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IIA IIA-CIA-Part2 Practice Test - Questions Answers, Page 31

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Question 301

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An internal audit team leader is having difficulties completing the planning phase of an assurance engagement because the business unit lacks a system of internal controls. Which of the following is the most appropriate course of action for the internal audit team leader?

Defer the engagement until a system of internal control has been established
Defer the engagement until a system of internal control has been established
Change the scheduled engagement from assurance to consulting to help correct the shortcomings
Change the scheduled engagement from assurance to consulting to help correct the shortcomings
Add a consulting component to the already scheduled assurance engagement
Add a consulting component to the already scheduled assurance engagement
Seek the involvement of the external auditor to assist with improving the internal controls
Seek the involvement of the external auditor to assist with improving the internal controls
Suggested answer: C

Explanation:

When an internal audit team leader encounters difficulties due to the lack of a system of internal controls, the most appropriate course of action is to add a consulting component to the scheduled assurance engagement. This approach allows the internal audit team to provide advice and recommendations on establishing internal controls while still fulfilling their assurance responsibilities. By integrating consulting activities, the auditors can help the business unit improve its control environment, which can then be assessed in the assurance engagement.

The Institute of Internal Auditors (IIA) Practice Guide: Consulting Engagements

IIA Standard 1130 - Impairment to Independence or Objectivity

asked 18/09/2024
Samya Sharab
40 questions

Question 302

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The head of customer service asked the chief audit executive (CAE) whether internal auditors could assist her staff with conducting a risk self-assessment in the customer service department The CAE promised to meet with customer service managers analyze relevant business processes and come up with a proposal Who is most likely to be the final approver of the engagement objectives and scope?

Senior management of the organization
Senior management of the organization
The chief audit executive
The chief audit executive
The head of customer service
The head of customer service
The board of directors
The board of directors
Suggested answer: B

Explanation:

The chief audit executive (CAE) is responsible for the approval of the engagement objectives and scope. While the head of customer service and other stakeholders may provide input, it is ultimately the CAE's responsibility to ensure that the engagement aligns with the internal audit plan and meets the organization's overall objectives. The CAE's approval ensures the independence and objectivity of the internal audit function.

The Institute of Internal Auditors (IIA) Standard 2010 - Planning

IIA Standard 2200 - Engagement Planning

asked 18/09/2024
Jonathan Dowds
37 questions

Question 303

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According to IIA guidance which of the following best describes reliable information?

Reliable information is factual adequate, and convincing so that a prudent informed person would reach the same conclusions as the internal auditor
Reliable information is factual adequate, and convincing so that a prudent informed person would reach the same conclusions as the internal auditor
Reliable information is the best attainable information through the use of appropriate engagement techniques
Reliable information is the best attainable information through the use of appropriate engagement techniques
Reliable information supports engagement observations and recommendations and is consistent with the objectives for the engagement
Reliable information supports engagement observations and recommendations and is consistent with the objectives for the engagement
Reliable information helps the organization and the internal audit activity meet its goals
Reliable information helps the organization and the internal audit activity meet its goals
Suggested answer: A

Explanation:

According to IIA guidance, reliable information must be factual, adequate, and convincing to ensure that a prudent and informed person would reach the same conclusions as the internal auditor. This means that the information should be supported by sufficient and appropriate evidence that can be independently verified and substantiated. Reliability of information is crucial for the credibility of audit findings and for making informed decisions based on those findings.

The Institute of Internal Auditors (IIA) Standard 2310 -- Identifying Information: 'Internal auditors must identify sufficient, reliable, relevant, and useful information to achieve the engagement's objectives.'

IIA Practice Guide on 'Audit Evidence'

asked 18/09/2024
Mian Mudasir Bari
40 questions

Question 304

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Which of the following statements is true regarding the audit objective for an assurance engagement?

Operational management must determine the audit objective in cooperation with the internal auditor
Operational management must determine the audit objective in cooperation with the internal auditor
The audit objective may be adjusted after the start of an engagement and it does not need to align with the assessed risks
The audit objective may be adjusted after the start of an engagement and it does not need to align with the assessed risks
The audit objective must consider the possibility of fraud and noncompliance
The audit objective must consider the possibility of fraud and noncompliance
The audit objective may or may not consider the possibility of fraud depending on the assessed likelihood and impact
The audit objective may or may not consider the possibility of fraud depending on the assessed likelihood and impact
Suggested answer: C

Explanation:

According to IIA guidance, the audit objective for an assurance engagement must consider the possibility of fraud and noncompliance. This consideration is essential for ensuring that the audit adequately addresses potential risks that could impact the organization. Assessing the possibility of fraud and noncompliance helps in identifying areas where controls might be deficient and where significant risks might be present, thus enabling the internal audit activity to provide meaningful and relevant recommendations.

The Institute of Internal Auditors (IIA) Standard 2120 -- Risk Management: 'The internal audit activity must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk.'

IIA Practice Guide on 'Fraud Risk Assessment'

asked 18/09/2024
Manoj Balan
44 questions

Question 305

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Which of the following best exemplifies having effective risk management and internal control processes?

Relevant risk indicators and mitigation plans are in place
Relevant risk indicators and mitigation plans are in place
All risks are identified and assessed
All risks are identified and assessed
Business profitability is likely to be achieved
Business profitability is likely to be achieved
Risk information is communicated to customers and suppliers
Risk information is communicated to customers and suppliers
Suggested answer: A

Explanation:

Effective risk management and internal control processes are best exemplified by having relevant risk indicators and mitigation plans in place. This demonstrates that the organization not only identifies and assesses risks but also actively monitors and manages these risks through appropriate mitigation strategies. The presence of risk indicators and mitigation plans indicates a proactive approach to risk management, ensuring that potential issues are addressed before they can impact the organization significantly.

The Institute of Internal Auditors (IIA) Standard 2100 -- Nature of Work: 'The internal audit activity must evaluate and contribute to the improvement of governance, risk management, and control processes using a systematic and disciplined approach.'

COSO Enterprise Risk Management Framework

asked 18/09/2024
Aur ROULIC
34 questions

Question 306

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Which of the following best describes external benchmarking using trend analysis for a subsidiary of an international company?

Comparing the current ratio of the subsidiary with the current ratio of another company for the same period
Comparing the current ratio of the subsidiary with the current ratio of another company for the same period
Comparing common-size financial statements of the subsidiary with the averages of the industry for the last two periods
Comparing common-size financial statements of the subsidiary with the averages of the industry for the last two periods
Comparing the sales of the subsidiary with the sales of another subsidiary for the last two periods.
Comparing the sales of the subsidiary with the sales of another subsidiary for the last two periods.
Comparing the sales of the subsidiary with the budgeted figures for the last two periods
Comparing the sales of the subsidiary with the budgeted figures for the last two periods
Suggested answer: B

Explanation:

External benchmarking using trend analysis involves comparing a company's performance metrics with industry standards or averages over a certain period to identify trends and areas for improvement. Comparing common-size financial statements of the subsidiary with the averages of the industry for the last two periods allows for a normalized comparison by expressing financial statement items as a percentage of a common base figure (e.g., total assets or sales). This method highlights the subsidiary's financial structure and performance trends in relation to industry norms, facilitating a comprehensive analysis.

Reference:

'Internal Auditing: Assurance & Advisory Services' (The Institute of Internal Auditors)

'Benchmarking: An Essential Tool for Assessment, Improvement, and Market Leadership' (Michael J. Spendolini)

asked 18/09/2024
junjie wang
36 questions

Question 307

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An internal auditor discovered that sales contracts with business clients were not stored in the electronic document management database instead they were scanned and saved in a nonsystematic manner to server folders Which of the following would be an appropriate consequence for the internal auditor to include in the documented observation?

The document management policy requires business client data to be stored in a specific management database
The document management policy requires business client data to be stored in a specific management database
Sales contracts were stored improperly because the office manager was not trained to use the electronic database and prefers to avoid it
Sales contracts were stored improperly because the office manager was not trained to use the electronic database and prefers to avoid it
if the organization becomes subject to litigation the agreed pricing terms and conditions of the contracts may be difficult to prove
if the organization becomes subject to litigation the agreed pricing terms and conditions of the contracts may be difficult to prove
All staff should be appropriately trained and required to follow the organization's established policies and procedures pertaining to document management
All staff should be appropriately trained and required to follow the organization's established policies and procedures pertaining to document management
Suggested answer: C

Explanation:

The key issue here is the risk associated with non-compliance to document management policies, particularly in terms of legal exposure. If sales contracts are not stored systematically in the electronic document management database, it can lead to difficulties in retrieving these documents, especially in the case of litigation. This can pose significant legal risks because the organization might struggle to prove the agreed pricing terms and conditions, which could potentially result in financial losses or legal penalties. The consequence highlighted in option C directly addresses this critical risk.

Reference:

'Internal Auditing: Assurance & Advisory Services' (The Institute of Internal Auditors)

'Document Management in Internal Auditing: Best Practices' (The Institute of Internal Auditors)

asked 18/09/2024
Landry Tankam
38 questions

Question 308

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The audit committee has asked the chief audit executive (CAE) to conduct an ad hoc forensic investigation of the purchasing department within a month due to the significance and urgency of a recently discovered risk The internal audit activity currently has no available staff with relevant experience or qualifications Which of the following is the CAE's best option for fulfilling the internal audit activity's responsibilities in this case?

Outsource the investigation to independent professional consultants
Outsource the investigation to independent professional consultants
Select certain internal auditors and remove them from their current assignments so that they can begin a forensic investigation course
Select certain internal auditors and remove them from their current assignments so that they can begin a forensic investigation course
Recruit additional internal auditors possessing relevant qualification and experience
Recruit additional internal auditors possessing relevant qualification and experience
Decline the engagement at this time
Decline the engagement at this time
Suggested answer: A

Explanation:

Given the urgency and the lack of internal expertise in forensic investigation, the most effective and immediate solution is to outsource the investigation to independent professional consultants. This approach ensures that the investigation is conducted by individuals with the necessary skills and experience, thereby maintaining the integrity and quality of the investigation. Training internal staff or recruiting new auditors would take time and may not address the immediate need, while declining the engagement would not fulfill the audit committee's request.

Reference:

'Internal Auditing: Assurance & Advisory Services' (The Institute of Internal Auditors)

'Forensic Accounting and Fraud Investigation for Non-Experts' (Howard Silverstone and Michael Sheetz)

asked 18/09/2024
Fernando Pereira dos Santos
39 questions

Question 309

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Which of the following statements is true regarding a drawback of using internal control questionnaires (ICQs)?

When internal auditors need to cover many control procedures using ICQs is generally less efficient than conducting observations and inspections
When internal auditors need to cover many control procedures using ICQs is generally less efficient than conducting observations and inspections
It is generally difficult for internal auditors lo compile appropriate ICQs for business activities that are governed by standardized operating procedures
It is generally difficult for internal auditors lo compile appropriate ICQs for business activities that are governed by standardized operating procedures
ICQs are inadequate to provide effective assurance on how organizational processes are executed in practice.
ICQs are inadequate to provide effective assurance on how organizational processes are executed in practice.
It is generally difficult for internal auditors to process completed questionnaires, because ICQs frequently elicit detailed comments and long answers from management
It is generally difficult for internal auditors to process completed questionnaires, because ICQs frequently elicit detailed comments and long answers from management
Suggested answer: A

Explanation:

A drawback of using Internal Control Questionnaires (ICQs) is that they can be less efficient than conducting observations and inspections when many control procedures need to be covered. ICQs can be time-consuming to complete and may not provide the depth of understanding that direct observation and inspection can achieve. They often require follow-up to clarify responses, which can further increase the time and resources needed to obtain the necessary assurance.

The Institute of Internal Auditors (IIA) Practice Guide on 'Audit Evidence Collection'

IIA Standard 2310 -- Identifying Information: 'Internal auditors must identify sufficient, reliable, relevant, and useful information to achieve the engagement's objectives.'

asked 18/09/2024
garima sharma
51 questions

Question 310

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While conducting a review of the logistics department the internal audit team identified a crucial control weakness. The chief audit executive (CAE) decided to prepare an audit memorandum for management of the logistics department followed by an informal meeting What is the most likely reason the CAE decided to prepare the audit memorandum?

To report up-to-date audit progress to management
To report up-to-date audit progress to management
To ensure that the internal audit team and the CAE are aligned with regard to the identified weakness
To ensure that the internal audit team and the CAE are aligned with regard to the identified weakness
To allow management to address the identified weakness timely
To allow management to address the identified weakness timely
To obtain management's agreement with regard to the identified weakness
To obtain management's agreement with regard to the identified weakness
Suggested answer: C

Explanation:

The most likely reason the Chief Audit Executive (CAE) decided to prepare an audit memorandum for management of the logistics department is to allow management to address the identified weakness timely. An audit memorandum serves as a formal communication that highlights the issue and provides management with the necessary details to understand and address the control weakness promptly. This approach facilitates immediate corrective action, thereby reducing the risk associated with the identified weakness.

The Institute of Internal Auditors (IIA) Standard 2420 -- Quality of Communications: 'Communications must be accurate, objective, clear, concise, constructive, complete, and timely.'

IIA Practice Guide on 'Engagement Communication'

asked 18/09/2024
Kristian Michael Matias
44 questions
Total 492 questions
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