Practice Free IIA-CIA-Part1 Exam Online Questions
Question #151
A chief audit executive ensures that the internal audit activity provides annual training to management on internal controls.
Where is the nature of these services defined?
- A . The annual audit plan.
- B . The audit report.
- C . The annual risk assessment.
- D . The audit charter.
Correct Answer: D
D
Explanation:
The nature of services provided by the internal audit activity, including training management on internal controls, is typically defined in the audit charter. The audit charter outlines the purpose, authority, and scope of the internal audit activity, including any advisory services it provides, such as training. It establishes the framework within which the internal audit team operates and serves as a formal document that specifies the arrangement between the internal audit function and the rest of the organization.
Reference: IIA Standard 1000: Purpose, Authority, and Responsibility.
D
Explanation:
The nature of services provided by the internal audit activity, including training management on internal controls, is typically defined in the audit charter. The audit charter outlines the purpose, authority, and scope of the internal audit activity, including any advisory services it provides, such as training. It establishes the framework within which the internal audit team operates and serves as a formal document that specifies the arrangement between the internal audit function and the rest of the organization.
Reference: IIA Standard 1000: Purpose, Authority, and Responsibility.
Question #152
Which of the following is a detective control?
- A . An organization requires certain employees who occupy sensitive positions to sign attestation to the code of conduct on an annual basis.
- B . A compliance specialist carries out quarterly reviews of an organization’s compliance with regulatory requirements.
- C . A front desk officer in an organization requires that visitors are identified by the host before access is granted.
- D . An internal audit activity deploys audit management policies and procedures for team members.
Correct Answer: B
B
Explanation:
A detective control is designed to identify and correct errors or irregularities that have occurred. A compliance specialist conducting quarterly reviews fits this definition as it involves monitoring and detecting non-compliance issues after they have occurred, allowing for corrective actions to be taken.
Reference: COSO Internal Control Framework and the IIA’s guidance on types of controls.
B
Explanation:
A detective control is designed to identify and correct errors or irregularities that have occurred. A compliance specialist conducting quarterly reviews fits this definition as it involves monitoring and detecting non-compliance issues after they have occurred, allowing for corrective actions to be taken.
Reference: COSO Internal Control Framework and the IIA’s guidance on types of controls.
Question #153
An internal auditor believes that a weakness exists in the control environment relating to the delegation of authority and responsibility within the management structure.
Which of the following actions should the internal auditor first consider in this matter?
- A . Recommend a control change and obtain management support
- B . Evaluate the potential impact on related controls
- C . Address the risk with senior management and the board
- D . Develop and communicate the scope and evaluation criteria to be used by management
Correct Answer: B
B
Explanation:
Evaluating the potential impact on related controls is the first step an internal auditor should take when identifying a weakness in the control environment regarding the delegation of authority and responsibility within the management structure. This approach allows the auditor to understand the extent of the weakness and how it might affect other controls within the organization. By assessing the impact, the auditor can gather the necessary information to inform management and recommend appropriate corrective actions. This method aligns with the principles of risk-based auditing, which emphasize understanding and evaluating risks before taking further steps.
Reference: The Institute of Internal Auditors (IIA) Standards: Standard 2210 C Engagement Objectives: "Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives."
COSO Framework: Control Environment principle emphasizes the need for a robust structure for delegation of authority and responsibility and its impact on related controls.
B
Explanation:
Evaluating the potential impact on related controls is the first step an internal auditor should take when identifying a weakness in the control environment regarding the delegation of authority and responsibility within the management structure. This approach allows the auditor to understand the extent of the weakness and how it might affect other controls within the organization. By assessing the impact, the auditor can gather the necessary information to inform management and recommend appropriate corrective actions. This method aligns with the principles of risk-based auditing, which emphasize understanding and evaluating risks before taking further steps.
Reference: The Institute of Internal Auditors (IIA) Standards: Standard 2210 C Engagement Objectives: "Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives."
COSO Framework: Control Environment principle emphasizes the need for a robust structure for delegation of authority and responsibility and its impact on related controls.
Question #154
Applying ISO 31000, which of the following is part of the external context for risk management?
- A . Risk treatment method based on risk evaluation.
- B . Organizational culture, objectives, and processes.
- C . The regulatory and competitive environment
- D . The method of determining the risk level.
Correct Answer: C
C
Explanation:
ISO 31000 outlines risk management principles and guidelines, including the consideration of external context in the risk management process. The external context refers to the environment in which the organization operates. This includes, but is not limited to, cultural, social, political, legal, regulatory, financial, technological, economic, and competitive environments, both international and national. Therefore, option C, "The regulatory and competitive environment," is part of the external context for risk management according to ISO 31000.
Reference: ISO 31000:2018, Risk management – Guidelines
C
Explanation:
ISO 31000 outlines risk management principles and guidelines, including the consideration of external context in the risk management process. The external context refers to the environment in which the organization operates. This includes, but is not limited to, cultural, social, political, legal, regulatory, financial, technological, economic, and competitive environments, both international and national. Therefore, option C, "The regulatory and competitive environment," is part of the external context for risk management according to ISO 31000.
Reference: ISO 31000:2018, Risk management – Guidelines
Question #155
Which of the following statements is the most appropriate example of the internal audit activity exercising due professional care during an audit of the payroll department?
- A . Internal auditors ensure that the work program is appropriately designed in order to identify all of the risks surrounding the payroll process.
- B . Internal auditors determine whether the policies, procedures, and practices of the payroll department are operating in accordance with relevant laws.
- C . Internal auditors verify whether the board of directors has implemented effective internal controls over the processes used by the payroll department.
- D . Internal auditors ask the organization’s risk manager to determine whether the degree of work planned is sufficient to determine whether payroll payments were complete and accurate.
Correct Answer: A
A
Explanation:
Exercising due professional care means ensuring that audit procedures are sufficient to meet the audit objectives and identify all significant risks. Ensuring that the work program is appropriately designed to identify all risks surrounding the payroll process demonstrates due professional care, as it involves planning and performing the audit with diligence and thoroughness.
Option B: Determining compliance with laws is part of due professional care but not as comprehensive as designing the work program to identify all risks.
Option C: Verifying internal controls implementation is part of the audit scope but does not fully encompass due professional care in planning and executing the audit.
Option D: Consulting with the risk manager is a good practice but does not substitute for the auditor’s responsibility to plan and perform the audit.
Reference: IIA Standard 1220: Due Professional Care.
IIA Practice Guide: Due Professional Care.
A
Explanation:
Exercising due professional care means ensuring that audit procedures are sufficient to meet the audit objectives and identify all significant risks. Ensuring that the work program is appropriately designed to identify all risks surrounding the payroll process demonstrates due professional care, as it involves planning and performing the audit with diligence and thoroughness.
Option B: Determining compliance with laws is part of due professional care but not as comprehensive as designing the work program to identify all risks.
Option C: Verifying internal controls implementation is part of the audit scope but does not fully encompass due professional care in planning and executing the audit.
Option D: Consulting with the risk manager is a good practice but does not substitute for the auditor’s responsibility to plan and perform the audit.
Reference: IIA Standard 1220: Due Professional Care.
IIA Practice Guide: Due Professional Care.
Question #156
Which of the following statements is true regarding management’s use of judgement to design, implement, and conduct internal control?
- A . The use of judgment enhances management’s ability to make better decisions about internal control, but cannot guarantee perfect outcomes.
- B . Introducing judgment generally diminishes management’s ability to make good decisions about internal control.
- C . It is inappropriate for management to exercise judgement in areas such as specifying and using suitable accounting principles.
- D . It is inappropriate for management to exercise judgement in assessing whether components are present, functioning, and operating together
Correct Answer: A
A
Explanation:
The use of judgment in designing, implementing, and conducting internal control is essential and enhances management’s ability to tailor controls to the organization’s unique circumstances, thereby making better decisions. However, it cannot guarantee perfect outcomes as it involves estimating and forecasting future conditions, which are inherently uncertain.
Reference: COSO Internal Control Framework
A
Explanation:
The use of judgment in designing, implementing, and conducting internal control is essential and enhances management’s ability to tailor controls to the organization’s unique circumstances, thereby making better decisions. However, it cannot guarantee perfect outcomes as it involves estimating and forecasting future conditions, which are inherently uncertain.
Reference: COSO Internal Control Framework
Question #157
Which of the following statements is true regarding the importance of risk management?
- A . Risk management ensures the ability to eliminate potential hazards to the organization.
- B . Risk management includes consideration of potential opportunities for the organization.
- C . Risk management aids with the establishment of appropriate key performance indicators.
- D . Risk management increases employees’ commitment and belief in strategic goals.
Correct Answer: B
B
Explanation:
Risk management is not solely about mitigating or eliminating potential hazards but also involves identifying and seizing potential opportunities that can benefit the organization. Effective risk management allows an organization to balance risk and reward, making informed decisions that align with its strategic objectives. This approach ensures a proactive stance in optimizing performance and achieving competitive advantage while managing risks.
Reference: The Institute of Internal Auditors (IIA) Standards and Practice Advisories.
COSO Enterprise Risk Management (ERM) Framework.
"Risk Management: Principles and Practices" by IIA.
B
Explanation:
Risk management is not solely about mitigating or eliminating potential hazards but also involves identifying and seizing potential opportunities that can benefit the organization. Effective risk management allows an organization to balance risk and reward, making informed decisions that align with its strategic objectives. This approach ensures a proactive stance in optimizing performance and achieving competitive advantage while managing risks.
Reference: The Institute of Internal Auditors (IIA) Standards and Practice Advisories.
COSO Enterprise Risk Management (ERM) Framework.
"Risk Management: Principles and Practices" by IIA.
Question #158
Regarding assurance and consulting services provided by the internal audit activity which of the following statements is correct?
- A . The nature and scope of a consulting engagement are determined by the internal audit activity based on its risk assessment
- B . The nature and scope of an assurance engagement are subject to agreement with management of the area under review
- C . Both assurance services and consulting services can be focused on controls or performance or both
- D . The assurance engagement process ends with reporting
Correct Answer: C
C
Explanation:
The correct statement regarding assurance and consulting services provided by the internal audit activity is that both assurance services and consulting services can be focused on controls or performance or both. This reflects the flexibility and adaptability of internal audit functions to address varying organizational needs, whether in assessing the adequacy and effectiveness of controls, improving operational performance, or both.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing on the nature of assurance and consulting services.
C
Explanation:
The correct statement regarding assurance and consulting services provided by the internal audit activity is that both assurance services and consulting services can be focused on controls or performance or both. This reflects the flexibility and adaptability of internal audit functions to address varying organizational needs, whether in assessing the adequacy and effectiveness of controls, improving operational performance, or both.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing on the nature of assurance and consulting services.
Question #159
According to IIA guidance, which of the following statements is true regarding proficiency?
- A . The globally accepted Certified Internal Auditor designation is mandatory at chief audit executive levels.
- B . Internal auditors are encouraged to obtain appropriate professional designations.
- C . Specialty designations are required for those who perform specialized audit and consulting work.
- D . Studies for professional designations are the preferred source of continuing professional education
Correct Answer: B
B
Explanation:
According to IIA guidance, internal auditors are encouraged to obtain appropriate professional designations. This encouragement is part of a broader recommendation to pursue continuous professional development and maintain proficiency in audit practices. The statement correctly reflects the IIA’s position on the importance of professional qualifications, though it does not imply that specific designations are mandatory.
Reference: IIA standards and guidelines, which promote ongoing professional education and encourage auditors to obtain certifications relevant to their field of work.
B
Explanation:
According to IIA guidance, internal auditors are encouraged to obtain appropriate professional designations. This encouragement is part of a broader recommendation to pursue continuous professional development and maintain proficiency in audit practices. The statement correctly reflects the IIA’s position on the importance of professional qualifications, though it does not imply that specific designations are mandatory.
Reference: IIA standards and guidelines, which promote ongoing professional education and encourage auditors to obtain certifications relevant to their field of work.
Question #160
An internal auditor performed a consulting engagement last year which included assisting with management’s design of controls over the procurement function.
How should the chief audit executive plan an assurance engagement on the adequacy of the internal control system in the procurement function in the current year?
- A . Assign the engagement to another internal auditor on staff
- B . Outsource the engagement to ensure independence
- C . Harness the auditor’s knowledge of the procurement function by assigning the engagement to the same internal auditor
- D . Postpone the engagement to the following year to ensure enough time has passed since the controls were designed
Correct Answer: A
A
Explanation:
In the scenario where an internal auditor assisted with management’s design of controls over the procurement function, the chief audit executive should plan an assurance engagement on the adequacy of the internal control system by assigning the engagement to another internal auditor on staff. This approach ensures that the evaluation of the controls is conducted with objectivity and independence, as the auditor who helped design the controls may have an inherent bias.
Reference: IIA Standards regarding objectivity and independence in assurance engagements.
A
Explanation:
In the scenario where an internal auditor assisted with management’s design of controls over the procurement function, the chief audit executive should plan an assurance engagement on the adequacy of the internal control system by assigning the engagement to another internal auditor on staff. This approach ensures that the evaluation of the controls is conducted with objectivity and independence, as the auditor who helped design the controls may have an inherent bias.
Reference: IIA Standards regarding objectivity and independence in assurance engagements.