IIA CIA Certification Exam Questions with AI Explanations

QUESTION: 286

A trucking company contracted a third party to construct a new vehicle maintenance facility. One of the trucking company's auditors was assigned to look for contractor overcharges. After reviewing the contract, the auditor recommended that an audit of the construction contract not be performed. What is the most likely reason for the auditor's recommendation?

The contract did not include a right to audit clause.
The contractor was engaged on a fixed price basis.
The contractor's billing system included comprehensive edit routines to detect overbilling.
The trucking company's accounts payable system compared amounts billed with contract terms to detect potential overcharges.

Answer(s): B

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QUESTION: 287

A chief audit executive agrees to conduct an engagement that will focus on customers' perceptions of the quality of the organization's products and services. Which of the following issues should be addressed first?

Cost effectiveness.
Quality control.
Customer complaints.
Supplier deliveries.

Answer(s): C

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QUESTION: 288

An internal auditor is concerned that a division's management may have shipped poor quality merchandise in order to inflate sales and thereby boost the division manager's bonus. Furthermore, the auditor suspects that returned goods are being shipped to other customers as new products before defects are fully corrected. Which of the following audit procedures would be least effective in determining whether such shipments took place?

Examine credit memos issued after year end for goods shipped before year end.
Physically observe the shipping and receiving area for evidence of returned goods.
Interview customer service representatives regarding unusual numbers of customer
complaints.
Require the division to take a complete physical inventory at year end, and observe the taking of the inventory.

Answer(s): D

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QUESTION: 289

One of the audit objectives for a manufacturing company is to verify that all rework is reviewed by the production engineer. Which of the following audit procedures would provide the best evidence for meeting this objective?

Trace a sample of entries in the rework log to remedial action taken.
Trace a sample of rework orders to entries in the rework log.
Trace a sample of entries in the review log to rework orders.
Trace a sample of rework orders to entries in the review log.

Answer(s): D

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QUESTION: 290

As part of a preliminary survey of the purchasing function, an auditor read the department's policies and procedures manual. The auditor concluded that the manual described the processing steps well and contained an appropriate internal control design. The next engagement objective was to determine the operating effectiveness of internal controls. Which procedure would be most appropriate in meeting this objective?

Prepare a flowchart.
Prepare a system narrative.
Perform a test of controls.
Perform a substantive test.

Answer(s): C

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