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1. What is the difference between a policy and a procedure?
- A.Compliance to a policy is discretionary, and compliance to a procedure is mandatory.
- B.A procedure provides discretionary advice to aid in decision making. The policy defines specific requirements to ensure compliance.
- C.A policy is a high-level document signed by a person of authority, and compliance is mandatory. A procedure defines the mandatory steps to attain compliance.✓ Correct
- D.A policy is a mid-level document issued to advise the reader of desired actions in the absence of a standard. The procedure describes suggested steps to use.
Explanation
Policies are high-level, issued by top authority, and mandatory; procedures detail required steps to comply.
2. Which of the following in a business organization will be held liable by the government for failures of internal controls?
- A.President, vice presidents, and other true corporate officers✓ Correct
- B.Board of directors, president, vice presidents, department directors, and managers
- C.All members of management
- D.Board of directors, CEO, CFO, CIO, and department directors
Explanation
Liability typically rests with true corporate officers (e.g., VP level and above).
3. What does fiduciary responsibility mean?
- A.To use information gained for personal interests without breaching confidentiality of the client.
- B.To act for the benefit of another person and place the responsibilities to be fair and honest ahead of your own interest.✓ Correct
- C.To follow the desires of the client and maintain total confidentiality even if illegal acts are discovered. The auditor shall never disclose information from an audit in order to protect the client.
- D.None of the above.
Explanation
Fiduciary duty requires placing the client's interests first while remaining lawful and honest.
4. What are the different types of audits?
- A.Forensic, accounting, verification, regulatory
- B.Integrated, operational, compliance, administrative✓ Correct
- C.Financial, SAS-74, compliance, administrative
- D.Information systems, SAS-70, regulatory, procedural
Explanation
Valid types include financial, operational, integrated, compliance, administrative, forensic, and IS; the listed correct set best fits.
5. What is the difference between the word should and shall when used in regulations?
- A.Shall represents discretionary requirements, and should provides advice to the reader.
- B.Should indicates mandatory actions, whereas shall provides advisory information recommending actions when appropriate
- C.Should and shall are comparable in meaning. The difference is based on the individual circumstances faced by the audit.
- D.Should indicates actions that are discretionary according to need, whereas shall means the action is mandatory regardless of financial impact.✓ Correct
Explanation
"Shall" indicates mandatory requirements; "should" is discretionary guidance.
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