IIA IIA-CIA-Part2 Quiz 227 Topic 3 Questions 1131-1135

Question: 1

An investment portfolio manager has the authority to use financial derivatives to hedge transactions but is not supposed to take speculative positions. However, the manager launches a scheme which includes

(1) taking a position larger than required by the hedge;

(2) putting the speculative gains in a suspense account; and

(3) transferring the funds to a nonexistent broker and from there to a personal account. Which of the following audit procedures would be least effective in detecting this fraud?

ASelect a sample of individual trades and examine to determine whether the trades violate the authorization limit for the manager.

BSelect a sample of individual trades and determine the exact matching of the hedge. Schedule and investigate all differences.

CSelect a sample of all debits to the suspense account and examine their disposition.

DSelect a sample of fund transfers to brokers and determine if the brokers are on the authorized list for company transactions.

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Question: 2

Confirmation would be most effective in addressing the existence assertion for

AThe addition of a milling machine to a machine shop.

BSales of merchandise during the regular course of business.

CInventory held on consignment.

DThe granting of a patent for a special process developed by the organization.

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Question: 3

During an operational audit of a chain of pizza delivery stores, an auditor determined that cold pizzas were causing customer dissatisfaction. A review of oven calibration records for the last six months revealed that adjustments were made on over 40 percent of the ovens. Based on this, the auditor

AHas enough evidence to conclude that improperly functioning ovens are the cause.

BNeeds to conduct further inquiries and reviews to determine the impact of the oven variations on the pizza temperature.

CHas enough evidence to recommend the replacement of some of the ovens.

DMust search for another cause since approximately 60 percent of the ovens did not require adjustment.

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Question: 4

An auditor decides to vouch a sample of ledger entries back to their original documentation. In terms of whether all transactions had been recorded, this test would be

ARelevant to the completeness objective.

BIrrelevant to the completeness objective.

CA more timely test of completeness than evidence from interviews.

DA more biased test of completeness than evidence from interviews.

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Question: 5

The following is an excerpt from an audit engagement workpaper A Company Accounts Receivable Date Objective To determine if the computer system is correctly recording all accounts receivable transactions. Procedures Judgmental selection of a sample of all accounts receivable balances greater than $50,000 for positive confirmation of balances. Conclusion Based on the results of testing wherein all but three confirmations were returned, the accounts receivable balance is fairly presented in all material respects. Which of the following is true regarding the workpaper?

AIt is not appropriate to judgmentally select a sample when testing accounts receivable.

BA conclusion should be reached only for the results of overall testing, not for individual procedures.

CThe audit procedures used are not consistent with the audit objective.

DThe format of the workpaper does not conform to the standard format for workpapers.

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IIA IIA-CIA-Part2 Quiz:227 Topic:3 Questions:1131-1135