Practice Free IIA-CIA-Part1 Exam Online Questions
Question #211
During an audit engagement, a junior staff internal auditor begins to suspect a fraud may have occurred involving a friend of the engagement supervisor. He reports his concerns to the engagement supervisor, who disagrees with his suspicions and directs him to continue with the engagement as planned.
Given the circumstance, what is the most appropriate action for the junior auditor to take?
- A . Document in the workpapers and expand testing.
- B . Continue with the engagement as planned, per the more senior auditor.
- C . Report the suspected fraud to law enforcement officials and seek financial restitution.
- D . Escalate the concern to the chief audit executive.
Correct Answer: D
D
Explanation:
In cases where a junior auditor suspects fraud involving an engagement supervisor’s associate and the supervisor dismisses these concerns, the most appropriate and ethical action is to escalate the issue to a higher authority within the audit function, such as the chief audit executive (CAE). This ensures that the concern is objectively evaluated and that the auditor adheres to professional standards of independence and objectivity.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics and International Standards for the Professional Practice of Internal Auditing
D
Explanation:
In cases where a junior auditor suspects fraud involving an engagement supervisor’s associate and the supervisor dismisses these concerns, the most appropriate and ethical action is to escalate the issue to a higher authority within the audit function, such as the chief audit executive (CAE). This ensures that the concern is objectively evaluated and that the auditor adheres to professional standards of independence and objectivity.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics and International Standards for the Professional Practice of Internal Auditing
Question #211
During an audit engagement, a junior staff internal auditor begins to suspect a fraud may have occurred involving a friend of the engagement supervisor. He reports his concerns to the engagement supervisor, who disagrees with his suspicions and directs him to continue with the engagement as planned.
Given the circumstance, what is the most appropriate action for the junior auditor to take?
- A . Document in the workpapers and expand testing.
- B . Continue with the engagement as planned, per the more senior auditor.
- C . Report the suspected fraud to law enforcement officials and seek financial restitution.
- D . Escalate the concern to the chief audit executive.
Correct Answer: D
D
Explanation:
In cases where a junior auditor suspects fraud involving an engagement supervisor’s associate and the supervisor dismisses these concerns, the most appropriate and ethical action is to escalate the issue to a higher authority within the audit function, such as the chief audit executive (CAE). This ensures that the concern is objectively evaluated and that the auditor adheres to professional standards of independence and objectivity.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics and International Standards for the Professional Practice of Internal Auditing
D
Explanation:
In cases where a junior auditor suspects fraud involving an engagement supervisor’s associate and the supervisor dismisses these concerns, the most appropriate and ethical action is to escalate the issue to a higher authority within the audit function, such as the chief audit executive (CAE). This ensures that the concern is objectively evaluated and that the auditor adheres to professional standards of independence and objectivity.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics and International Standards for the Professional Practice of Internal Auditing
Question #213
Which of the following factors is most important for internal auditors to consider when prioritizing fraud risks?
- A . The organization’s code of conduct.
- B . The organization’s competition.
- C . The organization’s code of ethics.
- D . The organization’s culture
Correct Answer: D
D
Explanation:
When prioritizing fraud risks, the most important factor for internal auditors to consider is the organization’s culture. A culture that does not robustly promote ethical behavior or where management overrides controls can significantly increase the likelihood and impact of fraud. This aligns with risk management principles that consider organizational culture as a key element in the effectiveness of controls to prevent, detect, and respond to fraud.
Reference: The Institute of Internal Auditors (IIA) guidance on assessing and managing fraud risks and organizational culture.
D
Explanation:
When prioritizing fraud risks, the most important factor for internal auditors to consider is the organization’s culture. A culture that does not robustly promote ethical behavior or where management overrides controls can significantly increase the likelihood and impact of fraud. This aligns with risk management principles that consider organizational culture as a key element in the effectiveness of controls to prevent, detect, and respond to fraud.
Reference: The Institute of Internal Auditors (IIA) guidance on assessing and managing fraud risks and organizational culture.
Question #214
A senior executive at a government-owned organization received an invitation to attend a public exhibition where he can learn about new trucks relevant to the organization’s business. As a special perk, the executive is offered an opportunity to drive a luxury vehicle manufactured by one of the exhibiting companies. Prior to the event, the executive asked for the chief audit executive s (CAE’s) advice.
What should the CAE recommend as the most appropriate course of action for the executive?
- A . Attend the event, but decline the offer to use the luxury vehicle
- B . Decline the invitation to the exhibition.
- C . Ask the board to decide on the issue.
- D . Select a lower-level employee to enjoy the luxury vehicle instead
Correct Answer: A
A
Explanation:
The chief audit executive (CAE) should recommend that the executive attend the event but decline the offer to use the luxury vehicle. This advice maintains the executive’s ability to participate in relevant business activities while avoiding activities that might appear to compromise his integrity or the organization’s standards of ethical conduct.
Reference: IIA’s Code of Ethics and standard guidance on conflicts of interest and the acceptance of gifts.
A
Explanation:
The chief audit executive (CAE) should recommend that the executive attend the event but decline the offer to use the luxury vehicle. This advice maintains the executive’s ability to participate in relevant business activities while avoiding activities that might appear to compromise his integrity or the organization’s standards of ethical conduct.
Reference: IIA’s Code of Ethics and standard guidance on conflicts of interest and the acceptance of gifts.
Question #215
During a payroll audit, a staff internal auditor suspects that signatures on some of the documents being sampled for examination are not authentic.
Which of the following actions should the auditor take before proceeding with the examination?
- A . Suggest to the payroll manager that the suspicious documents should be sent to the organization’s security department for forensic review.
- B . Keep the suspicious documents in the workpaper file until the end of the engagement, and then discuss the suspicions with the payroll manager.
- C . Discuss the suspicious documents with payroll staff to seek their views on the authenticity of the signatures.
- D . Review the suspicious documents with the chief audit executive and seek advice concerning further examination.
Correct Answer: D
D
Explanation:
The best course of action is for the internal auditor to consult with the chief audit executive (CAE) regarding the suspicious documents. This step aligns with IIA standards, which advise consulting senior audit leaders in cases of potential fraud to ensure proper investigation and avoid alerting those who might be involved.
D
Explanation:
The best course of action is for the internal auditor to consult with the chief audit executive (CAE) regarding the suspicious documents. This step aligns with IIA standards, which advise consulting senior audit leaders in cases of potential fraud to ensure proper investigation and avoid alerting those who might be involved.
Question #216
Which of the following approaches will internal audit utilize when developing a set of performance standards to measure an organization’s risk management process against?
- A . Key principles approach
- B . Process elements approach
- C . Holistic approach
- D . Maturity model approach
Correct Answer: A
A
Explanation:
When developing performance standards to measure an organization’s risk management process, internal audit may use the key principles approach. This approach involves identifying and applying fundamental principles that underpin effective risk management practices. These principles provide a benchmark against which the organization’s risk management process can be assessed, ensuring that the process aligns with best practices and contributes to achieving organizational objectives.
Reference: IIA Practice Guide: Assessing the Adequacy of Risk Management Using ISO 31000 COSO Enterprise Risk Management Framework
A
Explanation:
When developing performance standards to measure an organization’s risk management process, internal audit may use the key principles approach. This approach involves identifying and applying fundamental principles that underpin effective risk management practices. These principles provide a benchmark against which the organization’s risk management process can be assessed, ensuring that the process aligns with best practices and contributes to achieving organizational objectives.
Reference: IIA Practice Guide: Assessing the Adequacy of Risk Management Using ISO 31000 COSO Enterprise Risk Management Framework
Question #217
According to IIA guidance, which of the following would the internal audit activity examine in order to evaluate the organization’s governance process for strategic and operational decisions?
- A . The risk assessment process including interviews with senior management.
- B . The organization’s mission and value statements, code of conduct, and whistleblowing policy
- C . Board meeting minutes the board policy manual, and past audit reports
- D . Staff compensation objective setting and the performance evaluation policy and process
Correct Answer: C
C
Explanation:
The first step for a newly hired chief audit executive (CAE) to build and maintain the proficiency of the internal audit activity should be to incorporate the basic criteria of internal audit competency into job descriptions. This foundational step ensures that all current and future hires are aligned with the required skills and competencies needed for effective internal audit functions. It sets a clear expectation of skills and knowledge right from the recruitment stage, thereby facilitating the development and maintenance of a competent audit team.
Reference: The Institute of Internal Auditors (IIA) – Practice Guides on Talent Management
C
Explanation:
The first step for a newly hired chief audit executive (CAE) to build and maintain the proficiency of the internal audit activity should be to incorporate the basic criteria of internal audit competency into job descriptions. This foundational step ensures that all current and future hires are aligned with the required skills and competencies needed for effective internal audit functions. It sets a clear expectation of skills and knowledge right from the recruitment stage, thereby facilitating the development and maintenance of a competent audit team.
Reference: The Institute of Internal Auditors (IIA) – Practice Guides on Talent Management
Question #218
Which type(s) of assessments in an internal audit activity’s quality assurance and improvement program requires ongoing monitoring to evaluate internal audit activity’s efficiency and effectiveness?
- A . Neither internal nor external assessment
- B . internal assessment
- C . Both internal and external assessment
- D . External assessment
Correct Answer: B
B
Explanation:
Internal assessments are part of an internal audit activity’s quality assurance and improvement program that requires ongoing monitoring to evaluate the internal audit activity’s efficiency and effectiveness. These ongoing assessments help in continuously improving the performance and value of the internal audit function by ensuring that it operates effectively and adapts to changes in organizational needs and conditions.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
B
Explanation:
Internal assessments are part of an internal audit activity’s quality assurance and improvement program that requires ongoing monitoring to evaluate the internal audit activity’s efficiency and effectiveness. These ongoing assessments help in continuously improving the performance and value of the internal audit function by ensuring that it operates effectively and adapts to changes in organizational needs and conditions.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #219
Which of the following qualifies as an acceptable consulting service provided by the internal audit activity?
- A . Develop training and system rollout plans in response to the results of the change readiness assessment of a new sales distribution model
- B . Lead a risk self assessment session for laboratory managers to help identify inherent risks and provide recommendations on how to evaluate the risks
- C . Audit a third party cloud service provider to review the effectiveness of governance and management controls in providing secure services to its customers
- D . Conduct a post-implementation assessment of the enterprise resource planning system to determine whether project objectives were met and to identify opportunities to maximize potential benefits
Correct Answer: A
A
Explanation:
Developing training and system rollout plans in response to the results of the change readiness assessment of a new sales distribution model qualifies as an acceptable consulting service provided by the internal audit activity. This service is advisory in nature and is designed to add value and improve an organization’s operations―aligned with the definition of consulting services under IIA standards.
Reference: IIA definition of consulting services, which includes activities that provide advice and assistance designed to add value and improve an organization’s governance, risk management, and control processes without the internal auditor assuming management responsibility.
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A
Explanation:
Developing training and system rollout plans in response to the results of the change readiness assessment of a new sales distribution model qualifies as an acceptable consulting service provided by the internal audit activity. This service is advisory in nature and is designed to add value and improve an organization’s operations―aligned with the definition of consulting services under IIA standards.
Reference: IIA definition of consulting services, which includes activities that provide advice and assistance designed to add value and improve an organization’s governance, risk management, and control processes without the internal auditor assuming management responsibility.
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Question #220
Which of the following scenarios best illustrates the concept of due professional care?
- A . After establishing engagement objectives and reviewing a process, the internal auditor assured process owners that all significant risk events were identified and tested using a systematic, disciplined approach.
- B . After conducting an audit based upon a predefined scope and objective, the internal auditor guaranteed management that the system of internal controls in an audited area operates effectively.
- C . As head of the internal audit activity, the chief audit executive reported functionally to the organization’s board and administratively to senior management.
- D . As head of the internal audit activity, the chief audit executive ensures that engagement supervisors conduct post-engagement staff meetings.
Correct Answer: A
A
Explanation:
The scenario that best illustrates the concept of due professional care is when an internal auditor establishes engagement objectives, reviews processes systematically, and assures process owners that all significant risk events were identified and tested using a disciplined approach. This scenario reflects adherence to the standard of due professional care which mandates that internal auditors must apply the care and skill expected of a reasonably prudent and competent auditor.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing, particularly those standards related to due professional care.
A
Explanation:
The scenario that best illustrates the concept of due professional care is when an internal auditor establishes engagement objectives, reviews processes systematically, and assures process owners that all significant risk events were identified and tested using a disciplined approach. This scenario reflects adherence to the standard of due professional care which mandates that internal auditors must apply the care and skill expected of a reasonably prudent and competent auditor.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing, particularly those standards related to due professional care.