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

Questions 4

Which of the following is most likely to be considered a control weakness?

Options:

A.

Vendor invoice payment requests are accompanied by a purchase order and receiving report.

B.

Purchase orders are typed by the purchasing department using prenumbered forms.

C.

Buyers promptly update the official vendor listing as new supplier sources become known.

D.

Department managers initiate purchase requests that must be approved by the plant superintendent.

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Questions 5

Forty-five percent of an organization's customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.

Which of the following represents the organization's residual risk for online customer payments due?

Options:

A.

$11, 250

B.

$25, 000

C.

$33, 750

D.

$45, 000

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Questions 6

Which of the following statements is true about The IIA Global Internal Audit Competency Framework?

Options:

A.

The core competencies outlined in the framework are not expected of a person undertaking an entry-level position as an internal auditor.

B.

The framework is designed to be used primarily by chief audit executives that are developing indicators to measure the performance of the internal audit activity for which they are responsible.

C.

The framework lists the core competencies internal auditors should possess before attempting to attain The IIA's Certified Internal Auditor certification.

D.

The framework describes competencies needed for individual internal auditors, but not those necessary at the chief audit executive level.

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Questions 7

Internal auditors must exercise due professional care by considering which of the following?

1. Cost of assurance in relation to potential benefits.

2. Adequacy and effectiveness of governance, risk management, and control processes.

3. Management's competency level in the area being evaluated.

4. Probability of significant errors, fraud, or noncompliance.

Options:

A.

1 and 2 only

B.

1, 2, and 3 only

C.

1, 2, and 4 only

D.

2, 3, and 4 only

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Questions 8

Which of the following is true regarding the use of a formal risk management framework?

1. It facilitates a methodical approach to risk mitigation.

2. It defines and standardizes the terminology used in risk communication.

3. It establishes the risk tolerance levels to be accommodated in the strategy.

4. It facilitates the alignment of risk mitigation strategies with management priorities.

Options:

A.

1.2, and 3.

B.

1,2, and 4.

C.

1.3, and 4.

D.

2. 3, and 4.

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Questions 9

A government agency maintains a system of internal control, according to the COSO model, and has made a change to its employee performance reviews and rewards program. This change relates to which of the following components of COSO's internal control framework?

Options:

A.

Control environment.

B.

Control activities.

C.

Information and communication.

D.

Monitoring activities.

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Questions 10

An internal audit activity includes in its audit reports the assertion that its work is performed in conformance with the International Standards for the Professional Practice of Internal Auditing {Standards). A recent external quality assessment concluded that the internal audit activity had substantial deficiencies that impact its overall operations. According to IIA guidance, which of the following is the most appropriate action for issuing future audit reports?

Options:

A.

Refrain from indicating that the internal audit activity operates in conformance with the Standards until the chief audit executive confirms that the internal audit activity has addressed all areas of nonconformance and the audit committee has been notified.

B.

Refrain from indicating that the internal audit activity operates in conformance with the Standards until another external assessment confirms that the significant areas of nonconformance have been addressed.

C.

Indicate that the internal audit activity operates in partial conformance with the Standards, as the internal audit activity has a quality assurance and improvement program in place to address deficiencies and has met the requirement for conducting an external assessment.

D.

Update and reissue previous audit reports, removing the assertion that the internal audit activity operates in conformance with the Standards, and distribute them to all parties who received the original reports.

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Questions 11

According to IIA guidance, the results of a formal quality assessment should be reported to which of the following groups?

Options:

A.

The audit committee and senior management.

B.

The audit committee and the external auditors.

C.

Senior management and management of the audited area.

D.

Senior management and the external auditors.

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Questions 12

A new director was hired to lead the internal audit activity at a small start-up company. Which of the following assignments would impair the director's independence?

Options:

A.

Preparing the financial statements for the company's defined contribution plan.

B.

Performing a pre-implementation review of the company's payroll application.

C.

Providing the COBIT framework as a possible IT management tool.

D.

Reviewing the company's policy for foreign currency translation adjustments for compliance with accounting standards.

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Questions 13

Which of the following is not an objective of internal control?

Options:

A.

Compliance.

B.

Accuracy.

C.

Efficiency.

D.

Validation.

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Questions 14

In the area of business acumen, which of the following competencies would be the sole responsibility of an internal audit staff member?

Options:

A.

Maintaining industry-specific knowledge appropriate to the organization.

B.

Assessing how IT contributes to organization objectives, risks, and relevance to audit.

C.

Maintaining technical aspects of accounting standards and reporting processes.

D.

Understanding regulatory and legal framework and assessing its relevance.

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Questions 15

An internal auditor is conducting an assessment of the organization's fraud prevention program using the COSO enterprise risk management framework. According to this framework, which of the following activities would fall under the control environment component for preventing fraud?

1. The organization uses an automated authority approval matrix to control payments.

2. The organization has a whistleblower hotline that is available to employees.

3. Annually, every manager completes a comprehensive fraud assessment of his or her department.

4. Annually, the organization reviews and communicates the code of expected behavior.

Options:

A.

1 and 2.

B.

1 and 3.

C.

2 and 3.

D.

2 and 4.

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Questions 16

An auditor identifies three errors in the sample of 25 entries selected for review (a 12 percent error rate). Based on this result, the auditor assumes that approximately 59 of the total population of 492 entries are incorrect. To reach this assumption, the auditor has used a technique known as which of the following?

Options:

A.

Variability tolerance.

B.

Ratio estimation.

C.

Stratification.

D.

Acceptance sampling.

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Questions 17

Which of the following types of fraud includes embezzlement?

Options:

A.

Fraudulent statements.

B.

Bribery.

C.

Misappropriation of assets.

D.

Corruption.

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Questions 18

An internal auditor completed an audit of a bank's loan department and found all significant risks to be managed adequately through effective internal controls. Which of the following would be an appropriate conclusion to report to management?

Options:

A.

The residual risk is lower than or equal to the risk appetite.

B.

The residual risk is higher than or equal to the risk appetite.

C.

The inherent risk is lower than or equal to the risk tolerance.

D.

The inherent risk is higher than or equal to the risk tolerance.

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Questions 19

Sometimes, internal audit staff may partner with operating managers to rank risks. Which of the following outcomes may be the most beneficial aspects of this strategy?

1. Reappraising risks levels.

2. Providing accurate information to management.

3. Marketing the internal audit activity.

4. Planning safeguards for assets in high-risk areas.

Options:

A.

1 and 2.

B.

1 and 3.

C.

2 and 3.

D.

3 and 4.

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Questions 20

When developing the organization's first risk universe, which of the following would the chief audit executive be least likely to consider?

Options:

A.

The amount of risk that an organization is willing to seek or accept.

B.

The extent and degree of interdependency for identified key risks.

C.

The boundaries established to manage the amount of risk taken.

D.

The exposure to risks following management's risk responses.

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Questions 21

According to IIA guidance, which of the following statements describes one of the similarities between assurance and consulting services?

Options:

A.

When planning assurance and consulting engagements, internal auditors must consider the strategies and objectives of the activity being reviewed.

B.

Internal auditors determine the engagement objectives, scope, and work program for both assurance and consulting services.

C.

Internal auditors must not provide assurance or consulting services for an activity for which they had responsibility within the previous year.

D.

Both assurance and consulting services generally involve the internal auditor, the area under review, senior management, and the board.

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Questions 22

An internal auditor needs to recommend a policy element to be included in an organization's code of ethics. Which of the following recommendations would be most effective?

Options:

A.

Ethics should vary with local customs in the organization's foreign operations.

B.

Whistleblowing should be discouraged because it can cause distrust among employees.

C.

Ethical behavior should be incorporated into performance evaluations.

D.

Senior management should be granted specific exemptions to the code of ethics.

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Questions 23

An assurance mapping exercise helps an organization do which of the following?

1. Provide assurance to stakeholders that risks are managed and reported, and regulatory and legal obligations are met.

2. Fulfill best practices in the industry.

3. Identify and address any gaps in the risk management process.

4. Identify fraud.

Options:

A.

1 and 4.

B.

1 and 3.

C.

2 and 3.

D.

3 and 4.

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Questions 24

A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annua snowfall for the coming winter. Which of the following best describes this type of risk?

Options:

A.

Residual.

B.

Net.

C.

Inherent.

D.

Accepted.

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Questions 25

Which of the following responsibilities would fall under the role of the chief audit executive, rather than internal audit staff or the audit manager?

Options:

A.

Manage and support a quality assurance and improvement program.

B.

Maintain industry-specific knowledge appropriate to the audit engagements

C.

Set clear performance standards for internal auditors and the internal audit activity.

D.

Apply problem-solving techniques for routine situations.

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Questions 26

According to The IIA's Code of Ethics, which of the following actions violates the principle of confidentiality?

Options:

A.

Accepting a consulting request in the IT department without possessing the requisite experience.

B.

Providing personal tax preparation services for a fee for several employees during the lunch hour.

C.

Providing a friend with the marketing strategic plan, which she will use to prepare her university thesis.

D.

Agreeing to reword an observation to avoid the client complaining directly to the auditor's supervisor.

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Questions 27

What should the internal auditor's role be in assessing the organization's ethical climate?

Options:

A.

Perform ongoing surveys of the employees, customers, and partners of the organization to assess the organization's ethical climate. ^Evaluate the effectiveness of the organization's strategies and B. processes for achieving the desired level of legal and ethical compliance.

B.

Maintain a whistleblower hotline to identify inappropriate or illegal activity within the organization.

C.

Perform background checks of potential new employees before they are hired by the organization.

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Questions 28

Which of the following offers the best evidence that the internal audit activity has achieved organizational independence?

Options:

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 internal audit charter is drafted properly and approved by the appropriate parties.

D.

The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.

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Exam Code: IIA-CIA-Part1
Exam Name: Essentials of Internal Auditing
Last Update: May 15, 2022
Questions: 187

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