Which of the following statements is correct regarding risk analysis?

• A.The highest risk assessment should always be assigned to the area with the largest potential loss.
• B.The extent to which management judgments are required in an area could serve as a risk factor in assisting the auditor in making a comparative risk analysis.
• C.Risk analysis must be reduced to quantitative terms in order to provide meaningful comparisons across an organization.
• D.The highest risk assessment should always be assigned to the area with the highest probability of occurrence.

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Which of the following would not be considered part of preliminary survey of an engagement area?

• A.Analytical reviews.
• B.Interviews with individuals affected by the entity.
• C.Functional walk through test.
• D.Sampling scope.

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According to IIA guidance, which of the following statements is true regarding the reporting of results from an external quality assessment of the internal audit activity?

• A.The external assessment results are reported upon completion in confidence directly to the board, and senior management is advised only of the recommendations and improvement action plans.
• B.The external assessment results are communicated upon completion to senior management and the board, but action plans for recommended improvements do not have to be reported.
• C.The requirements for reporting quality assessment results are the same for external assessments and self-assessments with independent external validation.
• D.The results of self-assessments with independent external validation are shared with the board upon completion, and monitoring of recommended improvements must be reported monthly.

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Which of the following is not considered one of the most common red flags for perpetrators of fraud?

• A.Experiencing financial difficulty.
• B.Unusually close association with customers.
• C.Excessive control issues.
• D.Repeat performance issues.

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Management has decided to invest significant capital in a new and innovative large computer system. They understand that they are one of the first organizations to implement this system, but they believe the benefits outweigh the uncertainty over the performance and reliability of the software. This decision best describes which aspect of risk management?

• A.Risk appetite.
• B.Risk tolerance.
• C.Residual risk.
• D.Inherent risk.

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