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.

• A.I and II only
• B.II only
• C.I only
• D.III only

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A large investment organization hired a chief risk officer (CRO) to be responsible for the organization's risk management processes. Which of the following people should prioritize risks to be used for the audit plan?

• A.Operational management, because they are responsible for the day-to-day management of the operational risks.
• B.The CRO, because he is responsible for coordinating and project managing risk activities based on his specialized skills and knowledge.
• C.The chief audit executive, although he is not accountable for risk management in the organization.
• D.The CEO, because he has ultimate responsibility for ensuring that risks are managed within the agreed tolerance limits set by the board.

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The most common motivation for management fraud is the existence of:

• A.Vices, such as a gambling habit.
• B.The challenge of committing the perfect crime.
• C.Job dissatisfaction.
• D.Financial pressures on the organization.

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Which of the following is the most appropriate step for the chief audit executive to take in order to avoid defamation of character of the principal suspect in a fraud investigation?

• A.Restrict the use of potentially damaging words to privileged reports or discussions.
• B.Label all workpapers, reports, and correspondence of the internal audit activity as private.
• C.Restrict discussions of the fraud to members of management who express an interest in the investigation.
• D.Destroy all investigation workpapers and reports if the fraud cannot be proven.

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Some lime after the final audit report was issued, the engagement supervisor teamed that several internal control deficiencies were not remedied, despite management's previous agreement to remedy them According to IIA guidance, which of the following is the most appropriate response'5

• A.The engagement supervisor should rely on professional judgment as to whether the CAE should be informed, or the management action plan should be adjusted
• B.The engagement supervisor should rely on his negotiation skills and issue an ultimatum to management to remedy the control deficiencies
• C.The engagement supervisor must notify the chief audit executive (CAE) that the deficiencies have not been rectified
• D.Ensure that these deficiencies are captured in the documentation as high-priority areas to be reviewed during the next audit.

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