Practice Free IIA-CIA-Part1 Exam Online Questions
Question #91
During engagement planning, an internal auditor determines that the cost of a certain test outweighs the benefit that can be expected from the results. He determines that this test can be removed from the audit work program.
Which of the following did the internal auditor best demonstrate?
- A . Due professional care
- B . Individual objectivity
- C . Proficiency
- D . Internal assessment
Correct Answer: A
A
Explanation:
The internal auditor demonstrated due professional care by deciding to remove a test from the audit work program when the cost outweighed the benefit. Due professional care involves considering the efficiency and cost-effectiveness of audit procedures in relation to the potential benefits. This decision shows prudent judgment and a focus on optimizing the value of audit activities.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
A
Explanation:
The internal auditor demonstrated due professional care by deciding to remove a test from the audit work program when the cost outweighed the benefit. Due professional care involves considering the efficiency and cost-effectiveness of audit procedures in relation to the potential benefits. This decision shows prudent judgment and a focus on optimizing the value of audit activities.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #92
Which of the following is an indicator that the organization s risk management process is effective?
- A . The organization s risk appetite mission, and objectives are dearly outlined.
- B . The organization s risk management practices are assessed as mature.
- C . The organization has adopted risk management frameworks and global models.
- D . The organization s significant risks are identified and adequately assessed
Correct Answer: D
D
Explanation:
An effective risk management process is indicated by the organization’s ability to identify and adequately assess significant risks. This involves understanding the full range of potential risks the organization faces and evaluating their magnitude and likelihood in a way that aligns with the organization’s risk appetite and capacity. This ability ensures that strategic decisions are informed and that risks are managed proactively.
Reference: COSO Framework on Enterprise Risk Management, which outlines the importance of identifying and assessing risks in relation to an organization’s objectives.
D
Explanation:
An effective risk management process is indicated by the organization’s ability to identify and adequately assess significant risks. This involves understanding the full range of potential risks the organization faces and evaluating their magnitude and likelihood in a way that aligns with the organization’s risk appetite and capacity. This ability ensures that strategic decisions are informed and that risks are managed proactively.
Reference: COSO Framework on Enterprise Risk Management, which outlines the importance of identifying and assessing risks in relation to an organization’s objectives.
Question #93
According to HA guidance, which of the following would best support the internal auditor’s conclusion that the organization’s risk management processes are effective?
- A . The organization has identified all applicable operational and financial risks.
- B . The organization has documented its strategic and business objectives.
- C . The organization has selected risk responses aligned with its risk appetite.
- D . The organization has documented risk information pertinent to its business.
Correct Answer: C
C
Explanation:
According to the guidance from The IIA (International Professional Practices Framework – IPPF), the most robust support for concluding that an organization’s risk management processes are effective is the alignment of selected risk responses with the organization’s risk appetite. This indicates that the organization not only understands its risks but also manages them in a manner consistent with its capacity and willingness to accept risk. It reflects a mature risk management process where risks are identified, assessed, and managed in alignment with strategic objectives and risk appetite, ensuring that the organization is not taking on more risk than it can handle or than is acceptable to its stakeholders.
Reference: IIA Practice Guide on Assessing the Adequacy of Risk Management Processes.
COSO Enterprise Risk Management Framework.
C
Explanation:
According to the guidance from The IIA (International Professional Practices Framework – IPPF), the most robust support for concluding that an organization’s risk management processes are effective is the alignment of selected risk responses with the organization’s risk appetite. This indicates that the organization not only understands its risks but also manages them in a manner consistent with its capacity and willingness to accept risk. It reflects a mature risk management process where risks are identified, assessed, and managed in alignment with strategic objectives and risk appetite, ensuring that the organization is not taking on more risk than it can handle or than is acceptable to its stakeholders.
Reference: IIA Practice Guide on Assessing the Adequacy of Risk Management Processes.
COSO Enterprise Risk Management Framework.
Question #94
According to HA guidance, if an internal auditor suspects fraud during an assurance engagement, what should the auditor do first?
- A . Recommend parties involved to be sanctioned in accordance with the organization’s policy.
- B . Determine whether any additional audit work needs to be performed.
- C . Launch an investigation to obtain details of the fraud and parties involved.
- D . Request that the responsible process owner remediate the issue immediately.
Correct Answer: B
B
Explanation:
When an internal auditor suspects fraud during an assurance engagement, the first step should be to determine whether any additional audit work needs to be performed. This involves assessing the potential scope and impact of the suspected fraud and deciding on the appropriate audit procedures to confirm or refute the suspicion. This step is crucial to gather sufficient information before taking further actions.
Option A: Recommending sanctions is premature without confirming the fraud.
Option C: Launching an investigation is a subsequent step that may require coordination with fraud experts.
Option D: Requesting immediate remediation is also premature without confirming the fraud.
Reference: IIA Standard 1220: Due Professional Care.
IIA Practice Guide: Internal Auditing and Fraud.
B
Explanation:
When an internal auditor suspects fraud during an assurance engagement, the first step should be to determine whether any additional audit work needs to be performed. This involves assessing the potential scope and impact of the suspected fraud and deciding on the appropriate audit procedures to confirm or refute the suspicion. This step is crucial to gather sufficient information before taking further actions.
Option A: Recommending sanctions is premature without confirming the fraud.
Option C: Launching an investigation is a subsequent step that may require coordination with fraud experts.
Option D: Requesting immediate remediation is also premature without confirming the fraud.
Reference: IIA Standard 1220: Due Professional Care.
IIA Practice Guide: Internal Auditing and Fraud.
Question #95
Which of the following is a primary benefit of implementing a governance risk management and compliance framework within an organization?
- A . Fewer internal audits
- B . More effective interviews
- C . Automated risk management strategy tools
- D . Reduced assurance costs
Correct Answer: D
D
Explanation:
Implementing a governance, risk management, and compliance (GRC) framework within an organization primarily benefits by reducing assurance costs. This occurs as GRC frameworks streamline processes, enhance the alignment of objectives, improve risk management efficiency, and reduce the duplication of efforts in managing risks and compliance. This optimization leads to more effective use of resources, which can significantly lower the costs associated with assurance activities.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
D
Explanation:
Implementing a governance, risk management, and compliance (GRC) framework within an organization primarily benefits by reducing assurance costs. This occurs as GRC frameworks streamline processes, enhance the alignment of objectives, improve risk management efficiency, and reduce the duplication of efforts in managing risks and compliance. This optimization leads to more effective use of resources, which can significantly lower the costs associated with assurance activities.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #96
Which of the following actions by an internal auditor would be the most relevant to determine the effectiveness of controls?
- A . Participate in a fraud risk-assessment session as an in-house facilitator.
- B . Send regular written updates to senior management on new control-related regulations.
- C . Lead a seminar on internal controls and provide numerous examples to the audience.
- D . Conduct a surprise inventory count at the raw materials warehouse.
Correct Answer: D
D
Explanation:
The most relevant action to determine the effectiveness of controls, particularly in relation to inventory, is conducting a surprise inventory count at the raw materials warehouse. This action allows the auditor to directly assess the operational effectiveness of the inventory control processes and procedures in place, providing tangible evidence of whether controls are functioning as intended to safeguard assets.
Reference: IIA guidance on performing direct control testing and evaluating control effectiveness.
D
Explanation:
The most relevant action to determine the effectiveness of controls, particularly in relation to inventory, is conducting a surprise inventory count at the raw materials warehouse. This action allows the auditor to directly assess the operational effectiveness of the inventory control processes and procedures in place, providing tangible evidence of whether controls are functioning as intended to safeguard assets.
Reference: IIA guidance on performing direct control testing and evaluating control effectiveness.
Question #97
Which of the following statements about internal audit consulting engagements is true?
- A . The primary purpose of a consulting engagement is to assess evidence and provide conclusions.
- B . The internal audit activity determines the nature and scope of work for the specific consulting engagement
- C . Internal auditors may provide consulting services relating to operations for which they had previous responsibilities.
- D . It is not appropriate to communicate control issues identified during consulting engagements to the board
Correct Answer: C
C
Explanation:
Internal auditors may provide consulting services relating to operations for which they had previous responsibilities, provided they do not currently have any operational responsibilities that would impair their objectivity. This scenario is possible under IIA guidelines as long as any potential conflicts of interest are managed, and auditors maintain their independence regarding the areas they are auditing.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing, specifically standards on objectivity and independence in consulting roles.
C
Explanation:
Internal auditors may provide consulting services relating to operations for which they had previous responsibilities, provided they do not currently have any operational responsibilities that would impair their objectivity. This scenario is possible under IIA guidelines as long as any potential conflicts of interest are managed, and auditors maintain their independence regarding the areas they are auditing.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing, specifically standards on objectivity and independence in consulting roles.
Question #98
Which of the following actions would be most effective to help an internal auditor determine how successful the organization has been in communicating the existence of its ethics hotline?
- A . Reviewing the number of anonymous hotline allegations against employee complaints.
- B . Surveying employees to determine whether they are aware of the hotline.
- C . Benchmarking the average time to investigate hotline complaints.
- D . Tracking the number of hotline allegations per total number of employees.
Correct Answer: B
B
Explanation:
Surveying employees to determine whether they are aware of the ethics hotline is the most effective action to help an internal auditor assess how successful the organization has been in communicating the existence of its ethics hotline. Employee surveys can provide direct feedback on their awareness and understanding of the hotline, allowing the auditor to gauge the effectiveness of communication efforts and identify areas where additional outreach or education may be necessary.
Reference: The IIA’s Practice Guide on Assessing the Effectiveness of the Ethics Program.
The IIA’s International Professional Practices Framework (IPPF) on Communicating and Reporting.
B
Explanation:
Surveying employees to determine whether they are aware of the ethics hotline is the most effective action to help an internal auditor assess how successful the organization has been in communicating the existence of its ethics hotline. Employee surveys can provide direct feedback on their awareness and understanding of the hotline, allowing the auditor to gauge the effectiveness of communication efforts and identify areas where additional outreach or education may be necessary.
Reference: The IIA’s Practice Guide on Assessing the Effectiveness of the Ethics Program.
The IIA’s International Professional Practices Framework (IPPF) on Communicating and Reporting.
Question #99
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?
- A . Communication.
- B . Business acumen.
- C . Persuasion.
- D . Critical thinking.
Correct Answer: A
A
Explanation:
The scenario indicates a lack of communication competency. Effective communication involves not only presenting audit findings clearly but also ensuring that management is adequately informed and understands the findings prior to the closing meeting. Sharing draft findings in a way that management was not familiar with and found confusing suggests shortcomings in how information was conveyed.
Option B: Business acumen is understanding the business context, which is not the primary issue here.
Option C: Persuasion involves influencing others, which is secondary to clear communication.
Option D: Critical thinking is about analysis and judgment, not directly related to the communication issues described.
Reference: IIA Standard 2420: Quality of Communications.
IIA Practice Guide: Communication.
A
Explanation:
The scenario indicates a lack of communication competency. Effective communication involves not only presenting audit findings clearly but also ensuring that management is adequately informed and understands the findings prior to the closing meeting. Sharing draft findings in a way that management was not familiar with and found confusing suggests shortcomings in how information was conveyed.
Option B: Business acumen is understanding the business context, which is not the primary issue here.
Option C: Persuasion involves influencing others, which is secondary to clear communication.
Option D: Critical thinking is about analysis and judgment, not directly related to the communication issues described.
Reference: IIA Standard 2420: Quality of Communications.
IIA Practice Guide: Communication.
Question #100
Which of the following would be considered a primary control to reduce the risk associated with setting up duplicate vendors?
- A . Receipt of a signed and approved vendor setup form.
- B . Segregation of duties between setting up vendors and making vendor payments.
- C . System validation and edit checks on vendor identification number
- D . A vendor setup policy and procedure.
Correct Answer: C
C
Explanation:
System validations and edit checks on vendor identification numbers are primary controls that effectively reduce the risk of setting up duplicate vendors in the system. These controls ensure that each vendor’s information is unique and verified against existing records before a new vendor is entered into the system, thereby preventing duplication.
Reference: Institute of Internal Auditors (IIA) – Risk Control Matrices and Internal Control Frameworks
C
Explanation:
System validations and edit checks on vendor identification numbers are primary controls that effectively reduce the risk of setting up duplicate vendors in the system. These controls ensure that each vendor’s information is unique and verified against existing records before a new vendor is entered into the system, thereby preventing duplication.
Reference: Institute of Internal Auditors (IIA) – Risk Control Matrices and Internal Control Frameworks