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IIA Practice of Internal Auditing Sample Questions (Q39-Q44):

NEW QUESTION # 39
When conducting audit follow-up of a finding related to cash management routines, an internal auditor would expect to find that all of the following changes have occurred except:

  • A. Inherent risk has been eliminated as a result of resolution of the condition.
  • B. The steps being taken are resolving the condition disclosed by the finding.
  • C. Benefits have accrued to the entity as a result of resolving the condition.
  • D. Controls have been implemented to deter or detect a recurrence of the finding.

Answer: A

NEW QUESTION # 40
A company used simple regression analysis to analyze maintenance costs against machine hours (MH) for a
26-week period when the plant was in full operation. The regression yielded the following estimated cost function:
Maintenance Cost = $60 + $0.25/MH
The regression analysis also generated a coefficient of determination (R2), or goodness of fit, of 0.85. Which of the following statements regarding this regression analysis is appropriate?

  • A. This regression can be used to determine the maintenance cost for any period at any activity level by substituting the machine hours in the equation.
  • B. The coefficient of determination of R2 = 0.85 indicates that the goodness of fit is poor because the value is close to the maximum value of one.
  • C. The $0.25 component is the slope coefficient of the cost estimate and represents the average variable maintenance cost per machine hour.
  • D. The $60 component represents the best estimate of fixed maintenance costs for the company in a shutdown situation.

Answer: C

NEW QUESTION # 41
Which of the following items, included in the preliminary audit communication would be most useful for management to formulate action plans in response to audit recommendations?

  • A. A condition
  • B. An audit scope
  • C. An audit objectives
  • D. An observation rating

Answer: C

NEW QUESTION # 42
Which of the following evaluation criteria would be the most useful to help the chief audit executive determine whether an external service provider possesses the knowledge, skills, and other competencies needed to perform a review?

  • A. The service provider’s experience in the type of work being considered.
  • B. The financial interest the service provider may have in the organization.
  • C. Compensation or other incentives that may be applicable to the service provider.
  • D. The relationship the service provider may have had with the organization or the activities being reviewed.

Answer: A

NEW QUESTION # 43
Which of the following is a red flag associated with fictitious revenues?

  • A. Significant transactions with related parties.
  • B. Substantial increase in receivables turnover.
  • C. Unusual decrease in the number of days’ sales in receivables.
  • D. Slow growth or unusually low profitability.

Answer: A

Explanation:
Section: Volume B

NEW QUESTION # 44
……

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