CRMA Planning Risk-Based Engagements 2

Question 1

When building a risk-based engagement plan, which method BEST prioritizes auditable entities?

Accepted Answer

Risk ranking by inherent risk and control effectiveness

Answer

Alphabetical ordering of business units

Answer

Random sampling across all departments

Answer

Selection based solely on management requests

Question 2

Which definition BEST describes inherent risk in the context of engagement planning?

Accepted Answer

Risk that exists before any mitigating controls are considered

Answer

Risk remaining after controls are fully applied

Answer

Risk identified only after an audit is completed

Answer

Risk that has been formally accepted by the board

Question 3

A risk-based engagement plan should be formally updated when:

Accepted Answer

A significant change in the organization's risk profile occurs

Answer

The internal audit department receives additional budget

Answer

External auditors complete their annual financial audit

Answer

Senior management schedules an all-hands training event

Question 4

On a risk heat map used during engagement planning, what do the two primary axes represent?

Accepted Answer

Likelihood of occurrence and potential impact

Answer

Cost of audit and potential benefit

Answer

Control strength and residual risk level

Answer

Detection frequency and process complexity

Question 5

When determining audit engagement frequency for a high-risk area, which factor is MOST critical?

Accepted Answer

Historical audit findings indicating recurring control weaknesses

Answer

Number of full-time employees in the area

Answer

Annual budget allocated to internal audit overall

Answer

Operational manager's preferred audit schedule

Question 6

In risk-based engagement planning, 'residual risk' is best defined as:

Accepted Answer

Risk that remains after management applies controls to mitigate inherent risk

Answer

The total organizational risk universe before any auditing occurs

Answer

Risk that has been contractually transferred to a third-party vendor

Answer

Risks surfaced exclusively through prior internal audit engagements

Question 7

The PRIMARY purpose of developing an audit universe is to:

Accepted Answer

Identify and catalog all entities potentially subject to audit

Answer

Document the results of all prior audit engagements

Answer

Establish the annual budget for the internal audit function

Answer

Assign specific auditors to departments in advance