ST. PAUL’S UNIVERSITY
Private Bag-00217 Limuru, Kenya
Tel. Office: 020-2020505/10; Mobile: 0728669000
Website: www.spu.ac.ke
Fundamentals of Auditing
ANSWER ALL QUESTIONS IN SECTION A AND ANY FIVE FROM
SECTION B.
SECTION A
1. Which of the following best describes the objective of internal auditing?
a. To assist members of the organization in the effective discharge of their
responsibilities
b. To assist management with the design and implementation of accounting and
control systems
c. To examine and evaluate an organization's accounting system as a service to
management
d. To monitor the organization's internal control system for the external auditors
2. According the the Statement of Responsibilities of Internal Auditing, which of the
following is not included in the scope of the internal audit function?
a. Appraising the economy and efficiency with which resources are employed
b. Reviewing the strategic management process, assessing the quality of management
decision making both quantatively and qualitatively, and reporting the results to the
audit committee
c. Reviewing the means of safeguarding assets and, as appropriate, verifying the
existence of such assets
d. Reviewing operations or programs to ascertain whether results are consisten with
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established objectives and goals and whether the operations or programs are being
carried out as planned.
3. Of the following, which is the major objective of The Institue of Internal Auditors?
a. Cultivate, promote and disseminate information concerning internal auditing and
related subjects
b. Oversee the activities of internal auditors
c. Promulgate standards that must be followed by all corporations
d. Investigate accusations that Certified Internal Auditors have violated The Institute
of Internal Auditors Code of Ethics
4. One of the purposes of the Standards for the Professional Practice of Internal
Auditing as stated in the Introduction to the Standards is to
a. Encourage the professionalization of internal auditing
b. Establish the independence of the internal audit department and emphasize the
objectivity of internal auditing
c. Encourage external auditors to make more extensive use of the work of internal
auditors
d. Establish the basis for guidance and measurement of internal auditing performance
5. Which of the following statements does not describe one of the purposes of The IIA
Code of Ethics? The IIA Code of Ethics
a. Sets forth basic principles in the practice of internal auditing
b. Charges IIA members to maintain high standards of conduct
c. Explains the internal audit profession's responsibility to society at large
d. States that a distinguishing mark of a profession is acceptance by its members of
responsibility to those it serves
6. Independence permits internal auditors to render impartial and unbiased judgments.
The best way to achieve independence is through
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a. Individual knowledge and skills
b. Organizational status and objectivity
c. Supervision within the organization
d. Organizational knowledge and skills
7. Which of the following is considered a major reason for establishing an internal
audit function?
a. To relieve overburdened management of the responsibility for establishing an
effective control structure
b. To safeguard resources entrusted to the organization
c. To ensure the accuracy, reliability and timeliness of financial and operating data
used in managment's decision making
d. To assist members of the organization in the measurement and evaluation of the
effectivenss of the established internal control structure
8. The internal auditor's responsibility for the prevention of fraud includes all of the
following except
a. Determining if the organizational environment fosters control consciousness
b. Ensuring that fraud will not occur
c. Being aware of activities in which fraud is likely to occur
d. Evaluating the effectiveness of actions taken by management to deter fraud
9. The internal auditing profession is believed to have advanced primarily as a
consequence of
a. Increased interest by graduating students and experienced auditors
b. The limitation of external audit scope
c. Job qualification specifications that include added emphasis on background
knowledge and skills
d. Increased complexity and sophistication of business operations
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10. The audit committee can serve several important purposes, some of which directly
benefit internal auditing. The most significant benefit provided by the audit committee
to the internal auditor is
a. Protecting the independence of the internal auditor from undue management
influence
b. Reviewing annual audit plans and monitoring audit results
c. Approving audit plans, scheduling, staffing and meeting with the internal auditor as
needed
d. Reviewing copies of the procedures manuals for selected company operations and
meeting with company officials to discuss them
11. Which of the following best describes and internal auditor's purpose in reviewing
the adequacy of the system of internal control?
a. To help determine the nature, timing and extent of tests necessary to achieve audit
objectives
b. To ensure that material weaknesses in the internal control system are corrected
c. To determine whether the internal control system provides reasonable assurance
that the organization's objectives and goals are met efficiently and economically
d. To determine whether the internal control system ensures that the accounting
records are correct and that financial statements are fairly stated
SECTION B
1. Explain the operating elements of an Information System.
2. List the sources of planning data. Explain.
3. Discuss the need of Information Technology.
4. What are the categories of MIS? Explain.
5. Explain the ethical issues of IT.
6. Explain the structure of LAN.
7. Explain the three basic categories of electronic commerce applications.
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8. Discuss about ERP Implementations Cycle.
9. Define linear programming. State the procedure for formulating linear programming
problems.
10. What are the steps followed in simplex method. Explain different approaches to
probability.
11. Write the dual of given LPP
Maximise z  3 X1  10 X 2  2X 3
Subject to
2X1  3 X 2  2X 3  7
3 X1  2X 2  4 X 3  3
X1 , X 2 , X 3  0
12. Solve the transportation problem by using North West Corner Rule.
To
Q1 Q2 Q3 Supply
F1 50 30 200
1
From F2 90 45 170
3
F3 250 200 50
4
Demand
4
2
2
13. The joint probability mass function of random variables X and Y is given by
2x  y
P x, y  
, x  0,1, 2 and Y  2,  1, 0 . Find out the marginal probability mass
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function of x and y , the conditional distribution of X / Y  1 and P X  2UY  0  .
14. A decision problem has been expressed in the following pay off table.
Find the maximax and maximum pay off action.
Strategy
1
2
3
A 1880 1840 1800
States B 1620 1600 1640
C 1400 1420 1720
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