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Audit & Insurance Questions and Answers

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Question 1

The production department of Cates Ltd is headed by Brad Hogg, whose deputy is Michael. Brad reports to the managing director, John Silver. There are several other departments namely sales and marketing, treasury, accounting, production, processing, purchasing, HR and internal audit.

Which of the following is the BEST method to make ‘purchase orders’ from production department?

Options:

A.

Brad Hogg and Michael should make purchase orders as production needs dictate.

B.

Brad Hogg should make purchase orders, although Michael could make requisitions as production needs dictate.

C.

Brad Hogg and Michael should send requisition for materials as production needs dictate, but orders should be placed by the purchasing department.

D.

Brad Hogg and Michael should send requisition for materials as production needs dictate but orders should be placed by the purchasing department, having been authorised by John Silver.

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Question 2

The auditor finds a situation where one person has the ability to collect receivables, make deposits, issue credit memos, and record receipt of payments. The auditor suspects the individual may be stealing from cash receipts.

Which of the following audit procedures would be most effective in discovering fraud in this scenario?

Options:

A.

Send negative confirmations to all outstanding accounts receivable customers.

B.

Send positive confirmations to a random selection of customers.

C.

Perform a detailed review of debits to customer discounts, sales returns, or other debit accounts, excluding cash posted to the cash receipts journal.

D.

Take a sample of bank deposits and trace the detail in each of the bank deposit back to the corresponding entry in the cash receipts journal.

Question 3

Internal auditors and management have become increasingly concerned about computer fraud. Which of the following control procedures would be least important in preventing computer fraud?

Options:

A.

Programme change control that requires a distinction between production programmes and test programmes.

B.

Testing of new applications by users during the systems development process.

C.

Segregation of duties between the applications programmer and the programme librarian function.

D.

Segregation of duties between the programmer and systems analyst.

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