NO.201 A recent survey indicated that residents of a small town take the train to a nearby city eight times per month, on average. The same survey showed that the number of train trips that a resident takes per month (y) is determined by the number of days per month that the resident works in the nearby city (x), according to the equation: y = 2 + 2x. A person who never works in the nearby city is expected to take the train:

NO.202 One method for dealing with the uncertainty of demand forecasts used in linear programming is to extend the model solution to include.

NO.203 An internal auditor recommended that an organization implement computerized controls in its sales system in order to prevent sales representatives from executing contracts in excess of their delegated authority levels. A follow-up review found that the sales system had not been modified, but a process had been implemented to obtain written approval by the vice president of sales for all contracts in excess of $1 million. The chief audit executive (CAE) would be justified in reporting this situation to the organization’s board if:
I. In the opinion of the CAE, the level of residual risk assumed by senior management is too high.
II. Testing of compliance with the new process finds that all new contracts in excess of $1 million have been approved by the vice president of sales.
III. The cost of modifying the sales system to include a preventive control is less than $100,000.

NO.204 As a result of a recent discovery of false information on employment applications, an internal auditor has reviewed hiring procedures. Which of the following represents a weakness in the control system?
I.Applicants are not required to have their signed applications legally authenticated.
II.
Applicants’ educational information is not validated with the educational institution before employment is offered.
III.
Information related to applicants’ long-term work history is not validated before employment is offered.

NO.205 Audit supervision includes approval of the engagement report in order to ensure that:

NO.206 A company has recently incurred significant cost overruns on one of its construction projects. Management suspects that these overruns were caused by the contractor improperly accounting for costs related to contract change orders. Which of the following procedures would be appropriate for testing this suspicion?
I. Verify that the contractor has not charged change orders with costs that have already been billed to the original contract.
II. Determine if the contractor has billed for original contract work that was canceled as a result of change orders.
III. Verify that the change orders were properly approved by management.

NO.207 A major insurance company provides a discount on automobile insurance if the vehicle meets certain safety criteria. Which of the following audit tests would provide an internal auditor with the best evidence that all qualifying insured automobiles are receiving the discount?

NO.208 An organization’s internal auditors are reviewing production costs at a gas-powered electrical generating plant. They identify a serious problem with the accuracy of carbon dioxide emissions reported to the environmental regulatory agency, due to computer errors. The auditors should immediately report the concern to:

NO.209 An organization’s internal auditors are reviewing production costs at a gas-powered electrical generating plant. They identify a serious problem with the accuracy of carbon dioxide emissions reported to the environmental regulatory agency, due to computer errors. The auditors should immediately report the concern to:

NO.210 The internal audit activity of an organization obtained approval to add a senior auditor to its staff. The chief audit executive, audit manager, and audit supervisor each will interview the candidates. According to the Standards, which of the following best explains the involvement of management in the interview process?

NO.211 Senior management requested that the internal audit activity perform a consulting project to assist in making a decision on a new software system Which of the following would be used to determine the engagement objectives?

NO.212 According to the International Professional Practices Framework, which of the following is not an objective of the exit conference?

NO.213 An audit of a Web-based third-party payment processor determined that a programming error enabled customers to create multiple accounts for each mailing address. This caused problems during the processing of credit card transactions. Management agreed to correct the program and notify customers with multiple accounts that the accounts would be consolidated. What should the auditor do in response?
I. Amend the scope of the subsequent audit to verify that the program was corrected and that accounts were consolidated.
II. Evaluate the adequacy and effectiveness of the corrective action proposed by management.
III. Schedule a follow-up review to verify that the program was corrected and the accounts were consolidated.
IV.
Do nothing because management has agreed to address the problem.

NO.214 An organization does not have a formal risk management function. According to the Standards, which of the following are conditions where the internal audit activity (IAA) may provide risk management consulting?
1.There is a clear strategy and timeline to migrate risk management responsibility back to management.
2.The IAA has the final approval on any risk management decisions.
3.The IAA does not give objective assurance on any part of the risk management framework for which it is responsible.
4.The nature of services provided to the organization is documented in the internal audit charter.

NO.215 Due to the expanded role of internal audit in the organization, the chief audit executive (CAE) of a construction company decides to employ the services of an outsourced audit service provider to augment the internal audit staff. What does the CAE need to consider in determining whether the outsourced audit service provider possesses the necessary knowledge, skills and other competencies to perform an audit engagement?

NO.216 Which of the following might alert an auditor to the possibility of fraud in a division?
I.The division is not scheduled for an external audit this year.
II.
Sales have increased by 10 percent.
III.
A significant portion of management’s compensation is directly tied to reported net income of the division.