Burauen Community College

Poblacion District 9, Burauen, Leyte

College of Business and Accountancy

Preliminary Examination in Sustainability and Strategic Audit
Name of student: ____________________________________ Score: _______________
Program: ____________________________________ Date: _______________

PART I. IDENTIFICATION
Instruction: Write your answers legibly on the table provided below. No erasures allowed.

1. Corporate governance 6. Strategic Objectives

2. Risk Management 7. Independence

3. Internal Auditing 8. Objectivity

4. Assurance Services. 9. Customers

5. Consulting Services. 10. IIA

1. It involves a set of relationships between a company’s management, its board, its shareholders, and other
stakeholders. It also provides the structure through which the objectives of the company are set, and the
means of attaining those objectives and monitoring performance are determined.
2. It is the process conducted by management to understand and deal with uncertainties (risks and
opportunities) that could affect the organization’s ability to achieve its objectives.
3. An independent, objective assurance and consulting activity designed to add value and improve an
organization’s operations. It helps an organization accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk management, control, and
governance processes.
4. An objective examination of evidence for the purpose of providing an independent assessment on
governance, risk management, and control processes for the organization. Examples may include
financial, performance, compliance, system security, and due diligence engagements.
5. Advisory and related [customer] service activities, the nature and scope of which are agreed with the
[customer], are intended to add value and improve an organization’s governance, risk management, and
control processes without the internal auditor assuming management responsibility. Examples include
counsel, advice, facilitation, and training.
6. These are goals that management sets specifically related to stakeholder interests.
7. The freedom from conditions that threaten the ability of the internal audit activity to carry out internal
audit responsibilities in an unbiased manner.
8. An unbiased mental attitude that allows internal auditors to perform engagements in such a manner that
they believe in their work product and that no quality compromises are made.
9. They are typically the lifeblood of an organization’s business, and, as such, are directly involved in its
success.
10. The internal audit profession’s global voice, standard-setter, and resource for professional development
and certification.

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PART II. ENUMERATION
Instruction: Write your answers legibly on the table provided below. No erasures allowed.

11. The Core Principles 16. Supplemental Guidance

12. The standards 17. Employees

13. The definition of Internal auditing 18. Customers

14. The code of ethics 19. Suppliers

15. Implementation Guidance 20. Investors

11 – 14. Components of IPPF’s Mandatory Guidance

15 – 16. Components of IPPF’s Recommended Guidance

17 – 20. Cite at least four (4) common stakeholders of an organization.

PART III. MULTIPLE CHOICE QUESTIONS

Instruction: Write your answers legibly on the table provided below. Use CAPITAL LETTER ONLY. No
erasures allowed.

21. 31. 41.

22. 32. 42.
23. 33. 43.
24. 34. 44.
25. 35. 45.
26. 36. 46.
27. 37. 47.
28. 38. 48.
29. 39. 49.
30. 40. 50.

21. The internal auditor should exercise due professional care in conducting a formal consulting engagement
by understanding all of the following except
a. Possible motivations and reasons of those requesting the service.
b. Potential benefits in the form of compensation to be derived from the engagement.
c. Skills and resources needed to conduct the engagement.
d. Potential impact on future audit assignments and engagements.

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22. Which of the following is an appraisal activity established within an entity as a service to the entity?
a. External auditing c. Financial auditing
b. Internal auditing d. Compliance auditing

23. To operate effectively, an internal auditor must be independent of

a. The line functions of the organizations
b. The entity
c. The employer-employee relationship which exists for other employees in the organization
d. All of the above

24. The best description of the scope of internal auditing is that it encompasses
a. Primarily operational auditing.
b. Both financial and operational auditing.
c. Primarily the safeguarding of assets and verifying the existence of such assets.
d. Primarily financial auditing.

25. Which of the following statements is not a distinction between independent auditing and internal
auditing?
a. Independent auditors represent third party users external to the auditee entity, whereas internal
auditors report directly to management.
b. Although independent auditors strive for both validity and relevance of evidence, internal
auditors are concerned almost exclusively with validity.
c. Internal auditors are employees of the auditee, whereas independent auditors are independent
contractors.
d. The internal auditor's span of coverage goes beyond financial auditing to encompass operational
and performance auditing.

26. The chief audit executive is best defined as the

a. Inspector general.
b. Person responsible for the internal audit function.
c. Outside provider of internal audit services.
d. Person responsible for overseeing the contract with the outside provider of internal audit services.

27. A major reason for establishing an internal audit activity is to

a. Relieve overburdened management of the responsibility for establishing effective controls.
b. Safeguard resources entrusted to the organization.
c. Ensure the reliability and integrity of financial and operational information.
d. Evaluate and improve the effectiveness of control processes.

28. The most accurate term for the procedures used by the representatives of the organization’s stakeholders
to provide oversight of processes administered by management is
a. Governance. c. Risk management.
b. Control. d. Monitoring.

29. Internal auditors should be proficient with respect to which discipline?

a. Internal auditing procedures and techniques.
b. Accounting principles and techniques.
c. Management principles.
d. Marketing techniques.

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30. Internal auditors should possess all of the following except
a. Proficiency in applying internal auditing standards.
b. An understanding of management principles.
c. The ability to maintain good interpersonal relations.
d. The ability to conduct training sessions in quantitative methods.

31. Internal auditors should be objective. Objectivity

a. Requires internal auditors not to subordinate their judgment on audit matters to that of others.
b. Is required only in assurance engagements.
c. Is managed at the individual auditor, engagement, functional, and organizational levels.
d. Prohibits internal auditors from providing consulting services relating to operations for which
they had previous responsibility.

32. Freedom from conditions that threaten objectivity or the appearance of objectivity is
a. Control. c. Independence.
b. Compliance. d. Avoidance of conflicts of interest.

33. With regard to the exercise of due professional care, an internal auditor should
a. Consider the relative materiality or significance of matters to which assurance procedures are
applied.
b. Emphasize the potential benefits of an engagement without regard to the cost.
c. Consider whether established operating standards are being met and not whether those standards
are acceptable.
d. Select procedures that are likely to provide absolute assurance that irregularities do not exist.

34. Internal auditors should possess the knowledge, skills, and other competencies essential to the
performance of their individual responsibilities. Consequently, all internal auditors should be proficient
in applying
a. Internal auditing standards. c. Management principles.
b. Quantitative methods. d. Structured systems analysis.

35. The term “risk” is best defined as the possibility that

a. An internal auditor will fail to detect a material misstatement that causes financial statements or
internal reports to be misstated or misleading.
b. An event could occur affecting the achievement of objectives.
c. Management will, either knowingly or unknowingly, make decisions that increase the potential
liability of the organization.
d. Financial statements or internal records will contain material misstatements.

36. The authority of the internal audit activity is limited to that granted by
a. The board and the controller.
b. Senior management and the Standards.
c. Management and the board.
d. The audit committee and the chief financial officer.

37. Who is responsible for implementing ERM?

a. The Chief Financial Officer (CFO)
b. The Chief Audit Executive (CAE)
c. The Chief Compliance Officer (COO)
d. Management throughout the organization

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38. An internal auditor has recently received an offer from the manager of the marketing department of a
weekend’s free use of his beachfront condominium. No engagement is currently being conducted in the
marketing department, and none is scheduled. The internal auditor
a. Should reject the offer and report it to the appropriate supervisor.
b. May accept the offer because its value is immaterial.
c. May accept the offer because no engagement is being conducted or planned.
d. May accept the offer if approved by the appropriate supervisor.

39. Independence and objectivity may be impaired if assurance services are provided within one year after a
formal consulting engagement. What steps can be taken to minimize the effects of this kind of
impairment?
I. Assigning different auditors to perform each of the services.
II. Establishing independent management and supervision.
III. Defining separate accountability for the results of projects.
IV. Disclosing the presumed impairment.
a. I and III. c. II, III, and IV.
b. I, III, and IV. d. I, II, III, and IV.

40. You transferred from the treasury department to the internal audit activity of the same organization last
month. The chief financial officer of the organization has suggested that, because you have significant
knowledge in this area, it would be a good idea for you to immediately begin an engagement to evaluate
the treasury department. In this circumstance, you should
a. Accept the engagement and begin work immediately.
b. Discuss the need for such an engagement with your former superior, the treasurer.
c. Suggest that the engagement be performed by another member of the internal audit staff.
d. Offer to prepare an engagement work program but suggest that interviews with your former co-
workers be conducted by other members of the internal audit staff.

41. The scope of internal auditing work encompasses a systematic, disciplined approach to evaluating and
improving the adequacy and effectiveness of all of the following processes except
a. Risk management. c. Financial statements.
b. Control. d. Governance.

42. Risk management is the responsibility of management. The role of the internal audit activity in the risk
management process may include which of the following?
I. Monitoring activities.
II. Evaluating the risk management process as part of the engagement plan.
III. Participation on oversight committees, monitoring of activities, and status reporting.
IV. Managing and coordinating the process.
a. I only. c. I, II, and III only.
b. II only. d. I, II, III, and IV.

43. The most likely role of the chief audit executive (CAE) with regard to the financial reporting process is
to
a. Ensure that adequate resources have been committed to helping others with their responsibilities
for financial reporting.
b. Assess the reliability of the external auditor’s work and report these conclusions to the relevant
regulatory body.
c. Provide explanations of the company’s implementation of GAAP to the external auditor.
d. Work closely with the external auditor during the field audit stage.

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44. Limitations of ERM may arise from
a. Faulty human judgment. c. Collusion.
b. Cost-benefit considerations. d. All of the above.

45. Which of the following are "mandatory guidance" in The IIA's IPPF?
I. Implementation Guides
II. The Code of Ethics
III. The Definition of Internal Auditing
IV. The Standards
a. I, II, and IV c. II, III, and IV
b. II and IV d. I, II, III, and IV

46. When assessing the risk associated with an activity, and internal auditor should:
a. Determine how the risk should best be managed
b. Provide assurance on the management of the risk
c. Update the risk management process based on risk exposures
d. Design controls to mitigate the identified risks

47. AVF Company's new Chief Financial Officer (CFO) has asked the company's Chief Audit Executive
(CAE) to meet with him to discuss the role of the internal audit function. The CAE should inform the
CFO that the overall responsibility of internal auditing is to:
a. Serve as an independent assurance and consulting activity designed to add value and improve the
company's operations.
b. Assess the company's methods for safeguarding its assets and, as appropriate, verify the existence
of the assets.
c. Review the integrity of financial and operating information and the methods used to accumulate
and report information.
d. Determine whether the company's system of internal controls provides reasonable assurance that
information is effectively and efficiently communicated to management.

48. Which of the following are components of the definition of internal auditing?
a. Independence and objectivity
b. A systematic and disciplined approach
c. Helping the organization accomplish its objectives
d. All of the above

49. ____________________ are expected to take a more focused oversight role in respect of risk
management and internal control.
a. Internal Auditors c. External Auditors
b. Audit Committees d. None of the above.

50. Statement 1. External auditors generally consider operations a whole relative to objectives while
internal auditors focus primarily on financial systems that have a direct, significant effect on the amounts
reported in financial statements.
Statement 2. External auditors consider even small amounts of fraud, waste, and abuse as symptoms of
underlying issues. The internal auditor considers just what materially affects the financial statements
since that is the nature of their engagement.
a. Only Statement 1 is correct c. Both statements are correct.
b. Only Statement 2 is correct. d. Both statements are wrong

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