Practice Free IIA-CIA-Part1 Exam Online Questions
An Internal auditor accepted a role as an engagement supervisor on a highly specialized and technical engagement for which she did not have the expertise.
Which of the following fundamental principles of The IIA’s Code of Ethics did she violate?
- A . Objectivity.
- B . Confidentiality.
- C . Competency.
- D . Due professional care.
C
Explanation:
By accepting a role as an engagement supervisor on a highly specialized and technical engagement for which she did not have the expertise, the internal auditor violated the fundamental principle of competency as outlined in The IIA’s Code of Ethics. The principle of competency requires internal auditors to perform audit services with the necessary knowledge, skills, and experience. Accepting an assignment without the required expertise undermines the quality and reliability of the audit work.
Reference: The IIA Code of Ethics: "Internal auditors shall engage only in those services for which they have the necessary knowledge, skills, and experience."
The IIA Standards: Standard 1210 C Proficiency: "Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities."
An audit engagement required that an internal auditor, using available tools, test a transaction population for a period The auditor decided to test a sample of transactions rather than the full population.
Results of the audit were reported as satisfactory to management. Subsequent to the audit report, fraud was discovered in the area audited and was found to include transactions that were in the relevant transaction population not tested by the auditor. The auditor later disclosed that he decided to test a sample because it was representative of the population and facilitated quicker testing.
Which of the following skills below, if improved, would most likely have prevented this situation?
- A . Objectivity
- B . Critical thinking.
- C . Empathy.
- D . Communication
B
Explanation:
Critical thinking skills are essential for internal auditors when designing audit procedures and selecting samples. The situation described indicates that the auditor relied on a sampling method without thoroughly considering the potential risks and the specific context of the transaction population. Improved critical thinking skills would help the auditor better assess the representativeness of the sample, identify potential fraud risks, and ensure a more thorough and effective audit approach, potentially preventing the oversight that led to undetected fraud.
Reference: The IIA Standards: Standard 1220 C Due Professional Care: "Internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor. Due professional care includes consideration of the use of technology-based audit and other data analysis techniques." IIA Practice Guide: "Assessing the Adequacy of Risk Management and Controls": Emphasizes the importance of critical thinking in evaluating risks and controls.
An internal auditor has completed an assurance engagement.
Which of the following is most likely true regarding the engagement?
- A . During audit planning the auditor provided the client with the scope of the engagement for their agreement
- B . The results of tie engagement were included m a written report mat was issued to the client who requested me engagement
- C . During audit planning the auditor determined that the engagement scope would include a review of the security and privacy of payroll records
- D . The client requested the review of a new payroll system in order to improve the security of fie system
C
Explanation:
In the context of an assurance engagement, the auditor determines the scope of the engagement during the planning phase, which includes identifying the specific areas to be reviewed. In this case, if the engagement included a review of the security and privacy of payroll records, it means that during the planning phase, the auditor identified this area as part of the engagement scope. This step is crucial to ensure that the engagement objectives are met and that all relevant risks and controls are evaluated.
Reference: The IIA Standards: Standard 2200 C Engagement Planning: "Internal auditors must develop and document a plan for each engagement, including the engagement’s objectives, scope, timing, and resource allocations."
The IIA Practice Guide: "Engagement Planning: Establishing Objectives and Scope": Emphasizes the importance of defining the scope during the planning phase.
In addition to her internal audit activity responsibilities, the chief audit executive has been asked to oversee the organization’s insurance function.
Which of the following responses is most appropriate?
- A . Welcome the additional responsibility, as it represents an opportunity to gain more information for future audits.
- B . Revise the internal audit charter to include oversight of the insurance function, ensuring that all of her responsibilities are properly documented.
- C . Report the request to the board and recommend alternate processes to obtain assurance related to insurance activities.
- D . Promptly remove the organization’s insurance function from the audit universe.
C
Explanation:
The most appropriate response for a chief audit executive (CAE) who has been asked to oversee the organization’s insurance function is to report the request to the board and recommend alternate processes to obtain assurance related to insurance activities. Taking on operational responsibilities such as overseeing the insurance function could impair the objectivity and independence of the internal audit activity, making it difficult to audit those activities impartially in the future.
Reference: IIA Standards on independence and objectivity, particularly Standard 1130: Impairment to Independence or Objectivity.
When testing a sample of payroll records during an engagement, an internal auditor suspects mat fraud has been committed.
What should be the next step?
- A . The auditor should increase the sample size to determine the extent ol the fraud.
- B . The suspicions should be communicated to the chief audit executive.
- C . The testing should be completed with the results reported in the final audit report.
- D . A fraud investigator should examine the evidence and report back to the auditor.
B
Explanation:
If fraud is suspected, it is crucial to follow the organization’s protocol for reporting such suspicions. The chief audit executive should be informed so that appropriate steps can be taken, including involving fraud investigators if necessary.
Reference: IIA Standard 1210.A2: Internal auditors must have sufficient knowledge to identify indicators of fraud.
IIA Practice Guide: Internal Auditing and Fraud.
In an internal audit charter, which of the following statements regarding the chief audit executive (CAE) would be most directly related to describing the responsibilities of the internal audit activity*?
- A . The CAE shall report functionally to the board and administratively to the chief financial officer
- B . The CAE and the Internal audit activity shall have full access to any and all records and personnel of the organization that are relevant to audit engagements
- C . The CAE and the internal audit activity shall be independent and objective in performing their work.
- D . The CAE shall report periodically on the performance of the internal audit activity relative to its plan
D
Explanation:
In an internal audit charter, the statement most directly related to describing the responsibilities of the internal audit activity is that the Chief Audit Executive (CAE) shall report periodically on the performance of the internal audit activity relative to its plan. This statement explicitly outlines a fundamental responsibility of the CAE and the audit activity, focusing on accountability and performance measurement against the planned objectives.
Reference: IIA standards related to the roles and responsibilities included in the internal audit charter, which typically define the reporting obligations of the CAE as a reflection of the internal audit activity’s duties and performance.
In its five years of existence, an internal audit activity conducted a single internal assessment of its quality assurance and improvement program (QAIP). The results of that assessment showed that the internal audit activity did not conform with the Standards. Prior to this, an external assessment of the internal audit activity’s QAIP was conducted, which reported that the internal audit activity was in conformance with the Standards.
Considering the two assessments, what would be the internal audit activity’s current state of conformance with the Standards?
- A . Conformance with the Standards.
- B . Nonconformance with the Standards
- C . Unable to determine conformance with the Standards.
- D . Partial conformance with the Standards
B
Explanation:
The current state of conformance with the Standards for the internal audit activity would be considered as "Nonconformance with the Standards." This assessment is based on the most recent internal assessment, which showed nonconformance. According to IIA standards, the results of the latest quality assurance review are critical in determining conformance, and any finding of nonconformance indicates that the internal audit activity currently does not meet the Standards, despite previous external assessments to the contrary.
Reference: IIA Standard 1300: Quality Assurance and Improvement Program and related interpretation guidelines.
An electric company hires several independent contractors to trim trees that are in close proximity to electricity lines.
Which of the following would be the most effective control to mitigate the risk of contractors submitting fraudulent invoices regarding work completed?
- A . Require contractors to submit completed and signed work acceptance sheets
- B . Utilize unmanned drones to conduct regular flights and photo shoots over the areas where work is performed
- C . Reconcile invoices and work acceptance sheets submitted by contractors
- D . Compare actual payments to contractors with budgeted values and analyze discrepancies
A
Explanation:
Requiring contractors to submit completed and signed work acceptance sheets is an effective control to mitigate the risk of fraudulent invoices. This control provides direct evidence that the work was completed as agreed, and it offers a verifiable document that can be checked against invoices submitted. This step also ensures that any claims made by contractors can be cross-referenced easily, enhancing transparency and accountability in the billing process.
Reference: Best practices in contractor management and invoice verification.
An audit client who was unsatisfied with the audit report rating called the chief audit executive (CAE) and complained that the internal auditor who performed the audit was biased because his spouse, who worked in the area under review, was on a list of employees to be terminated.
Which of the following measures would be most appropriate to prevent this situation from arising?
- A . Initiating an internal investigation to clarify whether a biased judgment took place.
- B . Requiring the internal auditors to disclose any potential conflicts of interest.
- C . Requiring that the audit client disclose any potential conflicts of interest with the auditor.
- D . Requiring human resources manager to submit all future job applicants’ data in order to identify relatives of auditors.
B
Explanation:
To prevent situations where an internal auditor’s impartiality could be questioned, it is essential to have a process in place that requires auditors to disclose any potential conflicts of interest. This helps to identify and address any relationships or circumstances that might compromise, or appear to compromise, the auditor’s objectivity and independence. Ensuring that such disclosures are made before assignments are accepted can prevent conflicts of interest from affecting the audit process.
Reference: IIA Code of Ethics: Objectivity Principle
IIA Standard 1120: Individual Objectivity
The organization’s chief audit executive (CAE) is planning an immediate assurance engagement following several product recalls. However, the internal audit staff does not have the required Knowledge and experience to adequately assess all the relevant processes and procedures.
According to 11A guidance, which of the following actions should the CAE take under these circumstances?
- A . Use the current available resources to conduct the review and exclude those procedures that can’t currently be performed.
- B . Implement an accelerated training plan to provide the audit staff with the necessary skills and knowledge to conduct the engagement.
- C . Encourage management to accept the assessed risk until the internal audit activity is able to adequately review the area.
- D . Obtain assistance for the audit team from other internal assurance providers who possess the requisite expertise in the area.
D
Explanation:
According to the IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), when internal audit staff lacks the required knowledge or expertise to perform an engagement, the chief audit executive (CAE) should consider obtaining additional resources with the necessary expertise. This approach ensures that the assurance engagement can be conducted with the requisite level of competence and fulfills the standards’ mandate for proficiency and due professional care (Standard 1210: Proficiency).
Reference: IIA Standard 1210: Proficiency.