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NEW QUESTION # 23
Risk assessments can vary in format, but generally include.
I. A description of identified risks.
II. Tests of audit controls.
III. A system of rating risks.
IV. Sample size identification.
- A. I and III only
- B. I, III, and IV only
- C. II, III, and IV only
- D. I and II only
Answer: A
Explanation:
Section: Volume B
NEW QUESTION # 24
An internal auditor notes that inventory counts are conducted on Mondays only and that all documentation is on paper as there are no computers in the underground warehouses. Also she notices that the person responsible for receiving the goods is the same one who distributes materials and spare parts Finally, she sees that spare parts are written off and taken by the heads of mining units to different underground locations to wait for their turn to be installed. Which of the described findings requires more consideration from a fraud risk perspective?
- A. Warehouse management is conducted on paper and requires further investigation
- B. The job responsibilities of the warehouse employee compromise segregation of duties
- C. The inventory counts take place on specific days of the week for no apparent reason
- D. Spare parts are written off before their actual usage and installation
Answer: B
Explanation:
The job responsibilities of the warehouse employee, where the same individual is responsible for receiving goods and distributing materials and spare parts, compromise segregation of duties. This lack of segregation poses a significant fraud risk because it allows a single individual to control multiple aspects of the inventory process, increasing the opportunity for misappropriation or manipulation of inventory without adequate checks or oversight.References: Institute of Internal Auditors (IIA) - International Professional Practices Framework (IPPF), Practice Guide: Assessing Fraud Risks
NEW QUESTION # 25
An internal auditor discovered that a former colleague from the internal audit activity now works in a junior position in a department scheduled for an upcoming audit. How can the auditor best ensure his objectivity for this engagement?
- A. Declare a conflict of interest and hand over the engagement to another auditor
- B. Recommend mat the chief audit executive outsource the upcoming audit engagement
- C. Increase the amount of fieldwork in order to build greater credibility for audit conclusions
- D. Proceed with the audit engagement in accordance with the internal audit manual
Answer: D
NEW QUESTION # 26
A small not-for-profit organization with limited resources is unable to adequately maintain appropriate segregation of duties. Considering the organization's resource constraints, which type of controls would best mitigate segregation of duty risks?
- A. Compensating controls.
- B. Detective controls.
- C. Application controls.
- D. Preventive controls.
Answer: A
NEW QUESTION # 27
During an audit of an organization's accounts payable area, an internal auditor identified anomalies in the information examined that may indicate potential fraud. Which test should the auditor perform first to verify this?
- A. Verify the completeness and integrity of the data being analyzed.
- B. Identify duplicated organizational transactions.
- C. Check control totals that have may have been falsified.
- D. Analyze all transactions within the targeted area.
Answer: D
NEW QUESTION # 28
In publicly held companies, management often requires the internal audit activity's involvement with quarterly financial statements that are made public and used internally. Which of the following is generally not a reason for such involvement?
- A. The Standards state that internal auditors should be involved with reviewing quarterly financial statements.
- B. Management may be concerned about its reputation in the financial markets.
- C. Management may be concerned about potential penalties that could occur if quarterly financial statements are misstated.
- D. Management may perceive that having quarterly financial information examined by the internal auditors enhances its value for internal decision making.
Answer: A
NEW QUESTION # 29
Which of the following would be considered an indicator that an organization's ethics program is not yet well developed?
- A. The organization's code of ethics and related compliance policy are reviewed annually for potential updates.
- B. Disciplinary actions for ethics compliance violations are reviewed by the internal audit activity for consistency.
- C. Communication of ethics compliance expectations is the responsibility of employees' direct managers.
- D. The board of directors reviews ethics oversight metrics for violations and compliance.
Answer: C
NEW QUESTION # 30
In which of the following scenarios would the internal auditor's objectivity be best protected?
- A. An internal auditor conducts an effectiveness review of an organization's business continuity plan in which his son is a minority stockholder.
- B. An accounts payable clerk assists the internal auditors during an effectiveness review of the physical access controls to the server room.
- C. A former human resources manager conducts an effectiveness review of the appointment and termination process six months after transferring to the internal audit activity.
- D. An internal auditor writes the system manual for a newly acquired payroll software application prior to conducting an effectiveness review of the system.
Answer: A
NEW QUESTION # 31
According to IIA guidance, which of the following corporate social responsibility (CSR) evaluation activities may be performed by the internal audit activity?
1. Consult on CSR program design and implementation.
2. Serve as an advisor on CSR governance and risk management.
3. Review third parties for contractual compliance with CSR terms.
4. Identify and mitigate risks to help meet the CSR program objectives.
- A. 1,2, and 3,
- B. 2, 3, and 4.
- C. 1 2, and 4.
- D. 1, 3, and 4.
Answer: C
Explanation:
According to IIA guidance, the internal audit activity can consult on CSR program design and implementation, serve as an advisor on CSR governance and risk management, and identify and mitigate risks to help meet the CSR program objectives. These roles enable the internal audit to add value through both advisory and assurance services regarding CSR, aligning with their expertise in governance, risk management, and control.References: IIA guidance on the role of internal auditing in corporate social responsibility; Standards on advisory services.
NEW QUESTION # 32
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Which of the following is the responsibility of an internal auditor?
Assist operating management in implementing audit recommendations. Provide management with value-added analysis to improve operations. Become an advocate for changes to the internal audit activity charter. Disclose non-financial risks that may be identified during the course of an engagement.
- A. 1 and 3 only.
- B. 1, 2, and 4 only.
- C. 2 and 4 only.
- D. 1, 2, 3, and 4.
Answer: C
NEW QUESTION # 33
A chief audit executive (CAE) has no direct access to the board. According to IIA guidance, which of the following is the most appropriate way for the CAE to react?
- A. Focus on operational audit work and disregard lack of direct access to the members of the board.
- B. Ensure all subsequent audit reports include a disclaimer as to the lack of access to the board,
- C. Engage in written communications with the board and present relevant issues in writing
- D. Initiate changes to the internal audit charter to report to senior management for the time being,
Answer: C
Explanation:
If a CAE has no direct access to the board, the most appropriate action, according to IIA guidance, is to maintain communication with the board through written communications. This method ensures that the board is informed of relevant audit findings and issues, upholding the governance role of the internal audit function even without direct access. This approach aligns with IIA standards on communicating and reporting to senior management and the board.References: The Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing, specifically standards related to communication and reporting.
NEW QUESTION # 34
Which of the following is not a role of the internal audit activity in facilitating risk identification and evaluation?
- A. Evaluating risk management processes.
- B. Providing assurance that risks are evaluated correctly.
- C. Supporting managers to identify ways to mitigate risks.
- D. Recommending accountability for risk management.
Answer: D
NEW QUESTION # 35
Which of the following components influences the risk consciousness of an organization's people and is the basis for all other components of enterprise risk management?
- A. Risk Assessment.
- B. Objective setting.
- C. Internal Environment.
- D. Information and Communication.
Answer: C
NEW QUESTION # 36
Which of the following is a common type of payroll fraud?
- A. Unauthorized overtime.
- B. Unearned bonuses or commissions.
- C. Fictitious employees.
- D. Skimming.
Answer: C
NEW QUESTION # 37
Which of the following constitutes an example of a control designed to prevent an undesired activity from happening?
- A. Confirmation of sales by third parties.
- B. Physical inventory counts.
- C. Reconciliation of accounts.
- D. Segregation of personnel duties.
Answer: D
Explanation:
Segregation of personnel duties is a control that is designed to prevent an undesired activity from happening, such as errors, fraud, or misuse of resources. It means dividing the tasks and responsibilities related to a process or activity among different people, so that no one person has complete control over it2. This reduces the opportunity and incentive for anyone to manipulate or falsify the data or transactions, and increases the chances of detection if they do3.
References:
1: Preventive Controls: What Are They & Why Are They Important?3
2: Segregation of Duties - The Institute of Internal Auditors or The IIA
3: Segregation of Duties - Wikipedia
NEW QUESTION # 38
Which of the following engagement areas would allow the internal audit activity to assess organizational governance?
- A. Accounts payable.
- B. Ethics activities.
- C. Quality control.
- D. Regulatory compliance.
Answer: B
Explanation:
Organizational governance is the combination of processes and structures that help the organization achieve its objectives2. Ethics activities are part of organizational governance, as they reflect the organization's values, culture, and ethical standards3. Internal audit can assess the ethics activities by evaluating the design and effectiveness of the ethics program, policies, and procedures, and providing assurance and advice on how to improve them4.
References:
1: CIA Exam Practice Questions - Certified Internal Auditor 2019 2: IIA Audit Tool - The Institute of Internal Auditors or The IIA1 3: Internal Audit Governance: Effective Governance through Internal Auditing 4: Corporate Governance & Internal Audit | Ideagen
NEW QUESTION # 39
Which of the following procedures would provide the best evidence of the effectiveness of a credit-granting function?
- A. Observe the process.
- B. Review the trend in receivables write-offs.
- C. Check for evidence of credit approval on a sample of customer orders.
- D. Ask the credit manager about the effectiveness of the function.
Answer: B
NEW QUESTION # 40
An organization's board of directors has decided that the internal audit activity must have greater access to different pans of the organization in order to perform their assurance work effectively Which of !he following areas is the board seeking to improve by making this change?
- A. Internal audit interaction with the board
- B. Internal audit independence and objectivity.
- C. Internal audit reporting structure.
- D. Internal audit authority.
Answer: D
Explanation:
By deciding that the internal audit activity must have greater access to different parts of the organization, the board of directors is primarily seeking to improve the internal audit authority. This change aims to empower the internal audit activity with the necessary access to records, personnel, and physical properties to conduct thorough and effective assurance work, thereby enhancing the scope and depth of audits.References: Institute of Internal Auditors (IIA) - International Professional Practices Framework (IPPF)
NEW QUESTION # 41
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IIA-CIA-Part1 certification exam covers a wide range of topics that are essential for internal auditors to know. These topics include governance, risk management, and control, as well as the internal audit process. IIA-CIA-Part1 exam is designed to test the candidate's understanding of these topics and their ability to apply them in real-world situations. IIA-CIA-Part1 exam is computer-based and consists of 125 multiple-choice questions that must be answered within two hours and 30 minutes.
IIA-CIA-Part1 (Essentials of Internal Auditing) certification exam is a globally recognized certification that is designed for individuals who are looking to establish themselves as professionals in the field of internal auditing. Essentials of Internal Auditing certification exam is offered by the Institute of Internal Auditors (IIA) and is the first part of a three-part series that leads to the Certified Internal Auditor (CIA) designation. The Essentials of Internal Auditing certification exam is an entry-level certification that assesses the candidate's basic knowledge and skills in the field of internal auditing.
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