Operations Audit Quiz 2

1. "Assuming that the invoice amount is Php 20,000, and the amount paid by the firm as per the official
receipt is Php 20,010, choose which of the following would you test the transaction. "
a. Tick mark: N; Meaning: No ; Interpretation: The amount paid is incorrect but this condition is reportable;
Variance: Php 10; Comment: Variance is not significant
b. Tick mark: N; Meaning: No; Interpretation: the amount paid is incorrect but this condition is
non-reportable; Comment: Variance is not significant
c. "Tick mark: N/R; Meaning: Not reportable; Interpretation: The amount paid is incorrect, but this
condition is not reportable; Variance: Php 10; Comment: Variance is not significant"
d. None of these

2. "As employees competence increases, the risk of errors, omissions, and other operational problems
decreases because they will be qualified to perform their duties, including control activities. "
❏ True
❏ False

3. "Risk Control is the process of identifying, measuring, and analyzing risks relevant to a program or process."
❏ True
❏ False

4. Which of the following does not belong to the group?

a. Negligible
b. Marginal
c. Catastrophic
d. Unlikely
e. None of these

5. An evidence from within the organization is more persuasive than the evidence from a third party.
❏ True
❏ False

6. "In obtaining audit evidence, interviewing the auditee is not necessary for as long as the auditable materials
are available and presented to the auditor for his review."
❏ True
❏ False

7. "Internal auditors have been proclaiming that management and the board own the programs and processes
of the organization, the objectives of these programs and processes, the risks that jeopardize the
achievement of these objectives, and the controls that mitigate their likelihood and impact. "
❏ True
❏ False

8. "In the scenario-based approach to audit review, auditors should consider both external and internal factors
that can affect the occurrence of events. Which of the following constitutes internal factors? "
a. Intensity of competition
b. Threat of new entrant
c. Threat of product substitutes
d. Bargaining power of buyers
 e. Firm Infrastructure

9. Production Time refers to reducing the time and related costs needed for a product or service to move
through part or all a supply chain.
❏ True
❏ False

10. "Pilferage is defined as dishonest or unethical conduct by a person entrusted with a position of authority,
often to acquire personal benefit; it includes many activities, including bribery and embezzlement.
However,
it may also involve practices that are legal in many countries, such as blatant favoritism and nepotism,
discrimination, and largesse."
❏ True
❏ False

11. A driver of operational audit objective wherein the Internal audit may review the related transactions to
verify they are all legitimate.
a. Compliance Issues
b. New rules
c. Anomalous revenues or expenses
d. Poor Performance
e. None of these

12. Which of the following is not an internal audit risk consideration?

a. corporate image
b. industry specific
c. compliance
d. IT-related risks
e. None of these

13. "In the Expanded Likelihood Ratings, Certain or imminent means that the likelihood of the risk to occur is
very high. Which of the following describes this likelihood rating?"
a. The event is considered to have a reasonable probability of occurring and affecting the organization.
b. The event is considered to have a fairly high probability of occurring.
c. The event does not present a realistic probability to occur.
d. The organization has an extremely high amount of exposure to the threat.

14. "This phase of operational audit consists of communicating findings, observations, and best practices
noted during the review, and developing recommendations for corrective action. "
a. Reviewing
b. Monitoring
c. Planning
d. Field work
e. Reporting

15. "This phase is when most of the testing is performed, and it includes interviewing, documenting, applying
testing methodologies, and providing status updates."
a. Reviewing
b. Monitoring
 c. Planning
d. Field work
e. Reporting

16. Drop ship refers to circumventing the distribution center or entire distribution channel by routing freight
directly to its destination.
❏ True
❏ False

17. Mathematical error is a form of audit evidence consisting of mathematically checking the accuracy of
records.
❏ True
❏ False

18. "The _________ phase in operational audit which includes scoping, budgeting, defining the population of
interest, how testing will be performed, and announcing the audit. "
a. Reviewing
b. Monitoring
c. Planning
d. Field work
e. Reporting

19. Defining the objectives of any engagement in operational audit is essential as an initial step to put it on the
right footing for success.
❏ True
❏ False

20. The enterprise risk assessment aims to produce two outputs: its strategic plan and the Audit plan.
❏ True
❏ False

21. Make to order is a type of production system where the material is prepared to be assembled quickly upon
receipt of the customer request and is usually customizable to a certain degree.
❏ True
❏ False

22. "The conditions and other variables that, in their presence or absence, may either exacerbate or diminish
the underlying risks are known as Risk factors. "
❏ True
❏ False

23. A flowchart is a diagram of a sequence of movements or actions of people or things involved in a process
or activity.
❏ True
❏ False

24. An approach in risk assessment which can drive the identification of the relevant event using prefabricated
list of common risks in the industry or area of scope.
a. Scenario based
 b. Common risk checking
c. Objectives based
d. Risk charting
e. None of these

25. Internal auditors can help management achieve its organizational goals by focusing on the implementation
of activities and other exposures with the highest significance and likelihood of harming the organization.
❏ True
❏ False

26. The audit evidence identifies what the internal audit function will review based on available resources and
the needs and priorities of the organization.
❏ True
❏ False

27. Which of the following is not a risk of the organization?

a. Strategic
b. Operational
c. Compliance
d. Reporting
e. None of these

28. A type of question is the internal control questionnaire (ICQ) that requires elaboration on the information
provided is known as close-ended questions.
❏ True
❏ False

29. Which of the following scenarios illustrates a bottleneck?

a. Manufacturing begins only after a customer's order is received.
b. Products are manufactured based on demand forecast.
c. Input comes faster than the speed of the process.
d. Material is prepared to be assembled quickly
e. None of these

30. Which of the following is an example of a close-ended question?

a. How many years have you been working for this company?
b. Describe how a client's order is being processed.
c. What happens when an employee appeals the management's decision?
d. Tell us something about inventory forecasting.
e. None of these

31. An approach for identifying the relevant events which Identify events that may hinder the ability of the
organization to achieve its objectives partially or completely.
a. Scenario based
b. Common risk checking
c. Objectives based
d. Risk charting
e. None of these
32. Which of the following does not belong to the group in scenario-based approach to audit review?
a. Political
b. Economic
c. Socio-cultural
d. Demographic
e. Human resource

33. Which of the following is not an internal constraint of the organization?

a. Equipment
b. People
c. Policies
d. All of these
e. None of these

34. A testimonial is a document created by auditors to record the work done.

❏ True
❏ False

35. The interpretation for the tick mark N/R means that the document reviewed did not pass the test applied to
it but this condition is reportable.
❏ True
❏ False

36. Which of the following are not a driver of operational audit objectives?
a. Compliance Issues
b. New rules
c. Anomalous revenues or expenses
d. Poor Performance
e. None of these

37. Vouch is an audit procedure that means reverse tracing of a transaction from a destination to its source.
❏ True
❏ False

38. "Evidence is subjective when two or more auditors, working independently are likely to arrive at the same
results. "
❏ True
❏ False

39. Which of the following is an example of mechanical hazard?

a. Poorly placed or installed equipment
b. Poorly operated equipment
c. Supplier disruption of delivery of raw materials
d. Loss of connectivity
e. Corrupted data

40. "The risk matrix is a widely used and highly effective tool to record and analyze the objectives, risks, and
controls in the program or process that is being audited as defined in the scope definition. "
❏ True
 ❏ False
41. Which of the following illustrate/s professional skepticism?
a. Auditor interviewing the auditee.
b. Auditor vouching the process flow
c. Auditor tracing the flow of documents
d. Observing an auditee
e. All of these

42. "The audit procedure, which means adding items in a column, is referred to as foot."
❏ True
❏ False

43. "In doing an observation to obtain audit evidence, it is possible that the auditee may not know that an
auditor is observing his behaviour. "
❏ True
❏ False

44. A photo copy of document may be acceptable as evidence in audit review since it exactly reflects the
information found in the original document.
❏ True
❏ False

45. "In the expanded impact ratings, negligible means very low impact describing which of the following? "
a. Very little damage or harm
b. No disruption in operations
c. Insignificant number of injuries
d. Insignificant number of people displaced
e. All of the above

46. Competitors check is the search for those best practices that will lead to the superior performance of a unit
or organization.
❏ True
❏ False

47. Workpaper evidence consists of verbal or written statements or assertions given by someone as proof
regarding the matter being discussed.
❏ True
❏ False

48. Audit Engagement is the very first stage of an audit procedure where the auditor notifies the client that the
auditor has accepted the work about the audit.
❏ True
❏ False

49. "An audit procedure, which means to confirm, prove, or corroborate, is known as verification."
❏ True
❏ False

50. "The audit universe consists of all auditable activities such as accounts, processes, programs, and
functions within an organization, and the risks associated with their ability to achieve their objectives."
❏ True
❏ False