What is the most important risk in determining the validity of construction delay claims?

• A.Contractor claims may be understated.
• B.Contractor claims may include costs considered in the fixed-price portion of the work.
• C.Contractor claims may be submitted prior to completion of the work.
• D.Contractor claims may include subcontractor estimates of balances due to the subcontractor.

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An internal auditor is evaluating controls over the purchasing function. The function includes the material control department, the purchasing department, and the receiving department. Which of the following is true regarding the presentation of the process flow among the three departments?

• A.A horizontal flowchart, with the departments described across the top and the process flowing horizontally, would be most useful.
• B.Flowcharts are not useful for documenting process flow.
• C.A vertical flowchart of each department, showing inputs at the top and outputs at the bottom, would be most useful.
• D.Both a flowchart and narratives are needed due to the number of departments involved.

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A manager of one of a retailer's several retail outlets is stealing cash from cash sales, recording the sales as accounts receivable, and subsequently writing off the fictitious accounts receivable as bad debts. Which of the following comparisons would be most effective in signaling the possibility of such a fraud?

• A.Bad debt expense as a percentage of sales, compared to that of the other outlets.
• B.Bad debt expense as a percentage of sales, compared to that of previous years.
• C.Percentage of past-due accounts receivable, compared to that of the other outlets.
• D.Percentage of past-due accounts receivable, compared to that of previous years.

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Which of the following statements is false regarding roles and responsibilities pertaining to risk management and control?

• A.Operating managers are responsible for assessing risks and controls in their departments.
• B.The chief audit executive is responsible for overseeing the evaluation risk management and control processes.
• C.Senior management is charged with overseeing the establishment risk management and control processes.

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In response to an accounts receivable confirmation, a customer indicated that the invoice listed on the confirmation letter had been paid two months earlier.
This may indicate that:

• A.The receivable was selected for confirmation in error.
• B.The customer is a bad credit risk.
• C.The receivable should be written off.
• D.Fraudulent activity has occurred.

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