker to matric students at a nearby high school, with the purpose of introducing them to the fascinating world of Internal Auditing. Outline the formal requirements that a potential internal auditor must satisfy before they can be awarded the professional Certified Internal Auditor (CIA) designation.Show the full question

  26. Question 5.2 · Internal auditor roles, qualifications and characteristics · 6 marks

    As part of your company's initiative to become more involved in the community, you have been invited to act as a guest speaker to matric students at a nearby high school, with the purpose of introducing them to the fascinating world of Internal Auditing. Identify and describe at least six (6) personal characteristics that an internal auditor should possess, which would help him or her to effectively carry out their duties as an internal auditor.Show the full question

  27. Question 6.1 · The internal audit process and fieldwork · 4 marks

    You act as a mentor to the junior internal auditors in your internal audit department. Part of your responsibility is to assist them with their studies and other aspects regarding their training as internal auditors. Answer the following questions posed to you by a new junior internal auditor during a mentoring session. The internal audit process consists of four (4) phases, and the second phase is planning the internal audit (engagement planning). According to IIA Standard 2201 – Planning Considerations, explain what the internal auditor needs to consider when planning the engagement.Show the full question

  28. Question 6.2 · The internal audit process and fieldwork · 6 marks

    You act as a mentor to the junior internal auditors in your internal audit department. Part of your responsibility is to assist them with their studies and other aspects regarding their training as internal auditors. Answer the following questions posed to you by a new junior internal auditor during a mentoring session. Identify four (4) different types of audit evidence. Define each of these different kinds of evidence and provide an example for each kind.Show the full question

  29. Question 6.3 · The internal audit process and fieldwork · 4 marks

    You act as a mentor to the junior internal auditors in your internal audit department. Part of your responsibility is to assist them with their studies and other aspects regarding their training as internal auditors. Answer the following questions posed to you by a new junior internal auditor during a mentoring session. During one of the recent audits of the Accounts Receivable (Debtors) section, the following data was gathered. One of the findings related to a material increase in bad debts expenses. When preparing a report on the findings, each item may be classified as criteria, cause, condition or effect. Examine the following items, drawn from Wiley CIA Review (adapted): (a) audit tests showed that only some of the new accounts received were reviewed; (b) the bad debts loss increased by R78 000 during the last financial year; (c) credit department policy requires the review of credit references for all new accounts; (d) according to the new credit manager, strict adherence to established credit policy is not necessary. For each item (a to d), identify whether it represents the Criteria, Condition, Cause or Effect, and give reasons for your answer.Show the full question

  30. Question 6.4 · The internal audit process and fieldwork · 6 marks

    You act as a mentor to the junior internal auditors in your internal audit department. Part of your responsibility is to assist them with their studies and other aspects regarding their training as internal auditors. Answer the following questions posed to you by a new junior internal auditor during a mentoring session. Match each term in Column A with its corresponding meaning in Column B. Present your answer in the format: 6.4.1 = [letter], for example '6 4 1 d'. Column A consists of: 6.4.1 Accurate information is...; 6.4.2 Sufficient information is...; 6.4.3 Concise information is....; 6.4.4 Complete information...; 6.4.5 Relevant information...; 6.4.6 Objective information is.... Column B consists of the following possible meanings: (a) supports engagement observations and recommendations and is consistent with the objectives for the engagement; (b) fair, impartial, and unbiased and presents the result of a fair-minded and balanced assessment of all relevant facts and circumstances; (c) free from errors and distortions and faithful to the underlying facts; (d) to the point and avoids unnecessary elaboration, superfluous detail, redundancy and wordiness; (e) the best attainable information through the use of appropriate engagement techniques; (f) helps the organisation meet its goals; (g) factual, adequate and convincing so that a prudent person would reach the same conclusion as the auditor; (h) lacks nothing that is essential to the target audience and includes all significant and relevant information and observations to support recommendations and conclusions.Show the full question

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