IIA IIA-CIA-Part2 Exam With Confidence Using Practice Dumps

Residual risk is the risk that remains after management has taken steps to mitigate or control the inherent risks. The chief audit executive (CAE) performs residual risk assessment to determine the effectiveness of management’s actions and whether the remaining risk is acceptable.

IIA Standard 2120 – Risk Management:

The standard emphasizes that the CAE should evaluate the residual risks faced by the organization. This involves assessing whether management’s risk responses are adequate and whether any unmitigated risks (residual risks) remain within the organization’s risk tolerance.

Cost-Benefit Analysis:

Conducting a cost-benefit analysis of management’s decision not to implement a recommendation directly relates to assessing residual risk. This analysis helps determine whether the residual risk is acceptable compared to the cost of implementing the recommendation.

IIA Practice Guide on Assessing Residual Risk:

This guide outlines that assessing residual risk involves evaluating the impact of management’s controls and the risks that remain. A cost-benefit analysis is a method to quantify the impact of not addressing a recommendation, thereby evaluating the residual risk.

Option B (Inquiry of corrective action to be completed): This is more about monitoring follow-up actions rather than assessing residual risk.

Option C (Reporting status of every observation): While important, this is related to tracking audit issues, not specifically assessing residual risk.

Option D (Soliciting management’s feedback): While valuable for engagement quality, this does not directly relate to residual risk assessment.

Detailed Explanation:Why Not Other Options?Conclusion: Option A is correct as it reflects the CAE’s role in assessing residual risk through cost-benefit analysis, in line with IIA standards.

A consulting engagement in internal auditing involves providing advisory and related client service activities, the nature and scope of which are agreed upon with the client. These are intended to add value and improve an organization's governance, risk management, and control processes. Helping in the design of the risk management program is a consulting activity because it involves advising management on how to establish or improve the processes for identifying, assessing, and managing risks. This is different from assurance engagements, which primarily focus on assessing existing processes.

The Institute of Internal Auditors (IIA) Standard 2010: Planning

IIA Practice Advisory 2010-1: Linking the Audit Plan to Risk and Exposures

When identifying audit resource requirements, the chief audit executive (CAE) should consider approaching an external service provider to conduct internal audits in areas where the organization lacks the necessary skills (2). This ensures that audits are conducted by individuals with the appropriate expertise. Additionally, communicating to senior management a summary report on the status and adequacy of audit resources (4) keeps them informed about the internal audit activity's capacity and any resource constraints. Considering employees from other operational areas as audit resources (1) could compromise objectivity and independence, while suggesting deferral of audits (3) is generally not advisable as it might leave significant risks unaddressed. References: IIA Standard 2030 – Resource Management, IIA Practice Advisory 2030-1