A chief audit executive (CAE) is obtaining information required by a regulatory oversight body and discovers a situation that requires management to take immediate corrective action. What is the best course of action for the CAE to take?

• A.Report the situation to management immediately.
• B.Wait until all of the information has been gathered and reported to the oversight body before reporting the situation to management.
• C.Check with legal counsel to determine whether the situation can be reported to management before all information has been submitted to the oversight body.
• D.Schedule an engagement to explore the situation in depth, before reporting to either management or the oversight body.

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Which of the following audit findings would have the least impact (either positive or negative) on a department's control environment?

• A.The department manager sets and demonstrates a tone of honesty and integrity in all business dealings.
• B.Deficiencies were found in the appropriate authorization of transactions.
• C.The department makes long-term investment risk decisions to maximize return on investment.
• D.Many department functions are duplicated or verified by other department employees.

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A manufacturing organization's multi-step sales and shipping process starts when the organization's headquarters receives the sales order. Headquarters then shares that data with the individual manufacturing facility that compiles the shipment. Finally, the individual manufacturing facility sends the shipments to the customer. Which method should the internal auditor use to document this process in a flowchart?

• A.Request a copy of each individual manufacturing facility's flowcharts, speak with facility managers to confirm that they have been updated and then use the information in a flowchart.
• B.Trace the entire process in reverse, beginning with the shipped goods and ending with the receipt of the sales order at headquarters.
• C.Obtain information on how management sets sales prices, find documentation about how the organization approves the change of sales prices, and prepare an overview flowchart that links the sales price details.
• D.Trace the entire process, from the receipt of the sales order at headquarters to when the goods are shipped to the customer.

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Which of the following actions does not violate the IIA Code of Ethics or Standards?

• A.An internal auditor performing an audit on an operation that they managed less than a year ago.
• B.An internal auditor disclosing details of an audit report to colleagues from a different organization.
• C.An internal auditor disclosing confidential information in response to a lawsuit.
• D.An internal auditor performing an audit on procedures that they were responsible for creating.

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An internal auditor is conducting an assessment of the organization's fraud prevention program using the COSO enterprise risk management framework. According to this framework, which of the following activities would fall under the control environment component for preventing fraud?
1. The organization uses an automated authority approval matrix to control payments.
2. The organization has a whistleblower hotline that is available to employees.
3. Annually, every manager completes a comprehensive fraud assessment of his or her department.
4. Annually, the organization reviews and communicates the code of expected behavior.

• A.2 and 4.
• B.1 and 3.
• C.2 and 3.
• D.1 and 2.

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