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IIA-CIA-Part1 Essentials of Internal Auditing Questions and Answers

Questions 4

Which of the following is true about corporate social responsibility (CSR)?

Options:

A.

Social and environmental considerations are required parts of an organization's decision making

B.

The Global Reporting Initiative provides standards on required disclosures of CSR.

C.

CSR activities are overseen and managed by operational management.

D.

Internal auditors can provide assurance on reported sustainability results.

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Questions 5

Which of the following is an example of risk monitoring to ensure a system is performing as intended?

Options:

A.

Checking the progress of risk treatment plans

B.

Considering the consequence and likelihood of risks

C.

Documenting the risks and their areas of impact

D.

Communicating to management about risks

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Questions 6

A new chief audit executive realized that the internal audit charter has not been updated in five years and only includes the Core Principles for the Professional Practice of Internal Auditing, the Code of Ethics, and the Standards. What mandatory component is missing?

Options:

A.

Statement of Independence.

B.

Operating Procedures of Internal Auditing.

C.

Definition of Internal Auditing.

D.

Attestation of Quality Assurance.

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Questions 7

An internal audit of warehouse inventory revealed no material deficiencies. However, management later discovered fraud, which occurred during the period that was audited, and determined that a major control deficiency allowed the fraud to occur. Given management's discovery, which of the following statements is valid?

Options:

A.

The internal auditors violated the standard for due professional care because they did not detect the fraud, even though it occurred during the period that was reviewed.

B.

The internal auditors should have had sufficient knowledge of fraud to identify red flags indicating possible fraud.

C.

The internal auditors could not have detected the fraud due to collusion among employees in the inventory unit.

D.

The internal auditors are not responsible for considering fraud risk, which is a management responsibility.

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Questions 8

Which of the following statements is true regarding how the scope of a consulting engagement should be established?

Options:

A.

The engagement client should be able to determine the scope to be applied to the engagement

B.

The internal auditor should establish a scope that does not impair her objectivity

C.

Any attempts by the engagement client to limit the scope should be considered a scope limitation

D.

The scope should include reviewing the effectiveness of the internal control environment

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Questions 9

Which of the following describes a primary responsibility for the internal audit activity in helping management maintain effective controls?

Options:

A.

Promoting continuous evaluation

B.

Promoting continuous monitoring

C.

Promoting continuous improvement

D.

Promoting continuous reporting

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Questions 10

The results of an assessment of the adequacy of controls would be considered incomplete or misleading unless the internal auditor considers which of the following?

Options:

A.

Number of mitigating controls.

B.

Effectiveness of the control environment

C.

Use of computer-assisted auditing techniques.

D.

IT security controls

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Questions 11

The chief audit executive (CAE) has hired a new internal auditor who was immediately assigned to a procurement function audit. Because the new auditor's name is similar to that of the procurement manager, some staff members think the two are related, although they are not. Which of the following actions is most appropriate for the CAE to take?

Options:

A.

Take no action, as there is no impairment to independence.

B.

Remove the new internal auditor from the engagement team.

C.

Discuss the matter with the appropriate personnel to alleviate concerns.

D.

Closely supervise the new auditor and carefully review his work.

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Questions 12

According to IIA guidance, which of the following is accurate regarding the chief audit executive's (CAE's) requirement to report the results of quality assessments?

1. The CAE must report the results of external assessments at least annually.

2. The CAE must report the results of ongoing monitoring at least annually.

3. The CAE must report the results of quality assessments to senior management.

4. The CAE must report the results of quality assessments to the board.

Options:

A.

1 and 3 only.

B.

2 and 4 only.

C.

1,2. and 3.

D.

2,3, and 4.

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Questions 13

Nearing the completion of fieldwork, an internal auditor shared the draft report findings with management prior to the closing meeting. During the closing meeting, management expressed dissatisfaction in that they were not familiar with some of the findings. Management also noted that some aspects of the report seemed confusing. Which of the following competencies appears to have been lacking in this scenario?

Options:

A.

Communication.

B.

Business acumen.

C.

Persuasion.

D.

Critical thinking.

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Questions 14

According to HA guidance, which of the following is true regarding independence and objectivity for small internal audit activities?

Options:

A.

The chief audit executive (CAE) may consider including a disclaimer on independence in audit reports.

B.

The CAE may consider greater involvement of those with suitable knowledge of audit practice.

C.

Conformance with this Standard is not dependent upon the size of the internal audit activity.

D.

Due to the small size of the internal audit activity, having an external assessment once every seven years is acceptable.

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Questions 15

An internal auditor is reviewing the results of an employee survey at a mining company. Which of the following would alert the auditor to a potential ethics issue?

Options:

A.

Women account for 20% of the total number of employees in the company.

B.

Thirty percent of employees feel confident in raising concerns without a fear of retaliation.

C.

Most employees believe that transparent and fair decision-making forms the basis of business ethics.

D.

Employees with longer work experience believe that they deserve more privileges than new hires.

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Questions 16

The same internal auditor has audited the regional purchasing department annually for the last three years. The audits have shown several significant control deficiencies that have not been corrected by management. New management is in charge of this regional purchasing department, and it is time to audit the department again. What concerns should be considered prior to assigning the audit to the same auditor?

Options:

A.

Intimidation threats may compromise the auditor's objectivity due to multiple negative audit reports completed by the auditor.

B.

The auditor has reviewed the department annually for the last three years, leading to familiarity, which can impact the internal audit activity's independence.

C.

A negative cognitive bias may be in place that affects the employee's objectivity due to the recent audits with uncorrected control deficiencies.

D.

The auditor may have formed a cultural bias, as the department under review is in the auditor's geographic area.

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Questions 17

Which of the following is most likely to impair the internal audit activity's independence?

Options:

A.

Undertaking audit work in an area where internal auditors lack the necessary skills.

B.

Establishing an internal audit activity without documented policies and procedures.

C.

Assigning compliance responsibilities to the chief audit executive.

D.

Concluding that an internal control is effective without first obtaining evidence

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Questions 18

An internal auditor believes that the internal audit activity's independence is impaired. Which of the following actions should the internal auditor take first?

Options:

A.

Report the impairment to senior management

B.

Discuss the impairment with the audit manager

C.

Ascertain the best approach to disclose the impairment.

D.

Decide on the extent of impact of the impairment

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Questions 19

Which of the following scenarios violates The IIA's standard regarding internal audit independence?

Options:

A.

The chief audit executive (CAE) reports on the internal audit activity's day-to-day tasks and responsibilities to the CEO.

B.

An assessment of the risk management function is reviewed by an outside consulting firm because the CAE is temporarily fulfilling the role of risk manager.

C.

The CAE regularly meets with the organization's chief risk officer, who validates all reported audit findings and dictates which will be Included In the package to the audit committee.

D.

The internal audit activity will experience staffing shortages for the next six months due to planned and unplanned leaves of absence; therefore the CAE proposed including fewer audits in the annual audit plan compared to the previous financial year.

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Questions 20

According to IIA guidance, which of the following activities would typically be examined when using the maturity model approach for assessing an organization's risk management program?

Options:

A.

Monitor and review

B.

Performance measurement.

C.

Setting the context.

D.

Communication.

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Questions 21

Which of the following is true regarding the auditing of soft controls?

Options:

A.

Soft controls should not be audited due to subjectivity issues.

B.

There are no effective tools to use for audits of soft controls.

C.

Traditional testing is less suitable for soft controls assessment.

D.

Management input is the best source for assessment of soft controls.

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Questions 22

An organization is conducting a fraud risk assessment as part ol its risk management program. Which of the following steps is the organization most likely to perform first?

Options:

A.

Identify relevant fraud risk factors.

B.

Identify potential fraud schemes.

C.

Identify existing controls for preventing and detecting fraud.

D.

Identify red flags by conducting data analysis.

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Questions 23

An internal auditor is finalizing an audit report on the effectiveness of the organization's overall system of internal control. Several audit tests were performed, and the only issue identified was that the CEO frequently asks employees to make exceptions or bypass the organization's standard written policies and procedures. Which of the following conclusions is most appropriate for the auditor to report?

Options:

A.

The auditor should indicate that the system of internal control is not effective.

B.

The auditor should indicate that the system of internal control is generally effective, except for the minor issue identified.

C.

The auditor should indicate that the system of internal control is effective.

D.

The auditor cannot express a conclusive opinion in the audit report.

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Questions 24

Wi ch of the following circumstances would most likely be considered a potential red flag for fraud by the internal audit activity?

Options:

A.

The monthly payroll reports are not vetted to ensure terminated employees have been removed from the payroll system

B.

The volume of nonroutine journal entries has steadily increased over time.

C.

The database of approved suppliers has not been reviewed the last year

D.

The recent employee survey indicates that some employees remain unaware of the organization’s whistieblower hotline.

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Questions 25

A chief audit executive (CAE) was asked by senior management to establish and manage a risk management function. A new chief risk officer was hired a year later to assume these responsibilities. As this function was included in the current annual audit plan, the CAE engaged an external resource for a risk management engagement. Which of the following potential threats to objectivity was the CAE likely addressing?

Options:

A.

Self-review threat.

B.

Advocacy threat.

C.

Familiarity threat.

D.

Personal relationship threat.

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Questions 26

According to IIA guidance, which of the following best demonstrates due professional care?

Options:

A.

Staffing audit engagements with internal auditors who possess professional designations.

B.

Relying on prior audit work to save planning time and costs.

C.

Performing assurance procedures to guarantee all significant risks are identified.

D.

Assessing the cost of assurance in relation to the potential benefits.

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Questions 27

The chief audit executive (CAE) decided to conduct a self-assessment with independent validation. Which of the following is the most likely reason the CAE selected this course of action?

Options:

A.

The audit committee requested the self assessment for quality assurance purposes

B.

The staff auditors have the necessary knowledge and experience to conduct the review

C.

The internal audit activity is relatively small in size and is due for an external assessment

D.

The internal audit activity is due for a self-assessment which is specifically required at least once every five years

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Questions 28

Which of the following is a primary benefit of implementing a governance risk management and compliance framework within an organization?

Options:

A.

Fewer internal audits

B.

More effective interviews

C.

Automated risk management strategy tools

D.

Reduced assurance costs

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Questions 29

Which of the following frauds is most likely to occur in the accounts payable function?

Options:

A.

Factitious vendors are entered into the system, possibly resulting in improper disbursements.

B.

Bad debt expense is intentionally omitted from the financial statements.

C.

Certain costs are capitalized, rather than expensed.

D.

A related party receives benefits not appropriate in an arm's-length transaction.

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Questions 30

Regarding Ihe chief audit executive (CAE). which ot the following is considered an impairment to the independence of the internal audit activity?

Options:

A.

The CAE reports administratively to the CEO.

B.

The CAE is asked to submit the liquidation of her travel allowances to human resources for approval.

C.

The CAE's supervisor is responsible for the risk management function.

D.

The CAE is asked to review new procedures before implementation.

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Questions 31

Which of the following is an indicator that the internal audit activity does not fully conform with the Standards?

Options:

A.

The quality assurance and improvement program identified several opportunities for the internal audit activity to make improvements.

B.

In lieu of an external assessment, the internal audit activity performed a self-assessment with independent external validation.

C.

During an internal quality assessment, it was identified that rotational auditors often perform consulting engagements for areas of the organization where they had previous responsibilities.

D.

External assessments are performed every five years by a competent internal audit team from the organization's parent company.

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Questions 32

According to IIA guidance, which of the following actions by the chief audit executive (CAE) best demonstrates the organizational independence of the internal audit activity?

Options:

A.

The CAE seeks senior management approval of the internal audit charter

B.

The CAE obtains senior management's approval to hire staff

C.

The CAE reports significant issues to the organization's CEO

D.

The CAE provides the board with an annual budget for approval

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Questions 33

An internal auditor assessed the controls within his organization's payroll process and suspects that erroneous payments may have been made to a fraudulent bank account. What is the best course of action for the auditor to take?

Options:

A.

Speak to the payroll manager so he may investigate the auditor's observations.

B.

Continue to investigate the payments to confirm the accuracy of the observations, and determine whether further fraudulent payments have been made.

C.

Stop the audit and report the findings to senior management immediately.

D.

Escalate the concern to the engagement supervisor.

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Questions 34

The internal auditor of a small manufacturer noted that the accounting department has insufficient staff to achieve proper segregation of duties. What type of controls would the auditor likely recommend to management to specifically address this problem?

Options:

A.

Entity-level.

B.

Preventive.

C.

Directive.

D.

Compensating.

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Exam Code: IIA-CIA-Part1
Exam Name: Essentials of Internal Auditing
Last Update: Mar 28, 2024
Questions: 227

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