Chapter 7: Eight Areas of Waste from match production closely to demand,

Operational Auditing by Herman Murdock avoiding excess.

1. What is a common consequence of 4. Which of these drives

overproduction in manufacturing? overproduction in manufacturing?
A. Reduced worker fatigue A. Customer complaints
B. Increased per-unit fixed cost B. Economies of scale
C. Increased storage costs and risk of C. High inventory turnover
theft D. Centralized purchasing
D. Improved delivery speed Answer: B
Answer: C Explanation: Producing in large
Explanation: Overproduction results batches can reduce costs per unit,
in excess inventory, leading to but often leads to overproduction.
storage costs and potential for theft
5. In service organizations,
or damage.
overproduction can result from:
2. Which of the following is NOT a A. Duplicate tests or services
question to assess overproduction B. Inventory damage
in services? C. Frequent returns
A. Are extra copies being made? D. Machine breakdowns
B. Are employees entering repetitive Answer: A
data? Explanation: Performing
C. Are items being transported unnecessary tasks, like repeated
safely? tests or unneeded reports, is
D. Is unnecessary information wasteful.
requested?
6. Waiting is considered wasteful
Answer: C
because:
Explanation: Transport is a separate
A. It increases production speed
area of waste.
B. It provides rest time for workers
3. Overproduction contradicts which C. It delays value-added activities
principle of operational efficiency? D. It ensures better product quality
A. Minimizing defects Answer: C
B. Just-in-time production Explanation: Waiting adds no value
C. Quality assurance and delays processing.
D. Process mapping
Answer: B
Explanation: Just-in-time aims to
7. An example of unavoidable waiting delays and may lose trust in the
is: organization.
A. Waiting for employee availability
11. Transportation becomes wasteful
B. Waiting for paint to dry
when:
C. Waiting for approvals
A. It’s required by law
D. Waiting for customer feedback
B. It results from poor physical
Answer: B
layout
Explanation: Some processes like
C. It involves large shipments
drying or curing are essential and
D. It is outsourced
not avoidable.
Answer: B
8. Which of the following could cause Explanation: Poor layouts cause
unnecessary waiting? unnecessary movement of items or
A. Parallel workflows people, adding no value.
B. Coordinated schedules
12. Which of these is a transport waste
C. Delayed approvals
in office environments?
D. Reduced production time
A. Digitizing documents
Answer: C
B. Having printers far from desks
Explanation: Too many approval
C. Filing electronic records
layers can slow down processes.
D. Using single-unit processing
9. Which of these is a way to reduce Answer: B
waiting time? Explanation: Walking far distances
A. Add more forms to the process to shared equipment wastes time
B. Delay requests for needed data and motion.
C. Request information earlier in the
13. In hospital settings, transport waste
process
can cause:
D. Increase physical inspections
A. Better patient monitoring
Answer: C
B. Less walking for nurses
Explanation: Proactive data
C. Fatigue and reduced productivity
collection prevents delays later on.
D. Improved health outcomes
10. Waiting typically results in: Answer: C
A. Increased product quality Explanation: Excess walking reduces
B. Higher inventory turnover alertness and productive patient
C. Reduced customer satisfaction care time.
D. Lower production costs
Answer: C
Explanation: Customers dislike
14. Which technology did UPS use to D. Utilizing PDFs
minimize transport waste? Answer: C
A. Blockchain Explanation: Mailing documents
B. Telematics and GPS adds time, cost, and risk of loss.
C. ERP Systems
18. Paper-based records are wasteful
D. Barcoding
because they:
Answer: B
A. Are difficult to misplace
Explanation: UPS used GPS and
B. Allow real-time updates
telematics to reduce idle time and
C. Are easy to analyze
route inefficiencies.
D. Require maintenance and space
15. Which of these is NOT a strategy to Answer: D
reduce transportation waste? Explanation: Paper systems need
A. Creating work cells more storage and handling than
B. Reducing batch sizes digital ones.
C. Increasing paperwork
19. A recommended tool for digital
D. Optimizing layout
transformation is:
Answer: C
A. Photocopier
Explanation: Paperwork isn’t related
B. Filing cabinet
to physical transportation
C. Workflow applications
optimization.
D. Fax machine
16. One main goal of going paperless is: Answer: C
A. Making audits harder Explanation: Workflow software
B. Reducing documentation accuracy helps manage information
C. Saving space and money electronically.
D. Increasing manual signatures
20. Which of these does NOT support
Answer: C
going paperless?
Explanation: Digital systems reduce
A. Digital signatures
physical storage needs and save
B. Scanning documents
resources.
C. Mailing contracts
17. Which of the following is a wasteful D. Web servers for hosting forms
practice? Answer: C
A. Using e-forms Explanation: Physical mailing
B. Storing documents in a digital contradicts paperless strategies.
archive
C. Mailing physical reports
unnecessarily
21. Why is excess inventory considered B. Frequent replenishment
waste? C. Duplication across locations
A. It has no impact on costs D. High turnover rate
B. It increases demand Answer: C
C. It ties up capital and may become Explanation: Storing items in
obsolete multiple locations wastes space and
D. It always ensures smoother resources.
production
25. What happens when excess
Answer: C
inventory is never used?
Explanation: Excess inventory incurs
A. It earns revenue
carrying costs and may become
B. It is sold at a higher price
useless.
C. It is written off as obsolete
22. Which of the following questions D. It boosts customer loyalty
helps identify inventory waste? Answer: C
A. Are products frequently Explanation: Unused inventory is
reordered? eventually written off, wasting
B. Are items purchased “just in money.
case”?
26. Excess motion refers to:
C. Are items used as soon as they
A. Large batch production
arrive?
B. Individual unnecessary movement
D. Are deliveries faster than
C. Group transportation
expected?
D. Waiting time
Answer: B
Answer: B
Explanation: Buying without current
Explanation: Unlike transportation,
need causes overstocking.
motion involves personal or
23. Inventory should ideally match: equipment movement.
A. Supplier recommendations
27. Excess motion may result in:
B. Long-term contracts
A. Carpal tunnel syndrome
C. Storage space
B. Lower fuel costs
D. Future demand
C. Quicker operations
Answer: D
D. Less work time
Explanation: Inventory should align
Answer: A
closely with projected needs.
Explanation: Repetitive motions can
24. A symptom of unnecessary lead to soft tissue injuries.
inventory is:
A. Increased flexibility
28. A method used to identify motion Explanation: A defect impairs a
waste is: product or service’s effectiveness,
A. Flowcharting value, or usability.
B. Spaghetti mapping
32. Defects cause waste because they:
C. Inventory turnover analysis
A. Improve employee skills
D. Cost variance reports
B. Lower customer expectations
Answer: B
C. Require rework and consume
Explanation: Spaghetti diagrams
extra resources
visually map excessive movement in
D. Occur after production ends
workflows.
Answer: C
29. Excess motion in offices often Explanation: Fixing defects demands
results from: additional time, labor, and materials.
A. Task automation
33. Defects can be caused by all of the
B. Poor ergonomic design
following EXCEPT:
C. Digital recordkeeping
A. Tampering
D. Process consolidation
B. Accurate documentation
Answer: B
C. Machine wear
Explanation: Inefficient layout and
D. Unclear specifications
poor ergonomics force more physical
Answer: B
movement.
Explanation: Accurate
30. Motion waste differs from transport documentation helps prevent, not
waste in that it involves: cause, defects.
A. Physical goods
34. Which of these would be
B. Employee actions
considered a defect in a service
C. Shipping delays
setting?
D. Inventory systems
A. Redundant emails
Answer: B
B. Poor handwriting
Explanation: Motion is about human
C. Incorrect billing
or machine movement, not logistics.
D. Long employee breaks
31. Which of the following best defines Answer: C
a defect? Explanation: Incorrect billing is a
A. A price variation service error and needs correction —
B. A delay in delivery a defect.
C. A flaw that reduces value or utility
D. A return policy requirement
Answer: C
35. A key role of internal auditors with Answer: C
defects is to: Explanation: Even aesthetic flaws or
A. Track all rework costs mismatched expectations are
B. Guess customer expectations considered defects.
C. Clarify expectations and compare
39. Which of the following is NOT an
with output
example of a defect?
D. Ignore internal quality standards
A. Data entry errors
Answer: C
B. Correct processing
Explanation: Auditors compare
C. Missing documentation
outcomes against expected
D. Incorrect codes
standards to identify gaps.
Answer: B
36. What kind of waste is associated Explanation: Correct processing is
with frequent product returns? the opposite of a defect.
A. Inventory
40. One way to prevent defects is by:
B. Motion
A. Repeating the process multiple
C. Defects
times
D. Transport
B. Conducting post-production
Answer: C
inspections only
Explanation: Returns are often a
C. Clarifying process specifications
result of defects or quality issues.
upfront
37. Customers typically care most D. Ignoring customer feedback
about: Answer: C
A. Why an error occurred Explanation: Clear instructions
B. Who is responsible reduce the likelihood of error or
C. Getting the product fixed or rework.
replaced
41. Underutilized employees are often
D. Employee training
assigned tasks:
Answer: C
A. That stretch their potential
Explanation: Customers focus on
B. Beneath their capabilities
solutions, not internal problems.
C. Matching their strengths
38. Defects can also appear as: D. With performance bonuses
A. Low-cost materials Answer: B
B. Delayed updates Explanation: This results in lost
C. Qualitative issues like poor potential and lower productivity.
appearance
D. Approved budgets
42. A key sign of underutilization is C. Conducting skills gap analysis
when: D. Limiting team involvement
A. Employees are promoted Answer: C
regularly Explanation: Skills assessment
B. Workers serve in cross-functional ensures talents are aligned with job
roles needs.
C. Meetings lack purpose and action
46. A common cause of employee
D. There’s high retention and
underutilization is:
engagement
A. Flexible schedules
Answer: C
B. Performance bonuses
Explanation: Ineffective meetings
C. Glass ceilings and walls
waste talent and time.
D. External consultants
43. Internal auditors should assess Answer: C
underutilized employees by: Explanation: Barriers prevent
A. Conducting surprise inspections employees from advancing or
B. Asking about career goals contributing fully.
C. Reviewing job fit and skills
47. Which waste occurs when skilled
alignment
employees do tasks a machine
D. Monitoring attendance
could do?
Answer: C
A. Overproduction
Explanation: Auditors check whether
B. Underutilization
employees are used in roles that
C. Motion
match their training.
D. Inventory
44. Underutilization negatively impacts: Answer: B
A. Job clarity Explanation: Skills aren’t optimized if
B. Equipment efficiency people are performing low-value
C. Morale and engagement work.
D. Salary competitiveness
48. To address underutilization, internal
Answer: C
auditors may:
Explanation: Feeling undervalued
A. Recommend layoffs
reduces motivation and
B. Suggest role reassignments
engagement.
C. Ignore team dynamics
45. Which of the following helps reduce D. Limit promotion opportunities
underutilization? Answer: B
A. Assigning repetitive tasks Explanation: Reassigning people to
B. Avoiding cross-training better-suited roles maximizes value.
49. Underutilization wastes which
organizational resource?
A. Equipment
B. Storage
C. Human capital
D. Floor space
Answer: C
Explanation: People are one of the
most valuable — and expensive —
assets.

50. When employees are properly

utilized, the organization benefits
through:
A. Fewer policies
B. Lower insurance costs
C. Higher productivity and
satisfaction
D. More idle time
Answer: C
Explanation: When people are
matched to roles that suit their
strengths, performance improves.
Chapter 8: Quality Control from Operational 4. The rights and obligations assertion
Auditing by Herman Murdock ensures that:
A. Only expenses are valid
1. Which of the following is NOT one
B. Liabilities are understated
of the five main financial statement
C. The organization owns the assets
assertions for transactions?
and is liable for its debts
A. Occurrence
D. All revenues are recorded
B. Valuation
Answer: C
C. Completeness
Explanation: This assertion checks
D. Cutoff
legal ownership and responsibility.
Answer: B
Explanation: Valuation applies to 5. Operational audits can use
account balances, not transactions. assertions to:
A. Avoid testing
2. The accuracy assertion checks
B. Support only finance departments
whether:
C. Ensure program transactions align
A. Transactions occurred
with objectives
B. Transactions were classified
D. Replace internal controls
properly
Answer: C
C. Transactions were recorded
Explanation: Assertions help assess if
correctly
processes meet intended goals.
D. Transactions were presented with
notes 6. Which “E” relates to obtaining
Answer: C resources at the best overall value?
Explanation: Accuracy deals with the A. Efficiency
correctness of recorded amounts. B. Economy
C. Effectiveness
3. Which assertion confirms that all
D. Ecology
necessary disclosures are present in
Answer: B
the financial statements?
Explanation: Economy focuses on
A. Classification
value for resources spent.
B. Completeness
C. Occurrence 7. Efficiency means:
D. Existence A. Spending the least possible
Answer: B B. Minimizing inputs for maximum
Explanation: Completeness ensures output
nothing is left out that should be C. Having no ethical concerns
included. D. Outsourcing work
Answer: B
 Explanation: Efficiency is about 11. Which “E” focuses on
achieving more with fewer environmental responsibility?
resources. A. Excellence
B. Ecology
8. Effectiveness evaluates whether a
C. Equity
process:
D. Efficiency
A. Uses high-tech tools
Answer: B
B. Meets or exceeds its goals
Explanation: Ecology refers to
C. Reduces energy usage
minimizing negative environmental
D. Passes inspection
impact.
Answer: B
Explanation: Effectiveness relates to 12. What principle does "reduce, reuse,
achievement of desired outcomes. recycle" support?
A. Excellence
9. What is the goal of quality
B. Quality control
improvement programs?
C. Ecology
A. Cut employee benefits
D. Efficiency
B. Operate flawlessly
Answer: C
C. Increase taxes
Explanation: These are the 3Rs of
D. Perform more audits
ecological stewardship.
Answer: B
Explanation: QC aims for consistent, 13. Equity refers to:
error-free performance. A. Paying equal wages
B. Ensuring fairness in treatment and
10. Assertions apply in operational
decisions
audits because:
C. Tax deductions
A. They replace ISO standards
D. Outsourcing decisions
B. They identify accounting errors
Answer: B
only
Explanation: Equity ensures fair
C. They help confirm if business
treatment of people and vendors.
processes work as intended
D. They are only used in private 14. Ethical failures can lead to:
companies A. Increased stakeholder value
Answer: C B. Reduced complaints
Explanation: Assertions help verify C. Fraud and organizational loss
correctness in operational activities D. Better internal control
too. Answer: C
Explanation: Unethical behavior
causes damage and risk.
15. Which “E” relates to achieving the 19. Ecological initiatives often save
highest possible quality level? money through:
A. Excellence A. Global outsourcing
B. Economy B. Higher energy usage
C. Effectiveness C. Sustainable practices
D. Engagement D. Increased water usage
Answer: A Answer: C
Explanation: Excellence is about Explanation: Sustainable practices
striving for top-tier results. lower utility and waste costs.

16. An example of efficiency is: 20. Which “E” is most concerned with
A. Ignoring feedback setting clear objectives and
B. Increasing error rates achieving them?
C. Reducing time and cost in service A. Ecology
delivery B. Economy
D. Buying more than needed C. Effectiveness
Answer: C D. Ethics
Explanation: Efficiency improves Answer: C
productivity while saving resources. Explanation: Effectiveness is about
hitting performance targets.
17. Internal auditors use the 7Es to:
A. Enforce penalties 21. Internal controls help organizations
B. Assess operational quality by:
C. Replace accounting standards A. Slowing operations
D. Avoid management feedback B. Adding bureaucracy
Answer: B C. Mitigating risks that could derail
Explanation: The 7Es help auditors objectives
evaluate and improve processes. D. Replacing financial audits
Answer: C
18. A workplace that promotes fairness
Explanation: Controls reduce the
is practicing which principle?
chance of negative outcomes and
A. Ethics
support objectives.
B. Ecology
C. Equity 22. A process without a defined goal is
D. Economy best described as:
Answer: C A. Efficient
Explanation: Equity ensures equal B. A compliance tool
and fair opportunities. C. Busy work
D. Economical
 Answer: C 26. One reason people resist controls is
Explanation: Without goals, because they:
processes waste resources and lack A. Improve outcomes
value. B. Speed up processes
C. Are seen as obstacles to work
23. Which best describes COSO’s view
D. Lower turnover
on internal control?
Answer: C
A. A tool for auditors only
Explanation: Controls are
B. A nuisance in fast organizations
misunderstood as hindrances rather
C. A means to support operations,
than enablers.
reporting, and compliance
D. Obsolete for modern business 27. The internal audit definition
Answer: C emphasizes:
Explanation: COSO defines internal A. Reviewing past financial records
control as a framework supporting B. Ensuring HR policy compliance
business success. C. Helping the organization achieve
its objectives
24. Which of the following is NOT a
D. Enforcing discipline
component of the process
Answer: C
improvement cycle?
Explanation: Internal auditors
A. Where do we want to go?
provide assurance and improve
B. How do we slow down results?
business effectiveness.
C. How do we monitor progress?
D. Where are we now? 28. Which of the following makes
Answer: B controls more effective?
Explanation: Improvement models A. Relying on memory
focus on goal setting and tracking B. Formal documentation and
progress, not slowing down. accountability
C. Avoiding reports
25. Internal controls should be:
D. Minimizing process steps
A. Avoided whenever possible
Answer: B
B. Disconnected from operations
Explanation: Documented
C. Linked to organizational rewards
responsibilities and accountability
D. Applied only in accounting
enhance reliability.
Answer: C
Explanation: Linking controls to 29. Why should process metrics be tied
incentives ensures consistent to objectives?
application. A. For visual aesthetics
B. To satisfy regulators
 C. To evaluate performance and DPMO, or 99.99966% defect-free
guide improvement output.
D. For branding purposes
33. DMAIC is used for:
Answer: C
A. New product designs
Explanation: Metrics help measure
B. Employee appraisals
progress toward achieving business
C. Improving existing processes
goals.
D. Testing marketing theories
30. A process with strong internal Answer: C
control is more likely to: Explanation: DMAIC improves
A. Waste resources current processes, unlike DMADV
B. Encounter frequent fraud which designs new ones.
C. Deliver consistent results
34. What does the "A" in DMAIC stand
D. Ignore customer needs
for?
Answer: C
A. Adapt
Explanation: Controls promote
B. Analyze
consistency, predictability, and
C. Advance
reliability.
D. Audit
31. Six Sigma is a: Answer: B
A. Manufacturing-only tool Explanation: Analyze examines
B. Quality control standard cause-effect relationships in process
C. Process improvement performance.
methodology
35. The final phase in DMAIC focuses
D. Financial reporting framework
on:
Answer: C
A. Documentation
Explanation: Six Sigma is used to
B. Innovation
improve processes by reducing
C. Control
errors and waste.
D. Retesting
32. A process at Six Sigma quality level Answer: C
has how many defects per million? Explanation: Control maintains
A. 233 improvements and prevents
B. 6,210 backsliding.
C. 3.4
36. Six Sigma’s ultimate goal is to:
D. 66,807
A. Lower marketing costs
Answer: C
B. Minimize variability and defects
Explanation: Six Sigma aims for 3.4
C. Improve shareholder relations
D. Eliminate middle management
 Answer: B Answer: C
Explanation: It reduces variation and Explanation: Poka Yoke prevents
error to ensure quality outcomes. human error in processes.

37. In Six Sigma, the term “voice of the 41. Which of the following is NOT one
customer” is part of: of ISO 9001’s seven principles?
A. Analyze A. Customer focus
B. Define B. Risk neutrality
C. Control C. Leadership
D. Verify D. Relationship management
Answer: B Answer: B
Explanation: Defining the customer’s Explanation: Risk neutrality is not
needs is the starting point. among ISO’s core principles.

38. What is a core principle of Six 42. ISO 9001 promotes:

Sigma? A. Subjective decisions
A. Guess based on experience B. Internal control removal
B. Improve through intuition C. Continuous improvement
C. Manage with facts and data D. Expense reduction through layoffs
D. Avoid team involvement Answer: C
Answer: C Explanation: One of ISO’s key
Explanation: Six Sigma emphasizes principles is continuous
data-driven decisions. improvement.

39. Which of the following is NOT part 43. The ISO principle of “engagement of
of DMADV (Design for Six Sigma)? people” emphasizes:
A. Define A. Punishing poor performers
B. Analyze B. Staff empowerment and respect
C. Improve C. Profit over process
D. Verify D. Centralized command
Answer: C Answer: B
Explanation: DMADV is for designing Explanation: Engaging people leads
new processes; “Improve” is part of to value creation and innovation.
DMAIC.
44. ISO’s process approach supports:
40. Poka Yoke refers to: A. Isolated decision-making
A. Financial modeling B. Frequent hiring
B. Benchmarking tools C. Cross-functional integration and
C. Mistake-proofing techniques consistency
D. Control frameworks D. Daily executive meetings
 Answer: C 48. Customer focus in ISO includes:
Explanation: A process-based view A. Ignoring feedback
links upstream and downstream B. Aligning objectives with customer
activities. expectations
C. Offering generic services
45. “Evidence-based decision-making”
D. Following competitors
in ISO means:
Answer: B
A. Trusting management instincts
Explanation: Objectives should
B. Basing choices on measurable
directly reflect customer needs.
data
C. Following competitor trends 49. Why are ISO standards valuable to
D. Delegating decisions to AI auditors?
Answer: B A. They increase red tape
Explanation: Data-driven choices B. They replace accounting
lead to more reliable outcomes. standards
C. They offer a framework for quality
46. What is the main focus of ISO’s
and performance
“relationship management”?
D. They enforce HR rules
A. Creating silos
Answer: C
B. Strengthening stakeholder
Explanation: ISO offers guidelines to
collaboration
evaluate quality systems across
C. Increasing layoffs
organizations.
D. Avoiding customer feedback
Answer: B 50. Auditors contribute to quality by:
Explanation: ISO promotes good A. Replacing managers
relations with stakeholders like B. Repeating reviews without
suppliers and customers. reports
C. Helping improve processes and
47. How can internal auditors use ISO
ensure objectives are met
principles?
D. Reducing employee morale
A. Enforce legal compliance only
Answer: C
B. Design employee training
Explanation: Auditors ensure
C. Construct audit programs based
effectiveness and support continuous
on quality principles
improvement.
D. Audit financial statements
Answer: C
Explanation: ISO principles help build
meaningful operational audit
frameworks.