Real IIA-CIA-Part1 Exam Questions are the Best Preparation Material
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NEW QUESTION # 363
Which of the following offers the feast evidence that the internal audit activity has achieved organizational independence?
- A. An independent third party has assessed the organization's system of internal controls to be adequate and effective.
- B. The chief audit executive reports both functionally and administratively to the CEO.
- C. The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.
- D. The internal audit charter is drafted properly and approved by the appropriate parties.
Answer: D
NEW QUESTION # 364
Given the highly technical and legal nature of privacy issues, which of the following statements best describes the internal audit activity's responsibility with regard to assessing an organization's privacy framework?
- A. The internal audit activity may delegate to nonaudit IT specialists the responsibility of determining whether personal information has been secured adequately and data protection controls are sufficient.
- B. Because the audit committee is ultimately responsible for ensuring that appropriate control processes are in place to mitigate risks associated with personal information, the internal audit activity is C. required to conduct privacy assessments.
- C. If an organization does not have a mature privacy framework, the internal audit activity should assist in developing and implementing an appropriate privacy framework.
- D. The internal audit activity should have appropriate knowledge and competence to conduct an asses .......framework.
Answer: D
NEW QUESTION # 365
Which of the following is most likely to function as a directive control?
- A. Alert employees.
- B. Cycle counts.
- C. Insurance claims.
- D. Security dogs.
Answer: A
NEW QUESTION # 366
A chief audit executive (CAE) recruited a few new internal auditors to reduce the resource gaps identified in this year's internal audit plan. One of the new recruits has several years of experience with the organization.
Ten months ago. she served as a senior supervisor in the finance department. However, for the past 10 months, she has been helping the organization with implementing a new IT system. What approach should the CAE take for the upcoming financial statement controls audit?
- A. Ensure that the new auditor's previous manager, and other close former coworkers, are excused during the audit.
- B. Ensure that the new auditor is responsible only for the supervisory review, but not the execution of the audit field work.
- C. Assign the new auditor to assist with conducting the fieldwork. but ensure that her work is reviewed by the CAE.
- D. Assign the new auditor to assist with developing the audit program, but ensure that the audit program is executed by other audit staff.
Answer: D
Explanation:
In this scenario, the new recruit has a potential conflict of interest due to her recent role in the finance department. To maintain the objectivity and independence required by the IIA Standards, it is essential to prevent any actual or perceived bias in the audit process. Assigning the new auditor to assist with developing the audit program, but ensuring that the execution of the program is handled by other audit staff (Option B), is the most appropriate approach. This ensures her expertise is utilized without compromising the integrity of the audit. Standard 1130: Impairment to Independence or Objectivity requires auditors to avoid auditing areas where they have recently worked or where personal relationships could impair their objectivity.References:
* IIA Standards, Standard 1130: Impairment to Independence or Objectivity
* IIA Standards, Standard 1100: Independence and Objectivity
NEW QUESTION # 367
Which of the following scenarios would most likely impair the independence of an internal audit activity?
- A. An audit manager removes a finding from the draft report due to disagreements with the chief financial officer
- B. The internal audit budget is reduced by management requiring the removal of all lT-related engagements from the audit plan
- C. The operating effectiveness of a control is reported as 'satisfactory." because no concerns were identified during planning
- D. A relative of an internal audit team member works m a department being reviewed
Answer: B
Explanation:
Independence is a fundamental principle for internal auditing, ensuring that internal auditors are free from conditions that threaten their ability to carry out their responsibilities in an unbiased manner. Scenario B presents a clear impairment to independence because management's reduction of the internal audit budget, leading to the removal of all IT-related engagements from the audit plan, could limit the internal audit activity's ability to objectively assess areas critical to the organization's risk profile. This type of management interference compromises the scope and depth of internal audit activities, impacting their ability to provide an unbiased assurance.
References:
* IIA Standard 1100: Independence and Objectivity
* IIA Standard 1110: Organizational Independence
NEW QUESTION # 368
An organization's external auditor has prepared a list of risks and issues and has recommended to senior management that the internal audit activity focus on these items. Senior management has forwarded the list to the chief audit executive (CAE). The CAE should:
- A. Incorporate the external auditor's requirements into the internal audit plan.
- B. Ignore the external auditor's requirements because they are outside of the internal audit activity's planned scope of work.
- C. Consider the issues raised by the external auditor for possible inclusion in the planned scope of work.
- D. Report the risks and issues to the audit committee for possible future attention.
Answer: C
NEW QUESTION # 369
Which two of the following are preventive controls in a check disbursement process?
1. Daily reconciliation of the bank account used for check disbursements and prompt follow-up of un- reconciled items.
2. Segregation of the following duties: establishing new vendors, approving checks, and reconciling the bank account.
3. An activity report detailing who accesses the check disbursement system and the nature of any action taken in the system.
4. Evidence of strong access controls ensuring that authorized individuals have access only to the functions related to their responsibilities.
- A. 2 and 4.
- B. 1 and 3.
- C. 1 and 4.
- D. 2 and 3.
Answer: A
NEW QUESTION # 370
The primary reason that a chief audit executive (CAE) reviews external audit management letters and management response is to:
- A. Verify that there has been no duplication of internal audit work.
- B. Check the effectiveness of external audit resources used.
- C. Select areas to emphasize in future internal audit engagements.
- D. Ensure that comments in the letter are supported by evidence.
Answer: C
NEW QUESTION # 371
An internal quality assessment of the internal audit activity should provide the chief audit executive with.
- A. Recommendations for improvement.
- B. Objectives for internal audit engagements.
- C. Appraisals of internal audit staff performance.
- D. Confirmation of action on past audit recommendations.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION # 372
During an audit engagement of a large retail store, internal auditors noted significant discrepancies between available inventory and sales and suspect an abuse of cash register refunds and voids. Which of the following would be the most effective preventative control to reduce these losses?
- A. Require that a manager use a reserved register code to approve voids or refunds.
- B. Analyze voids and refunds by employee, credit card number, and amount for unusual numbers, amounts, or patterns.
- C. Ensure that returned merchandise is restocked to shelves or sent to the manufacturer by an independent employee.
- D. Call a sample of customers who returned merchandise to test the legitimacy of the returns and check refund amounts.
Answer: B
NEW QUESTION # 373
Which of the following best describes the underlying premise of the COSO enterprise risk management framework?
- A. Policies are established to ensure that risk responses are performed effectively.
- B. Every entity exists to provide value for its stakeholders.
- C. Enterprise risk management can minimize the impact and likelihood of unanticipated events.
- D. Management should set objectives before assessing risk.
Answer: B
NEW QUESTION # 374
During an account receivables audit,an internal auditor found a significant number of input errors resulting in a $500,000 balance understatement.
Which of the following is the most important question the internal auditor should ask to develop an appropriate recommendation for this finding?
- A. When?
- B. How?
- C. Why?
- D. Who?
Answer: C
NEW QUESTION # 375
During an audit engagement, an internal auditor finds that management is not complying with previous commitments made to the external auditors. However, the auditor determines management's actions to be justified due to significant changes in the business. The best course of action for the auditor to take would be to:
- A. Inform the external auditors and remove the associated work from the internal audit scope.
- B. Compare the recommended changes against the changes made by management and advise management which action to take.
- C. Proceed with the audit engagement and assess the changes actually implemented by management.
- D. Inform the external auditors and seek their guidance.
Answer: C
NEW QUESTION # 376
Which of the following tests would most likely help discover a fictitious invoice?
- A. Search for duplicate payment amounts.
- B. Match cancelled checks to invoices.
- C. Compare vendor addresses to employee addresses.
- D. Check employee bank records against invoice amounts.
Answer: B
NEW QUESTION # 377
Which of the following sources of evidence would be least persuasive regarding potential waste and inefficiency on the part of a contractor?
- A. A walk-through of the contractor's manufacturing and development facilities.
- B. An examination of the nature of contract expenses incurred.
- C. A comparison of contract expenses with those of similar projects.
- D. The contractor's certification that it has not incurred any waste or inefficiencies.
Answer: D
NEW QUESTION # 378
According to the IIA guidance, who is responsible for periodically assessing the internal audit activity?
- A. Senior management.
- B. The chief audit executive.
- C. The external auditors.
- D. The board.
Answer: B
NEW QUESTION # 379
Which of the following would be considered a violation of The HAfs mandatory guidance on independence?
- A. The CAE confirms to the board, at least once every five years, the organizational independence of the internal audit activity,
- B. The chief audit executive (CAE) reports functionally to the board and administratively to the chief financial officer.
- C. The CAE updates the internal audit charter and presents it to the board for approval periodically, not on a specific timeline
- D. The board seeks senior management's recommendation before approving the annual salary adjustment of the CAE.
Answer: D
Explanation:
According to the IIA's mandatory guidance on independence, allowing senior management to have influence over the CAE's salary adjustments could potentially compromise the independence of the internal audit function. The board should independently approve the CAE's salary without seeking senior management's recommendation to maintain the internal audit function's independence.References: The Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing, specifically standards related to independence.
NEW QUESTION # 380
Which of the following is a primary responsibility of senior management with respect to ethical violations?
- A. Senior management reviews major ethical policies in the organization for compliance
- B. Senior management promotes an ethical culture in the organization.
- C. Senior management provides oversight for the organization's ethical climate.
- D. Senior management assesses the effectiveness of the organization's ethical programs.
Answer: B
Explanation:
A primary responsibility of senior management with respect to ethical violations is to promote an ethical culture in the organization. Senior management's role includes setting the tone at the top, demonstrating ethical behavior, and ensuring that ethical standards are communicated and enforced throughout the organization.References: IIA guidance and corporate governance frameworks which emphasize the role of senior management in fostering and maintaining an ethical organizational climate.
NEW QUESTION # 381
Which of the following scenarios demonstrates nonconformance with the Standards?
- A. An internal audit activity lacks the skills need to perform a high-risk security engagement included on the annual audit plan.
- B. An internal audit activity has existed for two years and has not undergone external quality assessment
- C. An internal auditor failed to expand the engagement and include managements preferences when determining the scope of an upcoming assurance engagement.
- D. A chief audit executive fated to perform a risk assessment prior to preparing the audit plan
Answer: D
NEW QUESTION # 382
Which of the following are acceptable resources for a chief audit executive to use when developing a staffing plan?
1. Co-sourcing arrangements.
2. Employees from other areas of the organization.
3. The organization's external auditors.
4. The organization's audit committee members.
- A. 1 only
- B. 1, 2, and 4 only
- C. 2 and 3 only
- D. 1 and 2 only
Answer: D
NEW QUESTION # 383
Which of the following scenarios would represent the greatest threat to the authority of the internal audit activity (IAA)?
- A. An internal auditor was informed by the chief financial officer that client survey results would be unfavorable unless the auditor changed a finding in the report.
- B. The IAA was denied access to expenditure and budget requirement reports because the reports were considered to be financial administrative matters.
- C. Responsibility for risk management processes were removed from the IAA and placed under a newly created chief risk officer.
- D. A change was implemented requiring the IAA to report administratively to the organization's chief legal counsel rather than the board.
Answer: B
NEW QUESTION # 384
Which of the following would be considered an indicator that an organization's ethics program is not yet well developed?
- A. The organization's code of ethics and related compliance policy are reviewed annually for potential updates.
- B. Communication of ethics compliance expectations is the responsibility of employees' direct managers.
- C. Disciplinary actions for ethics compliance violations are reviewed by the internal audit activity for consistency.
- D. The board of directors reviews ethics oversight metrics for violations and compliance.
Answer: B
Explanation:
This indicator suggests that the organization's ethics program might not be well-developed if the responsibility for communicating ethics compliance is decentralized to the level of employees' direct managers without broader oversight or structured programs. Effective ethics programs typically involve centralized communication strategies that ensure consistency and comprehensiveness across the organization.References:
Institute of Internal Auditors (IIA) - Guidance on Developing an Ethics Program
NEW QUESTION # 385
An internal auditor assigned to a supplier management process engagement reviews the risk assessment with the process owner The auditor inquires about the risk response for potentially engaging unqualified third-party service providers The process owner responds that due diligence checks are undertaken to make sure that third parties possess requisite competencies before they are engaged Which of the following risk management techniques is the process owner using?
- A. Risk avoidance
- B. Risk reduction
- C. Risk sharing
- D. Risk acceptance
Answer: B
NEW QUESTION # 386
When an internal auditor applies due professional care to perform an assurance engagement, which of the following must she consider?
Findings of the last audit engagement performed.
Probability of significant errors, irregularities, or noncompliance.
Extent of work needed to achieve engagement objectives.
Cost of the engagement versus the potential benefits.
- A. 1,2,3,and 4
- B. 2,3,and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: B
NEW QUESTION # 387
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