Practice Free IIA-CIA-Part1 Exam Online Questions
Question #41
Which of the following statements is true regarding organizational culture and an audit of the control environment?
- A . For multinational organizations it is important to ensure that the organizational culture is
consistent at all locations - B . Because the chief audit executive (CAE) is part of the organizational culture, external auditors should be engaged to evaluate the control environment
- C . If there are unresolved scope restrictions, the CAE should consider whether to pursue the audit and note the scope restrictions in the audit report
- D . Because it will create a conflict of interest relating to the control environment, senior management should not be consulted during the audit
Correct Answer: C
C
Explanation:
If there are unresolved scope restrictions, the chief audit executive (CAE) should consider whether to pursue the audit and note the scope restrictions in the audit report. This is important because scope restrictions can limit the audit’s ability to fully assess the control environment, and documenting these limitations helps ensure that the audit report reflects the extent to which the auditor was able to evaluate the control environment.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing regarding scope limitations and reporting.
C
Explanation:
If there are unresolved scope restrictions, the chief audit executive (CAE) should consider whether to pursue the audit and note the scope restrictions in the audit report. This is important because scope restrictions can limit the audit’s ability to fully assess the control environment, and documenting these limitations helps ensure that the audit report reflects the extent to which the auditor was able to evaluate the control environment.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing regarding scope limitations and reporting.
Question #42
Which of the following statements relating to risk management is true?
- A . The high-level risk assessment performed during engagement planning is a detailed step-by-step analytical process
- B . External auditors must be engaged to evaluate the potential for fraud and how the organization manages fraud risk
- C . A lack of controls is acceptable if the risk is reduced to an acceptable level in some other way
- D . Internal auditors are responsible for managing the risks of the organization
Correct Answer: C
C
Explanation:
The statement that a lack of controls is acceptable if the risk is reduced to an acceptable level in some other way is true. Risk management involves identifying, assessing, and responding to risks to achieve the objectives of the organization. If a risk can be mitigated to an acceptable level through alternative means other than traditional controls, such as risk avoidance or risk transfer, this approach can be deemed acceptable.
Reference: Risk management standards and frameworks, such as COSO and ISO 31000.
C
Explanation:
The statement that a lack of controls is acceptable if the risk is reduced to an acceptable level in some other way is true. Risk management involves identifying, assessing, and responding to risks to achieve the objectives of the organization. If a risk can be mitigated to an acceptable level through alternative means other than traditional controls, such as risk avoidance or risk transfer, this approach can be deemed acceptable.
Reference: Risk management standards and frameworks, such as COSO and ISO 31000.
Question #43
Which of the following types of policies best helps promote objectivity in the interna! audit activity’s work?
- A . Policies that are distributed to all members of the internal audit activity and require a signed acknowledgment,
- B . Policies that match internal auditors’ performance with feedback from management of the area under review.
- C . Policies that keep internal auditors in areas where they have vast audit expertise.
- D . Policies that provide examples of inappropriate business relationships.
Correct Answer: D
D
Explanation:
Policies that provide examples of inappropriate business relationships best promote objectivity in the internal audit activity’s work by explicitly defining what constitutes a conflict of interest and guiding auditors on how to avoid situations that might impair their objectivity. This clear delineation helps maintain the independence and unbiased perspective necessary for effective auditing.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics and Professional Standards; literature on maintaining objectivity in internal auditing.
D
Explanation:
Policies that provide examples of inappropriate business relationships best promote objectivity in the internal audit activity’s work by explicitly defining what constitutes a conflict of interest and guiding auditors on how to avoid situations that might impair their objectivity. This clear delineation helps maintain the independence and unbiased perspective necessary for effective auditing.
Reference: Institute of Internal Auditors (IIA) – Code of Ethics and Professional Standards; literature on maintaining objectivity in internal auditing.
Question #44
Which of the following statements is most likely to be true regarding a consulting engagement involving an organization’s new payroll system?
- A . The internal auditor and engagement client established an understanding that the scope would include the new payroll system project.
- B . The payroll system engagement was scheduled as a result of internal audit’s risk-based annual planning process.
- C . The internal auditor concluded that the engagement objectives would include assessing the effectiveness of the payroll process controls.
- D . The internal auditor acknowledged the engagement client’s satisfactory performance in the final engagement results that were communicated to senior management and the board.
Correct Answer: A
A
Explanation:
In a consulting engagement, especially when dealing with specific systems like a new payroll system, the scope of the engagement would typically be agreed upon between the internal auditor and the engagement client. This includes defining what aspects of the new payroll system will be evaluated. Such agreements are fundamental in consulting engagements to ensure that the auditor’s activities align with the client’s expectations and needs.
Reference: IIA Standards for Professional Practice of Internal Auditing
A
Explanation:
In a consulting engagement, especially when dealing with specific systems like a new payroll system, the scope of the engagement would typically be agreed upon between the internal auditor and the engagement client. This includes defining what aspects of the new payroll system will be evaluated. Such agreements are fundamental in consulting engagements to ensure that the auditor’s activities align with the client’s expectations and needs.
Reference: IIA Standards for Professional Practice of Internal Auditing
Question #45
A new chief audit executive realized that the internal audit charter has not been updated in five years and only includes the Core Principles for the Professional Practice of Internal Auditing, the Code of Ethics, and the Standards.
What mandatory component is missing?
- A . Statement of Independence.
- B . Operating Procedures of Internal Auditing.
- C . Definition of Internal Auditing.
- D . Attestation of Quality Assurance.
Correct Answer: C
C
Explanation:
The internal audit charter should include the Definition of Internal Auditing, along with the Core Principles, Code of Ethics, and Standards. This definition provides clarity on the purpose, authority, and responsibility of the internal audit function within the organization.
Reference: IIA’s International Professional Practices Framework (IPPF) – Internal Audit Charter requirements.
C
Explanation:
The internal audit charter should include the Definition of Internal Auditing, along with the Core Principles, Code of Ethics, and Standards. This definition provides clarity on the purpose, authority, and responsibility of the internal audit function within the organization.
Reference: IIA’s International Professional Practices Framework (IPPF) – Internal Audit Charter requirements.
Question #46
A global organization established a new internal audit activity and the recently hired chief audit executive needs to develop an internal audit manual for internal auditors Among the following policies in the manual, which would facilitate internal auditors in upholding their objectivity?
- A . Internal auditors shall attend professional workshops to refresh internal audit norms and concepts
- B . Internal auditors’ performance is synchronized with satisfaction ratings given by audit clients
- C . Internal auditors take prior audit results into account when conducting current audit engagements
- D . Internal auditors observe the audit client’s expectations when scoping audit engagements
Correct Answer: A
A
Explanation:
Facilitating internal auditors in upholding their objectivity within the internal audit manual can effectively be addressed by ensuring that internal auditors regularly attend professional workshops to refresh and update their understanding of internal audit norms and concepts. This practice helps maintain a high level of professionalism and objectivity by keeping auditors informed about the latest standards and ethical guidelines, which in turn minimizes the risk of biases and enhances their ability to perform independent and objective audits.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing on Continuing Professional Development.
A
Explanation:
Facilitating internal auditors in upholding their objectivity within the internal audit manual can effectively be addressed by ensuring that internal auditors regularly attend professional workshops to refresh and update their understanding of internal audit norms and concepts. This practice helps maintain a high level of professionalism and objectivity by keeping auditors informed about the latest standards and ethical guidelines, which in turn minimizes the risk of biases and enhances their ability to perform independent and objective audits.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing on Continuing Professional Development.
Question #47
It is important for the chief audit executive to consider the level of competence of the internal audit staff because their competence influences which of the following?
- A . The cost-benefit relationship of planned audits.
- B . Proficiency needed to carry out engagements.
- C . Achievement of the objectives of internal control.
- D . Quantity of the audits performed.
Correct Answer: B
B
Explanation:
The level of competence of internal audit staff critically influences their proficiency in carrying out audit engagements. Competence encompasses the knowledge, skills, and other attributes necessary to perform audit tasks effectively. It affects the quality of the audits conducted and the value the audit team adds to the organization, ensuring that audits are performed with the required professional care and skepticism.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
B
Explanation:
The level of competence of internal audit staff critically influences their proficiency in carrying out audit engagements. Competence encompasses the knowledge, skills, and other attributes necessary to perform audit tasks effectively. It affects the quality of the audits conducted and the value the audit team adds to the organization, ensuring that audits are performed with the required professional care and skepticism.
Reference: Institute of Internal Auditors (IIA) – International Professional Practices Framework (IPPF)
Question #48
According to IIA guidance, which of the following best demonstrates how the chief audit executive may ensure that due professional care is applied?
- A . Establish policies and procedures concerning the engagement process
- B . Develop a strategy for recruiting assigning, and training staff
- C . Outsource complex engagements to an external service provider
- D . Base the auditor evaluation process on the number of observations
Correct Answer: A
A
Explanation:
To ensure that due professional care is applied, the chief audit executive should establish policies and procedures concerning the engagement process. This action sets a clear framework and standards for conducting audits, which guides auditors in meeting the necessary quality and ethical requirements. Establishing these policies is fundamental to ensuring that all engagements are performed with diligence and in accordance with professional standards.
Reference: IIA Standard 1300 – Quality Assurance and Improvement Program
A
Explanation:
To ensure that due professional care is applied, the chief audit executive should establish policies and procedures concerning the engagement process. This action sets a clear framework and standards for conducting audits, which guides auditors in meeting the necessary quality and ethical requirements. Establishing these policies is fundamental to ensuring that all engagements are performed with diligence and in accordance with professional standards.
Reference: IIA Standard 1300 – Quality Assurance and Improvement Program
Question #49
Outsourcing a business activity is considered which of the following risk management techniques?
- A . Sharing a risk.
- B . Avoiding a risk.
- C . Reducing a risk.
- D . Mitigating a risk
Correct Answer: C
C
Explanation:
Outsourcing a business activity is considered a risk reduction technique. By outsourcing, an organization transfers certain activities to external service providers who possess specialized skills or resources, thereby reducing the associated risks that the organization may face if it had to manage those activities internally.
Reference: IIA guidance on risk management techniques
C
Explanation:
Outsourcing a business activity is considered a risk reduction technique. By outsourcing, an organization transfers certain activities to external service providers who possess specialized skills or resources, thereby reducing the associated risks that the organization may face if it had to manage those activities internally.
Reference: IIA guidance on risk management techniques
Question #50
The internal audit activity plans to audit a supplier quality management process within the supply chain function.
In what way is this assurance engagement similar to a typical consulting engagement?
- A . For both types of engagements, internal auditors are solely responsible for deciding the goals and objectives.
- B . For both types of engagements, internal auditors must obtain requisite skillsets for the areas where their team lacks competencies.
- C . For both types of engagements, internal auditors should not be involved in the engagement if they previously managed the supply chain function.
- D . For both types of engagements, internal auditors are prohibited from undertaking operational responsibilities.
Correct Answer: B
B
Explanation:
Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities and the internal audit activity’s plan2. This applies to both assurance and consulting engagements, as they both require internal auditors to provide risk-based and objective assurance, advice, and insight to the organization3. If the internal audit team lacks the necessary competencies for a specific engagement, they should obtain them through training, coaching, or external assistance4.
Reference: 1: CIA Exam Practice Questions – Certified Internal Auditor® 2019 2: Standard 1210 C Proficiency – The Institute of Internal Auditors or The IIA 3: Mission of Internal Audit 4: Standard 1210.A3 – The Institute of Internal Auditors or The IIA
B
Explanation:
Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities and the internal audit activity’s plan2. This applies to both assurance and consulting engagements, as they both require internal auditors to provide risk-based and objective assurance, advice, and insight to the organization3. If the internal audit team lacks the necessary competencies for a specific engagement, they should obtain them through training, coaching, or external assistance4.
Reference: 1: CIA Exam Practice Questions – Certified Internal Auditor® 2019 2: Standard 1210 C Proficiency – The Institute of Internal Auditors or The IIA 3: Mission of Internal Audit 4: Standard 1210.A3 – The Institute of Internal Auditors or The IIA