Practice Free IIA-CIA-Part1 Exam Online Questions
Question #231
In which of the following situations would the organizational independence of an internal audit activity be impaired?
- A . The chief audit executive reports administratively to the CEO.
- B . Scope limitations are imposed on internal audits.
- C . The internal audit activity provides assurance services for an activity for which the engagement supervisor had responsibility within the previous year.
- D . The compensation committee of the board approves the remuneration of the chief audit executive.
Correct Answer: B
B
Explanation:
The organizational independence of an internal audit activity is considered impaired if there are scope limitations imposed on internal audits. Such limitations prevent the internal audit activity from fully evaluating and reporting on risk management, control, or governance processes within the organization, thus hindering the ability to perform work freely and objectively. Administrative reporting lines (such as to the CEO), the process of compensation approval, or assurance services provided for previous responsibilities do not inherently impair independence unless they lead to restrictions on audit scope or influence over audit findings.
Reference: IIA Standards and guidance on independence and objectivity.
B
Explanation:
The organizational independence of an internal audit activity is considered impaired if there are scope limitations imposed on internal audits. Such limitations prevent the internal audit activity from fully evaluating and reporting on risk management, control, or governance processes within the organization, thus hindering the ability to perform work freely and objectively. Administrative reporting lines (such as to the CEO), the process of compensation approval, or assurance services provided for previous responsibilities do not inherently impair independence unless they lead to restrictions on audit scope or influence over audit findings.
Reference: IIA Standards and guidance on independence and objectivity.
Question #232
During an assurance engagement, an internal auditor identified that a developer of the organization’s enterprise resource planning (ERP) system had intentionally modified the production code to commit a fraudulent transaction.
Which control activity should be implemented to prevent such issues in the future?
- A . Segregate duties between code development and migrating changes into production.
- B . Conduct fraud training for the IT team responsible for the ERP system.
- C . Penalize the developer who committed the fraud by terminating employment.
- D . Restrict developers’ access to the ERP system’s test environment.
Correct Answer: A
A
Explanation:
Segregating duties between code development and migrating changes into production is a critical control to prevent fraudulent activities by developers. This control ensures that no single individual has the ability to develop code and deploy it to the production environment without oversight. Key benefits include:
Reducing the risk of unauthorized or malicious code changes.
Ensuring that changes are reviewed and tested by a different team before deployment.
Increasing accountability and transparency in the software development lifecycle.
By implementing this control, organizations can prevent developers from committing fraud or making unapproved changes to the ERP system, thereby protecting the integrity and security of the system.
Reference: The Institute of Internal Auditors (IIA) Standards and Practice Advisories.
COBIT (Control Objectives for Information and Related Technologies) framework.
"Internal Auditing: Assurance & Advisory Services" by IIA, Chapter on IT General Controls and Segregation of Duties.
A
Explanation:
Segregating duties between code development and migrating changes into production is a critical control to prevent fraudulent activities by developers. This control ensures that no single individual has the ability to develop code and deploy it to the production environment without oversight. Key benefits include:
Reducing the risk of unauthorized or malicious code changes.
Ensuring that changes are reviewed and tested by a different team before deployment.
Increasing accountability and transparency in the software development lifecycle.
By implementing this control, organizations can prevent developers from committing fraud or making unapproved changes to the ERP system, thereby protecting the integrity and security of the system.
Reference: The Institute of Internal Auditors (IIA) Standards and Practice Advisories.
COBIT (Control Objectives for Information and Related Technologies) framework.
"Internal Auditing: Assurance & Advisory Services" by IIA, Chapter on IT General Controls and Segregation of Duties.
Question #233
In which of the following situations may the internal audit activity report conformance with the Standards?
- A . An internal audit activity has been in existence at least five years and has not completed an
external assessment, - B . An internal auditor was assigned to an audit engagement but did not meet individual objectivity requirements.
- C . The internal audit activity prepared an internal audit plan that was not risk-based.
- D . The internal audit activity has been in existence fewer than five years, but periodic self-assessments were conducted.
Correct Answer: D
D
Explanation:
According to the Standards set by the Institute of Internal Auditors (IIA), an internal audit activity may report conformance with the Standards even if it has not been in existence for more than five years provided that it has conducted periodic self-assessments and meets the other necessary criteria of the IIA standards. External assessments are required at least once every five years, but conformance can still be reported if internal assessments are conducted in the interim.
Reference: The Institute of Internal Auditors (IIA) – International Standards for the Professional Practice of Internal Auditing.
D
Explanation:
According to the Standards set by the Institute of Internal Auditors (IIA), an internal audit activity may report conformance with the Standards even if it has not been in existence for more than five years provided that it has conducted periodic self-assessments and meets the other necessary criteria of the IIA standards. External assessments are required at least once every five years, but conformance can still be reported if internal assessments are conducted in the interim.
Reference: The Institute of Internal Auditors (IIA) – International Standards for the Professional Practice of Internal Auditing.
Question #234
The organization’s internal audit charter was last updated six years ago.
To update the charter, which of the following actions is most appropriate for the chief audit executive to take?
- A . Wait for the next external assessment and address all of the missing information in the charter based on the recommendations from the external assessment team.
- B . Perform a review of IIA guidance to become acquainted with the latest mandatory elements prior to updating the charter
- C . Use an internal audit charter template from another organization that operates within the same industry.
- D . Identify an individual within the internal audit activity who has in-depth knowledge of mandatory IIA guidance elements to address any gaps or areas of the current version of the charter that could be improved.
Correct Answer: B
B
Explanation:
The most appropriate action for the chief audit executive to take when updating the internal audit charter is to perform a review of IIA guidance to become acquainted with the latest mandatory elements prior to updating the charter. This ensures that the charter will be updated according to the most current standards and practices required by the IIA. Staying updated with the latest guidance helps in maintaining compliance with professional standards and aligning the internal audit function’s objectives and scope with organizational needs and regulatory expectations.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing and guidance on internal audit charters.
B
Explanation:
The most appropriate action for the chief audit executive to take when updating the internal audit charter is to perform a review of IIA guidance to become acquainted with the latest mandatory elements prior to updating the charter. This ensures that the charter will be updated according to the most current standards and practices required by the IIA. Staying updated with the latest guidance helps in maintaining compliance with professional standards and aligning the internal audit function’s objectives and scope with organizational needs and regulatory expectations.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing and guidance on internal audit charters.
Question #235
The board requested the chief audit executive (CAE) to provide consulting services for a new systems implementation project.
Which of the following statements is true regarding this scenario?
- A . The CAE should avoid making decisions on risk responses within risk management processes.
- B . The CAE may only provide consulting and not assurance services in risk management processes
- C . The CAE may manage the project risks on behalf of management in this particular situation
- D . The CAE should avoid giving assurance on risk management processes in this particular situation
Correct Answer: A
A
Explanation:
In the scenario where the board requests the chief audit executive (CAE) to provide consulting services for a new systems implementation project, the CAE should avoid making decisions on risk responses within risk management processes. The CAE’s role is to provide independent and objective assurance and consulting services. Making decisions on risk responses would impair the CAE’s independence and objectivity, which are crucial for the internal audit function. Instead, the CAE can provide advice and recommendations on risk management practices while ensuring that management retains responsibility for decision-making.
Reference: The IIA Standards: Standard 1112 C Chief Audit Executive Roles Beyond Internal Auditing: "If the CAE has or is expected to have roles and/or responsibilities that fall outside of internal auditing, safeguards must be in place to limit impairments to independence or objectivity."
The IIA Practice Guide: "Independence and Objectivity": Discusses the importance of maintaining independence and objectivity in consulting engagements.
A
Explanation:
In the scenario where the board requests the chief audit executive (CAE) to provide consulting services for a new systems implementation project, the CAE should avoid making decisions on risk responses within risk management processes. The CAE’s role is to provide independent and objective assurance and consulting services. Making decisions on risk responses would impair the CAE’s independence and objectivity, which are crucial for the internal audit function. Instead, the CAE can provide advice and recommendations on risk management practices while ensuring that management retains responsibility for decision-making.
Reference: The IIA Standards: Standard 1112 C Chief Audit Executive Roles Beyond Internal Auditing: "If the CAE has or is expected to have roles and/or responsibilities that fall outside of internal auditing, safeguards must be in place to limit impairments to independence or objectivity."
The IIA Practice Guide: "Independence and Objectivity": Discusses the importance of maintaining independence and objectivity in consulting engagements.
Question #236
Which of the following drivers of fraud is directly controllable by an organization?
- A . Pressure
- B . Rationalization
- C . Opportunity
- D . Incentive
Correct Answer: C
C
Explanation:
The driver of fraud that is directly controllable by an organization is Opportunity. By designing and implementing strong internal controls, clearly defining roles and responsibilities, and conducting regular audits and reviews, an organization can significantly reduce the opportunities for fraud to occur within its environment.
Reference: Fraud Triangle theory and IIA guidance on fraud risk management.
C
Explanation:
The driver of fraud that is directly controllable by an organization is Opportunity. By designing and implementing strong internal controls, clearly defining roles and responsibilities, and conducting regular audits and reviews, an organization can significantly reduce the opportunities for fraud to occur within its environment.
Reference: Fraud Triangle theory and IIA guidance on fraud risk management.
Question #237
An internal auditor was assigned to work in the procurement department for six months to gam m-depth knowledge about the procurement process.
Which of the following personnel development practices was applied in this situation?
- A . Cosourcing
- B . Inbound rotation
- C . Guest auditor
- D . Outbound rotation
Correct Answer: D
D
Explanation:
The personnel development practice applied in this situation is ‘outbound rotation.’ This practice involves temporarily assigning staff from their usual roles into other departments or functions within the organization to gain a deeper understanding and knowledge of those areas. In this case, the internal auditor working in the procurement department to learn about the procurement process is a classic example of an outbound rotation.
Reference: Human resources management practices and IIA guidelines on staff development
D
Explanation:
The personnel development practice applied in this situation is ‘outbound rotation.’ This practice involves temporarily assigning staff from their usual roles into other departments or functions within the organization to gain a deeper understanding and knowledge of those areas. In this case, the internal auditor working in the procurement department to learn about the procurement process is a classic example of an outbound rotation.
Reference: Human resources management practices and IIA guidelines on staff development
Question #238
Which of the following best describes a purpose for the internal audit charter?
- A . The internal audit charter authorizes the internal audit activity’s reporting structure and clearly defines the roles of each internal auditor.
- B . The internal audit charter defines the roles and responsibilities of the chief audit executive, board of directors, and senior management.
- C . The internal audit charter authorizes access to records, personnel, and physical properties relevant to the performance of audit engagements.
- D . The internal audit charter defines the criteria by which the internal audit activity’s performance will be evaluated
Correct Answer: C
C
Explanation:
The internal audit charter is a formal document that outlines the purpose, authority, and responsibility of the internal audit activity. Among its core functions, it specifically grants the internal audit activity the authority to access records, personnel, and physical properties essential for the performance of audit engagements. This access is crucial for enabling auditors to obtain the necessary information to conduct their work effectively and independently.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
C
Explanation:
The internal audit charter is a formal document that outlines the purpose, authority, and responsibility of the internal audit activity. Among its core functions, it specifically grants the internal audit activity the authority to access records, personnel, and physical properties essential for the performance of audit engagements. This access is crucial for enabling auditors to obtain the necessary information to conduct their work effectively and independently.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #238
Which of the following best describes a purpose for the internal audit charter?
- A . The internal audit charter authorizes the internal audit activity’s reporting structure and clearly defines the roles of each internal auditor.
- B . The internal audit charter defines the roles and responsibilities of the chief audit executive, board of directors, and senior management.
- C . The internal audit charter authorizes access to records, personnel, and physical properties relevant to the performance of audit engagements.
- D . The internal audit charter defines the criteria by which the internal audit activity’s performance will be evaluated
Correct Answer: C
C
Explanation:
The internal audit charter is a formal document that outlines the purpose, authority, and responsibility of the internal audit activity. Among its core functions, it specifically grants the internal audit activity the authority to access records, personnel, and physical properties essential for the performance of audit engagements. This access is crucial for enabling auditors to obtain the necessary information to conduct their work effectively and independently.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
C
Explanation:
The internal audit charter is a formal document that outlines the purpose, authority, and responsibility of the internal audit activity. Among its core functions, it specifically grants the internal audit activity the authority to access records, personnel, and physical properties essential for the performance of audit engagements. This access is crucial for enabling auditors to obtain the necessary information to conduct their work effectively and independently.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #240
In which of the following situations has the internal auditor violated the IIA’s Code of Ethics?
- A . An employee confided in an internal auditor and told him about fradulent activities. Although the employee asked for confidentially, the auditor disclosed her identity later during police questioning.
- B . While auditing payroll controls, an auditor was granted temporary access to salary data. The auditor referred to the acquired information while negotiating her work conditions three months later.
- C . Management considers an auditor to be highly competent and asked the audit to participate in an upcoming acquisition project. The auditor declined the request, calming a lack of knowledge.
- D . An internal auditor failed to acquire the continuing education credits needed for the year and requested that. The IIA change his certification status to inactive until the completed the required education activities.
Correct Answer: B
B
Explanation:
In this situation, the internal auditor violated the IIA’s Code of Ethics by using confidential information obtained during an audit (salary data) for personal gain (negotiating work conditions). This action breaches the confidentiality and objectivity principles outlined in the IIA Code of Ethics, which require auditors to refrain from using information for any personal advantage or in a manner that would be detrimental to the legitimacy or trust of the audit function.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics
B
Explanation:
In this situation, the internal auditor violated the IIA’s Code of Ethics by using confidential information obtained during an audit (salary data) for personal gain (negotiating work conditions). This action breaches the confidentiality and objectivity principles outlined in the IIA Code of Ethics, which require auditors to refrain from using information for any personal advantage or in a manner that would be detrimental to the legitimacy or trust of the audit function.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics