Practice Free IIA-CIA-Part1 Exam Online Questions
Question #121
Which of the following best demonstrates that an internal auditor is applying due professional care when planning an assurance engagement?
- A . Assessing the risk of noncompliance with laws and regulations
- B . Following the policies as prescribed by the internal audit manual.
- C . Advising management of the area under review on how to mitigate internal control risks.
- D . Conducting the engagement on the presupposition that fraud exists.
Correct Answer: A
A
Explanation:
Applying due professional care in planning an assurance engagement includes assessing the risks involved in the engagement area. An assessment of the risk of noncompliance with laws and regulations directly addresses the potential legal and regulatory exposures that could significantly impact the organization. This risk assessment helps ensure that the audit plan is appropriately focused and aligned with key risks, demonstrating due professional care.
Reference: IIA standards on planning, which stipulate that due professional care includes an appropriate risk assessment.
A
Explanation:
Applying due professional care in planning an assurance engagement includes assessing the risks involved in the engagement area. An assessment of the risk of noncompliance with laws and regulations directly addresses the potential legal and regulatory exposures that could significantly impact the organization. This risk assessment helps ensure that the audit plan is appropriately focused and aligned with key risks, demonstrating due professional care.
Reference: IIA standards on planning, which stipulate that due professional care includes an appropriate risk assessment.
Question #122
An internal auditor discovered fraud while performing an audit of an organization’s procurement process.
Which of the following describes the greatest benefit of using forensic auditing techniques in this scenario?
- A . Enhanced capability to prevent frauds from occurring.
- B . Greater assurance that procurement frauds will be detected in a timely manner
- C . Improved capability of evaluating fraud risks within the organization.
- D . Greater understanding of fraud through better evidence collection
Correct Answer: D
D
Explanation:
The greatest benefit of using forensic auditing techniques when fraud is discovered in an organization’s procurement process is achieving a greater understanding of fraud through better evidence collection. Forensic auditing techniques are specialized procedures designed to collect, analyze, and evaluate evidence in a way that meets the standards of a legal process, which is crucial for understanding the mechanisms of fraud and potentially pursuing legal actions.
Reference: Forensic auditing practices and literature on fraud investigation techniques.
D
Explanation:
The greatest benefit of using forensic auditing techniques when fraud is discovered in an organization’s procurement process is achieving a greater understanding of fraud through better evidence collection. Forensic auditing techniques are specialized procedures designed to collect, analyze, and evaluate evidence in a way that meets the standards of a legal process, which is crucial for understanding the mechanisms of fraud and potentially pursuing legal actions.
Reference: Forensic auditing practices and literature on fraud investigation techniques.
Question #123
Which of the following situations best describes an internal auditor who may have violated the IIA Code of Ethics principle of confidentiality?
- A . The auditor intentionally omitted from his resume that he was fired from his previous job for fraud allegations,
- B . The auditor decided not to notify her supervisor that her brother-in-law was responsible for the project the auditor was expected to evaluate.
- C . The auditor asked the audit client to copy requested files to her personal unencrypted memory stick because it was faster and more convenient.
- D . The auditor was assigned to analyze the organization’s incentive program and spent long hours reviewing other employees’ bonuses,
Correct Answer: C
C
Explanation:
According to the IIA Code of Ethics, the principle of confidentiality emphasizes that internal auditors must refrain from disclosing confidential information acquired in the course of their duties unless legally obligated to do so. Using a personal unencrypted memory stick for transferring audit files not only risks the security of the information but also contravenes the confidentiality principles by potentially exposing sensitive data to unauthorized access.
Reference: IIA Code of Ethics, Principle of Confidentiality
C
Explanation:
According to the IIA Code of Ethics, the principle of confidentiality emphasizes that internal auditors must refrain from disclosing confidential information acquired in the course of their duties unless legally obligated to do so. Using a personal unencrypted memory stick for transferring audit files not only risks the security of the information but also contravenes the confidentiality principles by potentially exposing sensitive data to unauthorized access.
Reference: IIA Code of Ethics, Principle of Confidentiality
Question #124
The CAE may consider performing a self-assessment with independent external validation in Iieu of performing a full external assessment
- A . 1 and 2 only.
- B . 1 and 4 only
- C . 1, 2, and 3
- D . 3 and 4
Correct Answer: B
B
Explanation:
According to IIA guidance, the chief audit executive (CAE) may consider performing a self-assessment with independent external validation in lieu of performing a full external assessment. This is known as a self-assessment with independent validation (SAIV) and is acceptable as a part of the internal audit activity’s quality assurance and improvement program. Choosing an independent reviewer or review team to perform sufficient tests of the self-assessment to validate the results is also aligned with IIA standards for maintaining quality within the internal audit function.
Reference: IIA Standard 1300: Quality Assurance and Improvement Program, which outlines requirements for ongoing and periodic reviews of the internal audit activity.
B
Explanation:
According to IIA guidance, the chief audit executive (CAE) may consider performing a self-assessment with independent external validation in lieu of performing a full external assessment. This is known as a self-assessment with independent validation (SAIV) and is acceptable as a part of the internal audit activity’s quality assurance and improvement program. Choosing an independent reviewer or review team to perform sufficient tests of the self-assessment to validate the results is also aligned with IIA standards for maintaining quality within the internal audit function.
Reference: IIA Standard 1300: Quality Assurance and Improvement Program, which outlines requirements for ongoing and periodic reviews of the internal audit activity.
Question #125
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?
- 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.
Correct Answer: B
B
Explanation:
A low percentage of employees feeling confident in raising concerns without fear of retaliation indicates a potential ethics issue within the organization. It suggests that the company might have a culture that does not adequately protect whistleblowers, which can lead to ethical lapses and noncompliance with laws and regulations.
Reference: IIA guidance on ethics and whistleblower protection.
COSO Framework on organizational culture and ethics.
B
Explanation:
A low percentage of employees feeling confident in raising concerns without fear of retaliation indicates a potential ethics issue within the organization. It suggests that the company might have a culture that does not adequately protect whistleblowers, which can lead to ethical lapses and noncompliance with laws and regulations.
Reference: IIA guidance on ethics and whistleblower protection.
COSO Framework on organizational culture and ethics.
Question #126
A new internal audit activity is considering the adoption of a risk and control framework.
Which of the following is the most appropriate consideration during this process?
- A . The framework should not be developed by the internal audit activity
- B . The framework should apply to individual projects rather than the organization as a whole
- C . The framework should always be tailored to the organization
- D . The framework should require fewer resources to implement
Correct Answer: C
C
Explanation:
The most appropriate consideration when adopting a risk and control framework for a new internal audit activity is that the framework should always be tailored to the organization. This ensures that the framework is relevant to the specific operational, cultural, and strategic contexts of the organization, which enhances its effectiveness in managing risk and improves the alignment of control processes with organizational objectives.
Reference: Best practices in risk management and internal control frameworks, such as those provided by COSO and ISO, which emphasize the importance of customizing frameworks to fit the unique needs and characteristics of the organization.
C
Explanation:
The most appropriate consideration when adopting a risk and control framework for a new internal audit activity is that the framework should always be tailored to the organization. This ensures that the framework is relevant to the specific operational, cultural, and strategic contexts of the organization, which enhances its effectiveness in managing risk and improves the alignment of control processes with organizational objectives.
Reference: Best practices in risk management and internal control frameworks, such as those provided by COSO and ISO, which emphasize the importance of customizing frameworks to fit the unique needs and characteristics of the organization.
Question #127
With regard to the internal audit activity’s quality assurance and improvement program, which of the following must be reported to the board?
- A . A statement of independence of the organization’s internal auditors.
- B . Meeting minutes with the assessment team, if key risks were identified and discussed.
- C . Frequency of the quality assessments being performed.
- D . Summary of previous internal assessments undertaken.
Correct Answer: C
C
Explanation:
According to the International Standards for the Professional Practice of Internal Auditing, the internal audit activity must have a quality assurance and improvement program that covers all aspects of the internal audit activity. This program should include both internal and external assessments. The chief audit executive must report the results of the quality assurance and improvement program to senior management and the board, including the frequency of quality assessments. This ensures that the board is aware of how often quality assessments are conducted, ensuring continuous improvement and adherence to standards.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 1312 – External Assessments, and Standard 1320 – Reporting on the Quality Assurance and Improvement Program.
C
Explanation:
According to the International Standards for the Professional Practice of Internal Auditing, the internal audit activity must have a quality assurance and improvement program that covers all aspects of the internal audit activity. This program should include both internal and external assessments. The chief audit executive must report the results of the quality assurance and improvement program to senior management and the board, including the frequency of quality assessments. This ensures that the board is aware of how often quality assessments are conducted, ensuring continuous improvement and adherence to standards.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 1312 – External Assessments, and Standard 1320 – Reporting on the Quality Assurance and Improvement Program.
Question #127
With regard to the internal audit activity’s quality assurance and improvement program, which of the following must be reported to the board?
- A . A statement of independence of the organization’s internal auditors.
- B . Meeting minutes with the assessment team, if key risks were identified and discussed.
- C . Frequency of the quality assessments being performed.
- D . Summary of previous internal assessments undertaken.
Correct Answer: C
C
Explanation:
According to the International Standards for the Professional Practice of Internal Auditing, the internal audit activity must have a quality assurance and improvement program that covers all aspects of the internal audit activity. This program should include both internal and external assessments. The chief audit executive must report the results of the quality assurance and improvement program to senior management and the board, including the frequency of quality assessments. This ensures that the board is aware of how often quality assessments are conducted, ensuring continuous improvement and adherence to standards.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 1312 – External Assessments, and Standard 1320 – Reporting on the Quality Assurance and Improvement Program.
C
Explanation:
According to the International Standards for the Professional Practice of Internal Auditing, the internal audit activity must have a quality assurance and improvement program that covers all aspects of the internal audit activity. This program should include both internal and external assessments. The chief audit executive must report the results of the quality assurance and improvement program to senior management and the board, including the frequency of quality assessments. This ensures that the board is aware of how often quality assessments are conducted, ensuring continuous improvement and adherence to standards.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 1312 – External Assessments, and Standard 1320 – Reporting on the Quality Assurance and Improvement Program.
Question #129
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?
- 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.
Correct Answer: B
B
Explanation:
Internal auditors are required to have sufficient knowledge to identify indicators of fraud. They should recognize red flags and investigate them further, even if their primary responsibility is not to detect fraud.
Reference: IIA Standard 1210.A2 – Proficiency: Internal auditors must have sufficient knowledge to evaluate the risk of fraud.
IIA Practice Guide on Fraud and Internal Auditors.
B
Explanation:
Internal auditors are required to have sufficient knowledge to identify indicators of fraud. They should recognize red flags and investigate them further, even if their primary responsibility is not to detect fraud.
Reference: IIA Standard 1210.A2 – Proficiency: Internal auditors must have sufficient knowledge to evaluate the risk of fraud.
IIA Practice Guide on Fraud and Internal Auditors.
Question #130
To meet the resource requirements of this year’s internal audit plan, the chief audit executive (CAE) has recruited additional staff auditors, including an employee who resigned as a senior supervisor from the accounts payable department two months ago. There is a scheduled accounts payable review that the CAE wants to start within the next five months.
Which approach should the CAE take, knowing the expertise of his new recruit in the area intended to be audited?
- A . Have the new internal auditor’s previous boss be excused from the area during fieldwork.
- B . Have the new internal auditor be responsible for the planning of the audit as well as the review of the audit fieldwork.
- C . Have the new internal auditor assigned to other responsibilities and not work on the accounts payable audit engagement.
- D . Have the new internal auditor assist with conducting the fieldwork, but ensure that her work is reviewed by the CAE.
Correct Answer: C
C
Explanation:
To maintain objectivity and independence, the new internal auditor, who was recently a senior supervisor in the accounts payable department, should not be assigned to an audit engagement in the same area. The IIA standards emphasize the need to avoid actual or perceived conflicts of interest, especially when auditors have recently transferred from or held responsibilities in the areas they audit.
C
Explanation:
To maintain objectivity and independence, the new internal auditor, who was recently a senior supervisor in the accounts payable department, should not be assigned to an audit engagement in the same area. The IIA standards emphasize the need to avoid actual or perceived conflicts of interest, especially when auditors have recently transferred from or held responsibilities in the areas they audit.