Complete IIA-CIA-Part2 IIA Materials

Using the market price of the product for internal transfer pricing leads to the best decisions for the organization because it reflects the true economic value of the goods or services being transferred. This method promotes efficiency and fairness within the divisions.

Economic Value: Market price reflects the true economic value, ensuring that the internal transactions are conducted at fair and competitive prices.

Performance Measurement: It provides a consistent basis for evaluating the performance of different divisions, as they are measured against external market conditions.

Resource Allocation: Helps in optimal allocation of resources by ensuring that internal transactions are economically justified and comparable to external transactions.

The most critical factor in determining which engagements should be included in the annual internal audit plan is the organization's annual risk management strategy. This strategy identifies the key risks facing the organization and ensures that the internal audit plan aligns with the areas of highest risk. This prioritization helps ensure that internal audit resources are focused on areas that could have the most significant impact on the organization. References:

"Internal Auditing: Assurance & Advisory Services" (The Institute of Internal Auditors)

"Risk-Based Internal Auditing" (IIA Practice Guide)

The International Standards for the Professional Practice of Internal Auditing encourage auditors to acknowledge satisfactory performance to provide a balanced report. However, it is not a mandatory requirement. Including positive observations can help foster a constructive relationship with management and provide a more balanced view of the audited area.

The Institute of Internal Auditors (IIA), International Standards for the Professional Practice of Internal Auditing (Standards)

"Internal Auditing: Assurance and Advisory Services" by Urton L. Anderson et al.

Discovery sampling is a statistical sampling method that is specifically designed for detecting fraud or other irregularities. It is most appropriate when the auditor expects that deviations or fraud may be rare but significant if found.

Discovery Sampling:

Discovery sampling is used when the auditor is trying to identify at least one occurrence of a particular event, such as fraud. The sample is designed so that if a single error is found, it suggests that more may exist within the population, warranting further investigation.

Application in Fraud Detection:

Discovery sampling is effective in fraud detection because it focuses on identifying whether any instances of fraud exist within a population. This approach is well-suited for situations where even a small number of fraudulent transactions could have a significant impact.

IIA Practice Guide on Statistical Sampling:

The IIA suggests that discovery sampling is appropriate when the goal is to find the presence of an error or fraud, particularly in populations where such occurrences are expected to be infrequent.

Option B (Stop-or-go sampling): This method is used to control the risk of over-auditing when errors are expected to be low, but it is not specifically designed for fraud detection.

Option C (Haphazard sampling): This is a non-statistical sampling method and is not appropriate for systematic fraud detection.

Option D (Stratified attribute sampling): This method divides the population into subgroups but is not specifically aimed at discovering fraud.

Detailed Explanation:Why Not Other Options?Conclusion: Option A is correct because discovery sampling is the most appropriate statistical method for testing a population for fraud, as it is designed to detect even a small number of significant deviations, consistent with IIA guidance.