[Free] Download New Updated (October 2016) IIA IIA-CIA-Part2 Real Exam 261-270

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QUESTION 261

Production managers for a manufacturing company are authorized to prepare emergency purchase orders for raw materials. These manually prepared orders do not go through the purchasing department and do not require a receiving report. The managers forward the invoice and purchase order to the accounting department for payment. Which of the following internal controls would efficiently prevent abuse of this system?

 

A.

Institute a company policy requiring rotation of orders among several suppliers.

B.

Require a manual receiving report from the warehouse prior to payment.

C.

Forbid the use of emergency purchase orders.

D.

Review the level of safety stock.

 

Correct Answer: B

 

 

QUESTION 262

A major insurance company provides a discount on automobile insurance if the vehicle meets certain safety criteria. Which of the following audit tests would provide an internal auditor with the best evidence that all qualifying insured automobiles are receiving the discount?

 

A.

Compare the percentage of automobiles receiving discounts this year to that of last year.

B.

Ask managers whether they are aware of the discount criteria and whether they are providing the discount to all qualifying automobiles.

C.

Select a sample of automobiles that are not receiving the discount and determine if they have been properly excluded.

D.

Select a sample of automobiles receiving the discount and determine that the required discount criteria are being met.

 

Correct Answer: C

 

 

QUESTION 263

An internal auditor noticed that employees with responsibilities for cash collection had recently issued an unusually large number of credit memos, indicating that the original charges had been made to the wrong customer accounts. From a control standpoint, the auditor would be concerned with the possibility that:

 

A.

The organization is selling a large number of defective items.

B.

Employees in this function are concealing a theft of cash collected from customers.

C.

Credit memos are not being submitted on a timely basis.

D.

The credit department has not been properly screening customers and, as a result, a large portion of the accounts receivable may not be collectible.

 

Correct Answer: B

 

 

 

 

QUESTION 264

Which of the following risks assumes an absence of compensating controls in the area being reviewed?

 

A.

Control risk.

B.

Detection risk.

C.

Inherent risk.

D.

Sampling risk.

 

Correct Answer: C

 

 

QUESTION 265

Which of the following is least likely to vary when conducting audit engagements in different regions of an international organization?

 

A.

Application of governmental regulations to business activities.

B.

Work schedules and holidays of the individual regions.

C.

Level of workpaper documentation needed to support audit observations.

D.

Availability of technology and technical support.

 

Correct Answer: C

 

 

QUESTION 266

During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?

 

A.

Defective pricing.

B.

Cost mischarging.

C.

Fictitious vendor.

D.

Bid rotation.

 

Correct Answer: B

 

 

QUESTION 267

According to the International Professional Practices Framework, which of the following statements is true regarding the use of the statement, “Conducted in Conformance with the International Standards for the Professional Practice of Internal Auditing,” when communicating results of a seven-year-old internal audit activity?

 

A.

The statement may be used only when conducting international engagements.

B.

The statement may be used only if the results of the quality assurance and improvement program support the statement.

C.

The statement may be used whether or not the internal audit department has an external quality assessment review or an independent validation of a self assessment.

D.

The statement should not be used for a consulting engagement.

 

Correct Answer: B

 

 

QUESTION 268

In reviewing the appropriateness of the minimum quantity level of inventory established by a department, an auditor would be least likely to consider:

 

A.

Stockout costs, including lost customers.

B.

Seasonal variations in forecasting inventory demand.

C.

Optimal order sizes determined by an economic order quantity model.

D.

The potential for obsolescence of inventory items.

 

Correct Answer: C

 

 

QUESTION 269

When determining the nature, timing, and extent of follow up, the chief audit executive considers all of the following factors except:

 

A.

Significance of the reported observation or recommendation, degree of effort, and cost needed to correct the reported condition.

B.

Impact that may result should the corrective action fail.

C.

Authority and responsibility of the person required to take corrective action.

D.

Complexity of the corrective action and time period involved.

 

Correct Answer: C

 

 

QUESTION 270

The internal audit activity’s primary responsibility in a review or examination of the organization by an external regulatory body is to:

 

A.

Verify that regulatory reviews occur with adequate frequency.

B.

Provide follow-up to determine if the regulator’s findings are appropriately resolved by management.

C.

Prepare documentation for the regulator.

D.

Document the responses to the regulator’s findings.

 

Correct Answer: B

 

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