Which sampling technique uses a nonrandom selection process that is expected to be representative of the population as a whole?
Comprehensive and Detailed Step-by-Step Explanation:
Definition of Sampling Techniques:
Judgmental Sampling: A nonrandom method where the auditor uses their professional judgment to select items expected to be representative of the population.
Haphazard Sampling: A nonrandom approach without systematic methodology, relying on arbitrary selection.
Attribute Sampling: A statistical sampling method used to test for specific attributes or characteristics in a population.
Reasoning:
Option A is correct because judgmental sampling intentionally selects items based on the auditor's knowledge and expectations, aiming for representation.
Option B (haphazard sampling) lacks intentionality and may not reliably represent the population.
Option C (attribute sampling) involves random, statistical selection rather than a nonrandom process.
When to Use Judgmental Sampling:
It is appropriate when the auditor has sufficient expertise to select representative items and when statistical sampling is not feasible.
Internal and external benchmarking by the internal audit activity are examples of which of the following?
Comprehensive and Detailed Step-by-Step Explanation:
Analytical Procedures: Benchmarking compares an organization's performance against internal or external standards, which is a core analytical procedure used to assess efficiency, effectiveness, or best practices.
Other Options:
Inquiry: Involves obtaining information from individuals but does not inherently involve data analysis or comparison.
Confirmation: Typically involves verifying information from an external party, not benchmarking.
Thus, the correct answer is C. Analytical Procedures.
Which of the following would be considered out of scope for a purchasing process audit engagement?
Comprehensive and Detailed Step-by-Step Explanation:
Control of Goods: The control of goods is generally considered part of inventory management or logistics, not the purchasing process. The purchasing process typically ends with the receipt of goods or services and ensuring appropriate payments.
Other Options:
Authorization of Requisitions: Within scope, as it is directly related to the initiation of the purchasing process.
Matching Goods Received to Requisitions: Part of the purchasing process audit scope to ensure accurate and legitimate transactions.
Thus, the correct answer is B. Control of Goods.
Which of the following describes how the internal audit activity can add the greatest value by assisting management with internal controls?
Comprehensive and Detailed Step-by-Step Explanation:
Reference to IIA Standards:
Standard 2130 - Control: Internal audit must evaluate and contribute to the improvement of governance, risk management, and control processes.
Designing or operating controls (Options A and B) risks impairing internal audit independence (Standard 1100).
Reasoning:
Option C aligns with internal audit's role of evaluating internal controls objectively.
Option A could involve a management function, which compromises independence.
Option B focuses on monitoring, a management responsibility, and does not leverage internal audit's evaluative expertise.
Best Practice:
By evaluating controls, internal auditors provide actionable insights that help improve control effectiveness and efficiency without compromising independence.
Which of the following describes an internal auditor's use of external benchmarking?
Comprehensive and Detailed Step-by-Step Explanation:
Reference to Benchmarking:
External benchmarking involves comparing the organization's metrics with those of other entities, typically competitors or industry averages.
Standard 1210 - Proficiency: Internal auditors must have knowledge to evaluate performance against external benchmarks effectively.
Reasoning:
Option B demonstrates external benchmarking by comparing the organization's return on equity with a competitor's performance.
Option A and Option C focus on internal analysis within the organization and do not use external references.
Application in Internal Auditing:
External benchmarking identifies competitive gaps, informs strategic decisions, and supports recommendations for improvement.
