An auditor analyzed a payroll system's data files for unusual activity, such as excessive overtime hours, unusual fluctuations in pay rates, and excessive vacation time. The application controls being verified by this analysis are:

• A.Controls over update access to the database.
• B.Rejected and suspense item controls.
• C.Edit and validation controls.
• D.Programmed balancing controls.

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Which of the following does not represent a difficulty in using red flags as fraud indicators?

• A.Some red flags are difficult to quantify or to evaluate.
• B.Red flag information is only gathered in extraordinary circumstances.
• C.Many common red flags are also associated with situations where no fraud exists.
• D.The red flags literature is not well enough established to have a positive impact on auditing.

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An organization has acquired a new line of business. None of the organization's internal auditors have the required expertise to perform an internal audit of the new business line; therefore, the chief audit executive (CAE) has contracted the services of an external audit firm to perform the engagement. The CAE has assigned a member of the internal audit team to assist the external team with the engagement. According to the Standards, which of the following statements is true regarding supervision of the engagement?

• A.The CAE is not responsible for the quality of an audit performed by an external firm.
• B.The CAE may rely upon the external firm's auditor in charge to supervise the engagement.
• C.The external firm's auditor in charge must defer to the judgment of the CAE for any disputes.
• D.The CAE should not assign an inexperienced staff member to assist with the engagement.

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A company owns a machine that will produce 100 light switches in four hours. Due to increased demand, a second machine capable of producing 100 light switches in three hours has been added.
Approximately how many hours will it take to produce 100 light switches using both machines working together?

• A.7.0
• B.3.5
• C.1.7
• D.0.58

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An internal auditor submitted a report containing recommendations for management to enhance internal controls related to investments. To follow up, which of the following is the most appropriate action for the internal auditor to take?

• A.Conduct appropriate testing to verify management responses.
• B.Follow up during the next scheduled audit.
• C.Observe corrective measures.
• D.Seek a management assurance declaration.

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