Question: 1
According to the International Professional Practices Framework, which of the following statements is correct regarding the communication of audit results?
I . Summary reports may be issued separately from or in conjunction with the final report.
II . Interim reports may be written or oral.
III . Detailed reports should always be issued to the audit committee.
IV . Interim reports should be used to communicate information which requires immediate attention.
Question: 2
An auditor decides to perform an inventory turnover analysis for both raw materials inventory and finished goods inventory. The analysis would be potentially useful in:
I . Identifying products for which management has not been attuned to changes in market demand.
II . Identifying potential problems in purchasing activities.
III . Identifying obsolete inventory.
Question: 3
An internal auditor provided the following statement about division A's performance during the month: "Because supplies of raw material X were scarce, division A's profits declined by 15 percent."
Which of the following can be validly concluded from the auditor's statement?
I . Division A's production level declined by 15 percent.
II . Division A could have sold more products than it produced.
III . Division A usually sells all of the products that it produces.
Question: 4
Which of the following might alert an auditor to the possibility of fraud in a division?
I . The division is not scheduled for an external audit this year.
II . Sales have increased by 10 percent.
III . A significant portion of management's compensation is directly tied to reported net income of the division.
Question: 5
A company has recently incurred significant cost overruns on one of its construction projects. Management suspects that these overruns were caused by the contractor improperly accounting for costs related to contract change orders. Which of the following procedures would be appropriate for testing this suspicion?
I . Verify that the contractor has not charged change orders with costs that have already been billed to the original contract.
II . Determine if the contractor has billed for original contract work that was canceled as a result of change orders.
III . Verify that the change orders were properly approved by management.
