An engagement supervisor notes that an internal auditor usually documents and submits draft audit reports for review without giving the process owners the opportunity to state their position on the issues raised. How should the engagement supervisor respond?

Encourage the auditor to improve communication skills.

Encourage the auditor to continue this practice, as it demonstrates objectivity.

Encourage the auditor to improve communication skills.

Encourage the auditor to conduct post-engagement surveys to obtain the audit client's position on the issues raised.

Encourage the auditor to sign the draft reports before submitting them.

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?

Determine the competencies needed and assess whether team members have a conflict of Interest.

Ask internal auditors to gather all relevant information and evidence.

Identify and interview witnesses first and potential suspects later.

Conduct a fraud risk assessment to identify the most vulnerable areas.

Determine the competencies needed and assess whether team members have a conflict of Interest.

The chief audit executive (CAE) has decided to outsource an audit of the organization's cloud governance in the annual audit plan. Why would the CAE outsource this audit?

Lack of internal audit staff proficiency.

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

The internal audit charter is drafted properly and approved by the appropriate parties.

An independent third party has assessed the organization's system of internal controls to be adequate and effective.

The chief audit executive reports both functionally and administratively to the CEO.

The internal audit charter is drafted properly and approved by the appropriate parties.

The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.

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?

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

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

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

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

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

An internal auditor believes that a weakness exists in the control environment relating to the delegation of authority and responsibility within the management structure. Which of the following actions should the internal auditor first consider in this matter?

Evaluate the potential Impact on related controls.

Recommend a control change and obtain management support.

Evaluate the potential Impact on related controls.

Address the risk with senior management and the board.

Develop and communicate the scope and evaluation criteria to be used by management.

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

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

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

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

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

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

An existing Internal audit charter is currently under review for revision. Who is responsible for assuring that all required components are included?

The head of legal and compliance.

Which of the following would be a preventive control for helping to manage fraud in an organization?

A code of conduct and whistleblower policy that must be signed by all employees annually.

Reviews of reports to determine which issued payments lack evidence of supervisory review.

A monthly review of new vendors performed by management for reasonableness.

Bank reconciliations performed on a monthly basis by the accounting department.

A code of conduct and whistleblower policy that must be signed by all employees annually.

Which of the following statements is true regarding a key difference between assurance and consulting services provided by the internal audit activity?

Three parties are participants in assurance services, while consulting engagements generally involve two parties.

When conducting a consulting engagement, the nature and scope of the engagement are determined by the internal audit activity.

Three parties are participants in assurance services, while consulting engagements generally involve two parties.

An assurance engagement has two participants, while consulting engagements generally involve three parties.

When conducting an assurance engagement, the engagement objectives, scope, and techniques are agreed with the area under review.

An internal auditor has documented several instances in which management asked employees to ad against the policies and procedures. Which of the following is the most appropriate next step?

Investigate the rationale for management's actions.

Report the non-compliance cases to the board of directors.

Recommend that management update its policies and procedures based on the circumstances.

Investigate the rationale for management's actions.

Recommend those employees to report the cases through the designed whistleblowing channel for the appropriate treatment.

When testing a sample of payroll records during an engagement, an internal auditor suspects mat fraud has been committed. What should be the next step?

The suspicions should be communicated to the chief audit executive.

The auditor should increase the sample size to determine the extent ol the fraud.

The suspicions should be communicated to the chief audit executive.

The testing should be completed with the results reported in the final audit report.

A fraud investigator should examine the evidence and report back to the auditor.

Which of the following scenarios would cause a chief audit executive (CAE) to immediately discontinue using any statements that would indicate conformance with the Standards in an audit report?

The area under review restricted the internal audit activity's ability to access records, impacting the audit results.

The internal audit activity used a risk-based approach to create the internal audit plan.

The engagement supervisor considered requests from senior management regarding engagements to include in the internal audit plan.

The CAE only accepted engagements that the internal audit activity collectively had the knowledge to perform.

The area under review restricted the internal audit activity's ability to access records, impacting the audit results.

Which of the following frauds is most likely to occur in the accounts payable function?

Factitious vendors are entered into the system, possibly resulting in improper disbursements.

Bad debt expense is intentionally omitted from the financial statements.

Certain costs are capitalized, rather than expensed.

A related party receives benefits not appropriate in an arm's-length transaction.

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

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

Internal auditors' level of competencies and skills.

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

Evaluation of staff certifications and continued development.

Effectiveness of the quality assurance and improvement program.

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?

The organization has selected risk responses aligned with its risk appetite.

The organization has identified all applicable operational and financial risks.

The organization has documented its strategic and business objectives.

The organization has selected risk responses aligned with its risk appetite.

The organization has documented risk information pertinent to its business.

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

Conformance with this Standard is not dependent upon the size of the internal audit activity.

The chief audit executive (CAE) may consider including a disclaimer on independence in audit reports.

The CAE may consider greater involvement of those with suitable knowledge of audit practice.

Conformance with this Standard is not dependent upon the size of the internal audit activity.

Due to the small size of the internal audit activity, having an external assessment once every seven years is acceptable.

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?

The CAE should disclose objectivity limitations to the audit committee and suggest alternatives, such as outsourcing the engagement.

The decision to involve auditors in the IPO was made by former audit committee members; therefore, the CAE is not responsible and can proceed with the new assignment.

The CAE should reject the assignment, as such engagements are beyond the scope of auditors who are usually not familiar with root cause analysis methodology.

The engagement should be undertaken by audit assistants and other junior staff members who were not involved in the IPO process.

The CAE should disclose objectivity limitations to the audit committee and suggest alternatives, such as outsourcing the engagement.

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?

Evaluate the adequacy of the controls and then test the controls for effectiveness.

Test the controls for effectiveness and then evaluate the adequacy of the controls.

Identify risks and then evaluate the controls for effectiveness.

Evaluate the controls for effectiveness and then assess the risks in the area.

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?

The chief audit executive (CAE) should report all stages of the OAlP's development and key milestones.

The CAE should report only corrective action plans that meet external assessor or stakeholder requirements.

The CAE should establish the form and content of program communication so that it is in alignment with the internal audit activity charter.

The CAE should disclose program details only after both internal and external assessments have been completed.

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

Internal auditors provide assurance about the sufficiency of controls to manage risks. Including risks of failure to achieve future goals, and external auditors evaluate the accuracy and understandability of financial reporting.

Internal auditors evaluate past achievements to understand whether controls are operating effectively, and external auditors focus on the accuracy of financial reporting.

Internal auditors provide assurance about the sufficiency of controls to manage risks. Including risks of failure to achieve future goals, and external auditors evaluate the accuracy and understandability of financial reporting.

internal auditors are always employed by the organization, rather than outsourced, and external auditors are never employed by the organization but contracted independently.

Internal auditors are most directly concerned with the detection of fraud, while external auditors are most directly concerned with the prevention of fraud.

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?

Implementing the use of agile auditing during engagements to meet expectations.

Communicating to internal audit staff instructions for completing engagements within shorter time periods.

Requesting additional funding from the board to train internal audit staff on time and resource management.

Implementing the use of agile auditing during engagements to meet expectations.

Encouraging internal audit staff to participate in workshops to further develop their understanding of the organization's strategies.

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?

A party outside of the internal audit activity.

A member of the compliance function.

A party outside of the internal audit activity.

A member of the risk management function.

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

Performing an annual organizationwide employee survey.

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

Performing an annual organizationwide employee survey.

Reviewing all departmental ethics-related policies.

Conducting annual ethics training for all employees.

Which of the following best illustrates the principle of due professional care?

The internal auditors demonstrate they have an understanding of engagement objectives and scope.

The internal audit activity uses key performance indicators for all staff members after all audit engagements.

The internal auditors provide assurance to third parties indicating that their work was properly supervised.

The internal auditors demonstrate they have an understanding of engagement objectives and scope.

The internal auditors are heavily involved in training and development to enhance their skills.

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

The CAE's supervisor is responsible for the risk management function.

The CAE reports administratively to the CEO.

The CAE is asked to submit the liquidation of her travel allowances to human resources for approval.

The CAE's supervisor is responsible for the risk management function.

The CAE is asked to review new procedures before implementation.

What is the main difference between a consulting engagement versus an assurance engagement?

The objectives and scope of the engagement typically are directed by management.

The nature of services provided are defined in the internal audit charter.

Internal auditors must maintain objectivity while performing their work.

The objectives and scope of the engagement typically are directed by management.

Internal auditors may assume management responsibilities.

The chief audit executive (CAE) annually develops a budget and resource plan and submits it to the board for approval. This action best fulfills which of the following responsibilities of the CAE?

The responsibility to maintain organizational independence.

The responsibility to perform engagements with due professional care.

The responsibility to communicate corrective action plans to the board.

The responsibility to define the purpose of the internal audit activity.

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

To enhance an organization's confidence in achieving strategy.

To achieve planned profitability for business expansion.

To enhance an organization's confidence in achieving strategy.

To strengthen corporate governance standards.

To eliminate business risks and uncertainties.

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?

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

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

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

The compensation structure of the qualified assessment team.

IIA IIA-CIA-Part1 Practice Test 16 - Free Online Exam Questions 601-640

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?

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IIA IIA-CIA-Part1 Practice Test 16

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