Question 1

Internal auditors are expected to provide value to the organization through improved operational effectiveness.

Accepted Answer

Internal auditors are responsible for evaluating and improving organizational processes and controls to enhance operational efficiency and effectiveness. Their role is focused on adding value to the organization by identifying areas for improvement and enhancing the overall risk management framework. Therefore, the statement is true.

Question 2

Which of the following is most correct regarding external auditors use of internal auditors directly on the audit engagement?
A) discourage
B) prohibit
C) require
D) permit

Accepted Answer

External auditors may use internal auditors directly on the audit engagement, but they must evaluate their competence and objectivity before doing so. The external auditor should also appropriately supervise and evaluate the work of any internal auditors utilized. Prohibiting the use of internal auditors would limit the external auditor’s ability to perform an effective and efficient audit. Requiring or discouraging it would also not be appropriate as there may be situations where it is beneficial to use internal auditors. Therefore, permitting the use of internal auditors with proper evaluation and supervision is the most correct option.

Question 3

Internal auditing standards are included in the Blue Book.

Accepted Answer

Internal auditing standards are included in the Red Book, not the Blue Book. The Red Book is the informal name for the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Auditors (IIA).

Question 4

The International Standards for the Professional Practice of Internal Auditing include which two categories of standards?
A) attribute and performance
B) competency and professional skepticism
C) performance and integrity
D) ethics and rules of conduct

Accepted Answer

The International Standards for the Professional Practice of Internal Auditing include two categories of standards: attribute standards that describe the characteristics of organizations and individuals performing internal audit activities and performance standards that describe the nature of internal audit activities and provide quality criteria against which the performance of these services can be measured. Competency and professional skepticism are important attributes for internal auditors, but they are included within the attribute standards category. Ethics and rules of conduct are also important for internal auditors, but they are not one of the two categories of standards.

Question 5

Statements on Internal Auditing Standards are issued by the
A) AICPA.
B) SEC.
C) Internal Auditing Standards Board.
D) Auditing Standards Boards.

Accepted Answer

Statements on Internal Auditing Standards (SIAS) are issued by the Internal Auditing Standards Board (IASB), a subsidiary of the Institute of Internal Auditors (IIA). The AICPA issues auditing standards for external auditors conducting audits of financial statements, while the SEC oversees the public disclosure of financial information by companies. The Auditing Standards Board is a subsidiary of the AICPA and develops auditing standards for external auditors.

Question 6

External auditors would consider internal auditors effective if they
A) are independent of the operating units being evaluated.
B) are competent and well trained.
C) apply a systematic and disciplined approach, including quality control.
D) all of the above.

Accepted Answer

External auditors would consider internal auditors effective if they are independent of the operating units being evaluated, competent and well trained, and apply a systematic and disciplined approach, including quality control. Therefore, all of the above options are correct.

Question 7

Which of the following is a performance standard under the International Standards for the Professional Practice of Internal Auditing?
A) proficiency and due professional care
B) independence and objectivity
C) requirement that the internal audit must be a CPA
D) engagement planning

Accepted Answer

Engagement planning is a performance standard under the International Standards for the Professional Practice of Internal Auditing, focusing on how internal audits should be conducted.

Question 8

The Internal Auditing Standards Board issues Statements on Internal Auditing Standards.

Accepted Answer

The Internal Auditing Standards Board (IASB) does indeed issue Statements on Internal Auditing Standards (SIAs), which provide guidance and best practices for internal auditors.

Question 9

External financial statement auditors must obtain evidence regarding what attributes of an internal audit department if the external auditors intend to rely on the internal auditor's work?
A) 
B) 
C) 
D)

Accepted Answer

The answer of External financial statement auditors must obtain evidence...

Question 10

Internal auditors are expected to add value to the organization through improved operational effectiveness. In addition, their responsibilities include all the following except
A) reviewing the reliability and integrity of information.
B) ensuring compliance with the company's accounting policies.
C) verifying accounting information for external users.
D) ensuring compliance with applicable governmental regulations.

Accepted Answer

Internal auditors are responsible for reviewing the reliability and integrity of information, ensuring compliance with the company's accounting policies, and ensuring compliance with applicable governmental regulations. However, they are not responsible for verifying accounting information for external users. This responsibility typically falls to external auditors.

Question 11

Because they spend all their time within one company, internal auditors have much greater knowledge about the company's operations and internal controls then external auditors.

Accepted Answer

Internal auditors are employed by the company they audit and therefore have access to more detailed and in-depth knowledge about the company's operations and control systems. In contrast, external auditors are hired by the company to provide an objective and independent opinion about the financial statements, but they have limited access to the company's operations beyond what is necessary to conduct their audit.

Question 12

Integrity is one of the Institute of Internal Auditors' ethical principles.

Accepted Answer

Integrity is indeed one of the IIA's ethical principles. The others are objectivity, confidentiality, and competency.

Question 13

Which of the following is not a similarity between external and internal auditors?
A) Both must be independent of the company.
B) Both must be competent.
C) Both follow a similar methodology in performing their audits.
D) Both consider risk and materiality deciding the extent of their tests and evaluating results.

Accepted Answer

External auditors are required to maintain independence from the company they audit to ensure their objectivity and impartiality. Internal auditors, however, are employees of the company and, while they must maintain an objective stance, they are not independent of the company in the same way external auditors are.

Question 14

Internal auditors are responsible to
A) the board of directors.
B) management.
C) both A and B.
D) neither A nor B.

Accepted Answer

Internal auditors are responsible to both the board of directors and management. In their roles, they provide independent, objective assessments of an organization's operations and help to improve the effectiveness of its risk management, internal control, and governance processes. While they report to management and are part of the organization's structure, they also have a duty to report to the board and ensure that the organization's interests are being safeguarded. Therefore, both the board and management rely on internal auditors to provide valuable insights and guidance in achieving their respective goals.

Question 15

Under the International Standards for the Professional Practice of Internal Auditing, the performance standards deal with the education requirements of the internal auditor.

Accepted Answer

The performance standards in the International Standards for the Professional Practice of Internal Auditing deal with the nature of internal auditing and provide criteria for evaluating the effectiveness of the internal audit function. The education requirements for internal auditors are addressed in the attribute standards.

Question 16

The objectives of internal auditors are considerably broader than the objectives of external auditors.

Accepted Answer

Internal auditors are responsible for providing independent and objective assurance and consulting services designed to add value and improve an organization's operations. They also evaluate and improve the effectiveness of risk management, control, and governance processes. In contrast, external auditors are primarily responsible for expressing an opinion on the financial statements of an organization and ensuring that they are presented fairly in accordance with the applicable accounting standards.

Question 17

Current professional auditing standards prohibit external auditors from using internal auditors for direct assistance on external audits.

Accepted Answer

Current professional auditing standards allow external auditors to use internal auditors for direct assistance on external audits under certain conditions, including independence and adequate supervision. However, the external auditor is still responsible for the work performed by the internal auditor and must evaluate their competence and objectivity.

Question 18

The professional organization which is responsible for providing guidance for internal auditors is the
A) Association of Private Auditors.
B) Institute of Internal Auditors.
C) American Bar Association.
D) Association of Internal Auditors.

Accepted Answer

The Institute of Internal Auditors is the professional organization responsible for providing guidance, standards, and certification for internal auditors. The other options are not relevant to the field of internal auditing.

Question 19

Independence is a fundamental ethical principle for internal auditors.

Accepted Answer

The answer of Independence is a fundamental ethical principle for...

Question 20

Professional guidelines for performing internal audits for companies are not as well-defined as for external audits.

Accepted Answer

While there are generally accepted auditing standards for external audits, there is no one-size-fits-all approach to performing internal audits, and companies may develop their own guidelines or refer to industry-specific standards.

Quiz 26: Internal and Governmental Financial Auditing and Operational Auditing

Internal auditors are expected to provide value to the organization through improved operational effectiveness.

Which of the following is most correct regarding external auditors use of internal auditors directly on the audit engagement?

Internal auditing standards are included in the Blue Book.

The International Standards for the Professional Practice of Internal Auditing include which two categories of standards?

Statements on Internal Auditing Standards are issued by the

External auditors would consider internal auditors effective if they

Which of the following is a performance standard under the International Standards for the Professional Practice of Internal Auditing?

The Internal Auditing Standards Board issues Statements on Internal Auditing Standards.

External financial statement auditors must obtain evidence regarding what attributes of an internal audit department if the external auditors intend to rely on the internal auditor's work?

Internal auditors are expected to add value to the organization through improved operational effectiveness. In addition, their responsibilities include all the following except