IIA IIA-CIA-Part2 Practice Test - Questions Answers, Page 14

The chief audit executive (CAE) can best illustrate the value of the internal audit activity by reporting the overall performance resulting from the internal audit balanced scorecard. The balanced scorecard includes metrics that measure the effectiveness, efficiency, and impact of the internal audit function, providing a comprehensive view of its contributions to the organization. This approach demonstrates how internal audit activities align with and support the organization's strategic objectives.

Reference:

The IIA's Practice Guide on Measuring Internal Audit Performance.

The IIA's Practice Guide on Internal Audit Effectiveness.

Valid closure of an audit observation requires evidence that the corrected process will function as expected in the future. This involves not just addressing the immediate condition but also ensuring that the root cause has been addressed and that the implemented corrective actions are sustainable and effective in preventing recurrence. This ensures that the underlying issue has been resolved comprehensively.

Reference:

The IIA's International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2500 - Monitoring Progress.

The IIA's Practice Guide on Audit Follow-up.

According to IIA guidance, an internal audit activity that provides overall assurance on governance, risk, and control, advises and influences senior management, and leverages the organization's management of risk is best described as being in the 'Managed' stage of internal audit maturity. This stage indicates a well-established internal audit function that is integrated into the organization's governance framework and plays a proactive role in risk management and strategic decision-making.

Reference:

The IIA's Maturity Model for the Internal Audit Activity.

The IIA's Practice Guide on Internal Audit's Role in Governance, Risk, and Control.

The internal auditor has primarily obtained testimonial evidence. Testimonial evidence is derived from interviews, discussions, and responses from employees or other parties. It involves collecting and analyzing verbal information to draw conclusions, which is precisely what the auditor did by conducting interviews, documenting them, analyzing the summaries, and drawing conclusions based on this information.

IIA Standards: 2310 - Identifying Information

IIA Practice Guide: Audit Evidence

The most critical situation for the chief audit executive (CAE) to report to the board is the disagreement with the business unit manager's initial decision to accept a particular risk, which was only addressed after discussion with senior management. This situation is critical because it involves a risk that was initially accepted without proper mitigation, which could have significant implications for the organization. Reporting this to the board ensures that they are aware of potential disagreements regarding risk acceptance and management's approach to risk mitigation.

IIA Standards: 2060 - Reporting to Senior Management and the Board

IIA Practice Guide: Reporting to the Board and Senior Management

The statement that the risk management process supports internal audit by evaluating whether critical controls are adequate and effective is true. The risk management process provides a framework for identifying, assessing, and managing risks, and internal audit uses this information to evaluate the adequacy and effectiveness of controls in place to mitigate those risks. This support helps internal audit focus on areas of high risk and ensure that controls are functioning as intended.

IIA Standards: 2120 - Risk Management

IIA Practice Guide: Assessing the Adequacy of Risk Management Processes

The most effective step in helping the auditor determine whether fraud exists after observing a double payment transaction on a supplier invoice is to perform data analytics on the supplier's information, invoiced amounts, and payments performed. Data analytics allows the auditor to systematically analyze large volumes of transactions to identify patterns, anomalies, and potential fraudulent activities. This approach is more comprehensive and effective in uncovering fraud than simply extending the audit scope or switching to a fraud investigation engagement without a thorough initial analysis.

IIA Standards: 1220.A1 - Due Professional Care

IIA Practice Guide: Auditing for Fraud

The observation provided in the final engagement communication includes the criteria (competitive bidding requirements), condition (three of the 10 contracts reviewed did not meet these requirements), and cause (senior management deemed these purchases critical and awarded them as sole-source). However, it lacks the effect, which would explain the potential consequences or impact of not meeting the competitive bidding requirements, such as increased costs, lack of transparency, or potential for favoritism.

Reference:

The IIA's International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2410 - Criteria for Communicating.

The IIA's Practice Guide on Communicating Results.

According to IIA guidance, the chief audit executive (CAE) is directly responsible for establishing the objectives, scope, and plan for each engagement. This responsibility ensures that each audit is properly focused and aligned with the overall goals and risk areas of the organization. While maintaining a quality assurance program and providing professional development opportunities are important, they are not solely the CAE's responsibility without management support. Periodic review and approval of the internal audit charter is typically a joint responsibility with senior management and the board.

Reference:

The IIA's International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2010 - Planning.

The IIA's Practice Guide on Developing the Internal Audit Plan.