Updated IIA-CIA-Part1 Exam Questions (V14.03) – Valid Resource for Essentials of Internal Auditing Exam Learning

1. Senior management asks the chief audit executive to review the organization's compliance with recently introduced legislation on international transfer pricing. The review requires an internal auditor who thoroughly understands the legislation and pricing methods. The internal audit activity does not have an auditor with those skills.

Which of the following is the most appropriate course of action?

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

3. Senior management and the board have expressed concerns about the length of engagements and whether their outcome aligns with the organization's strategies and objectives.

Which of the following actions, if taken by the chief audit executive, could address these concerns?

4. Which of the following statements best represents the duo professional care that is required of internal auditor’s?

5. Due to unfavorable economic conditions management decided to postpone new investments for the next year.

Which of the following best describes the risk management strategy used to address this situation?

6. Which of the following is true about corporate social responsibility (CSR)?

7. The same internal auditor has audited the regional purchasing department annually for the last three years. The audits have shown several significant control deficiencies that have not been corrected by management. New management is in charge of this regional purchasing department, and it is time to audit the department again.

What concerns should be considered prior to assigning the audit to the same auditor?

8. Which of the following scenarios violates The IIA's standard regarding internal audit independence?

9. Which of the following concepts is emphasized in the Mission of Internal Audit?

10. Which of the following situations is most likely to prompt the internal audit activity to disclose its nonconformance with the Standards?

11. A subsidiary of the organization was preparing for an initial public offering (IPO). Af the request of the audit committee, the chief audit executive (CAE) and all senior audit staff were actively involved in the process by helping collect and validate financial data, conducting assessments, and participating in meetings with IPO advisors. Six months later, it became obvious that the IPO had to be canceled. Newly appointed audit committee members requested an assurance engagement that v/ould assess the IPO preparation process.

Which of the following would be the best course of action for the chief audit executive (CAE) to take?

12. Which of the following would be the most suitable internal control framework for an organization to adopt?

13. Which of the following specifications in an internal audit charter is the most important factor in the internal audit activity’s independence?

14. Which of the following offers the feast evidence that the internal audit activity has achieved organizational independence?

15. According to HA guidance, which of the following would best support the internal auditor's conclusion that the organization's risk management processes are effective?

16. 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?

17. While preparing the audit plan for an automobile manufacturing company, the chief audit executive (CAE) noted that the company's engineering department received a high risk ranking. However, the internal audit activity is understaffed, and current staff do not possess the necessary skills to adequately assess the effectiveness of the engineering department.

What is the most appropriate course of action for the CAE to take?

18. 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?

19. Which of the following principles of The IIA's Code of Ethics implies that internal auditors should refrain from performing assurance services when there is an impairment to audit independence that has not been declared?

20. Which of the following practices is generally most effective to protect internal audit objectivity?

21. Which of the following actions would be most effective to help an internal auditor determine how successful the organization has been in communicating the existence of its ethics hotline?

22. Which of the following practices, applied by the chief audit executive {CAE), most likely indicates an effective continuing professional educational program for the internal audit activity?

23. Which of the following organizational practices is likely to be a part of a corporate social responsibility program?

24. Which of the following can be used to minimize employees’ resentment of controls?

25. 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?

26. According to IIA guidance, which of the following statements is true regarding consulting engagements performed by the internal audit activity?

27. The internal auditor of a small manufacturer noted that the accounting department has insufficient staff to achieve proper segregation of duties.

What type of controls would the auditor likely recommend to management to specifically address this problem?

28. Which of the following describes the primary objective when implementing a risk management framework?

29. During an audit engagement of a large retail store, internal auditors noted significant discrepancies between available inventory and sales and suspect an abuse of cash register refunds and voids.

Which of the following would be the most effective preventative control to reduce these losses?

30. 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?

31. It describes the expectations for communicating the results of a quality assurance and Improvement program.

32. The chief audit executive (CAE) has hired a new internal auditor who was immediately assigned to a procurement function audit. Because the new auditor's name is similar to that of the procurement manager, some staff members think the two are related, although they are not.

Which of the following actions is most appropriate for the CAE to take?

33. There is a growing perception that employees generally evade their responsibilities.

What impact will an internal auditor most likely see during an engagement?

34. Which of the following statements is the most appropriate for a chief audit executive to include in the internal audit policy manual in order to promote objectivity?

35. Which of the following written documents typically offers the best evidence that internal auditors exercise due professional care in conformance with the Standards?

36. 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?

37. A new internal audit activity is considering the adoption of a risk and control framework.

Which of the following is the most appropriate consideration during this process?

38. If the skills and competencies are not present within the internal audit activity to complete an ad-hoc assurance engagement, which of the following is an acceptable resolution?

39. What is the primary purpose of The IIA's Code of Ethics?

40. A chief audit executive (CAE) has been asked by the board to evaluate the effectiveness of ethical programs created by management.

Which of the following would be the most appropriate action for the CAE to take?

41. An internal audit of warehouse inventory revealed no material deficiencies. However, management later discovered fraud, which occurred during the period that was audited, and determined that a major control deficiency allowed the fraud to occur.

Given management's discovery, which of the following statements is valid?

42. 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'?

43. Management decided to post the organization's newly established code of conduct on its website.

This decision is primarily intended to mitigate which of the following risks?

44. Which of the following would best describe a control implemented to detect cash register disbursement fraud in a large retail store?

45. A chief audit executive (CAE) recruited a few new internal auditors to reduce the resource gaps identified in this year's internal audit plan. One of the new recruits has several years of experience with the organization. Ten months ago. she served as a senior supervisor in the finance department. However, for the past 10 months, she has been helping the organization with implementing a new IT system.

What approach should the CAE take for the upcoming financial statement controls audit?

46. The internal audit activity is responsible for conducting fraud investigations. A potential fraud instance was identified during an audit engagement. The chief audit executive appoints a lead investigator.

Which of the following would most likely be the next step?

47. Which of the following relates to the concept of due professional care?

48. Internal controls belong to which risk response category?

49. 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?

50. 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?

51. Which of the following would a chief audit executive most likely use to identify a need for improvement in a staff internal auditor's business acumen?

52. According to IIA guidance, which of the following is ultimately responsible for seeing that the internal control system of an organization’s social responsibility program is effective?

53. Which of the following statements best describes a functional difference between external auditors and internal auditors?

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

55. An internal auditor is reviewing employee travel expenses from the previous six months for fraud.

Which of the following tests would best detect instances where personal travel has been claimed?

56. 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?

57. 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?

58. Regarding the chief audit executive (CAE). which of the following is considered an impairment to the independence of the internal audit activity?

59. In which of the following ways can a whistleblower hotline serve as a prevent Aative control?

60. Which of the following items related to the quality assurance and improvement program should the chief audit executive report to the board?

61. What would be the proper sequence of steps for an internal auditor to take in order to draw a conclusion on internal control effectiveness and adequacy after ascertaining the key controls?

62. Which statement is accurate regarding reporting on the quality assurance and improvement program (OAIP) to conform with the International Standards for the Professional Practice of Internal Auditing?

63. Which of the following best demonstrates internal auditors performing their work with proficiency?

64. A global manufacturing company has three regional offices. The chief audit executive (CAE) is concerned about the cost of an upcoming external quality assessment of the internal audit activity. The last external assessment was performed six years ago. Recently, the internal audit staff at one of the regional offices performed an internal assessment.

To ensure conformance with the Standards, what is the most appropriate action for the CAE to take?

65. Which of the following describes the most appropriate match between a potential temporary guest auditor candidate and an upcoming audit assignment?

66. With regard to the internal audit activity's quality assurance and improvement program, which of the following must be reported to the board?

67. What is the best course of action when the internal audit activity does not have the knowledge necessary to perform a planned audit of the organization's new IT data backup process?

68. With regard to governance, which of the following is a board-level responsibility rather than a management responsibility?

69. An internal auditor found that his organization did not make a disclosure that is required by law. However, the auditor decided not to raise an audit finding.

Which of the following Code of Ethics principles was violated?

70. Who has the ultimate responsibility of implementing the organization’s governance system?

71. A senior executive at a government-owned organization received an invitation to attend a public exhibition where he can learn about new trucks relevant to the organization's business. As a special perk, the executive is offered an opportunity to drive a luxury vehicle manufactured by one of the exhibiting companies. Prior to the event, the executive asked for the chief audit executive s (CAE’s) advice.

What should the CAE recommend as the most appropriate course of action for the executive?

72. Which of the following best describes a consulting engagement rather an assurance engagement?

73. 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?

74. According to IIA guidance, the internal audit activity must be free from interference in which of the following areas in order to maintain organizational independence?

75. Which of the following describes a primary responsibility for the internal audit activity in helping management maintain effective controls?

76. Which of the following practices is generally most effective to protect internal audit objectivity?

77. Which of the following is a primary benefit of implementing a governance risk management and compliance framework within an organization?

78. According to HA guidance, which of the following is true regarding independence and objectivity for small internal audit activities?

79. According to the Standards, in today's technology and business environments, how much computer and information systems-related knowledge and skills must an internal auditor have to be effective in fulfilling his job responsibilities?

80. Which of the following actions best demonstrates an internal auditor exercising due professional care?

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

82. An internal audit activity is taking steps to promote professional development among the staff, and is in the process of implementing a mentorship program.

According to HA guidance, which of the following is important for a successful mentorship program?

83. What is an appropriate first step in an internal auditor’s fraud risk assessment to evaluate how the organization manages such risk?

84. An organization allows the same individuals to physical access inventory and purchase new assets when supplies are depleted.

Which of the following would best help the organization manage the risk of fraud?

85. Review the professional development plans of internal audit staff to ensure all are competent to assess the organization's risk assessment activity.