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IIA IIA-CIA-Part1 Dumps

Essentials of Internal Auditing Questions and Answers

Question 1

According to The IIA's Code of Ethics, an internal auditor who has a romantic relationship with an audit client violates which of the following rules of conduct?

Options:

A.

Confidentiality.

B.

Independence.

C.

Integrity.

D.

Objectivity.

Question 2

According to IIA guidance, which of the following activities would typically be examined when using the maturity model approach for assessing an organization's risk management program?

Options:

A.

Monitor and review

B.

Performance measurement.

C.

Setting the context.

D.

Communication.

Question 3

Which of the following statements is the most appropriate example of the internal audit activity exercising due professional care during an audit of the payroll department?

Options:

A.

Internal auditors ensure that the work program is appropriately designed in order to identify all of the risks surrounding the payroll process.

B.

Internal auditors determine whether the policies, procedures, and practices of the payroll department are operating in accordance with relevant laws.

C.

Internal auditors verify whether the board of directors has implemented effective internal controls over the processes used by the payroll department.

D.

Internal auditors ask the organization's risk manager to determine whether the degree of work planned is sufficient to determine whether payroll payments were complete and accurate.

Question 4

A risk assessment showed that the cost of addressing a particular risk in the organization's human resources department is greater than the perceived benefit. Which risk response approach should the organization take in this scenario?

Options:

A.

Reduce the risk.

B.

Transfer the risk.

C.

Accept the risk.

D.

Share the risk.

Question 5

An internal auditor assessed the controls within his organization's payroll process and suspects that erroneous payments may have been made to a fraudulent bank account. What is the best course of action for the auditor to take?

Options:

A.

Speak to the payroll manager so he may investigate the auditor's observations.

B.

Continue to investigate the payments to confirm the accuracy of the observations, and determine whether further fraudulent payments have been made.

C.

Stop the audit and report the findings to senior management immediately.

D.

Escalate the concern to the engagement supervisor.

Question 6

An iniernal auditor creates a professional development plan to obtain more experience in the organization's environmental, social, and corporate governance initiatives. Which of the following would the auditor include in the plan to support these objectives?

Options:

A.

A plan to study for and obtain a certification in nonprofit management.

B.

A deadline within the individual development plan to meet the overall engagement objectives.

C.

A plan to perform a variety of engagements to develop general skills that could be used to assess environmental, social, and governance initiatives.

D.

A request to attend the organization's committee meeting that is focused on strategic community awareness.

Question 7

An internal auditor in a busy internal audit activity reviews her continuing professional development records toward the end of the year and is concerned to find she has undertaken limited training and formal professional development. Which of the following actions is the most appropriate for her to take?

Options:

A.

Remind the chief audit executive (CAE) that he is responsible for her continuing professional development and needs to address the issue

B.

Contact her professional organization and explain that she does not need formal professional development, as she is being developed sufficiently through undertaking audit engagements.

C.

Accept that she is unlikely to meet continuing professional development requirements but look to attend training courses at the next available time.

D.

Accept that she is responsible for her own continuing professional development, develop a professional plan, and discuss it with the CAE.

Question 8

Which of the following requests, if accepted by the internal audit activity, would impair its independence?

Options:

A.

A request to develop workshops on corporate governance for management.

B.

A request to act as liaison with external auditors.

C.

A request to determine appropriate risk management responses for management.

D.

A request to provide counseling services on ethical matters.

Question 9

Which of the following controls would be most useful to prevent an employee from using the organization's funds for inappropriate expenditures and falsifying financial records to conceal the fraud?

Options:

A.

Segregating duties in the payroll processes.

B.

Confirming receipt of goods or services.

C.

Performing background checks on newly hired employees.

D.

Requiring management approval for expenses.

Question 10

In which of the following ways can a whistleblower hotline serve as a prevent

Options:

A.

ative 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.

Question 11

Which of the following must be considered by the chief audit executive before writing the internal audit charter?

Options:

A.

Internal auditors' level of competencies and skills.

B.

The manner in which the internal audit activity is viewed by the board.

C.

Evaluation of staff certifications and continued development.

D.

Effectiveness of the quality assurance and improvement program.

Question 12

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?

Options:

A.

Statement of Independence.

B.

Operating Procedures of Internal Auditing.

C.

Definition of Internal Auditing.

D.

Attestation of Quality Assurance.

Question 13

Which of the following is an example of risk monitoring to ensure a system is performing as intended?

Options:

A.

Checking the progress of risk treatment plans

B.

Considering the consequence and likelihood of risks

C.

Documenting the risks and their areas of impact

D.

Communicating to management about risks

Question 14

Due to extreme liquid fuel price fluctuations, management decided to designate a specific price below which liquid fuel shall not be sold to customers, but instead shall be pumped into storage tanks. Which of the following risk responses has management selected?

Options:

A.

Risk reduction.

B.

Risk transfer.

C.

Risk acceptance.

D.

Risk avoidance.

Question 15

A chief audit executive (CAE) identifies that the internal audit activity lacks a necessary skill to perform a management request for a consulting engagement. According to IIA guidance, which of the following is the most appropriate action the CAE should take regarding the request?

Options:

A.

Assign the engagement to a more senior internal auditor.

B.

Decline the engagement request.

C.

Allow the internal auditors to acquire the needed skills while performing the engagement.

D.

Supervise the assigned internal auditors throughout the engagement.

Question 16

During an assurance engagement, an internal auditor reviews a tender inviting vendors to submit bids to supply financial services software to the organization. She suspects that the tender was tailored for the bidder who eventually won the contract. What should the auditor do next?

Options:

A.

Review payments made for the financial services software.

B.

Confront a procurement specialist with the suspicion.

C.

Submit an anonymous tip to the whistleblower hotline.

D.

Analyze technical terms and conditions of the tender.

Question 17

Which of the following is an area that an organization would most likely include as part of its corporate social responsibility reporting?

Options:

A.

The profitability impact of its products in developing markets.

B.

The amount of political donations to local government races.

C.

The number of complaints related to traffic from its new factory.

D.

The compensation packages awarded to senior management.

Question 18

The internal audit activity is undergoing a self-assessment as part of its quality assurance and improvement program Which of the following observations must be addressed in order for the internal audit activity to achieve conformance with the Standards?

Options:

A.

The internal audit charter does not identify which audit services are outsourced

B.

The internal audit charter has not been reviewed by the legal department

C.

The internal audit charter has not been approved by the board within the past year

D.

The internal audit charter does not describe the authority of the internal audit activity

Question 19

Which of the following is an indicator that the organization s risk management process is effective?

Options:

A.

The organization s risk appetite mission, and objectives are dearly outlined.

B.

The organization s risk management practices are assessed as mature.

C.

The organization has adopted risk management frameworks and global models.

D.

The organization s significant risks are identified and adequately assessed

Question 20

An external assessment was performed as part of the organization's quality assurance and improvement program. Which of the following conclusions confirms that the internal audit activity is in conformance with the Standards'?

Options:

A.

The chief audit executive is well qualified and has responsibilities over operational areas that the internal audit activity assesses.

B.

Periodic self-assessments are assigned to entry-level internal audit staff to support their continuing professional development.

C.

All audit workpapers are reviewed and signed by the engagement supervisor before the audit report is issued.

D.

Employees who rotate into the internal audit activity from other areas of the organization are assigned to audit areas where they previously worked, to take advantage of their operational expertise and experience.

Question 21

Which of the following tests would most likely help discover a fictitious invoice?

Options:

A.

Compare vendor addresses to employee addresses.

B.

Match cancelled checks to invoices.

C.

Search for duplicate payment amounts.

D.

Check employee bank records against invoice amounts.

Question 22

Which of the following is true regarding internal audit role's in The IIA's Three Lines Model?

Options:

A.

As internal control is part of risk management, the internal audit role in risk management implies reduced emphasis on internal control.

B.

Internal audit can blur the distinction between the second and the third lines as long as value is added.

C.

Internal audit cannot rely on other assurance providers when opining on the effectiveness of risk management.

D.

Internal audit should be aligned with first- and second-line functions through effective communication, cooperation, and collaboration.

Question 23

An organization is considering purchasing a new banking software system and has asked the internal audit activity to evaluate the system. An internal auditor assigned to perform the engagement worked at the software company two years ago and is familiar with the system's design strengths and weaknesses. Which of the following is true regarding impairment to the auditor's objectivity?

Options:

A.

This situation does not necessitate any action related to the auditor's objectivity.

B.

The auditor should decline to perform the audit because personal conflicts of interest are likely.

C.

The auditor must disclose to the chief audit executive that this situation may impair her objectivity.

D.

The auditor can provide only consulting services, not assurance.

Question 24

Prior to commencing a financial compliance engagement, the engagement supervisor reads the business plan for the finance department and meets informally with the director to learn more about any key issues. Which of the following competencies is the engagement supervisor demonstrating?

Options:

A.

The ability to inspire trust

B.

The ability to communicate effectively

C.

The ability to display courage

D.

The ability to understand the needs of stakeholders

Question 25

Which of the following risk management techniques best describes the strategy of obtaining insurance to protect against losses due to bad weather conditions?

Options:

A.

Risk avoidance

B.

Risk reduction

C.

Risk acceptance

D.

Risk sharing

Question 26

An internal auditor at a multinational organization is reviewing the effectiveness of the organization's risk management framework. In this scenario, which of the following statements is true?

Options:

A.

The auditor should consider local cultures and customs in various regions when assessing control effectiveness.

B.

Regardless of their location, employees at all levels share responsibility for designing effective controls to mitigate risks.

C.

To achieve an effective internal control environment, the organization's risk management plan must be documented and communicated to all levels throughout each region.

D.

Setting clear objectives is a precondition to effectively identifying, assessing, and responding to the organization's risks.

Question 27

Which of the following most accurately describes corporate social responsibility at an organization?

Options:

A.

An organizational locus on improving the overall environment, even it is to the detriment of the local community.

B.

A philosophy driven by employees that flows up to senior management and the board of directors.

C.

An overall commitment of the organization to improve the quality of life for not only the employees but the community at large.

D.

A policy of ensuring that the organization is socially responsible, even if it leads to unprofitability due to increased costs.

Question 28

IT management requires all employees in the IT department to attend annual training on the department’s mission values and key performance measures This activity is designed to prevent which of the following conditions?

Options:

A.

Knowledge’s kills gap

B.

Monitoring gap

C.

Accountability/reward failure

D.

Communication failure

Question 29

With regard to the internal audit activity's quality assurance and improvement program, which of the following topics would the chief audit executive include on the quarterly board meeting agenda?

Options:

A.

The scope and frequency of both internal and external quality assessments.

B.

The list of audit engagements that will be assessed during the year.

C.

The number and qualifications of internal audit staff members assigned to perform internal assessments during the year.

D.

The compensation structure of the qualified assessment team.

Question 30

When the chief audit executive Is responsible for risk management in an organization, which of the following parties is responsible for overseeing the internal audit activity's assurance over risk management?

Options:

A.

The chief audit executive.

B.

A member of the compliance function.

C.

A party outside of the internal audit activity.

D.

A member of the risk management function.

Question 31

According to The IIA's Competency Framework, which competency is considered the mandatory minimum for internal auditors to possess when performing internal audit engagements?

Options:

A.

To recognize red flags that indicate fraud.

B.

To recommend controls to prevent fraud.

C.

To apply forensic auditing techniques to detect fraud.

D.

To evaluate the potential for fraud.

Question 32

There is a growing perception that employees generally evade their responsibilities. What impact will an internal auditor most likely see during an engagement?

Options:

A.

Supervisors are likely to reduce their level of supervision and increase span of control.

B.

Employees are likely to be supervised closely and given little freedom.

C.

Peer employees are likely to trust one another, but distrust management.

D.

Employees are likely to join forces to accomplish their duties as teams.

Question 33

Which of the following best describes a proactive role for the internal audit activity with regard to the organization's ethics program?

Options:

A.

Becoming a voting member of the organization's internal ethics council.

B.

Performing an annual organizationwide employee survey.

C.

Reviewing all departmental ethics-related policies.

D.

Conducting annual ethics training for all employees.

Question 34

The accounting department asked the chief audit executive (CAE) to perform a review of suspicious transactions The CAE was an accounting manager for the organization six months ago How should she respond to the request?

Options:

A.

Decline, if it is consulting engagement because she recently worked in the organization s accounting department

B.

Accept, 11 is an assurance engagement, as she has been out of the department long enough to not impair objectivity.

C.

Inform the accounting department mat me engagement can take place m the future once she has been removed from accounting for a longer period of time.

D.

Accept, it is a consulting engagement with agreed-upon scope and services to be provided by me internal audit activity.