Practice Free IIA-CIA-Part1 Exam Online Questions
Question #171
During an audit of company expenses, the internal auditor performed a test using data analytics and identified a violation of the company’s expenses policy. The auditor who discovered the issue considered it a potential fraudulent transaction and informed the chief financial officer (CFO). The CFO dismissed the concern because he did not understand the data analytics test that was performed and the transaction was of a low value.
Given this situation, which skills or competencies should this internal auditor seek to improve?
- A . Skills in evaluating the risk of fraud.
- B . Knowledge of key IT risks and controls
- C . Soft skills such as communication and negotiation.
- D . Knowledge and understanding of the company’s expenses policy
Correct Answer: C
C
Explanation:
Given that the CFO dismissed the concern due to a lack of understanding of the data analytics test and the perceived insignificance of the transaction, the internal auditor should improve soft skills, specifically communication and negotiation. Enhancing these skills would help the auditor better explain the significance of findings and persuade management of the need to address such issues, regardless of transaction value.
Reference: Institute of Internal Auditors (IIA) – Competency Framework for Internal Auditors
C
Explanation:
Given that the CFO dismissed the concern due to a lack of understanding of the data analytics test and the perceived insignificance of the transaction, the internal auditor should improve soft skills, specifically communication and negotiation. Enhancing these skills would help the auditor better explain the significance of findings and persuade management of the need to address such issues, regardless of transaction value.
Reference: Institute of Internal Auditors (IIA) – Competency Framework for Internal Auditors
Question #172
According to IIA guidance, which of the following statements regarding ethics is true?
- A . Business ethics may vary within an organization with both domestic and foreign operations.
- B . Business ethics are universal in nature and organizations across the world are expected to comply with similar standards.
- C . A business ethics policy for an organization is established solely to direct the behavior and expectations of employees.
- D . Business ethics of an organization must remain independent from those of suppliers, customers, and business partners.
Correct Answer: A
A
Explanation:
Business ethics can vary within organizations that operate across multiple regions, as they must often consider local cultural norms and regulations. The IIA recognizes the need for flexibility in ethical policies for multinational organizations, while still adhering to fundamental ethical principles.
A
Explanation:
Business ethics can vary within organizations that operate across multiple regions, as they must often consider local cultural norms and regulations. The IIA recognizes the need for flexibility in ethical policies for multinational organizations, while still adhering to fundamental ethical principles.
Question #173
Which of the following written documents typically offers the best evidence that internal auditors exercise due professional care in conformance with the Standards?
- A . Internal audit charter.
- B . Workpaper.
- C . Audit report.
- D . Code of ethics.
Correct Answer: B
B
Explanation:
Workpapers typically offer the best evidence that internal auditors exercise due professional care in conformance with the Standards. Workpapers document the planning, execution, and results of audit engagements, providing detailed evidence of the auditor’s work and adherence to professional standards.
Reference: The IIA’s standards on documentation and due professional care, which emphasize the importance of maintaining detailed workpapers.
B
Explanation:
Workpapers typically offer the best evidence that internal auditors exercise due professional care in conformance with the Standards. Workpapers document the planning, execution, and results of audit engagements, providing detailed evidence of the auditor’s work and adherence to professional standards.
Reference: The IIA’s standards on documentation and due professional care, which emphasize the importance of maintaining detailed workpapers.
Question #174
Trchiet audit executive (CAE) of large organization is preparing job descriptions to hire five new general internal audit staff, two new IT auditors and a senior auditer how is the CAE likely to describe IT requirements for me general internal audit statt positions?
- A . The candidate must be able to apply data analytics tolls methodologies
- B . The candidate must be able to evaluate IT governance and cybersecurity frameworks.
- C . The candidate must be able to understand IT-elated risk and general controls
- D . The candidate must be able to execute web servers, applications, and databases testing procedures.
Correct Answer: C
C
Explanation:
For general internal audit staff positions, the chief audit executive (CAE) is likely to describe IT requirements as needing to understand IT-related risk and general controls. This requirement is essential for general auditors to evaluate how IT risks impact broader organizational risks and understand basic IT controls without necessarily needing the specialized skills to evaluate IT governance or perform technical IT testing.
Reference: General hiring practices for internal auditors as advised by the IIA, focusing on foundational IT knowledge suitable for general audit roles.
C
Explanation:
For general internal audit staff positions, the chief audit executive (CAE) is likely to describe IT requirements as needing to understand IT-related risk and general controls. This requirement is essential for general auditors to evaluate how IT risks impact broader organizational risks and understand basic IT controls without necessarily needing the specialized skills to evaluate IT governance or perform technical IT testing.
Reference: General hiring practices for internal auditors as advised by the IIA, focusing on foundational IT knowledge suitable for general audit roles.
Question #175
Which of the following would be considered a monitoring activity in organization wide risk management?
- A . Validate the results of management’s self-assessment.
- B . Perform reviews of personnel.
- C . Maintain rigorous and comprehensive documentation.
- D . Obtain authorizations and signatures.
Correct Answer: A
A
Explanation:
A monitoring activity in organization-wide risk management would include validating the results of management’s self-assessment. This activity ensures that risk management processes are effective and that self-assessments accurately reflect the risk status, aligning with the role of internal audit in providing assurance over risk management activities.
Reference: COSO framework for risk management; IIA guidance on risk management.
A
Explanation:
A monitoring activity in organization-wide risk management would include validating the results of management’s self-assessment. This activity ensures that risk management processes are effective and that self-assessments accurately reflect the risk status, aligning with the role of internal audit in providing assurance over risk management activities.
Reference: COSO framework for risk management; IIA guidance on risk management.
Question #176
According to MA guidance, which of the following statements is true regarding internal auditors’ use of technology-based techniques?
- A . Auditors must consider using technology if it advances the engagement, even when implementation costs exceed the benefits.
- B . Auditors must considering using technology to reduce the organization’s risk by detecting all instances of fraud.
- C . Auditors must consider using technology only when the Implementation cost does not exceed benefits.
- D . Auditors must consider using technology in a variety of engagements to ensure that their work is substantiated and infallible.
Correct Answer: C
C
Explanation:
According to IIA guidance, internal auditors must consider using technology in their audit engagements only when the implementation cost does not exceed the benefits. This approach aligns with the principle of adding value and effectiveness in audit processes while maintaining cost-effectiveness.
Reference: The IIA’s guidelines on the use of technology in auditing, including cost-benefit analysis considerations.
C
Explanation:
According to IIA guidance, internal auditors must consider using technology in their audit engagements only when the implementation cost does not exceed the benefits. This approach aligns with the principle of adding value and effectiveness in audit processes while maintaining cost-effectiveness.
Reference: The IIA’s guidelines on the use of technology in auditing, including cost-benefit analysis considerations.
Question #177
When performing an audit of the risk management process an auditor makes the observations listed below.
Which poses the greatest risk to the organization?
- A . The identified risks have not undergone a detailed review to ensure completeness in the past two years.
- B . The controls in place to mitigate the risks are not tested on an annual basis to confirm operating effectiveness.
- C . The process in place to identify and evaluate new risks to the organization is informal and poorly documented.
- D . The identified risks have not been ranked to establish their importance and risk management priority.
Correct Answer: C
C
Explanation:
When assessing the greatest risk among the provided observations in the audit of the risk management process, we must evaluate which issue could most significantly impact the organization’s ability to manage risks effectively. Here is a detailed analysis of each option:
Option A: While not reviewing identified risks for completeness in the past two years is a concern, it does not necessarily imply that new risks have not been identified or managed during that time. Option B: Not testing controls annually to confirm operating effectiveness is a significant issue, but existing controls may still be functioning effectively.
Option C: An informal and poorly documented process to identify and evaluate new risks presents a critical weakness. This means the organization might be unaware of emerging risks, leading to unmanaged exposures that could cause significant harm.
Option D: Not ranking identified risks to establish their importance affects prioritization but does not prevent risk identification or basic management.
The greatest risk is posed by Option C because an informal and poorly documented process to identify and evaluate new risks undermines the entire risk management framework, potentially allowing significant and emerging risks to go unrecognized and unaddressed.
Reference: The Institute of Internal Auditors (IIA) Standards and Guidance on Risk Management.
COSO ERM Framework.
C
Explanation:
When assessing the greatest risk among the provided observations in the audit of the risk management process, we must evaluate which issue could most significantly impact the organization’s ability to manage risks effectively. Here is a detailed analysis of each option:
Option A: While not reviewing identified risks for completeness in the past two years is a concern, it does not necessarily imply that new risks have not been identified or managed during that time. Option B: Not testing controls annually to confirm operating effectiveness is a significant issue, but existing controls may still be functioning effectively.
Option C: An informal and poorly documented process to identify and evaluate new risks presents a critical weakness. This means the organization might be unaware of emerging risks, leading to unmanaged exposures that could cause significant harm.
Option D: Not ranking identified risks to establish their importance affects prioritization but does not prevent risk identification or basic management.
The greatest risk is posed by Option C because an informal and poorly documented process to identify and evaluate new risks undermines the entire risk management framework, potentially allowing significant and emerging risks to go unrecognized and unaddressed.
Reference: The Institute of Internal Auditors (IIA) Standards and Guidance on Risk Management.
COSO ERM Framework.
Question #178
An engagement supervisor is overseeing a procurement assurance engagement. In the middle of the engagement, the engagement supervisor attends a weekend social event paid for by the head of procurement.
Which of the following ethics principles is the engagement supervisor potentially violating by attending the event?
- A . Confidentiality.
- B . Integrity.
- C . Objectivity.
- D . Competency.
Correct Answer: C
C
Explanation:
Objectivity is one of the ethics principles for internal auditors, which means that they should not allow bias, conflict of interest, or undue influence to impair their professional judgment2. By attending a weekend social event paid for by the head of procurement, the engagement supervisor is potentially violating this principle, as it may create a personal or professional relationship that could compromise their objectivity in the procurement assurance engagement3.
Reference: 1: CIA Exam Practice Questions – Certified Internal Auditor® 2019 2: Global Internal Auditing Code of Ethics | The IIA1, p. 1 3: Code of Ethics – The Institute of Internal Auditors or The IIA2, p. 1
C
Explanation:
Objectivity is one of the ethics principles for internal auditors, which means that they should not allow bias, conflict of interest, or undue influence to impair their professional judgment2. By attending a weekend social event paid for by the head of procurement, the engagement supervisor is potentially violating this principle, as it may create a personal or professional relationship that could compromise their objectivity in the procurement assurance engagement3.
Reference: 1: CIA Exam Practice Questions – Certified Internal Auditor® 2019 2: Global Internal Auditing Code of Ethics | The IIA1, p. 1 3: Code of Ethics – The Institute of Internal Auditors or The IIA2, p. 1
Question #179
Which of the following would an internal auditor expect to find within an organization’s internal control framework?
- A . A compliance risk mitigation strategy to be implemented by the compliance function.
- B . A statement of the organization s values, reflecting its attitude toward risk
- C . Details of how each group from the Three Lines Model fits into the risk management strategy.
- D . The risk appetite related to establishing and approving process
Correct Answer: B
B
Explanation:
An internal auditor would expect to find a statement of the organization’s values, reflecting its attitude toward risk, within an organization’s internal control framework. This statement helps set the tone at the top regarding the importance of control and the approach to risk management, which is fundamental for guiding the behavior and decision-making within the organization.
Reference: Committee of Sponsoring Organizations of the Treadway Commission (COSO) – Internal Control Framework` 1
B
Explanation:
An internal auditor would expect to find a statement of the organization’s values, reflecting its attitude toward risk, within an organization’s internal control framework. This statement helps set the tone at the top regarding the importance of control and the approach to risk management, which is fundamental for guiding the behavior and decision-making within the organization.
Reference: Committee of Sponsoring Organizations of the Treadway Commission (COSO) – Internal Control Framework` 1
Question #180
Internal controls belong to which risk response category?
- A . Reduction.
- B . Avoidance.
- C . Sharing.
- D . Acceptance.
Correct Answer: A
A
Explanation:
Internal controls are mechanisms put in place to reduce the probability or impact of risks affecting the organization’s objectives. They do not eliminate risks entirely (which would be avoidance) nor do they transfer or share the risk (as in risk sharing); rather, they mitigate risks to more acceptable levels.
Reference: Institute of Internal Auditors (IIA) – Guidance on Risk Assessment in Practice
A
Explanation:
Internal controls are mechanisms put in place to reduce the probability or impact of risks affecting the organization’s objectives. They do not eliminate risks entirely (which would be avoidance) nor do they transfer or share the risk (as in risk sharing); rather, they mitigate risks to more acceptable levels.
Reference: Institute of Internal Auditors (IIA) – Guidance on Risk Assessment in Practice