Introduction to internal auditing
Practice questions and answers
Q. Modern/contemporary internal auditing started as an extension of:
a. Financial reporting
b. Taxation
c. Bookkeeping
d. Financial/external audits
Q. Historically the initial focus of internal auditors was on:
a. Verifying financial transactions.
b. Examining corporate accounting and financial reporting policies.
c. Monitoring employee’s compliance with corporate policies.
d. All of the above.
Q. An organization seeking to procure internal auditing services can:
a. Setup an internal department/function.
b. Engage a third-party vendor such as an accounting firm.
c. Either create an in-house department or outsource the role to a third-party.
d. Choose to either setup an in-house function or outsource the role or use a combination
of internal resources and external services to meet its internal audit requirements.
Q. Which one of the following correctly describes the impact of post-millennial S&P 500
firm collapses during the early 2000 and the subsequent regulatory changes such as the
Sarbanes-Oxley Act (SOX):
a. The legitimacy of internal auditing strengthened.
b. The legitimacy of internal auditing eroded.
c. The importance of the internal auditing function diminished.
d. The internal auditing profession, in many jurisdictions, was brought under government
control.
Q. Which one of the following is an example of strategic objectives:
a. Ensuring compliance with health and safety regulations.
b. Ensuring products are delivered to customers on time.
c. Increasing market share through acquisitions and mergers.
d. Publishing high quality/credible corporate reports.
Q. From the options given select the incorrect combination of organizational objectives and
internal auditing objectives:
a. Internal auditors check for compliance with corporate ethical codes, thereby assisting
organisations in achieving their operating objectives.
b. Internal auditors verify financial transactions, thereby assisting organisations in
achieving their reporting objectives.
c. Internal auditors examine the quality of information used by senior managers, thereby
assisting organisations in achieving their strategic objectives.
d. Internal auditors examine delivery dates, thereby assisting organisations in achieving
their operating objectives.
Q. According to Mautz and Sharaf (1961), which one of the following correctly describes the
relationship between accounting and auditing:
a. Auditing is a sub-field/child of accounting/parent.
b. Auditing and accounting are business associates.
c. Accounting and auditing focus on reducing a tremendous mass of detailed information
to manageable and understandable proportions
d. All of the above.
Q. Which one of the following correctly describes the key common feature of external and
internal audits:
a. They both involve assurance to intended users.
b. They both involve reporting to corporate shareholders.
c. They both focus on financial reports.
d. None of the above.
Q. Advisory/consultancy engagements undertaken by internal auditors are often described as
tripartite engagements:
a. True
b. False
Q. Which one of the following internal auditing engagements are described as special
investigations:
a. Checking the accuracy of records in books of accounts.
b. Checking for potential breaches in legislation.
c. Evaluating internal controls.
d. Probing causes and consequences of fraud.
Q. Ensuring that the internal auditor reports directly to the audit committee is primarily
designed to:
a. Protect the independence of the internal auditor.
b. Ensure that the internal auditor adopts a systems based approach to internal auditing.
c. Ensure that the internal auditor carries out management audits.
d. All of the above.
Q. Internal auditors, like external auditors, always use sampling when undertaking their work.
a. True
b. False
Q. Internal auditors are primarily engaged to evaluate an organisations internal control
system:
a. True
b. False
Q. Which one of the following engagements is primarily designed to add value:
a. External audits
b. Internal auditing
c. Both external and internal auditing
d. None of the above
Q. Which one of the following are components of the IIA Value Proposition Model:
a. Assurance, governance, and insight.
b. Advisory, assurance, and insight.
c. Assurance, objectivity, and insight.
d. Assurance, objectivity, and advisory.
Q. Which one of the following are components of the sub-component “assurance” in the IIA
Value Proposition Model:
a. Governance, risk, and control.
b. Insight, governance and advisory.
c. Governance, risk, and control.
d. Catalyst, analyses, and assessments.
Q. Which one of the following is not a factor identified in the Turnbull Report as a driver for
the need for internal auditing:
a. The external auditor issues a qualified audit report.
b. The benefit of internal auditing is greater than the cost.
c. There are significant changes in the risks facing the organization.
d. There are major weaknesses in the internal control system.
Q. The difference between external audits and internal audits is:
a. External auditors report to senior management while internal auditors report to the
board of directors.
b. External auditors report to shareholders while internal auditors report to senior
management.
c. External auditors report to shareholders while internal auditors report to the board of
directors.
d. External auditors report to shareholders while internal auditors report to lenders.
