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Frequently Asked Questions
Question # 1
An engagement supervisor is overseeing a procurement assurance engagement. In the middle of the engagement, the engagement supervisor attends a weekend social event paid for by the head of procurement. Which of the following ethics principles is the engagement supervisor potentially violating by attending the event? Confidentiality.
A. Integrity.
B. Objectivity.
C. Competency.
Question # 2
An internal auditor failed to identify transactions between the parent organization and a subsidiary. What is the most likely reason for the failure?
A. The auditor misunderstood the audit objectives.
B. The auditor lacked professional skepticism.
C. The auditor's fieldwork was not properly supervised.
D. The auditor lacked an understanding of the organization.
Question # 3
Which of the following is an example of computer forensic auditing?
A. Testing compliance with policies that define acceptable computer use.
B. Assessing controls over allocation of IT assets in a specific location.
C. Recovering deleted communications and emails.
D. Logging targeted cybersecurity events on the organization's network.
Question # 4
Which of the following would the internal audit activity do first if fraud is suspected during an audit engagement?
A. Interview the employees who may be implicated in the fraud.
B. Advise management regarding the event and provide recommendations.
C. Expand audit testing to determine whether fraud actually occurred.
D. Determine the potential impact on the organization.
Question # 5
Which of the following engagement areas would allow the internal audit activity to assess organizational governance?
A. Accounts payable.
B. Quality control.
C. Ethics activities.
D. Regulatory compliance.
Question # 6
Which of the following constitutes an example of a control designed to prevent an undesired activity from happening?
A. Physical inventory counts.
B. Reconciliation of accounts.
C. Segregation of personnel duties.
D. Confirmation of sales by third parties.
Question # 7
Which of the following is a true statement regarding environmental, social, and governance (ESG) and corporate social responsibility (CSR)?
A. Sustainability disclosure is evolving around the world.
B. Having a CSR program also means decreased revenue and increased costs.
C. Organizations with ESG programs have lower performance due to the necessity to focus on sustainability as well.
D. Sustainability reporting focuses solely on the environmental and social performance of an organization's activities.
Question # 8
The internal audit activity plans to audit a supplier quality management process within the supply chain function. In what way is this assurance engagement similar to a typical consulting engagement?
A. For both types of engagements, internal auditors are solely responsible for deciding the goals and objectives.
B. For both types of engagements, internal auditors must obtain requisite skillsets for the areas where their team lacks competencies.
C. For both types of engagements, internal auditors should not be involved in the engagement if they previously managed the supply chain function.
D. For both types of engagements, internal auditors are prohibited from undertaking operational responsibilities.
Question # 9
An internal auditor is assigned to an assurance engagement. The auditor's aunt has been working in management of the area under review for a considerable amount of time. Which of the following would best assist the internal auditor in this situation?
A. The internal audit charter.
B. The whistleblowing policy.
C. The audit committee charter.
D. The conflict of interest policy.
Question # 10
Which of the following actions by an organization's board would potentially impair the internal audit activity's independence?
A. Approving the appointment and compensation package of the chief audit executive (CAE).
B. Requiring that reports from the CAE are reviewed and approved first by senior management.
C. Approving the internal audit activity's resources and audit plans annually.
D. Asking senior management and the CAE about the scope of the annual internal audit plan.
Question # 11
Which of the following scenarios most likely indicates that the organization is not managing risks effectively?
A. Securities market oversight authorities fined the organization for not disclosing significant transactions with a related party.
B. A construction project is significantly delayed due to an unexpected global pandemic.
C. Senior management terminated contracts with certain solar panel manufacturers due to potential allegations of child labor usage.
D. A local community filed a lawsuit against a wind farm developer even though the developer complied with all legal requirements.
Question # 12
Which of the following statements is true regarding a small internal audit activity with limited resources demonstrating due professional care?
A. Conformance with the standard for due professional care is not relevant for small audit internal activities.
B. The internal audit activity may conduct internal quality assessments multiple times per year due to the size.
C. The internal audit activity may use a risk-based audit approach to ensure adequate focus.
D. The internal audit team may guide and supervise nonaudit employees with relevant knowledge to assist in performing engagements.
Question # 13
Which of the following statements is true regarding risk management frameworks?
A. The organization should ensure that it uses a universally-accepted riskmanagement framework.
B. The organization should ensure that its risk management framework is designed specifically to meet the needs of its operations.
C. The organization should ensure that the board is responsible for implementing the risk management framework.
D. The organization should ensure that the risk management framework has been validated by the internal audit activity for implementation.
Question # 14
A chief audit executive (CAE) is currently employed at a commercial bank where she was previously the chief compliance officer over three years ago. The current chief compliance officer abruptly resigned prior to the start of a mandatory anti-money laundering compliance audit. The board is contemplating a number of alternatives regarding the vacant post, bearing in mind that the bank has been struggling financially and is looking to contain costs. Which of the following alternatives, if taken by the board, would be most appropriate to satisfy the bank's objectives as well as preserve the internal audit activity's independence?
A. Extend the CAE's responsibility to cover the compliance function and postpone the scheduled compliance audit to next year.
B. Recruit a new chief compliance officer to fill the vacancy and have the CAE direct the new individual in the compliance officer role.
C. Assign responsibility for the compliance function to the CAE and have an external auditor perform the scheduled compliance audit.
D. Appoint the current CAE to head of the compliance function. No further action is required since the CAE was employed in the compliance function more than a year ago.
Question # 15
During an audit of the procurement department, the internal auditor interviewed the department manager to ask questions about the purchasing process. There have been a number of employee complaints, tips, and reports regarding the purchasing process via the organization's whistleblower hotline. Which of the following phrases from the interviewee is most likely to raise concerns regarding potential control deficiencies or fraud risks?
A. "The process works the way it is mandated to work."
B. "I never did it this way."
C. "I cannot take more than a few days of vacation, as nobody else can perform my duties."
D. "There are policies or procedures for this process."
Question # 16
Which aspect of an internal audit charter relates to the reporting structure for the internal audit activity?
A. Objectivity.
B. Responsibility.
C. Organization.
D. Authority.
Question # 17
Which of the following preventive controls would be most effective for organizations facing business disruptions and respective financial losses?
A. Develop a business continuity plan for contingent situations.
B. Insure the organization against financial losses.
C. Rely on third-party cloud solution providers for the organization's systems.
D. Hedge company assets via purchasing derivatives.
Question # 18
Which of the following statements describes the activities performed by the internal audit activity to fulfill the Mission of Internal Audit?
A. Conduct reviews of internal risk and controls.
B. Conduct fraud investigations on suspicious deals.
C. Perform risk management functions in selected areas.
D. Establish the risk appetite of the organization.
Question # 19
Instead of leaving its capital in a bank account with a low guaranteed interest rate, an organization's board approved a proposal to invest in a stock that could have a high expected return rate without taking any risk mitigation activities. Which risk concept does this decision illustrate?
A. Risk appetite.
B. Risk capacity.
C. Risk tolerance.
D. Risk retention.
Question # 20
According to IIA guidance, who is ultimately responsible for the enhancement of the internal auditor's knowledge, skills, and other competencies?
A. The officer in charge of human resources.
B. The chief audit executive.
C. The internal auditor.
D. The CEO.
Question # 21
The audit committee chair requested that the chief audit executive include in his annual report to the audit committee information related to how the internal audit activity meets its requirement for due professional care. Which of the following statements would be appropriate to include in the report?
A. During engagements, the identified risks were appropriately addressed with necessary audit procedures to ensure that any risk that threatened the company's objectives was adequately mitigated, regardless of cost.
B. Due professional care was exercised during the conduct of each engagement so that all risks were identified and ranked, and assurance procedures were designed to address each risk accordingly.
C. To meet its mission of enhancing and protecting organizational value and to demonstrate appropriate support for management, the internal audit activity planned to accept all proposed management consulting engagements.
D. During engagements, internal auditors considered various data analysis techniques and relevant technology-based audit procedures, and used these techniques and procedures when applicable.
Question # 22
Internal audit requests access to write and export specialized reports from the organization's database to aid with testing and analysis. Management authorizes internal audit only to view production reports that are built into the system. How can the chief audit executive create buy-in with management and attain the access required for the engagement?
A. By sending the internal audit charter to the general manager to show that the requested level of access is approved by the charter.
B. By sending a staff auditor with at least two years experience in the field to explain the importance of the internal audit function and the reasons why the requested level of access is necessary
C. By explaining to the general manager that internal audit's work program requires the reports that can only be gathered from the system's report writer.
D. By meeting with the general manager to discuss the planned control testing and the risks that can be identified from utilizing the specialized reports.
Question # 23
An Internal auditor noted that many amended purchase orders were automatically created for discrepancies between the value of the original purchase order and the final invoice. Further examination revealed that most differences resulted from rounding errors bulk weights or minor tariff adjustments for shipping. Which of the followtng IS the most reasonable conclusion for the Internal auditor regarding this control?
A. The control IS effective but inefficient
B. The control IS ineffective but efficient.
C. The control IS both Ineffective and Inefficient
D. The control is both effective and efficient
Question # 24
Which of the following would be Included in ongoing monitoring of the performance of the internal audit activity?
A. Acquiring feedback from audit clients and other stakeholders.
B. Having senior auditors conducting an annual self-assessment
C. Benchmarking against best practices in internal auditing.
D. Performing an external assessment once every five years.
Question # 25
A senior Internal auditor was hired Into a large Internal audit activity It was agreed upon hiring that the auditor would pursue professional development that would support her ability to take on the role of the head of Internal audit, Which of the following skills best supports this development goal?
A. Data analysis and mining
B. Technical and IT skills.
C. Application of IIA mandatory and supplemental guidance.
D. Risk management and planning.
Question # 26
How can an Internal audit activity contribute to Its organization’s risk assessment process
A. Assist in reviewing how key risks are reported
B. Determine the risk appetite based on an independent review
C. Determine necessary risk responses based on an assessment
D. Take accountability for risk management
Question # 27
Which of the following tests would most likely help discover a fictitious invoice?
A. Compare vendor addresses to employee addresses.
B. Match cancelled checks to invoices.
C. Search for duplicate payment amounts.
D. Check employee bank records against invoice amounts.
Question # 28
During a procurement process audit the internal audit activity undertakes a fraud risk assessment and considers a range of possible fraud scenarios within the process. Which of the following scenarios constitutes a pressure to commit fraud?
A. An employee believes his poor compensation package justifies engaging in unethical behavior.
B. The head of the department is the only signatory to purchase orders issued to third party contractors.
C. Some employees strongly believe monetary gifts from vendors is a means of saving for life after employment.
D. One of the employees was found to have an obsession with expensive jewelry
Question # 29
An experienced internal auditor is planning an assurance engagement of the organization's sales activities. During process walkthroughs and interviews, many sales representatives expressed concerns about management's escalating demands to meet the organization's sales goals. According to the MA guidance, which of the following is the best application of due professional care in planning the engagement?
A. Disregard the complaints because the information isn't reliable and isn't sufficient to support engagement conclusions and results.
B. Consider the significance of the risks related to the complaints and develop appropriate assurance procedures in work programs.
C. Disregard the complaints because using them would violate the confidentiality principle.
D. Discuss management's needs and expectations related to including the complaints in the audit scope.
Question # 30
Which action by senior management indicates to the internal auditor that there may be fraudulent activities occurring within the organization?
A. Setting unrealistic targets for staff to achieve
B. Granting external audit firms access to staff and records.
C. Automating some processes and allowing others to be performed manually
D. Enforcing a zero-tolerance policy for misconduct
Question # 31
An Internal auditor accepted a role as an engagement supervisor on a highly specialized and technical engagement for which she did not have the expertise. Which of the following fundamental principles of The IIA's Code of Ethics did she violate?
A. Objectivity.
B. Confidentiality.
C. Competency.
D. Due professional care.
Question # 32
Which of the following is a detective control?
A. An organization requires certain employees who occupy sensitive positions to sign attestation to the code of conduct on an annual basis.
B. A compliance specialist carries out quarterly reviews of an organization's compliance with regulatory requirements.
C. A front desk officer in an organization requires that visitors are identified by the host before access is granted.
D. An internal audit activity deploys audit management policies and procedures for team members.
Question # 33
When an organization purchases a derivative contract in the stock market to limit the potential loss in the value of a security, the organization is applying which of the following risk management techniques?
A. Avoiding the risk altogether.
B. Transferring the risk.
C. Introducing a control feature.
D. Accepting the risk.
Question # 34
What is the primary purpose of The IIA's Code of Ethics?
A. Communicate specific activities appropriate to the performance of internal auditing
B. Promote ethical culture within corporations and other business organizations
C. Establish mandatory standards of competence for the practice of internal auditing
D. Establish principles and expectations governing behavior of individuals and organizations in the conduct of internal auditing
Question # 35
A chief audit executive (CAE) is concerned that the internal audit activity is not receiving adequate training and continuing education. Which of the following approaches should the CAE take?
A. Implement a uniform professional development plan for the internal audit activity.
B. Create a formal development agreement with each individual staff auditor.
C. Require each internal auditor to obtain the same professional certifications.
D. Require training and developmental activities that are sponsored by The HA.
Question # 36
An electrician visits a client to assess the scope of work. After the visit, the sales office compiles and sends the client a proposal based on the electrician's estimation and approved price list. The internal auditor notices that in the last six months, the number of cancelled proposals has increased substantially. Which of the following is a fraud risk scenario that the auditor should consider in this situation?
A. Some electricians may be offering clients opportunities for reduced fees if they pay with cash.
B. There is a new competitor in the area who offers better prices.
C. Sales representatives may be manipulating the proposals to include additional costs.
D. An unauthorized person may be modifying client data and cancelling the proposals.
Question # 37
An internal auditor discovered that a former colleague from the internal audit activity now works in a junior position in a department scheduled for an upcoming audit. How can the auditor best ensure his objectivity for this engagement?
A. Recommend mat the chief audit executive outsource the upcoming audit engagement
B. Proceed with the audit engagement in accordance with the internal audit manual
C. Increase the amount of fieldwork in order to build greater credibility for audit conclusions
D. Declare a conflict of interest and hand over the engagement to another auditor
Question # 38
How do assurance services and consulting services differ?
A. There is less variety of consulting services that an internal audit activity might provide compared to assurance services
B. Assurance services are limited to financial events or actions, and consulting services are not limited in this way
C. Consulting services do not have to be included in the internal audit charter
D. Other employees in an organization can provide consulting services but only an internal audit activity can provide assurance services
Question # 39
Which of the following describes the primary objective when implementing a risk management framework?
A. To achieve planned profitability for business expansion.
B. To enhance an organization's confidence in achieving strategy.
C. To strengthen corporate governance standards.
D. To eliminate business risks and uncertainties.
Question # 40
During an assurance engagement, an internal auditor identified that a developer of the organization's enterprise resource planning (ERP) system had intentionally modified the production code to commit a fraudulent transaction. Which control activity should be implemented to prevent such issues in the future?
A. Segregate duties between code development and migrating changes into production.
B. Conduct fraud training for the IT team responsible for the ERP system.
C. Penalize the developer who committed the fraud by terminating employment.
D. Restrict developers' access to the ERP system's test environment.
Question # 41
Which of the following would a chief audit executive most likely use to identify a need for improvement in a staff internal auditor's business acumen?
A. A quality assessment review.
B. An internal audit client survey.
C. A control self-assessment.
D. A peer review of the internal audit activity.
Question # 42
Once an organization's risks are identified, what would be the next step to ensure resources are properly allocated to manage those risks?
A. Risk responses must be selected.
B. Risks must be assessed.
C. The risk universe must be established.
D. Risk responses must be aligned.
Question # 43
Which of the following would decrease or be reduced if an organization establishes and implements excessive internal controls?
A. Production cycle time.
B. Activities that add no value.
C. Staff productivity.
D. Complexity of operations.
Question # 44
The board requested the chief audit executive (CAE) to provide consulting services for a new systems implementation project Which of the following statements is true regarding this scenario?
A. The CAE should avoid making decisions on risk responses within risk management processes.
B. The CAE may only provide consulting and not assurance services in risk management processes
C. The CAE may manage the project risks on behalf of management in this particular situation
D. The CAE should avoid giving assurance on risk management processes in this particular situation
Question # 45
An internal auditor is assessing the effectiveness of the organization's risk management practices She checks to see whether risk management is an intégrai part of decision making and whether risk management is transparent, responsive to change and addresses uncertainty. According to HA guidance on risk management frameworks, which of the following approaches is the auditor most likely using?
A. Maturity model approach
B. Process element approach
C. Key principles approach
D. Key performance indicators approach.
Question # 46
According to HA guidance, which of the following is true regarding independence and objectivity for small internal audit activities?
A. The chief audit executive (CAE) may consider including a disclaimer on independence in audit reports.
B. The CAE may consider greater involvement of those with suitable knowledge of audit practice.
C. Conformance with this Standard is not dependent upon the size of the internal audit activity.
D. Due to the small size of the internal audit activity, having an external assessment once every seven years is acceptable.
Question # 47
According to IIA guidance, a new internal auditor is expected to possess which of the following competencies?
A. Technical industry-specific expertise.
B. Expertise in cybersecurity, an area of increasing risk.
C. Knowledge of IT risks and controls.
D. Knowledge of forensic accounting.
Question # 48
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?
A. Recommend a control change and obtain management support.
B. Evaluate the potential Impact on related controls.
C. Address the risk with senior management and the board.
D. Develop and communicate the scope and evaluation criteria to be used by management.
Question # 49
During an audit of an organization's accounts payable area, an internal auditor identified anomalies in the information examined that may indicate potential fraud. Which test should the auditor perform first to verify this?
A. Verify the completeness and integrity of the data being analyzed.
B. Identify duplicated organizational transactions.
C. Analyze all transactions within the targeted area.
D. Check control totals that have may have been falsified.
Question # 50
During a monthly internal audit staff meeting, the chief audit executive (CAE) decided to reinforce the importance of internal audit staff being objective in their work. Which of the following examples would be most appropriate for the CAE to include as part of the meeting presentation?
A. Statistical sampling techniques should always be used to pull unbiased sampling for testing.
B. Fieldwork completed by internal auditors should be appropriately reviewed.
C. Internal auditors should avoid using the lunch room simultaneously with audit clients.
D. During the audit review period, there should be no nonaudit dialogues with the audit client.
Question # 51
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?
A. The chief audit executive (CAE) should report all stages of the OAlP's development and key milestones.
B. The CAE should report only corrective action plans that meet external assessor or stakeholder requirements.
C. The CAE should establish the form and content of program communication so that it is in alignment with the internal audit activity charter.
D. The CAE should disclose program details only after both internal and external assessments have been completed.
Question # 52
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?
A. The internal audit activity used a risk-based approach to create the internal audit plan.
B. The engagement supervisor considered requests from senior management regarding engagements to include in the internal audit plan.
C. The CAE only accepted engagements that the internal audit activity collectively had the knowledge to perform.
D. The area under review restricted the internal audit activity's ability to access records, impacting the audit results.
Question # 53
There is a growing perception that employees generally evade their responsibilities. What impact will an internal auditor most likely see during an engagement?
A. Supervisors are likely to reduce their level of supervision and increase span of control.
B. Employees are likely to be supervised closely and given little freedom.
C. Peer employees are likely to trust one another, but distrust management.
D. Employees are likely to join forces to accomplish their duties as teams.
Question # 54
Which of the following risk management techniques best describes the strategy of obtaining insurance to protect against losses due to bad weather conditions?
A. Risk avoidance
B. Risk reduction
C. Risk acceptance
D. Risk sharing
Question # 55
Which of the following would an internal auditor expect to find within an organization’s internal control framework?
A. A compliance risk mitigation strategy to be implemented by the compliance function.
B. A statement of the organization s values, reflecting its attitude toward risk
C. Details of how each group from the Three Lines Model fits into the risk management strategy.
D. The risk appetite related to establishing and approving process
Question # 56
Which of the following fraud prevention measures is most likely to trigger undesired adverse behavior if improperly designed?
A. Disclosure of outside business activities
B. Ethics training programs
C. Compensation programs
D. Exit interviews
Question # 57
An organization is conducting a fraud risk assessment as part ol its risk management program. Which of the following steps is the organization most likely to perform first?
A. Identify relevant fraud risk factors.
B. Identify potential fraud schemes.
C. Identify existing controls for preventing and detecting fraud.
D. Identify red flags by conducting data analysis.
Question # 58
A financial services organization's board is assessing increased regulations and its effect on current industry lending practices. Which of the following committees would help the board identify and assess the effects of the increased regulations?
A. Quality committee.
B. Audit committee.
C. Risk committee.
D. Governance committee.
Question # 59
A newly hired chief audit executive is reviewing available documentation to provide evidence of conformance with the standard for continuing professional development. Which of the following documents is the most reliable source for this purpose?
A. The organization's training policy.
B. A list of auditors who requested to attend the next audit conference.
C. Self-assessments against an internally developed audit benchmark
D. In house training manual
Question # 60
An internal audit of warehouse inventory revealed no material deficiencies. However, management later discovered fraud, which occurred during the period that was audited, and determined that a major control deficiency allowed the fraud to occur. Given management's discovery, which of the following statements is valid?
A. The internal auditors violated the standard for due professional care because they did not detect the fraud, even though it occurred during the period that was reviewed.
B. The internal auditors should have had sufficient knowledge of fraud to identify red flags indicating possible fraud.
C. The internal auditors could not have detected the fraud due to collusion among employees in the inventory unit.
D. The internal auditors are not responsible for considering fraud risk, which is a management responsibility.
Question # 61
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?
A. The responsibility to maintain organizational independence.
B. The responsibility to perform engagements with due professional care.
C. The responsibility to communicate corrective action plans to the board.
D. The responsibility to define the purpose of the internal audit activity.
Question # 62
Which statement accurately describes the authority of the internal audit activity as outlined in the audit charter?
A. The chief audit executive (CAE) shall report directly to the board and administratively to the CEO.
B. The CAE shall provide senior management and the board with performance updates quarterly.
C. The internal audit team shall have full access to the organization's records, physical property, and personnel required to conduct audit engagements.
D. The internal audit activity shall maintain a quality assurance and improvement program in conformance with the Standards.
Question # 63
Which of the following offers the feast evidence that the internal audit activity has achieved organizational independence?
A. An independent third party has assessed the organization's system of internal controls to be adequate and effective.
B. The chief audit executive reports both functionally and administratively to the CEO.
C. The internal audit charter is drafted properly and approved by the appropriate parties.
D. The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.
Question # 64
Which risk management activity would cause the internal auditor to assume a management responsibility?
A. Assessing management's acceptance of risk.
B. Reviewing a cybersecurity risk report issued by management.
C. Developing a list of emerging risks for management.
D. Prioritizing risks for management.
Question # 65
A chief audit executive (CAE) has just joined an organization with an existing internal audit activity. Based on her review of the current organizational structure, the CAE determines that the internal audit activity lacks adequate independence. Which of the following actions is the CAE's best step to take next to move the internal audit activity toward organizational independence?
A. Ensure the limitations are disclosed through communication with the board and senior management, so that the internal audit activity can continue operating under the same organizational structure.
B. Request that the board restructure the reporting line of the internal audit activity to ensure the CAE has unrestricted access to the board.
C. Rotate internal audit assignments among members of the internal audit activity to minimize the effects of the current structure.
D. Train internal auditors about organizational independence and have them sign an acknowledgment of understanding.
Question # 66
Senior management is eager to assess the organization's risks with regard to electricity sales processes, but the senior management team does not know where to start. How can the internal audit activity assist?
A. Outsource the identification of best practices for risk management to an external third party.
B. Perform an audit engagement to identify risk management practices deployed in electricity sales processes.
C. Recommend reporting the lack of risk management to government authorities and request guidance.
D. Facilitate a self-assessment workshop with the employees responsible for process execution.
Question # 67
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?
A. The scope and frequency of both internal and external quality assessments.
B. The list of audit engagements that will be assessed during the year.
C. The number and qualifications of internal audit staff members assigned to perform internal assessments during the year.
D. The compensation structure of the qualified assessment team.
Question # 68
Internal audit is performing an engagement to determine whether there were indications of questionable bidding on a city s infrastructure project. As part of the engagement the internal audit activity became aware that certain firms tend to receive the contracts for large city projects. How should the internal audit activity proceed with the engagement and identify questionable bidding practices?
A. Obtain the city s vendor listing to determine whether there was an adequate number of firms available to solicit bids for protects
B. Obtain at of the city s financial records to identify any firms that received payments for contracted goods and services.
C. Obtain the city's contracting files to determine whether the city demonstrated efforts to solicit bids from various interested firms.
D. Obtain the city’s official public meeting minutes to determine whether there were concerns about the contracting practices
Question # 69
Which of the following would be an important aspect of an internal auditor's role in fraud management?
A. Utilizing analytical techniques to actively discover instances of potential fraud
B. Conducting fraud based audits to ensure that fraud will be detected during engagements
C. Implementing fraud prevention controls to minimize and mitigate the risk of fraud
D. Reporting instances of fraud discovered during engagements to regulatory bodies
Question # 70
Which of the following best demonstrates the application of due professional care?
A. An engagement supervisor requests that the employment of a process owner be terminated due to a significant control failure.
B. An audit lead establishes internal audit manuals to guide the internal audit activity on now to undertake audit engagements.
C. An audit manager provides a guarantee to senior management that internal controls relating to an audited process operate effectively.
D. An organization's internal audit activity operates under a direct reporting structure to tie audit committee of the board
Question # 71
An internal auditor failed to identify transactions between the parent organization and a subsidiary. What is the most likely reason for the failure?
A. The auditor misunderstood the audit objectives.
B. The auditor lacked professional skepticism.
C. The auditor's fieldwork was not properly supervised.
D. The auditor lacked an understanding of the organization.
Question # 72
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?
A. Encourage the auditor to continue this practice, as it demonstrates objectivity.
B. Encourage the auditor to improve communication skills.
C. Encourage the auditor to conduct post-engagement surveys to obtain the audit client's Cposition on the issues raised.
D. Encourage the auditor to sign the draft reports before submitting them.
Question # 73
Which of the following describes the most appropriate match between a potential temporary guest auditor candidate and an upcoming audit assignment?
A. A purchasing manager with two years of prior audit experience in public practice to lead a contracts management audit
B. A communications officer who worked in the marketing department during the last six months to conduct a customer loyalty program audit
C. A manager of social responsibility who has a nursing background to participate m a health and safety audit for the corporate office and plant facilities
D. An accounting manager who discovered and reported fraud committed by a payables clerk to conduct a performance audit of accounts payable
Question # 74
At the beginning of an IT development project key risks were identified and assessed and risk owners were appointed Six months later the IT development team reported that the project Is significantly over budget, it will not be completed on time and key personnel had left the organization. Which of the following risk management practices should be improved for future projects?
A. Risk response.
B. Risk assessment
C. Risk monitoring.
D. Risk avoidance.
Question # 75
Which of the following practices is generally most effective to protect internal audit objectivity?
A. Ensuring regular documentation of auditor skills and experience in the workpapers.
B. Basing performance evaluations heavily on customer satisfaction surveys.
C. Prohibiting auditors from accepting gifts from audit clients or potential clients.
D. Ensuring that auditors have a balance of both operational and internal audit responsibilities.
Question # 76
According to IIA guidance, which of the following is the most accurate statement regarding the internal audit charter?
A. The IIA's Code of Ethics must exist outside of the charter to maintain independence.
B. The charter must be approved by both senior management and the board.
C. The nature of consulting services does not need to be defined in the internal audit charter.
D. The charter provides a framework for performing a broad range of value-added audit services.
Question # 77
Which of the following situations is most likely to threaten the independence of the internal audit activity?
A. The chief audit executive reports functionally to the board and administratively to the CEO.
B. The annual budget for the internal audit activity is approved by the chief financial officer.
C. The internal audit activity is completely outsourced to an external service provider.
D. The internal audit manager provides consulting services to the procurement department, where she worked during the prior year.
Question # 78
Which of the following best illustrates the principle of due professional care?
A. The internal audit activity uses key performance indicators for all staff members after all audit engagements.
B. The internal auditors provide assurance to third parties indicating that their work was properly supervised.
C. The internal auditors demonstrate they have an understanding of engagement objectives and scope.
D. The internal auditors are heavily involved in training and development to enhance their skills.
Question # 79
According to IIA guidance, which of the following best demonstrates due professional care?
A. Staffing audit engagements with internal auditors who possess professional designations.
B. Relying on prior audit work to save planning time and costs.
C. Performing assurance procedures to guarantee all significant risks are identified.
D. Assessing the cost of assurance in relation to the potential benefits.
Question # 80
Which of the following describes a responsibility of operating management in an organization's corporate social responsibility (CSR) efforts?
A. Responsible for implementing CSR principles and overseeing of CSR performance.
B. Responsible for performing periodic internal self-verifications of reported CSR results.
C. Responsible for performing analysis and comparison of CSR reports and performance.
D. Responsible for ongoing CSR reporting and accomplishing of performance targets.
Question # 81
The internal auditor of a small manufacturer noted that the accounting department has insufficient staff to achieve proper segregation of duties. What type of controls would the auditor likely recommend to management to specifically address this problem?
A. Entity-level.
B. Preventive.
C. Directive.
D. Compensating.
Question # 82
A global manufacturing company has three regional offices. The chief audit executive (CAE) is concerned about the cost of an upcoming external quality assessment of the internal audit activity. The last external assessment was performed six years ago. Recently, the internal audit staff at one of the regional offices performed an internal assessment. To ensure conformance with the Standards, what is the most appropriate action for the CAE to take?
A. Request from the audit committee an additional budget and an extension so that the external assessment could be performed next year.
B. Review the results of the internal assessment, identify weaknesses, and implement improvements at the remaining offices.
C. Request the regional office that performed the internal assessment to perform an assessment of the remaining offices.
D. Request that an external assessor validate the results of the internal assessment and review the remaining offices.
Question # 83
According to The IIA’s Code of Ethics, which of the following best describes the principle of integrity?
A. Auditors shall observe the law and make disclosures expected by the law and the profession
B. Auditors shall disclose all material facts known to them that if not disclosed may distort the reporting of activities under review
C. Auditors shall engage only in those services for which they have the necessary knowledge skills and experience
D. Auditors shall be prudent in the use and protection of information acquired in the course of their duties
Question # 84
A new chief audit executive wants to develop a formal internal control framework for her organization. She uses globally accepted frameworks as a guide. Which of the following would she likely find critical in creating the new framework for her organization?
A. Independent assessments.
B. Continuous monitoring.
C. Business continuity and backups.
D. Organization wide objectives.
Question # 85
In a small company with a small budget, the board and senior management asked the chief audit executive (CAE) to develop specific controls prompted by a new regulatory requirement affecting a specific process. The CAE was also directed to report functionally to senior management. An audit engagement on this process was already set in the internal audit plan. Which of the following represents an impairment to the internal audit activity's independence?
A. The development of controls by the CAE.
B. The audit engagement regarding this process.
C. The functional reporting of the CAE to senior management.
D. The small budget.
Question # 86
During engagement planning, an internal auditor determines that the cost of a certain test outweighs the benefit that can be expected from the results. He determines that this test can be removed from the audit work program. Which of the following did the internal auditor best demonstrate?
A. Due professional care
B. Individual objectivity
C. Proficiency
D. Internal assessment
Question # 87
Which of the following fundamental principles of The IIA's Code of Ethics is best described as performing work honestly diligently and responsibly?
A. Integrity
B. Proficiency
C. Due Professional Care
D. Competency
Question # 88
An internal auditor wants to compare her organization’s governance processes to those of a well-known governance model. Which of the following approaches would the auditor take for this purpose?
A. Perform a gap analysis to assess me differences between the approaches
B. Assess the governance processes using computerized modeling techniques
C. identify any differences between the processes using a variance analysis
D. Benchmark the governance processes using a capability maturity modal
Question # 89
In an environment where employees are frequently penalized for mistakes and the organizational culture is one of fear and blame which of the following is an internal auditor most likely to find?
A. Management regularly overrides key controls
B. Employee turnover is tow
C. Careless behavior becomes normal
D. Employee morale is low
Question # 90
A chief audit executive (CAE) has been asked by the board to evaluate the effectiveness of ethical programs created by management. Which of the following would be the most appropriate action for the CAE to take?
A. Compare the design of the organization's ethical programs with best practices.
B. Verify that a code of conduct and related policies exist and are communicated.
C. Use employee surveys to assess whether ethical programs are achieving desired outcomes.
D. Compare the cost of the ethical programs with the achieved outcomes.
Question # 91
To comply with the proficiency standard which of the following would the chief audit executive likely consider as the primary hiring criterion when choosing a new internal auditor?
A. The length and consistency of the auditor's work experience
B. The auditor's demonstrated problem-solving skills
C. The auditor's skills compared to those already possessed by other audit staff
D. The auditor's ability to be self motivated and a good team player
Question # 92
An internal auditor assessed the controls within his organization's payroll process and suspects that erroneous payments may have been made to a fraudulent bank account. What is the best course of action for the auditor to take?
A. Speak to the payroll manager so he may investigate the auditor's observations.
B. Continue to investigate the payments to confirm the accuracy of the observations, and determine whether further fraudulent payments have been made.
C. Stop the audit and report the findings to senior management immediately.
D. Escalate the concern to the engagement supervisor.
Question # 93
A telecommunications organization is planning to cease operations in one or the markets in which it operates due to increasing volatility and uncertainties. Which of the following risk management techniques is the organization selecting?
A. Risk acceptance.
B. Risk avoidance.
C. Risk sharing.
D. Risk reduction.
Question # 94
Which of the followIng would permit an internal audit activity to use the statement "conducted m conformance with the International Standards for the Professional Practice of Internal Auditing m audit reports?
A. The result of a quality assurance and improvement program confirm there are no material issues.
B. Engagement workpapers are retained by the internet audit activity according to the retention and deletion policy.
C. The internal audit activity receives positive feedback from the managers of the areas that were under review.
D. internal auditors demonstrate proficiency by maintaining professional internal audit certifications
Question # 95
Which of the following is a strategic risk that internal auditors should consider when performing a third-party risk management engagement?
A. Physical security
B. Loss of intellectual property
C. Cost overruns
D. Conflict of interest
Question # 96
With regard to governance, which of the following is a board-level responsibility rather than a management responsibility?
A. Obtaining assurance on external financial, regulatory, and internal audits.
B. Complying with laws, regulations, and codes.
C. Assigning authority and responsibilities organization wide.
D. Monitoring and measuring performance.
Question # 97
Which of the following items related to the quality assurance and improvement program should the chief audit executive report to the board?
A. Ongoing monitoring results
B. Periodic management assessment results
C. Annual risk assessment results
D. Internal auditors' training evaluation results
Question # 98
The organization s procurement manager asks the internal auditor to deliver training to the procurement team on the organization’s third-party risk management process. Which of the following is the most appropriate response?
A. The internal auditor should reject the request it she previously worked in the procurement area to maintain objectivity
B. The internal auditor should reject the request if the internal audit team does not have the requisite expertise.
C. The internal auditor should accept the request and in fact she may assume some management responsibilities temporarily if the result is a relevant training benefit
D. The internal auditor may accept the request only if she defines the scope to ensure conformance with the Code of Ethics
Question # 99
According to IIA guidance, an internal audit charter should detail which of the following?
A. The objectives and goals of management
B. The process used by the CAE to manage the organization's internal controls
C. The nature of services that the internal audit activity will provide to external third parties
D. The responsibilities of the audit committee
Question # 100
Which of the following controls would be most useful to prevent an employee from using the organization's funds for inappropriate expenditures and falsifying financial records to conceal the fraud?
A. Segregating duties in the payroll processes.
B. Confirming receipt of goods or services.
C. Performing background checks on newly hired employees.
D. Requiring management approval for expenses.
Question # 101
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?
A. Report the non-compliance cases to the board of directors.
B. Recommend that management update its policies and procedures based on the circumstances.
C. Investigate the rationale for management's actions.
D. Recommend those employees to report the cases through the designed whistleblowing channel for the appropriate treatment.
Question # 102
Which of the following is an indicator that the internal audit activity does not fully conform with the Standards?
A. The quality assurance and improvement program identified several opportunities for the internal audit activity to make improvements.
B. In lieu of an external assessment, the internal audit activity performed a self-assessment with independent external validation.
C. During an internal quality assessment, it was identified that rotational auditors often perform consulting engagements for areas of the organization where they had previous responsibilities.
D. External assessments are performed every five years by a competent internal audit team from the organization's parent company.
Question # 103
Which of the following statements is the most appropriate example of the internal audit activity exercising due professional care during an audit of the payroll department?
A. Internal auditors ensure that the work program is appropriately designed in order to identify all of the risks surrounding the payroll process.
B. Internal auditors determine whether the policies, procedures, and practices of the payroll department are operating in accordance with relevant laws.
C. Internal auditors verify whether the board of directors has implemented effective internal controls over the processes used by the payroll department.
D. Internal auditors ask the organization's risk manager to determine whether the degree of work planned is sufficient to determine whether payroll payments were complete and accurate.
Question # 104
A manufacturing organization's chief audit executive (CAE) was approached by the head of security from one of the manufacturer's third party suppliers The head of security requested internal audit records from a recent audit engagement involving the third-party supplier The head of security believed those records contained information that would enable to identify employees of the third-party supplier who may be involved m fraudulent activities What is the most appropriate course of action for the CAE?
A. Obtain approval from the manufacturer's audit committee regarding the release of audit records
B. Release the records but first remove all data regarding the manufacturing organization s internal actions and procedures
C. Deny access to the records as the third party supplier s security learn should be able to investigate then own employees.
D. Consult with the manufacturer's senior management to determine whether releasing tie records would be appropriate
Question # 105
The head of human resources notified the internal audit activity that a key account manager was fired because he did not register a large number of contracts with clients As a result the organization was unaware of its duties and would suffer some financial loss Which of the following should be expected from a competent internal auditor who is analyzing this situation?
A. The ability to apply forensic methods to obtain legally admissible evidence
B. The ability to conduct admission-seeking interviews with potential suspects
C. The ability to evaluate whether such attributes as intent and personal gain were present
D. The ability to retrieve concealed or deleted information from the former employee's laptop
Question # 106
An external assessment was performed as part of the organization's quality assurance and improvement program. Which of the following conclusions confirms that the internal audit activity is in conformance with the Standards'?
A. The chief audit executive is well qualified and has responsibilities over operational areas that the internal audit activity assesses.
B. Periodic self-assessments are assigned to entry-level internal audit staff to support their continuing professional development.
C. All audit workpapers are reviewed and signed by the engagement supervisor before the audit report is issued.
D. Employees who rotate into the internal audit activity from other areas of the organization are assigned to audit areas where they previously worked, to take advantage of their operational expertise and experience.
Question # 107
A risk assessment showed that the cost of addressing a particular risk in the organization's human resources department is greater than the perceived benefit. Which risk response approach should the organization take in this scenario?
A. Reduce the risk.
B. Transfer the risk.
C. Accept the risk.
D. Share the risk.
Question # 108
According to IIA guidance, which of the following is an appropriate role for the internal audit activity?
A. Coaching management in responding to risks.
B. Implementing risk responses on management's behalf.
C. Imposing risk management processes.
D. Setting the risk appetite.
Question # 109
Which of the following most accurately describes corporate social responsibility at an organization?
A. An organizational locus on improving the overall environment, even it is to the detriment of the local community.
B. A philosophy driven by employees that flows up to senior management and the board of directors.
C. An overall commitment of the organization to improve the quality of life for not only the employees but the community at large.
D. A policy of ensuring that the organization is socially responsible, even if it leads to unprofitability due to increased costs.
Question # 110
The same internal auditor has audited the regional purchasing department annually for the last three years. The audits have shown several significant control deficiencies that have not been corrected by management. New management is in charge of this regional purchasing department, and it is time to audit the department again. What concerns should be considered prior to assigning the audit to the same auditor?
A. Intimidation threats may compromise the auditor's objectivity due to multiple negative audit reports completed by the auditor.
B. The auditor has reviewed the department annually for the last three years, leading to familiarity, which can impact the internal audit activity's independence.
C. A negative cognitive bias may be in place that affects the employee's objectivity due to the recent audits with uncorrected control deficiencies.
D. The auditor may have formed a cultural bias, as the department under review is in the auditor's geographic area.
Question # 111
How should the internal audit activity promote continuous improvement of organizational controls?
A. By assessing implementation of controls m individual processes during audit engagements
B. By identifying the most significant business processes and designing effective controls for those processes
C. By implementing an internationally accepted internal control framework across the organization
D. By facilitating control self-assessment sessions for managers responsible for business processes
Question # 112
Which of the following frauds is most likely to occur in the accounts payable function?
A. Factitious vendors are entered into the system, possibly resulting in improper disbursements.
B. Bad debt expense is intentionally omitted from the financial statements.
C. Certain costs are capitalized, rather than expensed.
D. A related party receives benefits not appropriate in an arm's-length transaction.
Question # 113
Which of the following is the internal audit activity expected to do with respect to the organization's governance processes?
A. Formally audit all governance activities.
B. Provide strategic guidance on the organizational processes to senior management.
C. Achieve agreement with the board regarding the range of activities, depth of review, and time period to include in the assessment.
D. Audit against the governance structures and practices widely used in the industry.
Question # 114
According to IIA guidance which of the following statements is true regarding the internal audit charier?
A. The charier should be revised and re-approved whenever a new chief audit executive (CAE) is appointed or at the request of the board
B. The charier should be re-approved every five years, in conjunction with the external quality assessment
C. The charier can be revised at the discretion of the CAE whenever 4 is determined that its content no longer supports the achievement of objectives
D. The charier should be reviewed and resubmitted for board approval annually together with the audit plan
Question # 115
Which of the following requests, if accepted by the internal audit activity, would impair its independence?
A. A request to develop workshops on corporate governance for management.
B. A request to act as liaison with external auditors.
C. A request to determine appropriate risk management responses for management.
D. A request to provide counseling services on ethical matters.
Question # 116
Which of the following is a control that is used mainly to check the integrity of data entered into a business application, whether the data is entered directly by staff, remotely by a business partner, or through a web-enabled application?
A. General IT control.
B. Processing control.
C. Input control
D. Integrity control
Question # 117
A new chief audit executive realized that the internal audit charter has not been updated in five years and only includes the Core Principles for the Professional Practice of Internal Auditing, the Code of Ethics, and the Standards. What mandatory component is missing?
A. Statement of Independence.
B. Operating Procedures of Internal Auditing.
C. Definition of Internal Auditing.
D. Attestation of Quality Assurance.
Question # 118
An audit client who was unsatisfied with the audit report rating called the chief audit executive (CAE) and complained that the internal auditor who performed the audit was biased because his spouse, who worked in the area under review, was on a list of employees to be terminated. Which of the following measures would be most appropriate to prevent this situation from arising?
A. Initiating an internal investigation to clarify whether a biased judgment took place.
B. Requiring the internal auditors to disclose any potential conflicts of interest.
C. Requiring that the audit client disclose any potential conflicts of interest with the auditor.
D. Requiring human resources manager to submit all future job applicants' data in order to identify relatives of auditors.
Question # 119
Which of the following controls would most likely prevent fraud related to the overpayment of vendors?
A. Require supervisory review of all invoices and cash disbursements exceeding a stated threshold.
B. Require the matching of a purchase order, receiving report, and invoice before payment.
C. Require all checks to be signed by more than one person.
D. Require all invoices to be paid within 30 days by check only.
Question # 120
According to HA guidance, if an internal auditor suspects fraud during an assurance engagement, what should the auditor do first?
A. Recommend parties involved to be sanctioned in accordance with the organization's policy.
B. Determine whether any additional audit work needs to be performed.
C. Launch an investigation to obtain details of the fraud and parties involved.
D. Request that the responsible process owner remediate the issue immediately.
Question # 121
Which of the following actions by the internal audit activity requires disclosure to the board of nonconformance with the Standards?
A. The internal audit activity did not complete an external assessment within the last seven years
B. The internal audit activity performed an engagement with limited scope due to lack of knowledge
C. The internal audit activity failed to consider risk when conducting a review of a department
D. An internal auditor was assigned to an engagement m an area where she previously worked more than 10 years ago
Question # 122
An internal auditor is assessing how the organization processes financial transactions and whether written policies and procedures are followed. The auditor requested to meet with certain employees to understand their related roles and responsibilities. However the employees refuse to meet with the auditor claiming they are too busy. Which of the following responses would best demonstrate the auditor's conflict-resolution skills?
A. The auditor considers the employees to be unresponsive and proceeds to document the actions and concerns as a scope limitation that can affect the engagement
B. The auditor considers other options to determine whether the employees are processing financial transactions as required by the organization
C. The auditor meets with senior management of the organization to discuss the employees' behavior and possible resolutions that would satisfy all parties
D. The auditor meets with the department supervisor and staff to discuss the employees' actions in order to obtain an understands and potential resolution
Question # 123
Which of the following should the internal audit activity establish to ensure auditors develop the appropriate skills for conducting audits?
A. An audit charter that includes the internal audit activity mission and vision
B. A policy encouraging audit staff to earn certifications
C. A quality assurance and improvement program to address audit risk areas
D. An internal audit plan that links engagements to strategic objectives
Question # 124
What is the best course of action when the internal audit activity does not have the knowledge necessary to perform a planned audit of the organization's new IT data backup process?
A. Postpone the audit engagement to a later date.
B. Recruit and hire a full-time staff auditor who is proficient in data backup processes.
C. Change the plan from an assurance engagement to a consulting engagement.
D. Provide data backup training to the engagement supervisor.
Question # 125
What is the main difference between a consulting engagement versus an assurance engagement?
A. The nature of services provided are defined in the internal audit charter.
B. Internal auditors must maintain objectivity while performing their work.
C. The objectives and scope of the engagement typically are directed by management.
D. Internal auditors may assume management responsibilities.
Question # 126
Which of the following must be considered by the chief audit executive before writing the internal audit charter?
A. Internal auditors' level of competencies and skills.
B. The manner in which the internal audit activity is viewed by the board.
C. Evaluation of staff certifications and continued development.
D. Effectiveness of the quality assurance and improvement program.
Question # 127
According to the Standards, in today's technology and business environments, how much computer and information systems-related knowledge and skills must an internal auditor have to be effective in fulfilling his job responsibilities?
A. Auditors must have an IT specialty in at least one of their organization's key information technology systems.
B. Auditors must be proficient in data analysis and computer assisted audit techniques for their organization.
C. Auditors must understand their organization's integrated test facilities and generalized audit software.
D. Auditors must understand their organization's IT governance, risk, and control processes.
Question # 128
Which of the following should play a leading role in overseeing ihe ethical atmosphere of an organization?
A. Internal audit activity.
B. Operating management.
C. Senior management.
D. Board of directors.
Question # 129
Due to toe increased operational responsibility of the CEO. The chief audit executive (CAE) of an organization currently reports to the chief financial officer (CFO). What is the likely imped of such a situation?
A. There may be limitation m the scope of engagements that can be undertaken
B. The CPO could provide expert advice when auditing areas under his purview
C. The internal audit activity is adequately positioned when the CAE reports to a member of executive management
D. The expense of finance staff can be catted upon during an audit of finance-related areas
Question # 130
A chief audit executive has reported to the board that the internal audit activity is lacking financial accounting knowledge for specific audit projects. Upon approval from the board which of the following hiring approaches is best in this situation?
A. An inbound rotational program
B. A full-time permanent recruitment
C. An outbound rotational program
D. A guest auditor program
Question # 131
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?
A. 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.
B. 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.
C. The engagement should be undertaken by audit assistants and other junior staff members who were not involved in the IPO process.
D. The CAE should disclose objectivity limitations to the audit committee and suggest alternatives, such as outsourcing the engagement.
Question # 132
Management decided to post the organization's newly established code of conduct on its website. This decision is primarily intended to mitigate which of the following risks?
A. Accountability risk.
B. Communication risk.
C. Knowledge risk.
D. Cultural risk.
Question # 133
Which of the following is the primary benefit of an effective professional development program for internal auditors?
A. An effective program may enhance internal auditors' business acumen
B. An effective program may ensure that HA Standards requirements are adhered to during audit engagements
C. An effective program may ensure internal auditors' effectiveness in setting the organization's nsk management process
D. An effective program may clarify management's expectations of the auditors and their responsibilities to the organization
Question # 134
Which combination of strategies would provide the best evaluation of the effectiveness of the organization's risk assessment activity? 1. Interview staff at various levels to discuss the organization's objectives, significant risks, and risk appetite. 2. Review board meeting minutes to determine whether the significant risks identified are communicated timely to the board. 3. Evaluate the adequacy and timeliness of management remediation actions by reviewing the control design, testing the controls, and reviewing monitoring procedures. 4. Review the professional development plans of internal audit staff to ensure all are competent to assess the organization's risk assessment activity.
A. 1 and 2 only.
B. 1.2, and 3 only.
C. 1.3. and 4 only.
D. 3 and 4 only.
Question # 135
The principle that "no action should be taken that may harm in some way the least fortunate people" is an expression of which of the following more general ethical principles?
A. Utilitarian benefits.
B. Personal virtues.
C. Religious injunctions.
D. Distributive justice.
Question # 136
Which of the following factors are commonly assessed to determine the magnitude of risk events?
A. Tolerance and appetite
B. Inherent and residual risk
C. Cost and benefit
D. Impact and likelihood
Question # 137
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?
A. The auditor should consider local cultures and customs in various regions when assessing control effectiveness.
B. Regardless of their location, employees at all levels share responsibility for designing effective controls to mitigate risks.
C. To achieve an effective internal control environment, the organization's risk management plan must be documented and communicated to all levels throughout each region.
D. Setting clear objectives is a precondition to effectively identifying, assessing, and responding to the organization's risks.
Question # 138
Which of the following statements demonstrates that internal auditors are in conformance with the standard of due professional care?
A. Internal auditors have shown they have the freedom to carry out their responsibilities.
B. Internal auditors have demonstrated the skills needed to carry out the audit engagement.
C. Internal auditors have strictly followed a formal audit process in conducting their work.
D. Internal auditors have demonstrated an unbiased mental attitude.
Question # 139
Which of the following best describes a proactive role for the internal audit activity with regard to the organization's ethics program?
A. Becoming a voting member of the organization's internal ethics council.
B. Performing an annual organizationwide employee survey.
C. Reviewing all departmental ethics-related policies.
D. Conducting annual ethics training for all employees.
Question # 140
A chief audit executive (CAE) recruited a few new internal auditors to reduce the resource gaps identified in this year's internal audit plan. One of the new recruits has several years of experience with the organization. Ten months ago. she served as a senior supervisor in the finance department. However, for the past 10 months, she has been helping the organization with implementing a new IT system. What approach should the CAE take for the upcoming financial statement controls audit?
A. Assign the new auditor to assist with conducting the fieldwork. but ensure that her work is reviewed by the CAE.
B. Assign the new auditor to assist with developing the audit program, but ensure that the audit program is executed by other audit staff.
C. Ensure that the new auditor's previous manager, and other close former coworkers, are excused during the audit.
D. Ensure that the new auditor is responsible only for the supervisory review, but not the execution of the audit field work.
Question # 141
According to the IIA Code of Ethics, which of the following best describes the conduct of an internal auditor who demonstrates the principle of competency?
A. The auditor is prudent in the use and protection of information acquired in the course of his work.
B. The auditor does not accept anything that may impair or be presumed to impair his professional judgment.
C. The auditor does not perform services in a particular area when he lacks skills in that area.
D. The auditor performs work with honesty, diligence, and responsibility.
Question # 142
Which of the following situations is most likely to prompt the internal audit activity to disclose its nonconformance with the Standards?
A. One of the organization's senior internal auditors owns a side business, though to date, no sales have been made to this business.
B. The annual internal audit plan includes performance audits of main business processes, but reviews of high-risk development projects were not considered.
C. The internal audit activity committed to carrying out an audit of documentation on investment hedging, and a hedging expert was contracted to assist with the engagement.
D. A periodic quality self-assessment of the internal audit activity identified a number of improvement areas with regard to key performance indicators.
Question # 143
Which of the following is true about corporate social responsibility (CSR)?
A. Social and environmental considerations are required parts of an organization's decision making
B. The Global Reporting Initiative provides standards on required disclosures of CSR.
C. CSR activities are overseen and managed by operational management.
D. Internal auditors can provide assurance on reported sustainability results.
Question # 144
Which of the following statements is true regarding the importance of risk management?
A. Risk management ensures the ability to eliminate potential hazards to the organization.
B. Risk management includes consideration of potential opportunities for the organization.
C. Risk management aids with the establishment of appropriate key performance indicators.
D. Risk management increases employees' commitment and belief in strategic goals.
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