IIA IIA-CIA-Part2 Practice Test - Questions Answers, Page 4

According to IIA guidance, the internal audit activity (IAA) can evaluate risk management processes without the need for safeguards. This activity aligns with the internal auditors' role in providing assurance on the effectiveness of the risk management process. Coaching management (Option A) and developing risk management strategies (Option B) involve direct participation in management functions, which could impair objectivity and require safeguards. Facilitating the identification and evaluation of risks (Option C) might also involve a degree of management participation that could compromise independence without proper safeguards.

Reference: IIA Standard 2120 -- Risk Management, IIA Practice Guide -- Assessing the Adequacy of Risk Management Processes

According to IIA guidance, the internal audit plan should be based on an assessment of risks to the organization (1), designed to determine the effectiveness of the organization's risk management process (2), and aligned with the organization's goals (4). The development of the audit plan is typically the responsibility of the chief audit executive, often with input from senior management and the audit committee, rather than being solely developed by senior management (3).

Reference: IIA Standard 2010 -- Planning, IIA Practice Guide -- Developing the Internal Audit Plan

The appropriate formula to calculate residual risk is (Probability of events) (Impacts). Residual risk is the risk that remains after controls are implemented to mitigate the inherent risk. It reflects the remaining exposure after considering the effectiveness of existing controls. This formula takes into account the likelihood of an event occurring and the potential impact if it does occur.

Reference: IIA Practice Guide -- Assessing the Adequacy of Risk Management Processes, COSO Framework

The statement that 'Senior management is charged with overseeing the establishment risk management and control processes' is false. Senior management is typically responsible for establishing risk management and control processes, not just overseeing them. The board or its committees usually have the oversight role.

A privacy audit engagement should comprehensively cover all aspects related to the collection, storage, and compliance of personal information. This includes assessing the appropriateness of the information gathered (1), reviewing the methods used to collect the information (2), ensuring the information collected complies with applicable laws (3), and determining how the information is stored (4). This comprehensive approach ensures that the organization adheres to privacy standards and regulations effectively.

Reference: = IIA's Practice Guide: ''Privacy Impact Assessment'' and IIA Standard 2110.A2 -

When recalculating exchange losses from foreign currency purchases, the internal auditor needs to validate the spot exchange rate on the transaction date (2) and the terms of the forward contract (3). These details are crucial to accurately assess the financial impact and ensure that the hedge is effectively mitigating the exchange rate risk.

Reference: = IIA's Practice Guide: ''Auditing Derivatives'' and IIA Standard 1220 - Due Professional Care.

Best practices for engagement planning involve setting objectives that align with the business objectives of the audit client. This ensures that the audit is relevant and provides valuable insights to the organization. Planning should also be systematic and documented, ensuring that specific testing procedures and expected outcomes are outlined and communicated.

Reference: = IIA Standard 2200 - Engagement Planning and IIA Practice Guide: ''Planning the Engagement''.

The primary purposes of a walk-through during the initial stages of an assurance engagement are to help develop process maps (A), determine segregation of duties (B), and identify residual risks (C). Testing the adequacy of controls (D) is generally performed after these initial steps to ensure a thorough understanding of the process and risks involved.

Reference: = IIA Standard 2201 - Planning Considerations and IIA Practice Guide: ''Walkthroughs for Internal Auditors''.

Outsourcing fraud investigations to a third-party service provider can result in a lack of familiarity with the organization's specific operations, culture, and history. This can be a disadvantage as external investigators may require more time to understand the context and nuances of the organization, potentially affecting the efficiency and effectiveness of the investigation.

Reference: = IIA Standard 1210 - Proficiency and IIA Practice Guide: ''Internal Audit and Fraud''.