Practice Free IIA-CIA-Part1 Exam Online Questions
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.
Question #222
The management at a national consumer goods organization implements a fair work and pay practice as well as a policy to treat employees equitably and consistently.
Which common characteristics of fraud will the practice and policy most likely reduce?
- A . Pressure or incentive.
- B . Opportunity.
- C . Rationalization.
- D . Commitment.
Correct Answer: A
A
Explanation:
Implementing fair work and pay practices and a policy to treat employees equitably and consistently will most likely reduce the pressure or incentive as a common characteristic of fraud. These measures can help diminish feelings of unfair treatment or dissatisfaction among employees, which are often drivers behind the rationalization for committing fraud.
Reference: Fraud Triangle and organizational behavior literature.
A
Explanation:
Implementing fair work and pay practices and a policy to treat employees equitably and consistently will most likely reduce the pressure or incentive as a common characteristic of fraud. These measures can help diminish feelings of unfair treatment or dissatisfaction among employees, which are often drivers behind the rationalization for committing fraud.
Reference: Fraud Triangle and organizational behavior literature.
Question #223
Management assessed the organization’s risk of expanding operations into a new, but volatile, region and began looking for a compatible local partner to manage sales and distribution.
Which of the following best describes this risk management technique?
- A . Avoidance.
- B . Acceptance.
- C . Reduction.
- D . Sharing
Correct Answer: D
D
Explanation:
The risk management technique described by finding a local partner to manage sales and distribution in a new, volatile region is best characterized as "Sharing." This approach involves sharing the risk with another party that can better manage or absorb part of the risk, thus reducing the organization’s direct exposure to potential adverse outcomes.
Reference: Risk management literature and practices, including frameworks such as ISO 31000.
D
Explanation:
The risk management technique described by finding a local partner to manage sales and distribution in a new, volatile region is best characterized as "Sharing." This approach involves sharing the risk with another party that can better manage or absorb part of the risk, thus reducing the organization’s direct exposure to potential adverse outcomes.
Reference: Risk management literature and practices, including frameworks such as ISO 31000.
Question #224
According to IIA guidance, which of the following most appropriately justifies the CEO’s decision that the internal audit activity shall be responsible for risk management and investigation at a multinational organization?
- A . The recommendation of the parent office external auditors.
- B . The provisions of the internal audit charter
- C . The authority of the CEO.
- D . The level of proficiency of the chief audit executive
Correct Answer: B
B
Explanation:
According to IIA guidance, any additional roles beyond traditional audit functions, such as being responsible for risk management and investigation, must be explicitly defined in the internal audit charter. This document, approved by senior management and the board, delineates the scope and responsibilities of the internal audit function, ensuring clarity and proper governance. Thus, if the internal audit charter stipulates such roles, it justifies the CEO’s decision.
Reference: IIA Standard 1000 – Purpose, Authority, and Responsibility
B
Explanation:
According to IIA guidance, any additional roles beyond traditional audit functions, such as being responsible for risk management and investigation, must be explicitly defined in the internal audit charter. This document, approved by senior management and the board, delineates the scope and responsibilities of the internal audit function, ensuring clarity and proper governance. Thus, if the internal audit charter stipulates such roles, it justifies the CEO’s decision.
Reference: IIA Standard 1000 – Purpose, Authority, and Responsibility
Question #225
Which of the following most accurately describes corporate social responsibility at an organization?
- A . An organizational locus on improving the overall environment, even it is to the detriment of the local community.
- B . A philosophy driven by employees that flows up to senior management and the board of directors.
- C . An overall commitment of the organization to improve the quality of life for not only the employees but the community at large.
- D . A policy of ensuring that the organization is socially responsible, even if it leads to unprofitability due to increased costs.
Correct Answer: C
C
Explanation:
Corporate social responsibility (CSR) refers to an organization’s overall commitment to improving the quality of life for its employees and the community at large. This commitment involves ethical behavior, sustainable practices, and contributions to social and environmental well-being. CSR initiatives aim to create a positive impact on society while also enhancing the organization’s reputation and stakeholder relationships.
Reference: The IIA Standards: Standard 2110 C Governance: "The internal audit activity must assess and make appropriate recommendations to improve the organization’s governance processes for making strategic and operational decisions, overseeing risk management and control, and promoting appropriate ethics and values within the organization."
COSO ERM Framework: Discusses the role of CSR in enhancing organizational sustainability and stakeholder value.
C
Explanation:
Corporate social responsibility (CSR) refers to an organization’s overall commitment to improving the quality of life for its employees and the community at large. This commitment involves ethical behavior, sustainable practices, and contributions to social and environmental well-being. CSR initiatives aim to create a positive impact on society while also enhancing the organization’s reputation and stakeholder relationships.
Reference: The IIA Standards: Standard 2110 C Governance: "The internal audit activity must assess and make appropriate recommendations to improve the organization’s governance processes for making strategic and operational decisions, overseeing risk management and control, and promoting appropriate ethics and values within the organization."
COSO ERM Framework: Discusses the role of CSR in enhancing organizational sustainability and stakeholder value.
Question #226
Which of the following offers the feast evidence that the internal audit activity has achieved organizational independence?
- A . An independent third party has assessed the organization’s system of internal controls to be adequate and effective.
- B . The chief audit executive reports both functionally and administratively to the CEO.
- C . The internal audit charter is drafted properly and approved by the appropriate parties.
- D . The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.
Correct Answer: C
C
Explanation:
The proper drafting and approval of the internal audit charter by the appropriate parties (e.g., the board or audit committee) offer the clearest evidence that the internal audit activity has achieved organizational independence. The internal audit charter formally defines the purpose, authority, and responsibility of the internal audit activity, including its independence from management and its direct reporting line to the board or audit committee. This document is foundational for establishing and maintaining the independence of the internal audit function.
Reference: IIA Standard 1000: Purpose, Authority, and Responsibility
IIA Standard 1110: Organizational Independence
C
Explanation:
The proper drafting and approval of the internal audit charter by the appropriate parties (e.g., the board or audit committee) offer the clearest evidence that the internal audit activity has achieved organizational independence. The internal audit charter formally defines the purpose, authority, and responsibility of the internal audit activity, including its independence from management and its direct reporting line to the board or audit committee. This document is foundational for establishing and maintaining the independence of the internal audit function.
Reference: IIA Standard 1000: Purpose, Authority, and Responsibility
IIA Standard 1110: Organizational Independence
Question #227
According to The IIA’s Code of Ethics, which of the following best describes the principle of integrity?
- A . Auditors shall observe the law and make disclosures expected by the law and the profession
- B . Auditors shall disclose all material facts known to them that if not disclosed may distort the reporting of activities under review
- C . Auditors shall engage only in those services for which they have the necessary knowledge skills and experience
- D . Auditors shall be prudent in the use and protection of information acquired in the course of their duties
Correct Answer: B
B
Explanation:
According to The IIA’s Code of Ethics, the principle of integrity emphasizes the importance of honesty and fairness in the auditor’s conduct. The statement that best reflects this principle is that auditors must disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review. This aspect of integrity ensures transparency and accuracy in the presentation of audit findings, crucial for the credibility of the audit function and the trust placed in it by stakeholders.
Reference: The IIA’s Code of Ethics – Integrity
B
Explanation:
According to The IIA’s Code of Ethics, the principle of integrity emphasizes the importance of honesty and fairness in the auditor’s conduct. The statement that best reflects this principle is that auditors must disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review. This aspect of integrity ensures transparency and accuracy in the presentation of audit findings, crucial for the credibility of the audit function and the trust placed in it by stakeholders.
Reference: The IIA’s Code of Ethics – Integrity
Question #228
An internal audit activity maintains a quality assurance and improvement program that includes annual self-assessments. The internal audit activity includes in each engagement report a clause that the engagement is conducted in conformance with the International! Standards for the Professional Practice of Internal Auditing (Standards).
Which of the following justifies inclusion of this clause in the reports?
- A . Internal audit activity policies and engagement records provide relevant, sufficient, and competent evidence that the statement is correct.
- B . The audit committee has reviewed the annual self-assessment results and approved the use of the clause.
- C . The self-assessment results were validated by a qualified external review team three years prior.
- D . The internal audit charter, approved by the audit committee, requires conformance with the Standards
Correct Answer: A
A
Explanation:
The inclusion of the clause stating that engagements are conducted in conformance with the International Standards for the Professional Practice of Internal Auditing can be justified if internal audit activity policies and engagement records provide relevant, sufficient, and competent evidence that the statement is correct. This evidence shows adherence to the Standards in audit planning, execution, and reporting, ensuring the quality and reliability of audit results as per the Standards’ requirements.
Reference: International Standards for the Professional Practice of Internal Auditing; guidelines on quality assurance and improvement programs.
A
Explanation:
The inclusion of the clause stating that engagements are conducted in conformance with the International Standards for the Professional Practice of Internal Auditing can be justified if internal audit activity policies and engagement records provide relevant, sufficient, and competent evidence that the statement is correct. This evidence shows adherence to the Standards in audit planning, execution, and reporting, ensuring the quality and reliability of audit results as per the Standards’ requirements.
Reference: International Standards for the Professional Practice of Internal Auditing; guidelines on quality assurance and improvement programs.
Question #229
An existing Internal audit charter is currently under review for revision.
Who is responsible for assuring that all required components are included?
- A . The audit committee.
- B . The head of legal and compliance.
- C . The chief audit executive.
- D . Senior management.
Correct Answer: C
C
Explanation:
The chief audit executive (CAE) is responsible for assuring that all required components are included in the internal audit charter. The CAE must ensure that the charter clearly defines the purpose, authority, and responsibility of the internal audit activity, and that it aligns with the standards set by the Institute of Internal Auditors (IIA). The CAE is also responsible for presenting the charter to senior management and the board for approval.
Reference: The IIA Standards: Standard 1000 C Purpose, Authority, and Responsibility: "The chief audit executive must periodically review the internal audit charter and present it to senior management and the board for approval."
IIA Practice Guide: "Internal Audit Charter: Understanding the Components": Emphasizes the CAE’s responsibility in developing and maintaining the charter.
C
Explanation:
The chief audit executive (CAE) is responsible for assuring that all required components are included in the internal audit charter. The CAE must ensure that the charter clearly defines the purpose, authority, and responsibility of the internal audit activity, and that it aligns with the standards set by the Institute of Internal Auditors (IIA). The CAE is also responsible for presenting the charter to senior management and the board for approval.
Reference: The IIA Standards: Standard 1000 C Purpose, Authority, and Responsibility: "The chief audit executive must periodically review the internal audit charter and present it to senior management and the board for approval."
IIA Practice Guide: "Internal Audit Charter: Understanding the Components": Emphasizes the CAE’s responsibility in developing and maintaining the charter.
Question #230
Which of the following skills is most important for an internal auditor who facilitates control self-
assessment workshops to possess?
- A . Groupthink.
- B . Collaboration skills.
- C . Process analysis skills.
- D . Project management skills.
Correct Answer: B
B
Explanation:
For an internal auditor who facilitates control self-assessment workshops, collaboration skills are most important. These skills enable the auditor to effectively engage with participants, foster open communication, and facilitate group interactions that lead to more comprehensive and accurate assessments. Collaboration is essential for guiding discussions, resolving conflicts, and ensuring that the workshop objectives are met effectively.
Reference: Best practices in facilitating workshops and internal auditor competency requirements as outlined in professional development resources and the IIA’s standards.
B
Explanation:
For an internal auditor who facilitates control self-assessment workshops, collaboration skills are most important. These skills enable the auditor to effectively engage with participants, foster open communication, and facilitate group interactions that lead to more comprehensive and accurate assessments. Collaboration is essential for guiding discussions, resolving conflicts, and ensuring that the workshop objectives are met effectively.
Reference: Best practices in facilitating workshops and internal auditor competency requirements as outlined in professional development resources and the IIA’s standards.