Which of the following is an appropriate objective in an engagement to review a personnel department determining whether?

Which of the following is an appropriate objective in an engagement to review apersonnel department? Determining whetherAnswers●A.Hourly employees are being paid only for hours actually worked as indicatedby time cards or similar reports.●B.An equitable training program exists that provides all employees withapproximately the same amount of training each year.●C.Reference checks of prospective employees are being performed.

●Answer C iscorrect.●An effective personnel function is necessary for hiring, training, and monitoring humanresources. One purpose of this function is to recruit, select, hire, train, supervise, andevaluate individuals who are suitable in light of job requirements, job descriptions, andjob specifications (the abilities needed for particular jobs). In a review of this function, anappropriate objective is to determine whether the selection process is being properlyperformed. Thus, a potential employee’s references should be checked to determinewhether (s)he is truthful and has the desired qualifications.●D.Recruitment is being delegated to the various departments that have personnelneeds.Which of the following activities represents the greatest risk to a post-mergermanufacturing organization and is therefore most likely to be the subject of an internalaudit engagement?

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●Answer B iscorrect.●The financial exposure in the purchasing function is ordinarily greater than in, forexample, the legal and marketing functions. Also, purchasing functions ordinarilyrepresent the greatest exposure to loss of the items listed and are therefore most likelyto be evaluated. After a merger, risk is heightened because of the difficulty of combiningthe systems of the two organizations. Thus, the likelihood of an engagement isincreased.●C.Combining marketing functions.●D.Combining legal functions.For an upcoming engagement, an internal auditor’s objective is to determine whethercosts are both documented and reasonable. This is most likely an engagementinvolvingAnswers

38. A final communication issued by an internal auditor following an assurance engagement should containan expression of opinion when

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39.Management believes that some specific sales commissions for the year were too large. The accuracy of therecorded commission expense for specific salespersons is best determined by

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40.For review of an accounting department’s bank reconciliation unit, which of the following is anappropriate engagement work program step for the review of canceled checks for authorized signatures?41.

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Developing engagement observations, conclusions, and recommendations involves comparing thecondition with the relevant standard or criterion. Which of the following choices best represents anappropriate standard or criterion to support engagement observations, conclusions, and recommendations?

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42.Which of the following best describes a preliminary survey?

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43.According to theStandards, when should a signed report be issued?

D 2 and 3.

One step in planning the engagement is to define engagement objectives (intended engagement accomplishments) and procedures (means of achieving the objectives). Taken together, the objectives and procedures define the scope of the internal auditor's work. Objectives and procedures are documented in the engagement work program. Before the work program can be drafted, however, a preliminary assessment of the risks relevant to the activity under review is conducted. This survey includes, among other steps, discussions with the engagement client to increase the internal auditor's familiarity with the activities to be reviewed. Furthermore, if the internal auditing staff does not have the requisite knowledge, skills, and other competencies to perform all or part of the engagement, the CAE must obtain competent advice and assistance (Impl. Std. 1210.A1). However, the outside claims processing function is an integral part of the organization's internal control. Thus, the scope of the internal auditor's work should extend to the adequacy and effectiveness of internal control over claims processing.

D Reference checks of prospective employees are being performed.

An effective personnel function is necessary for hiring, training, and monitoring human resources. One purpose of this function is to recruit, select, hire, train, supervise, and evaluate individuals who are suitable in light of job requirements, job descriptions, and job specifications (the abilities needed for particular jobs). In a review of this function, an appropriate objective is to determine whether the selection process is being properly performed. Thus, a potential employee's references should be checked to determine whether (s)he is truthful and has the desired qualifications.

A service company is currently experiencing a significant downsizing and process reengineering. Its board of directors has redefined the business goals and established initiatives using in-house developed technology to meet these goals. As a result, a more decentralized approach has been adopted to run the business functions by empowering the business branch managers to make decisions and perform functions traditionally done at a higher level.
The internal auditing staff is made up of the director, two managers, and five staff auditors, all with financial background. In the past, the primary focus of successful audit activities has been the service branches and the six regional division headquarters that support the branches. These division headquarters are the primary targets for possible elimination. The support functions, such as human resources, accounting, and purchasing, will be brought into the national headquarters, and technology will be enhanced to enable and augment these operations.

Assuming that total available resources remain the same, what activities should the internal audit activity perform to best serve the organization?
A Decrease engagement time in systems development.
B Increase engagement time in service branches.
C Continue the allocation of engagement time as before.
D Increase engagement time in functions being centralized.

D Supervisory review of all engagement work.

The engagement must be properly supervised to ensure objectives are achieved, quality is ensured, and staff is developed (Perf. Std. 2340). Supervision includes (1) ensuring the auditors possess the requisite knowledge, skills, and other competencies; (2) providing appropriate instructions during planning and approving the engagement program; (3) ensuring the approved engagement program is complete unless changes are justified and authorized; (4) determining working papers adequately support observations, conclusions, and recommendations; (5) ensuring communications are accurate, objective, clear, concise, constructive, and timely; (6) ensuring objectives are met; and (7) providing opportunities for developing internal auditors' knowledge, skills, and other competencies. Thus, supervision is a control that applies to all aspects of engagements.

Fact Pattern: The legislative auditing bureau of a country is required to perform compliance engagements involving organizations that are issued defense contracts on a cost-plus basis. Contracts are clearly written to define acceptable costs, including developmental research cost and appropriate overhead rates.
During the past year, the government has engaged in extensive outsourcing of its activities. The outsourcing included contracts to run cafeterias, provide janitorial services, manage computer operations and systems development, and provide engineering of construction projects. The contracts were modeled after those used for years in the defense industry. The legislative internal auditors are being called upon to expand their efforts to include compliance engagements involving these contracts.

Upon initial investigation of these outsourced areas, the internal auditor found many areas in which the outsourced management has apparently expanded its authority and responsibility. For example, the contractor that manages computer operations has developed a highly sophisticated security program that may represent the most advanced information security in the industry. The internal auditor reviews the contract and sees reference only to providing appropriate levels of computing security. The internal auditor suspects that the governmental agency may be incurring developmental costs that the outsourcer may use for competitive advantage in marketing services to other organizations.

Regarding the engagement observation concerning an advanced computing security system, what is the most appropriate course of action by the internal auditor?
A Estimate the amount of cost used to develop the advanced security system and inform the outsourcer that it will be a disallowed cost.
B Compare the cost with previous costs incurred by governmental operations and inform the outsourcer that the difference will be a disallowed cost.
C Estimate the added cost, report it to management, and suggest that management meet with its lawyers and the outsourcer to resolve differences.
D Exclude the observation from the engagement communication because the contract was vague and the level of security is clearly acceptable.

The chief audit executive of a manufacturer is updating the long-range engagement work schedule. There are several possible assignments that can fill a given time spot. Information on potential monetary exposure and key internal controls has been gathered. Based on perceived risk, select the assignment of greatest merit.
Branch office petty cash -- ledger amount, US $50,000; 10 branch offices, equal amounts; replenishment of accounts requires three separate approvals.
Sales force travel expenses -- budget, US $1,000,000; 50 sales people; all expenditures over US $25 must be receipted.
Expendable tools inventory -- carrying amount, US $500,000; issued by tool crib attendant upon receipt of authorization form.
Precious metals inventory -- carrying amount, US $1,000,000; separately stored, but access not restricted.

Which of the following is an appropriate statement of an engagement objective?

Which of the following possible engagement objectives would lead to a test of the efficiency of an organization's use of labor resources?

Which of the following engagement procedures will provide the least relevant information for determining that payroll payments were made to bona fide employees?

When developing the objectives of the engagement the internal auditor considers the?