Question 1

External auditors would consider internal auditors effective if they are:
A) independent of the operating units being evaluated.
B) competent and well trained.
C) have performed relevant audit tests of the internal controls and financial statements.
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 have performed relevant audit tests of the internal controls and financial statements. Therefore, all of the above (A, B, and C) are the best choices.

Question 2

An audit conducted in accordance with the Yellow Book must include an audit report that states the audit was performed in accordance with:
A) GAAS.
B) GAGAS.
C) GASA.
D) SAS.

Accepted Answer

The Yellow Book refers to the Generally Accepted Government Auditing Standards (GAGAS), also known as the "Yellow Book". Therefore, an audit conducted in accordance with the Yellow Book must include an audit report that states the audit was performed in accordance with GAGAS. Choice A is incorrect because GAAS (Generally Accepted Auditing Standards) applies to audits of financial statements for private companies, not government entities. Choice C is not a recognized auditing standard. Choice D (Statements on Auditing Standards) is a set of standards issued by the American Institute of Certified Public Accountants (AICPA) for audits of private companies, not government entities.

Question 3

What are several similarities between internal and external auditors?

Accepted Answer

• Both must be competent as auditors and remain objective in performing their work and reporting their results.
• Both follow a similar methodology in performing their audits, including planning and performing tests of controls and substantive tests.
• Both consider risk and materiality in deciding the extent of their tests and evaluating results. However, their decisions about materiality and risks may differ, because external users may have different needs than management or the board.

Question 4

The Institute of Internal Auditors has established Ethical Principles for its members. List each of the principles.

Accepted Answer

The answer of The Institute of Internal Auditors has established...

Question 5

Integrity is one of the IIA's ethical principles.

Accepted Answer

Integrity is one of the fundamental principles of the International Standards for the Professional Practice of Internal Auditing set forth by the IIA.

Question 6

Internal auditing standards are included in the Red Book.

Accepted Answer

Internal auditing standards are included in the International Professional Practices Framework (IPPF), often referred to as the "Red Book," but the term "Red Book" is not an official name for the standards themselves.

Question 7

Current professional auditing standards allow external auditors to use internal auditors for direct assistance on external audits.

Accepted Answer

According to the International Standards on Auditing (ISA) 610, external auditors may use internal auditors for direct assistance on external audits under certain conditions.

Question 8

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

Accepted Answer

Statements on Internal Auditing Standards (SIAS) are issued by the Institute of Internal Auditors' (IIA) Internal Auditing Standards Board (IASB). The AICPA issues Generally Accepted Auditing Standards (GAAS) while the SEC and Auditing Standards Boards do not issue SIAS.

Question 9

External auditors typically consider internal auditors effective if they meet three criteria. What are these criteria?

Accepted Answer

The answer of External auditors typically consider internal auditors effective...

Question 10

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. They provide objective and independent assurance to both parties regarding the effectiveness of internal controls, risk management, and governance processes. This ensures that the organization is operating in compliance with laws, regulations, and ethical standards.

Question 11

The International Standards for the Professional Practice of Auditing list 7 performance standards. List three.

Accepted Answer

The answer of The International Standards for the Professional Practice...

Question 12

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

Accepted Answer

External auditors may utilize the work of internal auditors in their audit engagement, subject to certain conditions and limitations. The external auditors may permit the internal auditors to perform certain audit procedures, but the external auditors retain responsibility for the overall audit opinion. It is important for external auditors to evaluate the competency and objectivity of the internal auditors as well as the nature, timing, and extent of the work performed.

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

The professional organization which is responsible for providing guidance for internal auditors is the:
A) APA.
B) IIA.
C) ABA.
D) AIA.

Accepted Answer

The Institute of Internal Auditors (IIA) is the premier professional organization for internal auditors. They are responsible for providing guidance, standards, and best practices to internal auditors globally. The APA (American Psychological Association) is a professional organization related to psychology, the ABA (American Bar Association) is related to law, and the AIA (American Institute of Architects) is related to architecture.

Question 15

Independence is a fundamental ethical principle for internal auditors.

Accepted Answer

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

Question 16

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 17

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

Accepted Answer

Current professional auditing standards do not prohibit external auditors from using internal auditors for direct assistance on external audits, but they do require the external auditors to evaluate and supervise the work of internal auditors if they are used.

Question 18

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

Accepted Answer

Internal auditors are responsible for evaluating and improving the effectiveness of risk management, control, and governance processes within an organization, while external auditors primarily focus on providing assurance on the accuracy and reliability of financial statements. Therefore, the objectives of internal auditors are broader in scope.

Question 19

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

The responsibility of verifying accounting information for external users is typically performed by an external auditor, not an internal auditor. Internal auditors focus on providing assurance and consulting services to the organization for operational and financial effectiveness, while external auditors focus on providing an opinion on the accuracy and completeness of financial statements for external users.

Question 20

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 two categories of standards for the professional practice of internal auditing are attribute and performance standards. Attribute standards relate to the characteristics of organizations and individuals performing internal audit activities, while performance standards describe the nature of internal audit activities and the quality of performance that should be achieved by internal auditors.

Quiz 26: Internal and Governmental Financial Auditing and Operational Auditing

External auditors would consider internal auditors effective if they are:

An audit conducted in accordance with the Yellow Book must include an audit report that states the audit was performed in accordance with:

What are several similarities between internal and external auditors?

The Institute of Internal Auditors has established Ethical Principles for its members. List each of the principles.

Integrity is one of the IIA's ethical principles.

Internal auditing standards are included in the Red Book.

Current professional auditing standards allow external auditors to use internal auditors for direct assistance on external audits.

Statements on Internal Auditing Standards are issued by the:

External auditors typically consider internal auditors effective if they meet three criteria. What are these criteria?

Internal auditors are responsible to:

The International Standards for the Professional Practice of Auditing list 7 performance standards. List three.

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

Which of the following is not a similarity between external and internal auditors?

The professional organization which is responsible for providing guidance for internal auditors is the:

Independence is a fundamental ethical principle for internal auditors.

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?

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

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

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

The international standards for the professional practice of internal auditing include which two categories of standards?