The internal auditors available to perform the engagement do not have sufficient skills related to the area under review. Which of the following iss an appropriate action for the chief audit executive to take?

Supplement the internal auditors assigned to the engagement by bringing onto the engagement team a consultant who is independent of the area under review and has the missing expertise

Continue the engagement with the available staff, providing more hands-on supervision than usual

Limit the objectives and scope of the engagement to align them with the skills available among the current staff.

Cosource the performance of the engagement using personnel in the area that will be reviewed to supplement the knowledge of the staff and complete the engagement

Supplement the internal auditors assigned to the engagement by bringing onto the engagement team a consultant who is independent of the area under review and has the missing expertise

Prior to performing testing an internal auditor has determined that a primary process control failed due to design weakness. Which of the following actions should the auditor perform next?

Determine whether there are any compensating controls in place to reduce the nsk to an acceptable level, and discuss this matter with management of the business area to determine which corrective action is needed

Test the control anyway to determine the likelihood that the control was not performed property, and discuss this matter with management of the business area to determine which corrective action is needed

Conclude that the process control environment is weak, issue a finding on this conclusion and report this finding to management of the business area

Confer with a second internal auditor to determine whether the control failure is legitimate issue a finding on this conclusion and report this finding to management of the business area

An internal auditor was reviewing the procurement department's tender documentation for completeness He documented all discrepancies but the procurement manager disagreed with his findings Upon further review, the internal auditor noted that all discrepancies had been corrected in the tender database. Which of the following courses of action would have prevented this situation?

The auditor should have ensured the preservation of audit evidence by taking screenshots or extracting tender documents

The auditor should have extracted a list of logs and identified any actions that were executed in the database during the audit

The auditor should have instructed procurement workers that changes to the database during the course of the audit were strictly forbidden

The internal auditor should have created a more thorough work program, which would address audit criteria and potential causes in more detail

An organization buys crude oil on the open market and refines it into a high-quality gasoline. The price of crude oil is extremely volatile. Which of the following is the most appropriate risk management technique to protect the organization against these price fluctuations?

Purchase crude oil-related derivatives such as futures or options

Enter into long-term gasoline purchase agreements with end customers.

Trade crude oil derivatives at financial markets in order to benefit from price fluctuations

Purchase crude oil-related derivatives such as futures or options

Stock as much raw materials as possible and consider Investing into additional facilities

In an organization with a large internal audit activity that has several audit teams performing engagements simultaneously which of the following tasks is an engagement supervisor most likely to perform during the planning phase of a new engagement?

Approve the engagement work program to ensure the program is designed to achieve the engagement objectives

Establish a means for resolving any professional judgment differences over ethical issues that may arise during the engagement.

Approve the engagement work program to ensure the program is designed to achieve the engagement objectives

Evaluate whether the testing and results support the engagement results and conclusion

Review the sample testing results for exceptions.

According to MA guidance, which of the following factors should an internal auditor consider when assessing the likelihood of fraud risk1?

Past fraud allegations and actual occurrences

The effect on the organization's reputation

Any potential damage to the organization's relationship with customers.

Past fraud allegations and actual occurrences

The potential and realized financial impacts

The internal audit activity has adopted the balanced scorecard approach to assess its performance According to MA guidance which of the following is a key performance indicator relevant to the audit client?

Percentage of recommendations implemented by corrective action date

Percentage of planned audits completed

Conformance with the International Professional Practices Framework

Which of the following statements is true regarding internal auditors and other assurance providers?

Internal auditors may rely on the work of internal compliance teams to expand their coverage of the organization without increasing direct audit

Assurance providers who report to management and/or are part of management cannot provide control serf-assessments services

Internal auditors should always reperform and validate audit work completed by external assurance providers

Internal auditors may rely on the work of internal compliance teams to expand their coverage of the organization without increasing direct audit

hours Internal auditors can rely on the work of other assurance providers only rf the other assurance providers report directly to the board

Some lime after the final audit report was issued, the engagement supervisor teamed that several internal control deficiencies were not remedied, despite management's previous agreement to remedy them According to IIA guidance, which of the following is the most appropriate response'5

The engagement supervisor must notify the chief audit executive (CAE) that the deficiencies have not been rectified

The engagement supervisor should rely on professional judgment as to whether the CAE should be informed, or the management action plan should be adjusted

The engagement supervisor should rely on his negotiation skills and issue an ultimatum to management to remedy the control deficiencies

Ensure that these deficiencies are captured in the documentation as high-priority areas to be reviewed during the next audit.

To which of the following aspects should the chief audit executive give the most consideration while communicating an identified unacceptable risk to management?

The organization's risk management policy

The organization's attitude to hierarchy

The organization's whistleblowing strategy

The organization's ongoing risk monitoring process

The organization's risk management policy

Which of the following statements is true regarding the use of internal control questionnaires (ICOs)?

Answers to survey questions can be easily misinterpreted

ICQs are efficient because they minimize the need for follow-up with survey respondents

Controls with positive survey responses can be eliminated from further testing

Answers to survey questions can be easily misinterpreted

ICQs offer limited value for organizations with uniform procedures

The internal audit manager has been delegated the task of preparing the annual internal audit plan for the forthcoming fiscal year All engagements should be appropriately categorized and presented to the chief audit executive for review Which of the following would most likely be classified as a consulting engagement?

Helping in the design of the risk management program

Evaluating procurement department process effectiveness

Helping in the design of the risk management program

Assessing financial reporting control adequacy

Reviewing environmental, social, and governance reporting compliance

According to HA guidance, which of the following is the Key planning step internal auditors should perform to establish appropriate engagement objectives prior to starting an audit engagement?

Evaluate management's risk assessment and the internal audit activity's risk assessment

Review the organizational structure, management roles and responsibilities and operating procedures

Evaluate management's risk assessment and the internal audit activity's risk assessment

Assess process How and control documents used to meet regulatory requirements

Review meeting notes from discussions involving management of the area to be reviewed.

At a construction company, an internal auditor is planning an audit of the company's process for designing and building grid connections The process involves customers making payments m three parts* The first payment of 10% after approval of the customer s application* The second payment of 70% prior to construction* The third payment of 20% after construction is completeWhich of the following key controls should the auditor test to ensure that the company is not taking any unwanted credit risks?

Controls that ensure construction orders are initiated after the second invoice is paid

Controls that ensure that grid connection design is finalized before construction is approved to begin

Controls that ensure construction orders are initiated after the second invoice is paid

Controls that ensure all three invoices are calculated correctly according to the total project cost

Controls that ensure that applications are verified for approval prior to initiating design and construction

As part of the preliminary survey, an internal auditor sent an internal control questionnaire to the accounts payable function Based on the questionnaire responses, the auditor determines that there is no established procedure for adding and approving new vendors. What would the auditor do next?

Interview the personnel associated with this observation.

Determine that this situation is acceptable and focus on more significant issues

Document the issue m the draft audit report

Document the observation for further follow up when testing the operating effectiveness of controls

Interview the personnel associated with this observation.

What is the primary purpose of issuing a preliminary communication to management of the area under review?

To help management develop more responsive and timely action plans

To build good relations with management

To help management develop more responsive and timely action plans

To formally report medium- and high-risk observations in writing

To improve the internal audit key performance indicators

Which of the following statements is true regarding internal control questionnaires?

Internal control questionnaires can be used by internal auditors as an interview guide

Internal control questionnaires are useful m evaluating the effectiveness of standard operating procedures

internal control questionnaires provide reliable documents allowing internal auditors to cover many control procedures in little time

Internal control questionnaires can be used by internal auditors as an interview guide

Internal control questionnaires provide direct audit evidence which may need corroboration

According to HA guidance, which of the following statements regarding audit workpapers is true?

The internal auditor's workpapers are the primary reference for reported control deficiencies.

Audit reports should include the workpapers as a reference for the audit conclusions.

The internal auditor's workpapers are the primary reference for reported control deficiencies.

Ad-hoc communications with management of the area under review should be excluded from the workpapers.

Both draft and final versions of workpapers should be saved at the end of the engagement

Which of the following statements about including consulting engagements in the annual internal audit plan is true?

The acceptance of proposed consulting engagements into the annual internal audit plan may depend on their ability to add value

All requests for consulting engagements must be included in the annual internal audit plan

Assurance engagements must be included in the annual internal audit plan but there is no requirement to include consulting engagements

Consulting engagements do not need to be included m the annual internal audit plan unless requested by the board

The acceptance of proposed consulting engagements into the annual internal audit plan may depend on their ability to add value

An internal auditor is conducting an initial risk assessment of an audit area and wants to assess management's compliance with privacy laws for safeguarding customer information stored on the organization's servers. Which course of action is appropriate for this phase of the engagement?

Obtain the most current approved copies of the organization's privacy policy

Solicit the services of a specialist information systems auditor

Obtain the most current approved copies of the organization's privacy policy

Consult with legal counsel about new privacy laws to establish appropriate criteria

Consider the detection risk of noncompliance with the laws

An internal auditor is asked to determine why the production line for a large manufacturing organization has been experiencing shutdowns due to unavailable pacts The auditor learns that production data used for generating automatic purchases via electronic interchange is collected on personal computers connected by a local area network (LAN) Purchases are made from authorized vendors based on both the production plans for the next month and an authorized materials requirements plan (MRP) that identifies the parts needed per unit of production The auditor suspects the shutdowns are occurring because purchasing requirements have not been updated for changes in production techniques. Which of the following audit procedures should be used to test the auditor's theory?

Compare the pans needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period

Compare purchase orders generated from test data input into the LAN with purchase orders generated from production data for the most recent period

Develop a report of excess inventory and compare the inventory with current production volume

Compare the pans needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period

Select a sample of production estimates and MRPs for several periods and trace them into the system to determine that input is accurate

Which of the following statements is true regarding the final assurance engagement report issued to management?

Communications must be relevant logical, and free from errors before they are disseminated.

Ratings are only used to assess the condition of an observation made by an internal auditor.

Audit findings may be communicated to management prior to issuance of the final approved audit report.

Communications must be relevant logical, and free from errors before they are disseminated.

The audit report must present the information in the following order (1) audit scope, (2) engagement objectives, and (3) engagement results

An internal auditor collected several employee testimonials Which of the following is the best action for the internal auditor to take before drawing a conclusion?

Substantiate the testimonials with physical or documentary evidence

Ensure the testimonials are well documented

Substantiate the testimonials with physical or documentary evidence

Corroborate testimonials with the results from other soft control techniques

Review the testimonials with the interviewed employees

Which of the following statements concerning workpapers is the most accurate?

The extent of what is included in workpapers is a matter of professional judgment

The organization and the format of workpapers is the same for all engagements

The extent of what is included in workpapers is a matter of professional judgment

Workpapers should be complete so that every conceivable question that can be raised should be answered

Copies of operational managements records should not be included, but referenced so that they can be located

Which of the following reasonably represents best practices regarding what should be the level of internal audit resource investment in monitoring and following up on engagement outcomes?

Resources should be allocated to this without conditions as long as doing so meets the expectations of management and the judgment of the chief audit executive.

Limited resources should be employed since the actual engagement is already completed and the onus of corrective actions rests with management

No resources should be exclusively deployed for that at all rather it should be planned as part of future engagements in the same area

Resources should only be provided towards this if doing so does not result in depletion of resources for new engagements planned in the current period

Resources should be allocated to this without conditions as long as doing so meets the expectations of management and the judgment of the chief audit executive.

An internal audit manager is planning a contract compliance audit Which of the following should be done prior to developing the audit work program?

Review the contract for evidence of authorization

Select a sample of invoices for substantive testing

Review the contract for evidence of authorization

Document underlying reasons for noncompliance

Assess the inherent risk of paying duplicate invoices

Which of the following best describes how an internal auditor would use a flowchart during engagement planning?

To evaluate the design of controls

To prepare for testing the effectiveness of controls

To plan for evaluating potential losses

To prepare a sampling plan for the engagement

To evaluate the design of controls

A chief audit executive (CAE) reviews the supervision of an internal audit engagement Which of the following would most likely assure the CAE that the engagement had adequate supervision?

The supervisor reviews and initials internal audit workpapers for the engagement

The engagement supervisor has an open door pokey for audit team members to discuss concerns

The supervisor reviews weekly progress reports from the audit team members

The supervisor reviews and initials internal audit workpapers for the engagement

The supervisor meets periodically with management in the reviewed area to get feedback during the engagement.

Which of the following would present the most critical external risk to an organization?

Regulators announce broad legislative reforms applicable to the industry within which the organization operates

The organization experiences a merger, and the management team is reorganized and redistributed globally

The organization launches a product into new global markets

After minimal testing, the organization implements a new system to replace a legacy system

Regulators announce broad legislative reforms applicable to the industry within which the organization operates

Which of the following computerized audit tools or techniques should be used if the internal auditor wants to extract specific files and records in the database?

An expert or decision support system

In which of the following situations would an internal control questionnaire best suit the internal auditor's purpose?

The auditor wants to obtain information on whether adherence to approval matrices is actually taking place in different maintenance units.

The auditor wants to receive mid-level management insight on how to improve hiring practices

The auditor wants to obtain information on whether adherence to approval matrices is actually taking place in different maintenance units.

The auditor wants to gain assurance that inventory counts are conducted in accordance with established procedures.

The auditor wants to assess whether different subsidiaries apply centrally established procurement rules in the same manner

Which of the following is a disadvantage of using flowcharts during a risk assessment?

Some serious risks that are not part of the linear process can be missed

People cannot quickly understand the processes via flowcharts

Flowcharts are not applicable for evaluating the design of controls

Some serious risks that are not part of the linear process can be missed

Flowcharts do not enable auditors to identify missing controls

IIA IIA-CIA-Part2 Practice Test 5 - Free Online Exam Prep & Questions

Which of the following actions best describes an internal auditor's use of test data to determine whether an organization's new accounts payable system avoids processing questionable invoices for payment?

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IIA IIA-CIA-Part2 Practice Test 5

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IIA IIA-CIA-Part2 Practice Tests

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