An internal auditor is reviewing the accounts receivable when she discovers account balances more than three years old. The auditor was previously supervising the area during this time, and she subsequently advises the chief audit executive (CAE) of a potential conflict.
Which of the following is the most appropriate course of action for the CAE to take?

1. A. Replace the auditor with another audit staff member.
2. B. Continue with the present auditor, as more than one year has passed.
3. C. Withdraw the audit team and outsource the financial audit of the division.
4. D. Work with the division's management to resolve the situation.

Correct Answer: A

What should the internal auditor's role be in assessing the organization's ethical climate?

1. A. Perform ongoing surveys of the employees, customers, and partners of the organization to assess the organization's ethical climat
2. B. ^Evaluate the effectiveness of the organization's strategies and
3. C. processes for achieving the desired level of legal and ethical compliance.
4. D. Maintain a whistleblower hotline to identify inappropriate or illegal activity within the organization.
5. E. Perform background checks of potential new employees before they are hired by the organization.

Correct Answer: B

According to The MA Code of Ethics, which of the following is one of the rules of conduct for objectivity?

1. A. Internal auditors shall continually improve their proficiency and effectiveness and quality of their services.
2. B. Internal auditors shall respect and contribute to legitimate and ethical objectives of the organization.
3. C. Internal auditors shall not accept anything that may impair or be presumed to impair their professional judgment.
4. D. Internal auditors shall be prudent in the use and protection of information acquired in the course of their duties.

Correct Answer: C

Which of the following are core responsibilities to be included in the internal audit charter?
* 1. Review reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
* 2. Determine the adequacy and effectiveness of the organization’s systems of internal accounting and operating controls.
* 3. Participate in the planning and performance of audits of potential acquisitions with the organization's outside accountants and other members of the corporate staff.
* 4. Report to those members of management who should be informed of results of audit examinations, the audit opinions formed, and the recommendations made.

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

Correct Answer: A

Which of the following offers the best evidence that the internal audit activity has achieved organizational independence?

1. A. An independent third party has assessed the organization's system of internal controls to be adequate and effective.
2. B. The chief audit executive reports both functionally and administratively to the CEO.
3. C. The internal audit charter is drafted properly and approved by the appropriate parties.
4. D. The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.

Correct Answer: B