An internal auditor has taken an attributes sample of a bank's existing loan portfolio. Out of a sample of 60 loans, the auditor found:
Four that were not properly collateralized.
Five that were not in compliance with bank policies (other than lack of collateralization).
Four that were part of a related-party group, but were set up as separate loan entities.
Of the 60 loans selected in the sample, these errors were noted on a total of 10 loans.
Several loans had multiple problems.
Which of the following conclusions can the auditor reach from these observations?
1. There is sufficient evidence that fraudulent activity is taking place by one or more of the bank's lending officers.
2. The financial statements will be misstated as a result of these actions.
3. There are significant noncompliance audit findings that should be reported.
A large trucking organization wants to reduce traffic accidents by improving its system of internal controls.
Which of the following controls is correctly classified?
Review of speeding violations to identify repetitive locations and drivers is an example of a preventive control.
Defensive driver training is an example of a directive control.
The installation of tracking devices in delivery vehicles is an example of a corrective control.
Providing a vehicle driver handbook is an example of a detective control.
According to the IIA guidance, who is responsible for periodically assessing the internal audit activity?
Which of the following actions by a chief audit executive is most likely to prevent exaggerated sales reports by division management?
I.Hire a new internal auditor who has fraud investigation credentials.
II.Assist the controller in developing and monitoring a series of business process indicators which are historically correlated with, but independent of, sales.
III.Announce a series of internal audit engagements focusing on compliance with corporate sales-reporting policies.
IV.Ask the president and the board to issue a statement of corporate policy stressing the importance of accurate management reporting and the negative consequences of intentional misreporting.
Which of the following decisions made during the testing phase of a compliance audit requires the most judgment by an internal auditor?
