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Wiley CIAexcel Exam Review 2014: Part 2, Internal Audit Practice by S. Rao Vallabhaneni

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Sample Practice Questions, Answers, and Explanations

Domain 1: Managing the Internal Audit Function (40–50%)

1. The proper organizational role of internal auditing is to:

a. Assist the external auditor in order to reduce external audit fees.

Incorrect. Reduction of external audit fees is a result of internal audit work but not a role.

b. Perform studies to assist in the attainment of more efficient operations.

Incorrect. This does not represent a complete description of the proper role.

c. Serve as the investigative arm of the audit committee of the board of directors.

Incorrect. This role is too limited for internal auditing. It also serves operations management and top management.

d. Serve as an appraisal function to examine and evaluate activities as a service to the organization.

Correct. This alternative describes the basic role concept of internal auditing.

2. In some organizations, consideration is being given to the possibility of outsourcing internal audit functions. Management in a large organization should recognize that the external auditor might have an advantage, compared to the internal auditor, because of the external auditor's:

a. Familiarity with the organization. Its annual audits provide an in-depth knowledge of the organization.

Incorrect. The internal audit staff, not the external auditor, through its continuous auditing, gains an in-depth knowledge of the organization.

b. Size. It can hire experienced, knowledgeable, and certified staff.

Incorrect. The internal ...

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