1.

Which of the following actions constitutes a violation of the confidentiality concept regarding
working papers?     An internal auditor
Select one:
a. Takes working papers to her hotel room overnight.
b. Shows working papers on occasion to engagement clients.
c. Allows the external auditor to copy working papers.

d. Misplaces working papers occasionally. 

The working papers belong to the auditor and should have proper control maintained over them.
Misplacing the working papers, even occasionally, is not maintaining proper control over them.

2. Which of the following is the most important if working papers are to have the characteristics that
will ensure that they achieve their primary purposes?
Select one:
a. Working papers must be of standard format and standard content.
b. Working papers must be properly indexed and cross-referenced to the draft final engagement
communication.
c. Working papers must provide sufficient, reliable, and useful information to support the final

engagement communication. 
Internal auditors must document relevant information to support the conclusions and engagement
results (Standard 2330). Working papers are the place in which the internal auditor records all of the
work and tests that are performed during the engagement. Working papers document the
information obtained, the analyses made, and the support for the conclusions and engagement
results. Therefore, the information contained in the working papers must be sufficient, reliable, and
useful to support the final engagement communication

d. Working papers must be arranged in logical order following the engagement work program
sequence.

3. Working papers often contain information of potential future value. A retention policy for working
papers should be devised after consultation with
Select one:

a. Legal counsel. 
In setting retention policy, the CAE should consult with legal counsel to ensure that all documents
that are required to be kept for a certain period by law or other contractual agreement are kept for
the required time.

b. Engagement clients.
c. The bonding organization.
d. The board.

4. Working papers contain a record of engagement work performed and much confidential
information. They are the property of the internal audit activity (IAA), which is responsible for their
security. Which of the following is the most important control requirement for working papers?
Select one:
a. Make the administrative section of the internal audit activity responsible for the security of working
papers.

b. Provide for the protection of working papers at all times and to the extent appropriate. 
The working papers belong to the auditor and should have proper control maintained over them.
This means that unauthorized personnel should not have access to the working papers.

c. Allow access to working papers only to internal audit activity personnel.

d. Purge working papers periodically of materials that are considered confidential.

5. The internal auditor prepares summaries of data in working papers to

Select one:
a. Explain the notes used throughout the working papers.
b. Indicate the numerical arrangement of the working papers.

c. Focus on significant engagement observations. 

Summaries are a useful tool to use in the working papers in order to bring together significant
information that may be located in different parts of the working papers.

d. Identify the irrelevant facts gathered during the engagement communication.

6. During the working paper review, an internal auditing supervisor finds that the internal auditor's
observations are not adequately cross-referenced to supporting documentation. The supervisor will
most likely instruct the internal auditor to
Select one:
a. Prepare a working paper to indicate that the full scope of the engagement was carried out.
b. Familiarize him/herself with the sequence of working papers so that (s)he will be able to answer
questions about the conclusions stated in the final engagement communication.
c. Eliminate any cross-references to other working papers because the system is unclear.
d. Provide a cross-referencing system that shows the relationship among observations, conclusions,

recommendations, and the related facts. 

A cross-referencing system is useful because it helps to facilitate: (1) supervisory review, (2)
subsequent engagements, (3) locating data in the working papers, and (4) the preparation of the
final engagement communication.

7. The best description of the principal purpose for retaining working papers is to
Select one:
a. Provide a basis for supervisory review.
b. Help perform the engagement in an orderly fashion.

c. Provide support for the final engagement communication. 

Working papers document the information obtained, the analyses made, and the support for the
conclusions and engagement results (PA 2330-1). Working papers provide the principal support for
the engagement communications.

d. Maintain the engagement work program for reuse in the next engagement.

8. An internal auditor's working papers should support the observations, conclusions, and
recommendations to be communicated. One of the purposes of this requirement is to
Select one:
a. Provide control over working papers.

b. Facilitate quality assurance reviews. 

Working papers are the place in which the internal auditor records all of the work and tests that are
performed during the engagement. The working papers are the basis for any conclusions that are
drawn by the internal auditor. Thus, working papers help to facilitate quality assurance reviews.

c. Permit the audit committee to review observations, conclusions, and recommendations.

d. Provide support for the internal audit activity's financial budget.

9. Which type of working paper summary is typically used to consolidate numerical data scattered
among several schedules?
Select one:
a. Results summaries.
b. Statistical summaries. 
Statistical summaries combine the results in the related schedules so the client can better
understand the meaning of the statistics.

c. Segment summaries.

d. Pyramid summaries.

10. Engagement working papers are indexed by means of reference numbers. The primary purpose
of indexing is to
Select one:
a. Support the final engagement communication.
b. Determine that working papers adequately support observations, conclusions, and
recommendations.

c. Permit cross-referencing and simplify supervisory review. 

Each page should contain an index number or reference so that it can be identified from other
working papers. This reference will be used to cross-reference information form one page to
another. Thus, cross-referencing simplifies supervisory review.

d. Eliminate the need for follow-up reviews.

11. He primary objective of maintaining security over working papers is to

Select one:
a. Facilitate engagements by external auditors.
b. Facilitate subsequent engagements in the same department.
c. Prohibit engagement clients from seeing working papers.

d. Prohibit unauthorized changes or removal of information 

The working papers belong to the auditor and should have proper control maintained over them.
This means that unauthorized personnel should not have access to the working papers. Proper
control would prohibit unauthorized changes or removal of information.

12. An internal auditor's working papers should be reviewed by the

Select one:
a. Management of the engagement client.
b. Audit committee of the board.
c. Chief audit executive. 
The auditor's working papers should be reviewed by the CAE. It is the CAE who is responsible for
the performance of the review.

d. Management of the organization's security division.

13. Which of the following conditions constitutes inappropriate working paper preparation?
Select one:
a. Tick marks are explained in notes

b. All forms and directives used by the engagement client are included in the working papers. 
Internal auditors must document relevant information to support the conclusions and engagement
results (Standard 2330). Only the relevant forms and directives issued by the engagement client
would be included in the working papers.

c. Flowcharts are included in the working papers.

d. Engagement observations are cross-referenced to supporting documentation.

14. You are an internal auditing supervisor reviewing the working papers of a staff internal auditor's
overall examination of the firm's sales function. The pages are not numbered or cross-referenced.
Further, the working papers were dropped and reassembled at random before they were brought to
you. You decide to put the working papers in the proper order according to the Standards. The first
stage of this activity is to identify each page as a part of: (A) the preliminary survey, (B) the review of
the adequacy of control processes, (C) the review for effectiveness of control processes, or (D) the
review of results.
The first page you select documents a test of controls performed during the course of the
engagement. This page belongs with which activity?
Select one:
a. Preliminary survey.
b. Review for adequacy of control processes.
c. Review of results.

d. Review for effectiveness of control processes. 

The IAA must evaluate the adequacy and effectiveness of controls in responding to risks within the
organization's governance, operations, and information systems regarding the: Reliability and
integrity of financial and operational information;
Effectiveness and efficiency of operations;
Safeguarding of assets; and
Compliance with laws, regulations, and contracts (Standard 2130.A1).
The testing of controls is performed in reviews for effectiveness of control systems.
15. Each individual working paper should, at a minimum, contain
Select one:

a. A descriptive heading. 
Each working paper (each page) should have a proper heading that identifies the engagement and
the contents or purpose of the working paper.

b. An expression of the internal auditor's overall opinion.

c. A tick mark legend.

d. A complete flowchart of the system of internal controls for the area being reviewed.

16. When determining the retention period for the working papers of a contract engagement, it is
best to
Select one:
a. Follow the contractor's own record retention policies.

b. Seek the assistance of the legal department to assure compliance with contract provisions. 
In setting retention policy, the CAE should consult with legal counsel to ensure that all documents
that are required to be kept for a certain period by law or other contractual agreement are kept for
the required time.

c. Review the organization's policy manual developed by the records management area for the
section regarding business records.

d. Check with the accounting department because accounting records are involved.

17. Engagement working papers should include

Select one:
a. Documentation of the examination and evaluation of the adequacy and effectiveness of the

system of internal control. 

Working papers should include documentation of the examination and evaluation of the adequacy
and effectiveness of the internal control system.

b. Copies of all procedures that were reviewed during the engagement.

c. All working papers prepared during a previous engagement performed in the same area.

d. Copies of all source documents examined in the course of the engagement.

18. When reviewing engagement working papers, the primary responsibility of an engagement
supervisor is to determine that
Select one:
a. Working papers adequately support the engagement observations, conclusions, and

recommendations. 
Engagement supervision includes determining whether engagement working papers adequately
support engagement observations, conclusions, and recommendations (PA 2340-1).

b. Each worksheet is properly identified with a descriptive heading.

c. Standard internal audit activity procedures are adhered to with regard to working paper
preparation and technique.

d. Working papers are properly referenced and kept in logical groupings.

19. Internal auditors often include summaries within their working papers. Which of the following
best describes the purpose of such summaries?
Select one:
a. Summaries document that the internal auditor has considered all relevant information.
b. Summaries distill the most useful information from several working papers into a more usable

form. 
Summaries are a useful tool to use in the working papers in order to bring together significant
information that may be located in different parts of the working papers.

c. Summaries are usually required to complete each section of an engagement work program.

d. Summaries are prepared to conform with the Standards.

20. A working paper is complete when it

Select one:

a. Satisfies the engagement objective for which it is developed. 

Working papers are the place in which the internal auditor records all of the work and tests that are
performed during the engagement. The working papers are the basis for any conclusions that are
drawn by the internal auditor.

b. Complies with the internal audit activity's format requirements.

c. Contains all of the attributes of an observation.
d. Is clear, concise, and accurate.

21. The primary purpose of an internal auditor's working papers is to

Select one:
a. Serve as a means with which to prepare the financial statements.
b. Document weaknesses in internal control with recommendations to management for
improvement.
c. Comply with the Standards.

d. Provide documentation of the planning and execution of engagement procedures performed. 

Working papers aid in the planning, performance, supervision and review of engagements. This is
the primary goal of the working papers.

22. Which of the following states an inappropriate policy relating to the retention of engagement
working papers?
Select one:

a. Working papers prepared for fraud investigators should be retained indefinitely. 

No working papers will have to be retained indefinitely, even for fraud investigations.

b. Working papers retention schedules should be approved by legal counsel.

c. Working papers should be disposed of when they have no further use.

d. Working papers retention schedules should consider legal and contractual requirements.

23. A feasibility study is being completed to determine whether an internal auditing activity (IAA)
should convert to electronic working papers. The decision to convert will be based primarily on the
requirements of the IAA and the experience of the audit department. Which of the following is true if
contemplating a conversion from paper to electronic medium?
Select one:
a. The media selected should determine working papers design and content.
b. Conversion from paper should occur no later than the time of final review.

c. Consideration should be given to generating backup copies of working papers. 

Information that is stored electronically is at risk for the loss of the data in more ways than is a hard
copy working paper file. Thus, there needs to be procedures for the regular and consistent backing
up of data stored electronically.

d. Working papers retention should be solely a function of the media used.

24. Internal auditors use a variety of indexing and cross-referencing methods in their working
papers. An internal auditing manager might devise a working paper indexing method tailored to a
specific organization's needs. On the other hand, a governmental agency might devise a method for
all organizations under the agency's jurisdiction. Which of the following best explains the reason for
this difference in working paper index methods?
Select one:
a. The internal auditing manager devises a method that simplifies the review process within a
particular organization, but the governmental agency devises one uniform method to simplify the

review process of the vastly different organizations to be reviewed. 

By standardizing the process, the forms, the tick marks, indexing and cross-referencing and other
elements of the working papers, it becomes easier for everyone to prepare and review the working
papers. But, the internal auditor of an organization will develop the indexing and cross-referencing
methods that are best suited for the organization. On the other hand, a governmental agency is
more inclined to develop uniform methods that are compatible throughout its jurisdiction.

b. The internal auditing manager devises the method specified by the board of the organization, but
the governmental agency devises one uniform method required by law.
c. The method of the internal auditing manager is prescribed by the Standards, but the method of the
governmental agency is required by the regulatory agency.

d. The method of the internal auditing manager is prescribed by the Standards, but the method of the
governmental agency is required by law.

25. Which of the following should be identified as a deficiency by an engagement supervisor who is
reviewing working papers?
Select one:
a. A letter to the engagement client outlining the scope of the engagement was recorded in the
working papers.
b. A memorandum recorded in the working papers explained why an engagement work program
step was omitted.
c. A memorandum recorded in the working papers explained why the time budget for a part of the
engagement was exceeded
d. A draft communication concerning an engagement observation recorded in the working papers

omitted the criteria used for evaluation. 

Any observations and recommendations that are made should be based on four attributes. These
four attributes are criteria, condition, cause and effect. Thus, omitting any, or all of these attributes is
a failure to properly support the observations and recommendations.
26. A fire destroyed a large portion of an organization's inventory. Management is filing an insurance
claim and needs to use the internal auditors' working papers in preparing the claim. Management
Select one:
a. May use the working papers in preparing the claim, but such use should be approved by the chief

audit executive. 
Engagement working papers can be used in circumstances such as insurance claims, fraud, and
lawsuit.

b. May use the working papers in preparing the claim, but such use should be approved by the
organization's external auditors.
c. May not use the working papers in preparing the claim.

d. Should be precluded from preparing the claim, and this function should be performed by the
internal audit activity.

27. A significant part of the auditor's working papers will be the conclusions reached by the auditor
regarding the audit area. In some situations, the supervisor might not agree with the conclusions and
will ask the staff auditor to perform more work. Assume that after subsequent work is performed, the
staff auditor and the supervisor continue to disagree on the conclusions documented in the working
paper developed by the staff auditor. Which of the following audit department responses would not
be appropriate?
Select one:
a. Present both conclusions in the audit report and let management and the auditee react to

both. 
This would not be an appropriate response. The CAE should determine the most reasonable
conclusion and present that to the auditee and management. The issue of disagreements on the
working papers should not necessarily affect the reporting to management unless the director of
internal auditing believes that both conclusions are equally appropriate and it would enhance
management's understanding to be presented with both.

b. Note the disagreement and retain the notice of disagreement and follow-up work in the audit
working papers.
c. Present both conclusions to the chief audit executive (CAE) for resolution. The CAE may resolve
the matter.

d. Both the staff auditor and the supervisor document their reasons for reaching different
conclusions. Retain the rationale of both parties in the working papers.

28. An internal auditor prepared a working paper that consisted of a list of employee names and
identification numbers as well as the following statement: "By matching random numbers with
employee identification numbers, 40 employee personnel files were selected to verify that they
contain all documents required by the organization's policy 501. No exceptions were noted." The
internal auditor did not place any tick marks on this working paper. Which one of the following
changes will improve the internal auditor's working paper the most?
Select one:
a. Listing of the actual documents examined for each employee.

b. Justification for the sample size. 

The working papers should justify the sample size. The working papers should include information
such as how the sample size was determined, etc. Sample size will affect the degree of sampling
risk.

c. Use of tick marks to show that each file was examined.

d. Removal of the employee names to protect their confidentiality.

29. When performing an engagement to evaluate the computerized purchasing activities of a

manufacturing organization, which of the following should be included in the permanent file portion of
the engagement working papers?
Select one:
a. Copies of the computer program documentation.
b. Prior year's working papers revised to reflect changes during the current year.
c. Information concerning administrative controls over the computer operations at each

location. 
The permanent file is where documents that will be relevant to different year's engagements are
stored. Some of the items that are commonly kept in the permanent file are: (1) chart of accounts,
(2) updated organizational charts, (3) long term contracts, (4) debt agreements, (5) historical
financial data, (6) management reports, (7) corporate charter and other corporate documents, (8)
communications and reports from previous engagements, (9) and correspondence related to the
engagement that is significant. Thus, it would be appropriate for the permanent file to contain
information concerning administrative controls over the computer operations at each location..

d. Printouts using internal auditor prepared programs and test data.

30. The internal auditor is most likely to make working papers available to the engagement client
when
Select one:
a. Fraud is suspected.
b. The internal auditor considers the content noncontroversial.
c. The internal auditors have recorded specific damaging comments.
d. Engagement client comments are needed to evaluate significance and accuracy. 
The working papers can be shared with the engagement client in cases where the engagement
client comments are needed to evaluate significance and accuracy.

31. Standardized (pro forma) working papers are often used, chiefly because they allow working
papers to be prepared more
Select one:
a. Accurately.
b. Professionally.

c. Efficiently. 
The use of pro forma working papers allows the working papers to be prepared more efficiently
because less time can be spent on preparation.

d. Neatly.

32. When current-file working papers are no longer of use to the internal audit activity (IAA), they
should be
Select one:
a. Transferred to the custody of the engagement client for ease of future records.
b. Transferred to the permanent file.

c. Destroyed. 
The period of time should be established in a policy set by the CAE. In setting this policy, the CAE
should consult with legal counsel to ensure that all documents that are required to be kept for a
certain period by law or other contractual agreement are kept for the required time. After the
necessary time period has passed, the working papers should be destroyed.

d. Placed in the custody of the organizational legal department for safekeeping.

33. The internal auditor prepares working papers primarily for the benefit of
Select one:
a. The external auditor.
b. The engagement client.
c. Senior management.

d. The internal audit activity. 

Working papers are the place in which the internal auditor records all of the work and tests that are
performed during the engagement. The working papers are the basis for any conclusions that are
drawn by the internal auditor.

34. The primary reason that internal auditors cross-index their working papers is to
Select one:
a. Give the working papers a professional appearance.

b. Provide a trail for the internal auditor and the reviewer. 

A good cross-referencing system is useful because it provides a trail for the internal auditor and the
reviewer.

c. Explain the use of tick marks.

d. Provide explanation of the engagement procedures performed.

35. When reviewing working papers, an internal auditing supervisor will be primarily concerned with
determining whether the
Select one:
a. Working papers adequately support the engagement observations, conclusions, and

recommendations. 
The working papers serve a number of purposes in the engagement. Working papers document the
information obtained, the analyses made, and support the conclusions and engagement results (PA
2330-1). Thus, a primary concern of the supervisor is determine whether the working papers
adequately support the engagement observations, conclusions, and recommendations.

b. Engagement work programs have been carried out without deviation.

c. Working papers reflect adherence to budget constraints.

d. Auditing department's standard formats and tick marks have been used consistently.

36. Working paper summaries, if prepared, can be used to

Select one:

a. Promote efficient working paper review by internal auditing supervisors. 

Working papers should have summaries throughout to provide the reviewer with a brief statement of
information contained in subsequent schedules. Summaries promote efficient working paper review
by internal auditing supervisors.

b. Serve as an engagement communication to senior management.

c. Document the full development of engagement observations.

d. Replace the detailed working paper files for permanent retention.

37. The primary purpose of an engagement working paper prepared in connection with payroll
expense is to
Select one:
a. Verify the work done by the internal auditor.

b. Record payroll data and analyses to support reported recommendations. 

Working papers document the engagement results and should be prepared by the internal auditor
and reviewed by management of the IAA. Working papers document the information obtained, the
analyses made, and the support for conclusions and engagement results (PA 2330-1.1).

c. Provide documentation to support payroll taxes due.

d. Record the names of all employees.

38. Which of the following is an unnecessary feature of a working paper prepared in connection with
maintenance costs?
Select one:
a. The internal auditor has initialed and dated the working paper as of the date completed even
though the working paper was prepared over the preceding 4 working days.
b. The chief audit executive has initialed the working paper as reviewer although the working paper
was prepared by another person.
c. Total repair expense for the month preceding the engagement is shown.

d. Total acquisition cost of property, plant, and equipment for the preceding month is shown. 
Total acquisition cost of property, plant, and equipment do not concern maintenance costs, so
therefore this information is irrelevant to the engagement working papers.

39. Engagement working papers should be reviewed to ensure that

Select one:
a. They meet or exceed the work standards of the organization's external auditors.
b. No issues are open at the conclusion of the fieldwork. 
All working papers need to be reviewed by the engagement management. This review is done to
ensure that the evidence that has been collected properly supports the conclusions that were drawn
and any communications that were sent.

c. They are properly referenced for easy follow-up within the next year.

d. They are properly cross-referenced to the engagement communications.

40. The chief audit executive (CAE) should establish policies for
Select one:
a. Defining standardized tick marks and ensuring compliance with them.

b. Indexing and the type of working paper files maintained. 

The CAE establishes working paper policies for the various types of engagements performed (PA
2330-1.4). The CAE establishes guidelines and standardized forms that will be followed in all of the
working papers that are created. For example, each page should contain an index number or
reference so that it can be identified form other working papers. This reference will be used to cross
reference information from one page to another.

c. Defining the hours available for individual engagements.

d. Ensuring the written documentation of all conversations held throughout the engagement.

41. Which of the following does not describe one of the functions of engagement working papers?
Select one:

a. Aids in the professional development of the operating staff. 

Working papers can aid in the professional development of the internal audit staff; however they are
not likely to aid in the development of the company's operating staff (staff outside the Internal Audit
Activity.

b. Provides the principal support for engagement results.

c. Aids in the planning, performance, and review of engagements.

d. Facilitates third-party reviews.

42. Adequately documented working paper should

Select one:
a. Be concise but complete. 
The working papers need to be prepared in a manner that is complete, yet concise. They should be
prepared so that they will be easier to review and easier to follow at later dates.

b. Not contain copies of engagement client records.

c. Contain examples of all forms and procedures used by the engagement client.

d. Follow a unique form and arrangement.

43. When engagement conclusions are challenged, the internal auditor's factual rebuttal is best
facilitated by
Select one:
a. Summaries in the engagement work program.
b. Explicit procedures in the engagement work program.

c. Cross-referencing of the working papers. 

A well-developed and implemented cross-referencing system will be useful when information from
the audit is challenged. By having a good system in place is easier to find the needed information
and will make the evidence appear more credible.

d. Pro forma working papers.

44. Working papers should be disposed of when they are of no further use. Retention policies should
Select one:
a. Specify a minimum retention period of 3 years.

b. Be approved by legal counsel. 

The CAE should consult with legal counsel to ensure that all documents that are required to be kept
for a certain period by law or other contractual agreement are kept for the required time.

c. Be approved by the external auditor.

d. Be prepared by the audit committee.

45. Working papers provide the documentary support for the internal auditor's report. Which of the
following is not a good practice for working papers
Select one:
a. Working papers should be kept secure at all times to prevent accidental loss or unauthorized
access.
b. Internal auditors within a given organization should develop standardized methods for
organization and documentation.
c. Working papers should be organized chronologically, i.e., with the papers prepared earliest at the

front of the file. 

Chronological organization would be ineffective.

d. Working papers should be sufficient to support the internal auditors' report without additional
verbal elaboration by the internal auditor.

46. A good working paper for a bank reconciliation should include (either directly or through cross
reference) all of the following except
Select one:

a. A list of all deposits made during the period in question. 

Because bank reconciliations do not show a list of all deposits, only deposits in transit.

b. A list of outstanding checks.

c. A legend explaining all tick marks employed.

d. The cash balance per the general ledger as of the reconciliation date.

47. Which of the following concepts distinguishes the retention of computerized engagement
working papers from that of the traditional hardcopy form?
Select one:
a. Analyses, conclusions, and recommendations are filed on electronic media and are therefore

subject to computer system controls and security procedures. 

Computers are used in the performance and analysis of tests, and may also be used in the process
of creating and storing the working papers themselves. There are some additional security related
issues that are specific to computers and electronic working papers. The primary issue for the
working paper is access to the information. Because electronic information can be assessed through
networks and the Internet, the company needs to have sufficient identification checks and
passwords to make certain that only people who should have access to the file are able to access
the file.

b. Informational support for all observations is copied and provided to local management during the
closing conference and to each person receiving the final engagement communication.
c. Work programs can be standardized to eliminate the need for a survey at each location.
d. Computerized files can be used in engagement procedures.

48. Auditors use a variety of indexing and cross-referencing methods in their audit working papers.
An internal auditing manager might devise a working paper indexing method tailored to a specific
organization's needs. On the other hand, a government audit agency would devise one method for
all organizations under the agency's jurisdiction. Which of the following best explains the reason for
this difference between the two working paper indexing methods?
Select one:
a. The method of the internal auditing manager is prescribed by the Standards, but the method of the
government audit agency is required by agency policy.
b. The internal auditing manager devises a method which simplifies the review process within a
particular organization, but the government audit agency devises one uniform method to simplify the

review process of the vastly different organizations to be audited. 

Since there are many differences between organizations (e.g., type, size, location, etc.), the internal
auditing manager devises the working paper indexing method that best suits his organization. A
government audit agency, on the other hand, audits many different organizations that come under
the agency. Therefore, the government audit agency devises one uniform indexing method that is
compatible with all of the organizations that it audits so that the review process can be simplified.

c. The internal auditing manager devises that method which is specified by the organization's audit
committee, but the government audit agency devises one uniform method which is required by law.

d. The method of the internal auditing manager is prescribed by the Standards, but the method of the
government audit agency is required by law.

49. Which of the following statements are correct regarding internal audit working paper
documentation for a fraud investigation?
I. All incriminating evidence should be included in the working papers.
II. All important testimonial evidence should be reviewed to ensure that it provides sufficient basis for
the conclusions reached.
III. If interviews are held with a suspected perpetrator, written transcripts or statements should be
included in the working papers.
Select one:

a. I, II, and III. 

All working papers should contain pertinent information to support findings.

b. II and III only.

c. II only.

d. I only.
50. Which of the following most completely describes the appropriate content of working papers?
Select one:
a. Audit subject, purpose, sampling information, and analysis.
b. Engagement objectives, procedures, and conclusions.

c. Engagement objectives, procedures, facts, conclusions, and recommendations. 

The working papers should record the information obtained and the analyses made and should
support the bases for the observations and recommendations to be reported. Thus, working papers
should generally include engagement objectives, procedures, facts, conclusions, and
recommendations.

d. Purpose, criteria, techniques, and conclusions.

51. Which of the following best explains the reason for a difference between two working paper
indexing methods used by internal auditors?.
Select one:
a. The method of one internal auditing manager might be prescribed by the Standards; the method
of the other might be required by company policy only.
b. The method of one internal auditing manager might be prescribed by the Standards, but the
method of the other might be required by law.
c. One internal auditing manager might devise a method that simplifies the review process within a
particular organization, and another might devise one uniform method to simplify the review process

of vastly different organizations to be audited. 

Since there are many differences between organizations (for example, type, size, location, etc.), one
internal auditing manager devises the working paper-indexing method that best suits his or her
organization.
On the other hand, another may have to audit many different organizations that are in that
organization. Therefore, that manager devises one uniform indexing method that is compatible with
all of the organizations audited so that the review process can be simplified.

d. One internal auditing manager might use that method specified by the organization’s audit
committee, and the other might use a method required by law.

52. The function of working papers include of the following except

Select one:
a. To explain all audit verification symbols properly.
b. To facilitate third-party reviews.
c. To provide the principal evidential support for the auditor's report.

d. To aid in the professional development of the operating staff or teach skills to non-auditors. 
The functions of the working papers are: (1) to facilitate third-party reviews, (2) to aid in the planning,
performance, and review of audits, (3) to provide the principal evidential support for the auditor’s
report, (4) to explain all audit verification symbols properly, and (5) to make cross-referencing
between the working papers and the audit report. Aiding in the professional development of the
operating staff or teaching skills to non-auditors is not a function of the working papers.

53. Which of the following is a disadvantage of electronic working papers?

Select one:
a. Each member internal auditor must have a personal computer.

b. Specific technical training may be required. 

Training is required to effectively use any software package.

c. Cross-referencing is more difficult.

d. Critical working papers must still be printed and filed.

54. Working paper summaries, if prepared, can be used to

Select one:

a. Promote efficient working paper review by internal audit supervisors. 

Summaries should be throughout the working papers and are done to promote efficient review and
to make sure that the information that is included is accurate and consistent.

b. Document the full development of engagement observations and recommendations.

c. Replace the detailed working paper files for permanent retention.

d. Serve as an engagement final communication to senior management.

55. Which of the following most completely describes the appropriate content of engagement
working papers?
Select one:
a. Subject, purpose, sampling information, and analysis.
b. Objectives, procedures, and conclusions.
c. Objectives, procedures, facts, conclusions, and recommendations. 
Working papers document the information obtained, the analyses made, and the support for the
conclusions and engagement results (PA 2330-1).

d. Purpose, criteria, techniques, and conclusions.

56. Which of the following represents appropriate evidence of supervisory review of engagement
working papers?
I. A supervisor's initials on each working paper.
II. An engagement working paper review checklist.
III. A memorandum specifying the nature, extent, and results of the supervisory review of working
papers.
IV. Performance appraisals that assess the quality of working papers prepared by auditors
Select one:

a. I, II, and III only. 

All engagement working papers are reviewed to ensure that they support engagement
communications and necessary audit procedures are performed. Evidence of supervisory review
consist of the reviewer initialing and dating each working paper after it is reviewed. Other techniques
that provide evidence of supervisory review include completing an engagement working paper
review checklist; preparing a memorandum specifying the nature, extent, and results of the review;
or evaluating and accepting reviews within the working paper software.

b. I, II, III, and IV.

c. I, III, and IV only.

d. II and IV only.