What is the primary reason that audit supervision includes approval of the engagement report?

1. A. To ensure the objectives of the area under review are met
2. B. To ensure senior management supports the reports conclusions
3. C. To ensure report style and grammar are appropriate.
4. D. To ensure report findings are substantiated

Correct Answer: D
The primary reason for audit supervision, including the approval of the engagement report, is to ensure that the findings presented in the report are substantiated by adequate and appropriate evidence. This step is crucial to maintain the credibility and reliability of the audit process and its outcomes.
✑ Substantiation of Findings: Ensuring that findings are substantiated helps in
providing a clear and defensible basis for the conclusions and recommendations made in the report.
✑ Audit Quality: This step ensures the quality and integrity of the audit process,
confirming that the evidence collected during the audit is sufficient and appropriate to support the findings.
✑ Credibility: By substantiating findings, the report gains credibility, which is essential
for the stakeholders who rely on the audit report for decision-making.
References:
✑ "Internal Audit Standards and Procedures," which outlines the importance of evidence substantiation in audit reports .

Organizations that adopt just-in-time purchasing systems often experience which of the following?

1. A. A slight increase in carrying costs.
2. B. A greater need for inspection of goods as the goods arrive
3. C. A greater need for linkage with a vendors computerized order entry system.
4. D. An Increase in the number of suitable suppliers

Correct Answer: C
Just-in-time (JIT) purchasing systems aim to minimize inventory levels by receiving goods only as they are needed in the production process, which requires tight integration with suppliers.
✑ Vendor Linkage: JIT systems demand a highly efficient and responsive supply
chain. Linking with vendors' computerized order entry systems ensures that orders are processed quickly and accurately, supporting the JIT philosophy.
✑ Inspection: JIT systems often rely on high-quality suppliers to minimize the need
for inspection upon arrival, focusing instead on preventive measures at the supplier's end.
✑ Carrying Costs: A JIT system typically reduces carrying costs by keeping inventory
levels low.
✑ Supplier Base: The focus is often on a few reliable suppliers rather than increasing the number of suppliers.
References:
✑ "Supply Chain Management: Strategy, Planning, and Operation," which discusses the operational requirements and benefits of JIT systems.

If the skills and competencies are not present within the internal audit activity to complete an ad-hoc assurance engagement, which of the following is an acceptable resolution?

1. A. Politely decline the engagement due to a lack of qualified staff available at the time.
2. B. Complete the engagement as requested, with the best of the current staff??s abilities.
3. C. Consider using employees from other departments in the organization on the audit team.
4. D. Change the scope of the testing to ensure that only available staff proficiencies are used

Correct Answer: C
✑ Introduction:
✑ Resolving Skill Gaps:
✑ Options Analysis:
✑ Conclusion:
:
Internal Audit Standards and Practice Guides

Which of the following statements is true regarding engagement planning?

1. A. The scope of the engagement should be planned according to the internal audit activity's budgetand then aligned to the risk universe.
2. B. The audit engagement objectives should be based on operational managements view of risk objectives
3. C. The planning phase of the engagement should be completed and approved before the fieldwork of the engagement begins.
4. D. The main purpose of the engagement work program is to determine the nature and timing of procedures required to gather audit evidence

Correct Answer: C
Proper engagement planning is essential to ensure that the internal audit engagement is conducted effectively and efficiently.
Completing and approving the planning phase before starting the fieldwork ensures that all objectives, scope, resources, and methodologies are well-defined and agreed upon.
This preparation helps in aligning the engagement with the overall audit strategy and reduces the risk of scope changes or misalignments during fieldwork

According to IIA guidance, which of the following statements is true regarding due professional care?

1. A. Internal auditors must exercise due professional care to ensure that all significant risks will be identified.
2. B. Internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.
3. C. Due professional care requires the internal auditor to conduct extensive examinations and verifications to ensure fraud does not exist.
4. D. Due professional care is displayed during a consulting engagement when the internal auditor focuses on potential benefits of the engagement rather than the cost

Correct Answer: B
Due professional care is a critical concept in internal auditing, ensuring that auditors conduct their work with the necessary diligence and competence.
✑ Definition and Standards:According to the IIA??s International Standards for the
Professional Practice of Internal Auditing (Standards), specifically Standard 1220 – Due Professional Care, internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.
Reference:Standard 1220 emphasizes that internal auditors must consider the extent of work needed to achieve the engagement's objectives and the cost of assurance in relation to potential benefits.
Expectation of Competence:The standard requires auditors to use their professional judgment and to exercise the level of skill and care that a reasonably prudent internal auditor would use in similar circumstances.
Practical Example:This includes evaluating the nature and complexity of the engagement, the adequacy and effectiveness of risk management, and control processes relevant to the engagement.
Comprehensive, Not Excessive:While due professional care involves being thorough, it does not mandate exhaustive procedures such as those implied in options A and C.
Clarification:Option A overstates the requirement by implying that all significant risks must be identified, which is not always feasible.
Clarification:Option C misinterprets due professional care by suggesting that extensive examinations and verifications to ensure fraud does not exist are always necessary, which is beyond the typical scope of many audits.
Cost vs. Benefit in Consulting:Option D refers to consulting engagements and the consideration of benefits over cost, which is a part of due professional care but does not capture the comprehensive expectation of care and skill.
Clarification:Due professional care in consulting engagements is about balancing benefits and costs but also involves ensuring quality and thoroughness appropriate to the engagement's objectives.
Conclusion:The correct answer is B, as it accurately reflects the IIA??s guidance that internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.