According to IIA guidance, which of the following statements is true regarding audit workpapers?

1. A. Review notes on audit workpapers must be retained to provide a record of questions raised by the reviewer.
2. B. Audit workpaper documentation policies are reviewed and approved by the audit committee.
3. C. Management of the department being audited should review the prepared workpapers for accuracy.
4. D. Audit workpaper preparation contributes to the professional development of the internal audit staff.

Correct Answer: D
Audit workpapers are essential documents that provide evidence of the audit work performed and the conclusions reached.
✑ Option A: While review notes can be useful, they do not need to be retained if they
do not add value to the audit evidence.
✑ Option B: Audit workpaper documentation policies are typically established by the internal audit department, not reviewed or approved by the audit committee.
✑ Option C: Management should not review the workpapers for accuracy as this could compromise the independence of the audit.
✑ Option D: Preparing workpapers helps auditors document their work thoroughly, facilitating learning and professional development.

Which of the following could increase risks to the organization??s control environment?

1. A. Strong board of directors oversight.
2. B. Incentive-based compensation structures
3. C. Lower than average employee turnover.
4. D. Implementation of a fraud hotline

Correct Answer: B
Incentive-based compensation can increase the risk of unethical behavior or fraudulent activities as employees might be tempted to manipulate results to achieve their performance targets.
This could undermine the control environment and lead to significant risks if not managed properly

According to IIA guidance, which of the following corporate social responsibility (CSR) evaluation activities may be performed by the internal audit activity?
* 1. Consult on CSR program design and implementation
* 2. Serve as an advisor on CSR governance and risk management. 3.Review third parties for contractual compliance with CSR terms 4Identify and mitigate risks to help meet the CSR program objectives

1. A. 1,2, and 3.
2. B. 1.2. and 4.
3. C. 1, 3, and 4.
4. D. 2. 3. and 4.

Correct Answer: B
According to the Institute of Internal Auditors (IIA) guidance, internal audit activities can encompass several aspects of evaluating corporate social responsibility (CSR) programs.
✑ Consulting on Design and Implementation: Internal auditors can provide valuable
insights into the design and implementation of CSR programs to ensure they are well-structured and aligned with organizational objectives.
✑ Advising on Governance and Risk Management: Serving as advisors, internal
auditors can help in establishing effective governance structures and identifying and managing risks associated with CSR initiatives.
✑ Mitigating Risks: By identifying and mitigating risks, internal auditors support the
achievement of CSR program objectives, ensuring these initiatives are both effective and sustainable.
✑ Reviewing Third Parties: While internal auditors may review third parties for
contractual compliance with CSR terms, this activity is more often part of broader compliance audits rather than a specific focus area for CSR evaluations.
References:
✑ "IIA Practice Guide: Auditing Corporate Social Responsibility," which outlines the role of internal auditors in CSR-related activities.

Which of the following is a true statement regarding whistleblowing?

1. A. Whistleblowing is one of several possible ethical structures an organization can undertake to encourage ethical behavior.
2. B. Whistleblowing programs help employees deal with ethical questions and instill ethicalvalues into everyday behavior
3. C. Whistleblowers are current or former employees who are disgruntled and looking to retaliate.
4. D. Whistleblowers should inform the organization about actual criminal circumstances, not assumed allegations.

Correct Answer: A
✑ Purpose of Whistleblowing:Whistleblowing is a mechanism that allows employees to report unethical or illegal activities within the organization. It is a vital part of an organization??s ethical framework, providing a structured way for concerns to be raised and addressed.
Reference:IIA??s Practice Guide on Whistleblowing Programs.
Encouraging Ethical Behavior:By having a whistleblowing program, an organization encourages employees to come forward with concerns, which helps in maintaining ethical standards and preventing misconduct.
Practical Example:Employees who notice financial discrepancies can report these through the whistleblowing system without fear of retaliation, supporting a culture of transparency and accountability.
Other Options Considered:
Option B:While whistleblowing programs can support ethical behavior, they are primarily designed for reporting issues rather than instilling values.
Option C:This is a misconception; whistleblowers often report genuine concerns rather than acting out of retaliation.
Option D:Whistleblowers can report suspected unethical or illegal activities, which may not always be criminal but are still significant for organizational integrity.
Conclusion:The correct answer is A, as whistleblowing is one of several ethical structures that organizations can adopt to encourage reporting of unethical behavior and maintain high ethical standards.

Which of the following statements is true regarding an organization??s inventory valuation?

1. A. The valuation will be incorrect if the inventory includes goods in transit shipped free on board (FOB) destination to another organization.
2. B. The valuation will be correct if the inventory includes goods received on consignment from another organization.
3. C. The valuation will be incorrect if the inventory includes goods in transit shipped FOB shipping point from another organization.
4. D. The valuation will be correct if the inventory includes goods sent on consignment to another organization

Correct Answer: C
Inventory Valuation Principles: Inventory valuation must accurately reflect the ownership of goods. The accounting treatment of inventory in transit depends on the shipping terms, specifically whether it is FOB (Free on Board) shipping point or FOB destination.
FOB Shipping Point:
✑ Ownership Transfer: When goods are shipped FOB shipping point, ownership transfers to the buyer as soon as the goods leave the seller's premises.
✑ Impact on Inventory Valuation: If goods shipped FOB shipping point are in transit at the end of the reporting period, they should be included in the buyer's inventory, not the seller's.
FOB Destination:
✑ Ownership Transfer: When goods are shipped FOB destination, ownership transfers to the buyer only when the goods arrive at the buyer's premises.
✑ Impact on Inventory Valuation: Goods in transit under FOB destination terms should remain in the seller's inventory until they reach the buyer.
Consignment:
✑ Goods Received on Consignment: Goods held on consignment should not be included in the inventory of the consignee (the holder) but remain in the inventory of the consignor (the owner).
✑ Goods Sent on Consignment: Goods sent out on consignment should still be included in the inventory of the consignor until they are sold by the consignee.
Correct and Incorrect Valuations:
✑ Incorrect Valuation (Option C): Including goods in transit shipped FOB shipping point in the seller's inventory would be incorrect, as ownership has transferred to the buyer.
✑ Correct Valuation (Option D): Including goods sent on consignment in the consignor's inventory is correct because ownership has not transferred.
References:
✑ Correct inventory valuation practices ensure that goods in transit are properly accounted for based on the shipping terms, thus providing an accurate financial picture of inventory.