Key Objectives
Objectives of Operational Audit are driven by the following, except:
a. New Rules
b. Poor Performance
c. Compliance Issues
d.Regular Revenues or Expenses
d. Regular Revenues or Expenses
What is the primary role of risk factors in the internal audit planning process?
A. To eliminate the need for testing
B. To determine audit fees
C. To assess conditions that increase or reduce underlying risk
D. To identify employees eligible for promotion
C. To assess conditions that increase or reduce underlying risk
What is the first phase of an operational audit?
A. Fieldwork
B. Reporting
C. Planning
D. Follow-up
C. Planning
What type of audit evidence involves verbal or written statements from employees?
A. Observation
B. Reperformance
C. Testimonial
D. Inspection
C. Testimonial
Statement 1: Internal Audit should avoid defining objectives unilaterally.
Statement 2: This means, independently setting objectives is never possible.
a. Both are true
b. Both are false
c. S1is true, S2 is false
d. S1 is false, S2 is true
c. S1is true, S2 is false
Which of the following best describes a risk factor that decreases the likelihood of errors and omissions?
A. High employee competence
B. High volume of transactions
C. Limited employee oversight
D. Increased judgment in controls
A. High employee competence
Which of the following is most associated with poor planning in an audit?
A. Clear audit scope
B. Efficient stakeholder meetings
C. Frequent rework and inefficient procedures
D. Accurate financial data
C. Frequent rework and inefficient procedures
Which type of evidence includes watching how tasks are performed in real time?
A. Testimonial
B. Observation
C. Documentation
D. Narratives
B. Observation
Why are management reports considered part of an organization’s infrastructure during an internal audit?
A. They help detect cyber threats.
B. They are the only documents reviewed during a financial audit.
C. Their accuracy and distribution directly affect management’s ability to perform duties.
D. They contain employee personal information.
C. Their accuracy and distribution directly affect management’s ability to perform duties.
Which of the following is a risk factor that typically increases the underlying risk of error or abuse?
A. Standardized procedures with little variation
B. High volume of routine transactions
C. Clearly defined duties and responsibilities
D. Increased need for judgment in control activities
D. Increased need for judgment in control activities
What are the two key outputs of the risk assessment conducted during audit planning?
A. Strategic plan and audit plan
B. Staff rotation plan and project risk register
C. Audit software selection and risk ranking
D. Scope memo and exit conference notes
A. Strategic plan and audit plan
Recalculating figures or repeating a task to verify accuracy is known as:
A. Observation
B. Reperformance
C. Walkthrough
D. Comparative testing
B. Reperformance
Which of the following best explains why internal auditors examine the organizational structure as part of infrastructure?
A. To verify payroll compliance
B. To assess the effectiveness of marketing strategies
C. To eliminate the need for physical infrastructure
D. To ensure responsibilities are assigned and backed by accountability
D. To ensure responsibilities are assigned and backed by accountability
How does the number of transactions typically relate to underlying risk?
A. It has no effect on risk
B. It inversely affects risk
C. It is only relevant in financial audits
D. It increases the likelihood of errors and omissions
D. It increases the likelihood of errors and omissions
Which of the following activities is performed during the fieldwork phase?
A. Identifying auditable units
B. Testing controls and documenting findings
C. Scoping and budgeting
D. Issuing final audit recommendations
B. Testing controls and documenting findings
Which of the following is the most persuasive type of audit evidence in confirming factual accuracy?
A. Verbal testimonial from a manager
B. Observation of normal operations
C. Independent document inspection
D. Auditor intuition and past experience
C. Independent document inspection
Which scenario best illustrates a breakdown in infrastructure that internal auditors would flag as a risk to performance?
A. A company with high sales but low profit margins
B. A regional branch led by a manager with no direct accountability and insufficient personnel
C. A department where responsibilities are clearly defined and well-staffed
D. A team using cloud-based software for report generation
B. A regional branch led by a manager with no direct accountability and insufficient personnel
Which of the following best illustrates how risk factors can have opposing effects on underlying risk?
A. A competent employee manually entering high volumes of data
B. Higher employee competence reduces risk, while greater judgment requirements increase it
C. An automated system that replaces employee oversight
D. Increasing the number of auditors without increasing their responsibilities
B. Higher employee competence reduces risk, while greater judgment requirements increase it
Which of the following best reflects the role of the reporting phase in an operational audit?
A. Determine testing methods
B. Evaluate employee satisfaction
C. Communicate findings and propose corrective actions
D. Schedule meetings with external stakeholders
C. Communicate findings and propose corrective actions
What is the key factor that determines whether audit evidence is persuasive?
A. The experience level of the auditor
B. The number of pages in the audit report
C. The rank of the person who provides the evidence
D. The confidence it gives the auditor in drawing conclusions
D. The confidence it gives the auditor in drawing conclusions