Practice Free IIA-CIA-Part1 Exam Online Questions
Question #51
Which of the following actions taken during an audit engagement is the best demonstration of an internal auditor’s due professional care?
- A . Ensure that all financial information related to the engagement is included in the audit plan and examined for irregularities.
- B . Document all audit tests completely.
- C . Consider the possibility of noncompliance or irregularities at all times during an engagement.
- D . Notify the audit committee of any noncompliance or irregularity discovered during an engagement
Correct Answer: C
C
Explanation:
Considering the possibility of noncompliance or irregularities at all times during an engagement best demonstrates an internal auditor’s due professional care. This proactive approach to skepticism ensures that the auditor remains vigilant and prepared to identify any indications of noncompliance or irregular activities, which is central to upholding the integrity of the audit process.
Reference: IIA standards on due professional care, which emphasize the importance of maintaining an attitude of professional skepticism throughout the audit process.
C
Explanation:
Considering the possibility of noncompliance or irregularities at all times during an engagement best demonstrates an internal auditor’s due professional care. This proactive approach to skepticism ensures that the auditor remains vigilant and prepared to identify any indications of noncompliance or irregular activities, which is central to upholding the integrity of the audit process.
Reference: IIA standards on due professional care, which emphasize the importance of maintaining an attitude of professional skepticism throughout the audit process.
Question #52
During a payroll audit, the internal auditor discovered that several individuals who have the same position classification as he are earning a significantly higher salary. The auditor noted the names and amounts of each, and he planned to prepare a request to the chief audit executive for a salary increase based on this information.
Which of the following IIA Code of Ethics principles was violated in this scenario?
- A . Competency.
- B . Objectivity,
- C . Integrity.
- D . Confidentiality
Correct Answer: D
D
Explanation:
The scenario described involves a violation of the principle of confidentiality as defined in The IIA’s Code of Ethics. The internal auditor misused information obtained during the course of an audit (salary data of colleagues) for personal gain (requesting a salary raise). This breaches the ethical principle of confidentiality, which mandates that auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so.
Reference: The IIA’s Code of Ethics on Confidentiality.
D
Explanation:
The scenario described involves a violation of the principle of confidentiality as defined in The IIA’s Code of Ethics. The internal auditor misused information obtained during the course of an audit (salary data of colleagues) for personal gain (requesting a salary raise). This breaches the ethical principle of confidentiality, which mandates that auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so.
Reference: The IIA’s Code of Ethics on Confidentiality.
Question #53
An internal auditor is providing consulting services on an area he was responsible for three years ago. Part of the consulting scope covers a review of a performance measuring system that the auditor helped to develop.
What is the best course of action for the auditor to take concerning the consulting service?
- A . Accept the consulting services only after receiving approval to do so from the board.
- B . Accept the consulting services. The objectivity won’t be impaired if it has been more than a year since he last worked in the area under review.
- C . Refrain from providing the consulting service because he was responsible for that area and his objectivity will be impaired,
- D . Disclose the potential impairment to the customer before accepting the consulting engagement
Correct Answer: D
D
Explanation:
The best course of action for the auditor in this scenario is to disclose the potential impairment to the customer before accepting the consulting engagement. By doing so, the auditor maintains transparency regarding any conflicts of interest and allows the customer to make an informed decision about the auditor’s objectivity. Disclosing prior involvement ensures that both the auditor and the client acknowledge and address any potential bias that could affect the outcomes of the consulting service.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing and Code of Ethics.
D
Explanation:
The best course of action for the auditor in this scenario is to disclose the potential impairment to the customer before accepting the consulting engagement. By doing so, the auditor maintains transparency regarding any conflicts of interest and allows the customer to make an informed decision about the auditor’s objectivity. Disclosing prior involvement ensures that both the auditor and the client acknowledge and address any potential bias that could affect the outcomes of the consulting service.
Reference: IIA’s International Standards for the Professional Practice of Internal Auditing and Code of Ethics.
Question #54
In which of the following ways can a whistleblower hotline serve as a prevent
- A . active control? 3
- B . Third parties who operate the hotline ensure anonymity for whistle blowers. D Whistleblower tips help discover wrongdoings and violations of the code of conduct.
Potential perpetrators of fraud know that their actions can be reported easily. - C . Better investigation protocols are triggered by the whistleblower hotline.
Correct Answer: C
C
Explanation:
A whistleblower hotline serves as a preventive control by deterring potential perpetrators of fraud.
Knowing that their actions can be reported easily and anonymously through the hotline creates a psychological barrier against committing fraud (Option C). This preventive aspect is supported by the IIA’s guidance on fraud risk management, which highlights the role of whistleblower mechanisms in creating an environment where unethical behavior is less likely to occur due to the increased risk of detection and reporting.
Reference: IIA Practice Guide: Internal Auditing and Fraud
ACFE’s Fraud Prevention Resources
C
Explanation:
A whistleblower hotline serves as a preventive control by deterring potential perpetrators of fraud.
Knowing that their actions can be reported easily and anonymously through the hotline creates a psychological barrier against committing fraud (Option C). This preventive aspect is supported by the IIA’s guidance on fraud risk management, which highlights the role of whistleblower mechanisms in creating an environment where unethical behavior is less likely to occur due to the increased risk of detection and reporting.
Reference: IIA Practice Guide: Internal Auditing and Fraud
ACFE’s Fraud Prevention Resources
Question #55
Which of the following is an example of an application control?
- A . Employees in the data center must always wear identification badges
- B . Operating system updates must be installed within 48 hours.
- C . A two stage authentication process must be used to access customer information
- D . System backup and recovery testing must be done monthly
Correct Answer: C
C
Explanation:
An example of an application control specifically involves the software or system used to process information. A two-stage authentication process to access customer information is an application
control because it involves the authentication mechanisms within the application software to secure access to sensitive data. This control helps in verifying the identity of users and ensuring that access to critical data is restricted to authorized personnel only.
Reference: IT Governance Institute’s COBIT Framework.
C
Explanation:
An example of an application control specifically involves the software or system used to process information. A two-stage authentication process to access customer information is an application
control because it involves the authentication mechanisms within the application software to secure access to sensitive data. This control helps in verifying the identity of users and ensuring that access to critical data is restricted to authorized personnel only.
Reference: IT Governance Institute’s COBIT Framework.
Question #56
With regard to organizational governance assurance, which of the following is an appropriate role for the internal audit activity’?
- A . Assess compliance with the organization’s code of conduct
- B . Oversee the governance and risk management processes
- C . Initiate new organizational control processes
- D . Provide advice on organizational governance activities
Correct Answer: A
A
Explanation:
The internal audit activity’s appropriate role with regard to organizational governance assurance includes assessing compliance with the organization’s code of conduct. This involves evaluating whether the organization’s actions align with its stated ethical standards and conduct guidelines. This role is fundamental to assurance services, ensuring that governance processes reflect and enforce the organization’s values and ethical standards as outlined in its code of conduct.
Reference: IIA Standard 2110 – Governance
A
Explanation:
The internal audit activity’s appropriate role with regard to organizational governance assurance includes assessing compliance with the organization’s code of conduct. This involves evaluating whether the organization’s actions align with its stated ethical standards and conduct guidelines. This role is fundamental to assurance services, ensuring that governance processes reflect and enforce the organization’s values and ethical standards as outlined in its code of conduct.
Reference: IIA Standard 2110 – Governance
Question #57
Consolidating the reporting of risks.
- A . 1 and 4.
- B . 2 and 4.
- C . 2, 3, and 4.
- D . 1, 2, and 3.
Correct Answer: D
D
Explanation:
Core internal audit roles include reviewing management’s handling of key risks, evaluating risk reporting, and assessing risk management processes. These align with the IIA’s framework for enterprise risk management to support organizations in identifying and managing risks effectively.
D
Explanation:
Core internal audit roles include reviewing management’s handling of key risks, evaluating risk reporting, and assessing risk management processes. These align with the IIA’s framework for enterprise risk management to support organizations in identifying and managing risks effectively.
Question #58
Which of the following statements is true regarding consulting engagements?
- A . Internal auditors cannot provide consulting services related to operations for which they had previous responsibilities.
- B . The nature of consulting services to be performed by internal auditors must be defined in the internal audit charter
- C . If internal auditors have potential impairments to objectivity related to the proposed consulting engagement, the engagement must be declined.
- D . If internal auditors lack the knowledge, skills, or other competencies needed to perform the consulting engagement, the engagement can proceed with proper disclosures.
Correct Answer: B
B
Explanation:
According to IIA standards, the nature of consulting services to be performed by internal auditors must be defined in the internal audit charter. This helps ensure clarity and alignment between the internal audit activity’s objectives and the organization’s expectations, while also providing a framework that guides the consulting services provided by internal auditors.
Reference: IIA Standard 1000 – Purpose, Authority, and Responsibility, which includes guidelines on the content of the internal audit charter, including the scope of consulting services.
B
Explanation:
According to IIA standards, the nature of consulting services to be performed by internal auditors must be defined in the internal audit charter. This helps ensure clarity and alignment between the internal audit activity’s objectives and the organization’s expectations, while also providing a framework that guides the consulting services provided by internal auditors.
Reference: IIA Standard 1000 – Purpose, Authority, and Responsibility, which includes guidelines on the content of the internal audit charter, including the scope of consulting services.
Question #59
Which of the following scenarios violates The IIA’s standard regarding internal audit independence?
- A . The chief audit executive (CAE) reports on the internal audit activity’s day-to-day tasks and responsibilities to the CEO.
- B . An assessment of the risk management function is reviewed by an outside consulting firm because the CAE is temporarily fulfilling the role of risk manager.
- C . The CAE regularly meets with the organization’s chief risk officer, who validates all reported audit findings and dictates which will be Included In the package to the audit committee.
- D . The internal audit activity will experience staffing shortages for the next six months due to planned and unplanned leaves of absence; therefore the CAE proposed including fewer audits in the annual audit plan compared to the previous financial year.
Correct Answer: C
C
Explanation:
This scenario violates The IIA’s standards regarding internal audit independence because the chief risk officer’s involvement in validating and dictating which audit findings are included in the audit committee reports undermines the independence of the internal audit activity. Independence is compromised when audit findings are subject to alteration or selection by another party within the organization, particularly one involved in managing risks that the audit may be assessing.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing, specifically standards related to independence.
C
Explanation:
This scenario violates The IIA’s standards regarding internal audit independence because the chief risk officer’s involvement in validating and dictating which audit findings are included in the audit committee reports undermines the independence of the internal audit activity. Independence is compromised when audit findings are subject to alteration or selection by another party within the organization, particularly one involved in managing risks that the audit may be assessing.
Reference: The IIA’s International Standards for the Professional Practice of Internal Auditing, specifically standards related to independence.
Question #60
An automobile manufacturer will become one of the first in the industry to adopt a new inventory management software. Despite the system being new to the market, senior management believes that the benefits are great enough to offset the potential risks.
Which of the following aspects of risk management does senior management’s decision best illustrate?
- A . Residual risk.
- B . Inherent risk.
- C . Risk tolerance.
- D . Risk appetite.
Correct Answer: D
D
Explanation:
Senior management’s decision to adopt new inventory management software despite its newness and associated risks illustrates ‘Risk Appetite’. Risk appetite is the amount of risk, on a broad level, an organization is willing to accept in pursuit of its objectives before action is deemed necessary to reduce the risk. It reflects the enterprise’s willingness to take risks to achieve its goals, which is clearly demonstrated in this scenario.
Reference: COSO Enterprise Risk Management Framework
D
Explanation:
Senior management’s decision to adopt new inventory management software despite its newness and associated risks illustrates ‘Risk Appetite’. Risk appetite is the amount of risk, on a broad level, an organization is willing to accept in pursuit of its objectives before action is deemed necessary to reduce the risk. It reflects the enterprise’s willingness to take risks to achieve its goals, which is clearly demonstrated in this scenario.
Reference: COSO Enterprise Risk Management Framework