Practice Free IIA-CIA-Part1 Exam Online Questions
Question #31
An internal auditor believes that the internal audit activity’s independence is impaired.
Which of the following actions should the internal auditor take first?
- A . Report the impairment to senior management
- B . Discuss the impairment with the audit manager
- C . Ascertain the best approach to disclose the impairment.
- D . Decide on the extent of impact of the impairment
Correct Answer: B
B
Explanation:
If an internal auditor believes that the internal audit activity’s independence is impaired, the first action to take should be to discuss the impairment with the audit manager. This step is crucial as the audit manager can provide guidance, support, and potentially escalate the issue appropriately within the governance framework. It ensures that the concerns are addressed promptly and effectively within the internal audit function before reaching out to higher levels of management or the audit committee, maintaining a proper chain of communication and resolution.
Reference: The Institute of Internal Auditors (IIA) – International Standards for the Professional Practice of Internal Auditing
B
Explanation:
If an internal auditor believes that the internal audit activity’s independence is impaired, the first action to take should be to discuss the impairment with the audit manager. This step is crucial as the audit manager can provide guidance, support, and potentially escalate the issue appropriately within the governance framework. It ensures that the concerns are addressed promptly and effectively within the internal audit function before reaching out to higher levels of management or the audit committee, maintaining a proper chain of communication and resolution.
Reference: The Institute of Internal Auditors (IIA) – International Standards for the Professional Practice of Internal Auditing
Question #32
Who is responsible for setting the risk appetite?
- A . External auditors.
- B . Chief risk officer.
- C . Operations management.
- D . Board of directors.
Correct Answer: D
D
Explanation:
The board of directors is responsible for setting the risk appetite of the organization. They define the level and type of risk the organization is willing to accept in pursuit of its goals and objectives. This strategic role ensures that the organization’s risk management framework aligns with its long-term vision and governance structure.
Reference: IIA guidance on governance and risk management
D
Explanation:
The board of directors is responsible for setting the risk appetite of the organization. They define the level and type of risk the organization is willing to accept in pursuit of its goals and objectives. This strategic role ensures that the organization’s risk management framework aligns with its long-term vision and governance structure.
Reference: IIA guidance on governance and risk management
Question #33
Which of the following statements is true regarding the role of the internal audit activity in the organization’s risk management process?
- A . The internal audit activity should not be responsible for developing the organization’s risk management framework, even with appropriate safeguards.
- B . The internal audit activity is typically responsible for alerting operational management to emerging risks and changes in regulatory scenarios
- C . The internal audit activity may coach management on risk response scenarios if safeguards have been implemented.
- D . The internal audit activity should avoid giving assurance regarding the accuracy of risk evaluations if safeguards have not been implemented.
Correct Answer: C
C
Explanation:
The correct statement regarding the role of the internal audit activity in the organization’s risk management process is that the internal audit activity may coach management on risk response scenarios if appropriate safeguards have been implemented. This coaching role helps management understand and address risks effectively while maintaining the audit function’s objectivity and independence.
Reference: The IIA’s guidance on the role of internal auditing in risk management and the standards regarding objectivity and consulting.
C
Explanation:
The correct statement regarding the role of the internal audit activity in the organization’s risk management process is that the internal audit activity may coach management on risk response scenarios if appropriate safeguards have been implemented. This coaching role helps management understand and address risks effectively while maintaining the audit function’s objectivity and independence.
Reference: The IIA’s guidance on the role of internal auditing in risk management and the standards regarding objectivity and consulting.
Question #34
Which of the following are considered root causes of fraud?
- A . Rationalization and corruption
- B . Corruption and opportunity
- C . Opportunity and perceived need
- D . Perceived need and weak internal controls
Correct Answer: C
C
Explanation:
According to fraud theory, specifically the Fraud Triangle, the root causes of fraud are typically identified as opportunity, rationalization, and perceived need (or pressure). Among the options given, "Opportunity and perceived need" most closely align with two of these three key elements. Opportunity provides the means to commit fraud, while perceived need motivates the individual to justify fraudulent actions.
Reference: Association of Certified Fraud Examiners (ACFE) – Fraud Triangle Theory
C
Explanation:
According to fraud theory, specifically the Fraud Triangle, the root causes of fraud are typically identified as opportunity, rationalization, and perceived need (or pressure). Among the options given, "Opportunity and perceived need" most closely align with two of these three key elements. Opportunity provides the means to commit fraud, while perceived need motivates the individual to justify fraudulent actions.
Reference: Association of Certified Fraud Examiners (ACFE) – Fraud Triangle Theory
Question #35
Which of the following actions is the internal audit activity best positioned within the organization to perform?
- A . Determine organizational risk tolerances
- B . Monitor the organization’s risk mitigations
- C . Determine the likelihood and impact of risks
- D . Advise the board on risk management issues
Correct Answer: B
B
Explanation:
The internal audit activity is best positioned to monitor the organization’s risk mitigations. This role involves regularly reviewing and assessing the effectiveness of risk management processes and controls that management has implemented to mitigate identified risks. This monitoring function is a key component of the internal audit’s assurance services.
Reference: IIA Standard 2120 – Risk Management
B
Explanation:
The internal audit activity is best positioned to monitor the organization’s risk mitigations. This role involves regularly reviewing and assessing the effectiveness of risk management processes and controls that management has implemented to mitigate identified risks. This monitoring function is a key component of the internal audit’s assurance services.
Reference: IIA Standard 2120 – Risk Management
Question #36
Which of the following engagement areas would allow the internal audit activity to assess
organizational governance?
- A . Accounts payable.
- B . Quality control.
- C . Ethics activities.
- D . Regulatory compliance.
Correct Answer: C
C
Explanation:
Organizational governance is the combination of processes and structures that help the organization achieve its objectives2. Ethics activities are part of organizational governance, as they reflect the organization’s values, culture, and ethical standards3. Internal audit can assess the ethics activities by evaluating the design and effectiveness of the ethics program, policies, and procedures, and providing assurance and advice on how to improve them4.
Reference: 1: CIA Exam Practice Questions – Certified Internal Auditor® 2019 2: IIA Audit Tool – The Institute of
Internal Auditors or The IIA1 3: Internal Audit Governance: Effective Governance through Internal
Auditing 4: Corporate Governance & Internal Audit | Ideagen
C
Explanation:
Organizational governance is the combination of processes and structures that help the organization achieve its objectives2. Ethics activities are part of organizational governance, as they reflect the organization’s values, culture, and ethical standards3. Internal audit can assess the ethics activities by evaluating the design and effectiveness of the ethics program, policies, and procedures, and providing assurance and advice on how to improve them4.
Reference: 1: CIA Exam Practice Questions – Certified Internal Auditor® 2019 2: IIA Audit Tool – The Institute of
Internal Auditors or The IIA1 3: Internal Audit Governance: Effective Governance through Internal
Auditing 4: Corporate Governance & Internal Audit | Ideagen
Question #37
Which of the following scenarios most likely indicates that the organization is not managing risks effectively?
- A . Securities market oversight authorities fined the organization for not disclosing significant transactions with a related party.
- B . A construction project is significantly delayed due to an unexpected global pandemic.
- C . Senior management terminated contracts with certain solar panel manufacturers due to potential allegations of child labor usage.
- D . A local community filed a lawsuit against a wind farm developer even though the developer complied with all legal requirements.
Correct Answer: A
A
Explanation:
A
Explanation:
Question #38
According to NA guidance, which of the following describes the primary reason to implement environmental and social safeguards within an organization?
- A . To enable Triple Bottom Line reporting capability.
- B . To facilitate the conduct of risk assessment.
- C . To achieve and maintain sustainable development.
- D . To fulfill regulatory and compliance requirements.
Correct Answer: C
C
Explanation:
According to guidance on corporate responsibility and sustainability, the primary reason to implement environmental and social safeguards within an organization is to achieve and maintain sustainable development. These safeguards help ensure that the organization’s operations do not adversely affect the environment or society, supporting long-term sustainability goals, which is a core aspect of modern corporate governance and ethics.
Reference: Sustainability and environmental management guidance from international standards such as ISO 14001 and the Global Reporting Initiative (GRI).
C
Explanation:
According to guidance on corporate responsibility and sustainability, the primary reason to implement environmental and social safeguards within an organization is to achieve and maintain sustainable development. These safeguards help ensure that the organization’s operations do not adversely affect the environment or society, supporting long-term sustainability goals, which is a core aspect of modern corporate governance and ethics.
Reference: Sustainability and environmental management guidance from international standards such as ISO 14001 and the Global Reporting Initiative (GRI).
Question #38
According to NA guidance, which of the following describes the primary reason to implement environmental and social safeguards within an organization?
- A . To enable Triple Bottom Line reporting capability.
- B . To facilitate the conduct of risk assessment.
- C . To achieve and maintain sustainable development.
- D . To fulfill regulatory and compliance requirements.
Correct Answer: C
C
Explanation:
According to guidance on corporate responsibility and sustainability, the primary reason to implement environmental and social safeguards within an organization is to achieve and maintain sustainable development. These safeguards help ensure that the organization’s operations do not adversely affect the environment or society, supporting long-term sustainability goals, which is a core aspect of modern corporate governance and ethics.
Reference: Sustainability and environmental management guidance from international standards such as ISO 14001 and the Global Reporting Initiative (GRI).
C
Explanation:
According to guidance on corporate responsibility and sustainability, the primary reason to implement environmental and social safeguards within an organization is to achieve and maintain sustainable development. These safeguards help ensure that the organization’s operations do not adversely affect the environment or society, supporting long-term sustainability goals, which is a core aspect of modern corporate governance and ethics.
Reference: Sustainability and environmental management guidance from international standards such as ISO 14001 and the Global Reporting Initiative (GRI).
Question #40
Which of the following statements is the most appropriate for a chief audit executive to include in the internal audit policy manual in order to promote objectivity?
- A . Internal auditors may conduct a financial effectiveness engagement in a business unit at any point after being transferred from that area.
- B . Internal auditors may conclude that a business unit’s current control environment is adequate and effective if the review of the prior year’s workpapers and audit report supports that conclusion.
- C . Internal auditors may conduct an engagement in a business unit at any point after providing a training workshop in that area.
- D . Internal auditors should limit the scope of an engagement if they become aware of a potential
impairment of their objectivity in order to reduce the potential impact of the impairment on the engagement results.
Correct Answer: D
D
Explanation:
The most appropriate statement for a Chief Audit Executive to include in the internal audit policy manual to promote objectivity is that internal auditors should limit the scope of an engagement if they become aware of a potential impairment of their objectivity in order to reduce the potential impact of the impairment on the engagement results. This guidance helps to manage and mitigate any risks to objectivity that might affect the integrity of audit findings.
Reference: The IIA’s standards and guidelines on objectivity and conflicts of interest, particularly those addressing how to handle and document potential impairments to objectivity.
D
Explanation:
The most appropriate statement for a Chief Audit Executive to include in the internal audit policy manual to promote objectivity is that internal auditors should limit the scope of an engagement if they become aware of a potential impairment of their objectivity in order to reduce the potential impact of the impairment on the engagement results. This guidance helps to manage and mitigate any risks to objectivity that might affect the integrity of audit findings.
Reference: The IIA’s standards and guidelines on objectivity and conflicts of interest, particularly those addressing how to handle and document potential impairments to objectivity.