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Operations Auditing - Midterm Exam: Input Process Output
Operations Auditing - Midterm Exam: Input Process Output
28. In the context of benchmarking, competitive 34. What is that activity that the internal auditor or
advantage is best described as the internal audit team may undertake to
THE ABILITY AND/OR ATTRIBUTES OF THE determine the main reasons for any finding and
BUSINESS ENTITY IN ENSURING THAT ITS explaining the occurrence for such findings
POSITION AS A MARKET OR INDUSTRY LEADER specifically on the matters that pertain to non-
IS MAINTAINED compliance to internal controls from which
recommendations will be expected by
29. Audit findings should ONLY be provided in management?
writing EXCLUSIVELY and in confidentiality to ROOT CAUSE ANALYSIS
the HEAD of the concerned unit being subjected
to audit review. 35. What could be a secondary process that can be
FALSE assigned to a function that involves handling
and monitoring of Accounts Receivable?
ALL OF THE ABOVE
OPERATIONS AUDITING – MIDTERM EXAM
36. All of the following are important uses of the 43. What is the primary process if the function
performance measurement methods EXCEPT involves the handling of petty cash and
IT CANNOT BE USED AS A VALID BASIS IN expenses related it.
INVESTIGATIONS WHERE MANAGEMENT’S EXPENDITURE PROCESS
LACK OF RESPONSE TO AN ADVERSE
MEASUREMENT. 44. During the planning phase of the audit
engagement, the audit objectives need to be
37. The business entity is not required to establish established and at this stage, the “audit
realistic measurement standards and methods objectives” are considered the same as the
because internal controls are already in place “management’s objectives”.
and it is the responsibility of the internal FALSE
auditor to determine if there is compliance or
non-compliance to such internal controls. 45. The following approaches that can be used by
FALSE the internal auditor as a guide to establishing
levels of standards from which performance
may be measured
38. Generally, internal audit activities will involve all
A, C, D AND F ONLY (BENCHMARKING,
of the following EXCEPT COMPARING, MEASURING AND AIMING NGA
FINANCIAL REPORTING ANSWERS)
39. Including in the audit team a technical expert 46. _________ is a way that can be applied in
from within the business organization is a evaluating business processes particularly in
violation of internal audit procedures. identifying whether there is any initial potential
FALSE for improvement, and then subsequently used
to monitor that the required levels of
40. This term refers to the way the organization is performance are maintained.
structured in terms of unit levels of offices as PERFORMANCE MEASUREMENT/ METHODS
well as position titles.
ORGANIZATIONAL CHART 47. In both the management and audit assessment
of matters of value of money, the usual
41. This term refers to the different standards that approach is to make comparisons with a range
have been set up within and across functions, of options or possible solutions to the principal
processes and/or units of the organization and problem including measurement methods
that must be complied with and from which which must be discussed and agreed upon with
measurement will be undertaken to establish a the management.
level of assurance that goals and objectives are TRUE
achieved.
INTERNAL CONTROLS 48. Referring to SAPG, in carrying out the stock and
materials handling and management function,
42. What is the primary business process that is the following processes shall be the primary
consistent with the main function involving the subjects of operations audit review EXCEPT
handling of General Ledger and Management FINANCIAL REPORTING
Accounts?
FINANCIAL REPORTING PROCESS
OPERATIONS AUDITING – MIDTERM EXAM
49. Using the SAPG format, management and
administration as a function would involve the 56. One of the advantages of subdividing the audit
following business processes EXCEPT: universe using the functional or departmental
WARRANTY ARRANGEMENTS approach is that the area under review is clearly
bounded and the focus of the audit review is on
50. It is described as “a series of cradle to grave” the specific area of interest. Therefore, the
processes or cycles, where a CHAIN OF interrelationship in terms of functions and
INTERRELATED EVENTS or activities is plotted process interfaces between the subject of the
from the origin to the conclusion.” review with other departments or units will not
BUSINESS OPERATIONS be an important factor to be considered so that
audit results can be confined to the specific
51. This term is generally used when undertaking a review required.
business process review that usually refers to FALSE
an activity or set of activities and/or utilities
that when performed or utilized will result in 57. This approach of subdividing and defining the
the achievement of the specific objectives for internal audit universe of auditable units refers
which these activities or utilities are designed. to different specific operational functions where
FUNCTION(S) different activities are identified and established
rather than a department or unit of the
52. This approach (in subdividing the audit organization that may have different function
universe) of defining audit reviews is described attached to it.
as “Each unit in the organizational structure is BUSINESS PROCESS APPROACH
considered as a separate functional unit apart
from the other units” 58. This refers to a process, method, or tool by
FUNCTIONAL OR DEPARTMENTAL APPROACH which a specific department(s) examines factors
to improve the existing internal controls and/or
53. Many opportunities for improvement lie as the implements new internal controls to mitigate
points of _______ between that part of the risks associated with a process or function.
business and other parts of the business and CONTROL SELF ASSESSMENT
system or departments where controls are
critical with which there needs to be effective 59. “Control is likely to be weaker between
coordination. sections or organizational units than within a
INTERFACES OR INTERACTION functional unit for BEHAVIORAL REASONS”
These behavioural reasons are evident in the
54. Self-assessment for controls within the following situations EXCEPT.
department may be undertaken through the LOYALTY IS NEVER AN IMPORTANT FACTOR
following EXCEPT. BECAUSE IT CAN BE COMPROMISED BASED ON
GUIDANCE AND DIRECTIVES FROM THE INDIVIDUAL BENEFITS THAT CAN BE
MANAGEMENT DERIVED
55. What is the role of the internal auditor in 60. The critical contents of the proposed SAPG are a
situations when behavioural reasons affect the number of issues related to the following that is
operations audit review? relevant to the specific system:
ALL OF THE ABOVE RISKS OR CONTROL
OPERATIONS AUDITING – MIDTERM EXAM
61. _______ refers to a group of representatives 66. SAPG documents offer an ideal basis for control
from specific groups or units within the self-assessment where auditing is done in a self-
organization who are competent and trained to audit context where management, together
be group coordinators and who are tasked with with their staff, consider in quite a formalized
ensuring that cohesive workgroups are through participative way in identifying the risks
maintained between the related and inter- of not achieving their objectives now and into
related units or departments of an organization. the future, and whether internal control is
This group is created to respond to one of the equal to the task of giving reasonable assurance
“behavioural reasons” for weaknesses in of achievement of objectives.
compliance with internal controls specifically THE STATEMENT PERTAINS TO THE
relating to interfaces. IMPORTANCE OF SAPG IN UNDERTAKING THE
LINKING PINS CONTROL SELF ASSESSMENT.
62. This term used in audit in general implies the 67. In the auditing context, there are a number of
preparation and retention within an ways that the organization can be divided for
organization for an adequate period, in a the purposes of reviewing the effectiveness of
reasonably accessible form, and in enough internal controls as follows: a. Functionally
detail to satisfy the auditors, of records which based on organizational ___ or b. Operationally
allow each detailed element of any transaction based on prime ____
to be tracked from its source through each CHART/STRUCTURE
intermediate stage to its final disposition (or ACTIVITIES
dispositions); and vice versa.
AUDIT TRAIL 68. _____ identifications is important in audit
reviews because it is basically a potent
63. The purpose of the SAPG is determinant in directing audit work particularly
ALL OF THE ABOVE the level of audit planning and activity to be
undertaken especially in the matters related to
64. How does the SAPG help the internal auditor? internal control compliance.
[Select the two (2) correct answers from the RISK
choices below to get one (1) full point.]
GUIDES THE INTERNAL AUDITOR 69. At this level of audit planning and activity, the
DETERMINING WHETHER THE SITUATION internal auditor uses risk assessment where the
NEEDS TO BE REPORTED TO MANAGEMENT auditor may choose to apply risk assessment
techniques to the potential universe of possible
HELPS THE INTERNAL AUDITOR TO CONSIDER audit projects as a means of setting relative
THEIR EFFECTIVENESS, AND DEPENDENT UPON priorities and thus determine those higher risk
THAT INTERPRETATION, RECORD THE NATURE audit projects for inclusion into the annual audit
AND RESULTS OF ANY AUDIT TESTING APPLIED plan.
TACTICAL OR PLANNING LEVEL
65. In a business approach of subdividing audit
universe, the specific activities are identified to
a function that is performed by the
PROCESS OWNER
OPERATIONS AUDITING – MIDTERM EXAM
70. The internal auditor used the risk assessment of
identifying audit activities at this LEVEL where
the risk linked to an evaluation of control
effectiveness will direct the focus of the
auditor's attention on aspects of the subject
under review which are more deserving of his
or her attention.
OPERATIONAL LEVEL