Practice Free IIA-CIA-Part1 Exam Online Questions
Question #201
Which of the following actions should the organization’s governing body perform to provide the most effective governance over the organization’s culture?
- A . Coordinate control activities.
- B . Provide direction.
- C . Design key controls.
- D . Deliver assurance.
Correct Answer: B
B
Explanation:
To provide effective governance over the organization’s culture, the organization’s governing body should provide direction. This involves setting a tone at the top that promotes ethical behavior, accountability, and transparency throughout the organization. Providing direction helps ensure that organizational values are communicated and reinforced, influencing the culture and ethical climate of the entire organization.
Reference: IIA guidance on governance and leadership’s role in organizational culture.
B
Explanation:
To provide effective governance over the organization’s culture, the organization’s governing body should provide direction. This involves setting a tone at the top that promotes ethical behavior, accountability, and transparency throughout the organization. Providing direction helps ensure that organizational values are communicated and reinforced, influencing the culture and ethical climate of the entire organization.
Reference: IIA guidance on governance and leadership’s role in organizational culture.
Question #201
Which of the following actions should the organization’s governing body perform to provide the most effective governance over the organization’s culture?
- A . Coordinate control activities.
- B . Provide direction.
- C . Design key controls.
- D . Deliver assurance.
Correct Answer: B
B
Explanation:
To provide effective governance over the organization’s culture, the organization’s governing body should provide direction. This involves setting a tone at the top that promotes ethical behavior, accountability, and transparency throughout the organization. Providing direction helps ensure that organizational values are communicated and reinforced, influencing the culture and ethical climate of the entire organization.
Reference: IIA guidance on governance and leadership’s role in organizational culture.
B
Explanation:
To provide effective governance over the organization’s culture, the organization’s governing body should provide direction. This involves setting a tone at the top that promotes ethical behavior, accountability, and transparency throughout the organization. Providing direction helps ensure that organizational values are communicated and reinforced, influencing the culture and ethical climate of the entire organization.
Reference: IIA guidance on governance and leadership’s role in organizational culture.
Question #203
Which of the following is true with regard to an organization’s risk management practices?
- A . Risks represent a single point estimate
- B . Each organization faces the same types of risk.
- C . Risks may relate to failing to achieve positive outcomes.
- D . Mitigated risks are no longer considered to be inherent.
Correct Answer: C
C
Explanation:
It is true that risks may relate to failing to achieve positive outcomes. This statement recognizes that risks are not only about preventing losses or avoiding negative consequences but also about failing to capitalize on opportunities that could lead to positive outcomes. This perspective aligns with a broader, more holistic view of risk management.
Reference: IIA Position Paper on Risk Management
C
Explanation:
It is true that risks may relate to failing to achieve positive outcomes. This statement recognizes that risks are not only about preventing losses or avoiding negative consequences but also about failing to capitalize on opportunities that could lead to positive outcomes. This perspective aligns with a broader, more holistic view of risk management.
Reference: IIA Position Paper on Risk Management
Question #204
The internal audit activity is responsible for conducting fraud investigations. A potential fraud instance was identified during an audit engagement. The chief audit executive appoints a lead investigator.
Which of the following would most likely be the next step?
- A . Ask internal auditors to gather all relevant information and evidence.
- B . Identify and interview witnesses first and potential suspects later.
- C . Conduct a fraud risk assessment to identify the most vulnerable areas.
- D . Determine the competencies needed and assess whether team members have a conflict of Interest.
Correct Answer: D
D
Explanation:
When a potential fraud instance is identified, the chief audit executive (CAE) appoints a lead investigator to manage the investigation. The next critical step is to determine the competencies needed for the investigation and assess whether the team members have any conflicts of interest.
This ensures that the investigation team has the appropriate skills, knowledge, and objectivity to handle the case effectively. Ensuring there are no conflicts of interest is vital to maintain the integrity and credibility of the investigation process.
Reference: IIA Practice Guide: Internal Auditing and Fraud
IIA Standard 1210: Proficiency
IIA Standard 1120: Individual Objectivity
D
Explanation:
When a potential fraud instance is identified, the chief audit executive (CAE) appoints a lead investigator to manage the investigation. The next critical step is to determine the competencies needed for the investigation and assess whether the team members have any conflicts of interest.
This ensures that the investigation team has the appropriate skills, knowledge, and objectivity to handle the case effectively. Ensuring there are no conflicts of interest is vital to maintain the integrity and credibility of the investigation process.
Reference: IIA Practice Guide: Internal Auditing and Fraud
IIA Standard 1210: Proficiency
IIA Standard 1120: Individual Objectivity
Question #205
During an audit engagement of a large retail store, internal auditors noted significant discrepancies between available inventory and sales and suspect an abuse of cash register refunds and voids.
Which of the following would be the most effective preventative control to reduce these losses?
- A . Ensure that returned merchandise is restocked to shelves or sent to the manufacturer by an independent employee.
- B . Call a sample of customers who returned merchandise to test the legitimacy of the returns and check refund amounts.
- C . Require that a manager use a reserved register code to approve voids or refunds.
- D . Analyze voids and refunds by employee, credit card number, and amount for unusual numbers, amounts, or patterns.
Correct Answer: C
C
Explanation:
The most effective preventative control to reduce losses due to discrepancies between inventory and sales, suspected to arise from the abuse of cash register refunds and voids, would be to require a manager to use a reserved register code to approve voids or refunds. This control introduces a level of oversight and accountability, ensuring that refunds and voids are legitimately and appropriately authorized, thereby reducing the likelihood of fraudulent activities.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
C
Explanation:
The most effective preventative control to reduce losses due to discrepancies between inventory and sales, suspected to arise from the abuse of cash register refunds and voids, would be to require a manager to use a reserved register code to approve voids or refunds. This control introduces a level of oversight and accountability, ensuring that refunds and voids are legitimately and appropriately authorized, thereby reducing the likelihood of fraudulent activities.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #206
A whistle blower notified internal audit of a conflict of interest between an organization’s employee and a major supplier.
Which of the following steps should be undertaken first?
- A . Interview the employee identified by the whistleblower.
- B . Attain an understanding of the employee’s role, responsibilities, and relationship with the supplier.
- C . Notify senior management, the board, and the external auditor about the alleged fraud
- D . Review all the orders issued to the supplier to investigate potential fraud.
Correct Answer: B
B
Explanation:
The first step in addressing a notification from a whistleblower about a conflict of interest should be to gain an understanding of the employee’s role, responsibilities, and relationship with the supplier. This step is critical before conducting interviews or notifying others, as it helps establish the context for the investigation, ensuring that further steps are informed and targeted effectively.
Reference: IIA guidance on handling whistleblower claims and conducting internal investigations.
B
Explanation:
The first step in addressing a notification from a whistleblower about a conflict of interest should be to gain an understanding of the employee’s role, responsibilities, and relationship with the supplier. This step is critical before conducting interviews or notifying others, as it helps establish the context for the investigation, ensuring that further steps are informed and targeted effectively.
Reference: IIA guidance on handling whistleblower claims and conducting internal investigations.
Question #207
An internal auditor in a newly established internal audit activity identifies many control weaknesses and raises a number of high-priority recommendations in her first few audit engagements. The internal auditor is concerned that there seems to be a poor understanding by management of risk and control.
Which of the following is the most likely reason for this?
- A . Poor performance by individual operational managers in the areas audited.
- B . Unrealistic expectations by the internal audit activity on the quality of risk management and control.
- C . A lack of an effective organizational framework for risk management and control.
- D . A failure by the internal audit activity to identify and manage the organization’s risks.
Correct Answer: C
C
Explanation:
The identification of multiple control weaknesses and high-priority recommendations often indicates a systemic issue with the organizational framework for risk management. A strong organizational framework provides guidance on risk management and controls, aligning with IIA guidelines on the importance of an integrated approach to risk management.
C
Explanation:
The identification of multiple control weaknesses and high-priority recommendations often indicates a systemic issue with the organizational framework for risk management. A strong organizational framework provides guidance on risk management and controls, aligning with IIA guidelines on the importance of an integrated approach to risk management.
Question #208
Which of the following is ultimately responsible for the continuing professional development of internal audit activity staff?
- A . Individual internal auditors.
- B . Chief audit executive.
- C . Board of directors.
- D . CEO.
Correct Answer: B
B
Explanation:
The chief audit executive (CAE) is responsible for ensuring the professional development of the internal audit staff. This responsibility includes providing opportunities for ongoing training and development to maintain and enhance their competencies.
Reference: IIA Standard 1230: Continuing Professional Development.
IIA Practice Guide: Continuing Professional Development for Internal Auditors.
B
Explanation:
The chief audit executive (CAE) is responsible for ensuring the professional development of the internal audit staff. This responsibility includes providing opportunities for ongoing training and development to maintain and enhance their competencies.
Reference: IIA Standard 1230: Continuing Professional Development.
IIA Practice Guide: Continuing Professional Development for Internal Auditors.
Question #209
According to NA guidance which of the following should be documented in the internal audit chatter?
- A . The risk assessment process applied by the internal audit activity
- B . The organization’s internal control framework used by the internal audit activity
- C . The nature of consulting services provided by the internal audit activity
- D . The performance evaluation process used by the internal audit activity
Correct Answer: C
C
Explanation:
According to IIA guidance, the internal audit charter should document the nature of consulting
services provided by the internal audit activity. This helps to define and communicate the scope and extent of consulting services that the internal audit is authorized to provide, thereby establishing clear boundaries and expectations for both the audit team and the rest of the organization.
Reference: IIA Standard 1000: Purpose, Authority, and Responsibility.
C
Explanation:
According to IIA guidance, the internal audit charter should document the nature of consulting
services provided by the internal audit activity. This helps to define and communicate the scope and extent of consulting services that the internal audit is authorized to provide, thereby establishing clear boundaries and expectations for both the audit team and the rest of the organization.
Reference: IIA Standard 1000: Purpose, Authority, and Responsibility.
Question #210
An internal auditor is assessing the effectiveness of the organization’s risk management practices She checks to see whether risk management is an intégrai part of decision making and whether risk management is transparent, responsive to change and addresses uncertainty.
According to HA guidance on risk management frameworks, which of the following approaches is the auditor most likely using?
- A . Maturity model approach
- B . Process element approach
- C . Key principles approach
- D . Key performance indicators approach.
Correct Answer: C
C
Explanation:
The key principles approach to risk management involves evaluating whether the organization’s risk management practices align with fundamental principles, such as being an integral part of decision making, being transparent, responsive to change, and addressing uncertainty. This approach focuses on assessing the adherence to core risk management principles rather than specific processes or maturity levels.
The maturity model approach (A) assesses the level of sophistication and development of risk management practices. The process element approach (B) evaluates specific components of the risk management process. The key performance indicators approach (D) focuses on using specific metrics to gauge the effectiveness of risk management.
The internal auditor’s focus on the integration of risk management into decision making and its responsiveness to change aligns with the key principles approach as outlined in IIA guidance on risk management frameworks.
Reference: IIA Practice Guide: Assessing the Adequacy of Risk Management Using ISO 31000
IIA Position Paper: The Role of Internal Auditing in Enterprise-Wide Risk Management
C
Explanation:
The key principles approach to risk management involves evaluating whether the organization’s risk management practices align with fundamental principles, such as being an integral part of decision making, being transparent, responsive to change, and addressing uncertainty. This approach focuses on assessing the adherence to core risk management principles rather than specific processes or maturity levels.
The maturity model approach (A) assesses the level of sophistication and development of risk management practices. The process element approach (B) evaluates specific components of the risk management process. The key performance indicators approach (D) focuses on using specific metrics to gauge the effectiveness of risk management.
The internal auditor’s focus on the integration of risk management into decision making and its responsiveness to change aligns with the key principles approach as outlined in IIA guidance on risk management frameworks.
Reference: IIA Practice Guide: Assessing the Adequacy of Risk Management Using ISO 31000
IIA Position Paper: The Role of Internal Auditing in Enterprise-Wide Risk Management