OPERATIONS AUDITING – MIDTERM EXAM
1. In th
the
e contex
contextt of manag
manageme
ement,
nt, oper
operao
aons,
ns, in
in
7. Und
Underta
ertakin
king
g a bro
broad
ad co
cover
verage
age of
of ope
opera
raons
ons
general, involve these three (3) important and
audit may be limited by which of the following
primary components that are also used as the
factors:
main guidance for undertaking internal audit
1. Cult
Cultur
ure
e of tthe
he o
org
rgan
aniz
iza
aon
on
reviews?
2. Abi
Abilit
lity
y of an e
ente
nterpr
rprise
ise tto
o ao
aord
rd so b
broa
road
d
INPUT
PROCESS
OUTPUT
an audit
3. The d
dic
icult
ulty
y of obtai
obtainin
ning
g people
people who
who ca
can
n
do a broad type of audit
4. Lack
Lack o
off ma
mana
nage
gemen
mentt guid
guidan
ance
ce
2. Wha
Whatt are th
the
e ve (5)
(5) ide
iden
ned
ed conse
conseque
quena
nall
The very praccal consideraon that
processes involved in the transformaon or
individuals may not like to be reported
conversion of input to output?
upon
PLANNING
2, 3, AND 5 ONLY
ORGANIZING
CONTROLLING
8. A bro
broad
ad d
deni
enion
on o
off op
operaon
eraonss au
audit
dit iiss tha
thatt it
LEADING
is an independent, objecve assurance and
STAFFING
consulng acvity designed to add value and
improve and organizaon’s operaons by
3. ___
____
_ __
____
__ refer
refers,
s, in gener
general,
al, tto
o the revi
review
ew of
helping it in accomplishing the corporate as well
the eciency, eecveness, and economy of
the dierent controls established for each step
as unit goals and objecves through a
systemac, disciplined approach to evaluate
of the business process(es) specically those
and improve the eecveness of risk
that require interfaces within and among the
management, control, and governance
dierent funcons and segments/units across
processes.
the organizaon.
FALSE
OPERATIONS AUDITING
9. ___
____
_ is that
that ca
can
n be u
uliz
lized
ed to de
determ
termine
ine the
the
4. Wha
Whatt is tthis
his asp
aspect
ect o
off broad
broad den
denio
ion
n of
approach and degree or scale of operaons
operaons audit that refers to the assurance
audit to be applied for each specic funcon,
that accounts properly reect the nancial facts
acvity, or system specically on the interfaces
as referenced to the conceptual framework of
accounng i.e. faithful representaon (fair
across dierent operang segments or business
units.
presentaon), relevance, and understanding?
SAPG OR STANDARD AUDIT PROGRAM GUIDE
FINANCIAL
10. ___ refe
refers
rs to one of the approach
approaches
es to
5. ___ is one
one of th
the
e E’s o
off aud
audin
ing
g that
that relates
relates to
to
operaonal audit where internal auditors are
the conversion process of turning the actual
looking for opportunies for improvement (in
inputs available into actual outputs.
business processes) and this can be indicated by
EFFICIENCY
a performance measurement that pertains to
the rao between planned inputs and actual
6. E
Ecien
ciency
cy is meas
measure
ured
d by de
deriv
riving
ing tthe
he ra
rao
o of
the usable ___ to the actual ___ input into the
conversion process.
OUTPUTS
RESOURCES
inputs in terms of unit costs of a given quality.
ECONOMY
OPERATIONS AUDITING – MIDTERM EXAM
11. What are the four (4) ma
main
in considerao
consideraons
ns that
18. What is the PR
PRIMARY
IMARY an
and
d ULTIMATE
ULTIMATE reason
reason
aect eciency?
why there is a need for the measurement of
QUALITY OF RAW MATERIALS
producvity and performance?
QUALITY OF LABOR
TO DETERMINE THE RESPONSIVENESS AND
DESIGN OF THE PROCESSES
COMPLIANCE TO THE SET GOALS AND
QUALITY OF TECHNOLOGY
OBJECTIVES WHETHER AT THE INDIVIDUAL,
UNIT OR CORPORATE LEVEL.
12. ___ is on
one
e of the E’s of auding
auding tha
thatt is
measured by the rao of actual outputs against
19. In order to ens
ensure
ure that go
goals
als and ob
objecves
jecves ar
are
e
planned outputs (i.e. planned objecves).
achieved either at the individual, unit, or
EFFECTIVENESS
corporate level, the measurement standard
must be set at the LEAST MINIMUM
13. In strate
strategic
gic management
management,, the resul
resulng
ng
measurement of performance in relaon to any
ACHIEVABLE result.
FALSE
of the three (3) E’s is reected
reect ed in the ___ of
either the individual or unit level.
BALANCE SCORECARD
20. The perfo
performance
rmance mea
measurem
surement
ent methods
methods to be
used must always be based on
ACCURATE AND RELIABLE DATA AND A
14. ___ is anot
another
her “E” of audi
auditt interest tha
thatt refers
to the legal and moral conduct by management
and sta.
ETHICAL/ETHICS
PROVEN METHOD
21. Which of th
the
e follow
following
ing are the pri
primary
mary
components in order to establish a
performance measurement? [Select three (3)
15. Accord
According
ing to the Instute
Instute of Internal Auditor
Auditors,
s,
from the choices]
“Prociency” is described as internal auditors or
GOALS/OBJECTIVES
the audit team who must possess the following
KEY PERFORMANCE INDICATORS
needed to perform their responsibilies either
STANDARD LEVEL OF MEASUREMENT
as individual or as a group.
KNOWLEDGE, SKILLS, AND OTHER
COMPETENCIES
16. The foll
following
owing ar
are
e opons that the Chief
Chief Audit
22. What is the most app
appropri
ropriate
ate key perfor
performance
mance
indicator to measure the eciency of a machine
or equipment?
NUMBER OF UNITS PRODUCED PER HOUR
Execuve can take when the internal auditors
lack the required prociency.
ALL OF THE ABOVE
23. What is the most app
appropri
ropriate
ate key perfor
performance
mance
indicator for a sales agent?
AMOUNT OF SALES GENERATED
17. This perso
person
n is responsible for all internal audit
engagements, whether performed by or the
24. ____ __
____
__ ____ auding refers to
to the benet
internal audit acvity, and all signicant
that arises when the internal audit acvity
professional judgements made throughout the
provides an objecve and relevant assurance
engagement.
and contributes to the eecveness and
CHIEF AUDIT EXECUTIVE
eciency of governance, risk management, and
control processes.
VALUE FOR MONEY
OPERATIONS AUDITING – MIDTERM EXAM
25. This is one of the approaches
approaches in establishing
30. Benchm
Benchmarkin
arking
g is more commonl
commonly
y used to
levels of performance measurements by
determine the business enty ‘s compeve
comparing one’s own performance in a specic
posion in the market or industry rather than
area with that applied by others in compable
enabling the company to take a view of the
circumstances or similar situaons.
need for change or review of their
t heir own
BENCHMARKING
organizaon’s approach to internal auding in
light of the survey data.
26. It is necessa
necessary
ry to underst
understand
and full
fully
y the exisng
FALSE
processes, systems, and acvies as a rm basis
for subsequent comparison with external points
31. One of the fol
followi
lowing
ng is NOT a descripo
descripon
n of a
of reference (such as industry or professional
business process:
standards or even compeon) in order to
A CHAIN OF UNRELATED ACTIVITIES BUT
maximize the benet from the benchmarking
INTERFACES WITH OTHER PROCESSES.
exercise.
TRUE
32. Which of the fol
followin
lowing
g best describes
describes the
general paern by which a business process or
27. What are th
the
e objecve
objecvess of benchmarkin
benchmarking?
g?
a. Mai
Mainta
ntaini
ining
ng a co
compe
mpev
ve
e advant
advantage
age iin
n the
appropriate market
a process, in general, is designed and
established?
ESTABLISH GOALS, DETERMINE THE STEPS OR
b. Est
Establ
ablish
ishing
ing tthe
he cu
curre
rrent
nt me
metho
thods,
ds, best
best
pracce, and related trends
ACTIVITIES, IDENTIFY THE PROCESS OWNERS
AND ASSIGN THE RESPONSIBILITIES AND
c.
ACCOUNTABILITIES.
Ens
Ensuri
uring
ng the
the ffutu
uture
re ssurv
urviva
ivall o
off the
the
organizaon
d. Mai
Mainta
ntaini
ining
ng an awa
awaren
reness
ess of cus
custom
tomer
er
33. In intern
internal
al audin
auding,
g, this is the genera
generall term
expectaons (and being able to address
used in referring to the wide, vast, and broad
them)
spectrum of processes, funcons, and systems
e. Ens
Ensuri
uring
ng that
that tthe
he or
organ
ganiza
izaon
on h
has
as the
the
appropriate approach to quality issues
from which the subject of the audit
engagement will be selected, planned, and
ALL ARE CONSIDERED AS OBJECTIVE OF
carried out.
BENCHMARKING
AUDIT UNIVERSE
28. In the context of ben
benchmark
chmarking,
ing, comp
compeve
eve
34. What is that acv
acvity
ity that the inte
internal
rnal aud
auditor
itor 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 nding and
BUSINESS ENTITY IN ENSURING THAT ITS
explaining the occurrence for such ndings
POSITION AS A MARKET OR INDUSTRY LEADER
specically on the maers that pertain to non-
IS MAINTAINED
compliance to internal controls from which
recommendaons will be expected by
29. Audit nd
ndings
ings should ONLY be provided in
wring EXCLUSIVELY and in condenality to
management?
ROOT CAUSE ANALYSIS
the HEAD of the concerned unit being subjected
to audit review.
FALSE
35. What coul
could
d be a second
secondary
ary proce
process
ss that can be
assigned to a funcon that involves handling
and monitoring of Accounts Receivable?
ALL OF THE ABOVE
OPERATIONS AUDITING – MIDTERM EXAM
36. All of the foll
following
owing are importan
importantt uses of the
43. What is the pr
primary
imary pr
process
ocess if th
the
e funco
funcon
n
performance measurement methods EXCEPT
involves the handling of pey 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. Durin
During
g the plan
planning
ning ph
phase
ase of the aud
audit
it
engagement, the audit objecves need to be
37. The busi
business
ness ent
enty
y is not required
required to establish
establish
established and at this stage, the “audit
realisc measurement standards and methods
objecves” are considered the same as the
because internal controls are already in place
“management’s objecves”.
and it is the responsibility of the internal
FALSE
auditor to determine if there is compliance or
non-compliance to such internal controls.
FALSE
38. Generally, internal audit acvies
acvies will involve al
alll
of the following EXCEPT
FINANCIAL REPORTING
39. Inclu
Including
ding in the aud
audit
it team a technic
technical
al expert
from within the business organizaon is a
45. The foll
following
owing app
approach
roaches
es that can be used by
the internal auditor as a guide to establishing
levels of standards from which performance
may be measured
A, C, D AND F ONLY (BENCHMARKING,
COMPARING, MEASURING AND AIMING NGA
ANSWERS)
46. ________
_________
_ is a way that can be applied iin
n
evaluang business processes parcularly in
violaon of internal audit procedures.
idenfying whether there is any inial potenal
FALSE
for improvement, and then subsequently used
to monitor that the required levels of
40. This ter
term
m refers to the wa
way
y the organizaon
organizaon is
structured in terms of unit levels of oces as
performance are maintained.
PERFORMANCE MEASUREMENT/ METHODS
well as posion tles.
ORGANIZATIONAL CHART
47. In both the mana
management
gement and au
audit
dit asses
assessment
sment
of maers of value of money, the usual
41. This term ref
refers
ers to the dieren
dierentt standards
standards that
approach is to make comparisons with a range
have been set up within and across funcons,
processes and/or units of the organizaon and
of opons or possible soluons to the principal
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 objecves are
TRUE
achieved.
INTERNAL CONTROLS
48. Referr
Referring
ing to SAPG, in carryi
carrying
ng out the stock and
materials handling and management funcon,
42. What is the prim
primary
ary busi
business
ness pro
process
cess that is
the following processes shall be the primary
consistent with the main funcon involving the
subjects of operaons audit review EXCEPT
handling of General Ledger and Management
FINANCIAL REPORTING
Accounts?
FINANCIAL REPORTING PROCESS
OPERATIONS AUDITING – MIDTERM EXAM
49. Using th
the
e SAPG forma
format,
t, management
management and
administraon as a funcon would involve the
56. One of the advantages
advantages of subdividing the audit
following business processes EXCEPT:
universe using the funconal 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 descri
described
bed as “a series
series of cradle
cradle to grave”
the specic area of interest. Therefore, the
processes or cycles, where a CHAIN OF
interrelaonship in terms of funcons and
INTERRELATED EVENTS or acvies is ploed
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 conned to the specic
51. This term is gen
generally
erally used
used when undertakin
undertaking
ga
business process review that usually refers to
review required.
FALSE
an acvity or set of acvies and/or ulies
that when performed or ulized will result in
57. This appr
approach
oach of subdi
subdividin
viding
g and dening the
the achievement of the specic objecves for
internal audit universe of auditable units refers
which these acvies or ulies are designed.
to dierent specic operaonal funcons where
FUNCTION(S)
dierent acvies are idened and established
rather than a department or unit of the
52. This a
approach
pproach ((in
in sub
subdividing
dividing the aud
audit
it
universe) of dening audit reviews is described
as “Each unit in the organizaonal structure is
organizaon that may have dierent funcon
aached to it.
BUSINESS PROCESS APPROACH
considered as a separate funconal unit apart
from the other units”
FUNCTIONAL OR DEPARTMENTAL APPROACH
58. This ref
refers
ers to a proces
process,
s, metho
method,
d, or tool by
which a specic department(s) examines factors
to improve the exisng internal controls and/or
53. Many opp
opportun
ortunies
ies for improveme
improvement
nt lie as the
implements new internal controls to migate
points of _______ between that part of the
risks associated with a process or funcon.
business and other parts of the business and
CONTROL SELF ASSESSMENT
system or departments where controls are
crical with which there needs to be eecve
coordinaon.
INTERFACES OR INTERACTION
59. “Contr
“Control
ol is like
likely
ly to be weaker between
between
secons or organizaonal units than within a
funconal unit for BEHAVIORAL REASONS”
These behavioural reasons are evident in the
54. SelfSelf-assess
assessment
ment for controls
controls within the
following situaons 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 ro
role
le of the internal
internal auditor
auditor in
60. The crical contents of the proposed SAPG are a
situaons when behavioural reasons aect the
number of issues related to the following that is
operaons audit review?
relevant to the specic system:
ALL OF THE ABOVE
RISKS OR CONTROL
OPERATIONS AUDITING – MIDTERM EXAM
61. ____
_______
___ refers
refers to a group of represent
representaves
aves
66. SAPG docum
documents
ents oer an ideal basis
basis for control
control
from specic groups or units within the
self-assessment where auding is done in a self-
organizaon who are competent and trained to
audit context where management, together
be group coordinators and who are tasked with
with their sta, consider in quite a formalized
ensuring that cohesive workgroups are
through parcipave way in idenfying the risks
maintained between the related and inter-
of not achieving their objecves now and into
related units or departments of an organizaon.
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 objecves.
compliance with internal controls specically
THE STATEMENT PERTAINS TO THE
relang to interfaces.
IMPORTANCE OF SAPG IN UNDERTAKING THE
LINKING PINS
CONTROL SELF ASSESSMENT.
62. This term u
used
sed in aud
audit
it in general implies the
67. In the audi
auding
ng context,
context, there are a nu
number
mber of
preparaon and retenon within an
ways that the organizaon can be divided for
organizaon for an adequate period, in a
the purposes of reviewing the eecveness of
reasonably accessible form, and in enough
internal controls as follows: a. Funconally
detail to sasfy the auditors, of records which
based on organizaonal ___ or b. Operaonally
allow each detailed element of any transacon
based on prime ____
to be tracked from its source through each
CHART/STRUCTURE
intermediate stage to its nal disposion (or
ACTIVITIES
disposions); and vice versa.
AUDIT TRAIL
68. ____
_____
_ idencaons
idencaons is impor
important
tant in audit
reviews because it is basically a potent
63. The p
purpos
urpose
e of tthe
he SAPG
SAPG is
ALL OF THE ABOVE
determinant in direcng audit work parcularly
the level of audit planning and acvity to be
undertaken especially in the maers related to
64. How does the SAPG hel
help
p the internal
internal auditor?
auditor?
[Select the two (2) correct answers from the
internal control compliance.
RISK
choices below to get one (1) full point.]
GUIDES THE INTERNAL AUDITOR
DETERMINING WHETHER THE SITUATION
NEEDS TO BE REPORTED TO MANAGEMENT
69. At this level of audit p
planning
lanning and acvity, the
internal auditor uses risk assessment where the
auditor may choose to apply risk assessment
techniques to the potenal universe of possible
HELPS THE INTERNAL AUDITOR TO CONSIDER
audit projects as a means of seng relave
THEIR EFFECTIVENESS, AND DEPENDENT UPON
priories 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 appr
approach
oach of subdividi
subdividing
ng audit
universe, the specic acvies are idened to
a funcon that is performed by the
PROCESS OWNER
OPERATIONS AUDITING – MIDTERM EXAM
70. The inter
internal
nal audi
auditor
tor used the risk ass
assessme
essment
nt of
idenfying audit acvies at this LEVEL where
the risk linked to an evaluaon of control
eecveness will direct the focus of the
auditor's aenon on aspects of the subject
under review which are more deserving of his
or her aenon.
OPERATIONAL LEVEL
71. The use of ri
risk
sk assessment
assessment is a major
major factor iin
n
idenfying audit acvies because, with audit
resources under pressure, it is important that
auding eorts are concentrated on the highly
risky, poorly controlled aspects where
management acon may be required.
TRUE