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IIA IIA-CIA-Part1 Essentials of Internal Auditing Exam Practice Test

Demo: 28 questions
Total 187 questions

Essentials of Internal Auditing Questions and Answers

Question 1

Which of the following scenarios best illustrates a rationalization as the root cause of potential fraud?

Options:

A.

Managers who have been with the organization for several decades become aware that newly hired, younger managers are being moved more quickly into senior positions.

B.

The controller at a nationwide manufacturing company recently opted to no longer require two-week mandatory vacations for accounting staff.

C.

Security cameras that monitor cash handling at the register are not functioning.

D.

The organization is slowly phasing out three mature products that produce the highest commissions for the sales staff.

Question 2

Which of the following is the best way to detect fraud?

Options:

A.

Conduct anti-fraud training.

B.

Perform background investigations.

C.

Implement process controls.

D.

Activate a whistleblower hotline.

Question 3

Which of the following are generally recognized as essential elements of a corporate social responsibility program?

Options:

A.

Human rights and the environment.

B.

Organizational governance and financial reporting.

C.

Fair operating practices and government regulation.

D.

Consumer issues and return on investment.

Question 4

Which of the following is an example of a management control technique?

Options:

A.

A budget.

B.

A risk assessment.

C.

The board of directors.

D.

The control environment.

Question 5

Which of the following would be considered a violation of The IIA's mandatory guidance on independence?

Options:

A.

The chief audit executive (CAE) reports functionally to the board and administratively to the chief financial officer.

B.

The board seeks senior management's recommendation before approving the annual salary adjustment of the CAE.

C.

The CAE confirms to the board, at least once every five years, the organizational independence of the internal audit activity.

D.

The CAE updates the internal audit charter and presents it to the board for approval periodically, not on a specific timeline.

Question 6

An internal auditor who is carrying out an engagement to review controls related to corporate tax reporting must possess which of the following competencies?

1. Proficiency in analyzing key IT risks and controls.

2. The ability to recognize significant deviations from good business practices.

3. Knowledge of key indicators of fraud in tax reporting.

4. The ability to recognize the existence of problems related to tax accounting.

Options:

A.

1 and 4 only.

B.

3 and 4 only.

C.

2, 3, and 4 only.

D.

1,2, 3, and 4.

Question 7

According to IIA guidance, which of the following describes the primary reason to implement environmental and social safeguards within an organization?

Options:

A.

To enable Triple Bottom Line reporting capability.

B.

To facilitate the conduct of risk assessment.

C.

To achieve and maintain sustainable development.

D.

To fulfill regulatory and compliance requirements.

Question 8

Which of the following scenarios best illustrates the principle of due professional care?

Options:

A.

An internal auditor evaluates the significant risks arising from a consulting engagement.

B.

An internal auditor declares that he would have a conflict of interest in providing planned audit support.

C.

An internal auditor has been given sufficient authority to access documents needed to make an appraisal of an issue.

D.

An internal auditor uses technology-based audit techniques to ensure that all significant risks are identified.

Question 9

Which of the following statements is true about The IIA Global Internal Audit Competency Framework?

Options:

A.

The core competencies outlined in the framework are not expected of a person undertaking an entry-level position as an internal auditor.

B.

The framework is designed to be used primarily by chief audit executives that are developing indicators to measure the performance of the internal audit activity for which they are responsible.

C.

The framework lists the core competencies internal auditors should possess before attempting to attain The IIA's Certified Internal Auditor certification.

D.

The framework describes competencies needed for individual internal auditors, but not those necessary at the chief audit executive level.

Question 10

A large sales organization maintains a system of internal control according to the COSO model and has updated its code of conduct. This change relates to which component of the COSO framework?

Options:

A.

Control activities.

B.

Information and communication.

C.

Commitment.

D.

Control environment.

Question 11

According to IIA guidance, which of the following statements about working papers is false?

Options:

A.

They assist in the implementation of recommendations.

B.

They provide support for communication to third parties.

C.

They demonstrate compliance with auditing standards.

D.

They contribute to development of the internal audit staff.

Question 12

An internal auditor uses a predefined macro provided in a popular spreadsheet application to verify the present value of the organization's investments. Which of the following is the most appropriate course of action regarding the auditor's use of this functionality?

Options:

A.

The auditor should accept the calculations generated by the function, as any further work or documentation would be inefficient.

B.

The auditor should perform a manual recalculation of several results to validate and document the results.

C.

The auditor should review the programming of the macro before its use to ensure that it is appropriate for the required calculations.

D.

The auditor should tabulate the results in the spreadsheet to ensure the macro has generated the correct results for all calculations.

Question 13

According to IIA guidance, which of the following statements is true when an internal auditor performs consulting services that improve an organization's operations?

Options:

A.

The services must be aligned with those defined in the internal audit charter.

B.

The services must not be performed by the same internal auditor who performed assurance services, in order to maintain objectivity.

C.

The services may preclude assurance services from the consulting engagement.

D.

The services impose no responsibility to communicate information other than to the engagement client.

Question 14

Which of the following actions should the audit committee take to promote organizational independence for the internal audit activity?

Options:

A.

Delegate final approval of the risk-based internal audit plan to the chief audit executive (CAE).

B.

Approve the annual budget and resource plan for the internal audit activity.

C.

Assist the CAE with hiring objective and competent internal audit staff.

D.

Encourage the CAE to communicate and coordinate with the external auditor.

Question 15

Click the Exhibit.

Internal auditors are asked to keep track of how many hours per day they spend planning the audit, conducting the engagement, and writing the audit report. The data for two days has been collected as follows:

Day 1

Day 2

Planning the audit

2 hours

3 hours

Conducting the engagement

1 hour

1 hour

Writing the audit report

2 hours

4 hours

Which of the following graphs depicts the data accurately?

Options:

A.

Graph A only

B.

Graph B only

C.

Both A and B.

D.

Neither A nor B.

Question 16

A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

Options:

A.

Require the physician to submit a signed statement attesting that the treatments had been performed.

B.

Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider.

C.

Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.

D.

Use computer software to identify abnormal claims based on the insured's age and medical history.

Question 17

Which of the following is true regarding the use of a formal risk management framework?

1. It facilitates a methodical approach to risk mitigation.

2. It defines and standardizes the terminology used in risk communication.

3. It establishes the risk tolerance levels to be accommodated in the strategy.

4. It facilitates the alignment of risk mitigation strategies with management priorities.

Options:

A.

1.2, and 3.

B.

1,2, and 4.

C.

1.3, and 4.

D.

2. 3, and 4.

Question 18

Which of the following activities should the chief audit executive perform to ensure compliance with an organization's code of conduct?

Options:

A.

Act as an adviser to the committee responsible for reviewing violations of the code.

B.

Review and adjudicate all violations of the code of conduct.

C.

Lead the committee responsible for the oversight of the code.

D.

Implement a system of procedures to inform all employees of the code.

Question 19

A chief audit executive (CAE) is reviewing the internal audit activity's performance and is concerned that the average number of revisions to findings is steadily rising, making it increasingly difficult to trace the finding to the supporting evidence and workpapers. According to MA guidance, which of the following elements of the internal audit activity's quality assurance and improvement program would provide the CAE with the most helpful insight into the cause of this problem?

Options:

A.

The overall effectiveness of the internal audit activity's periodic self assessments.

B.

The type of audit productivity and performance statistics reported.

C.

The adequacy of the day-to-day supervision and review process.

D.

The scope and frequency of external assessments.

Question 20

An internal audit activity includes in its audit reports the assertion that its work is performed in conformance with the International Standards for the Professional Practice of Internal Auditing {Standards). A recent external quality assessment concluded that the internal audit activity had substantial deficiencies that impact its overall operations. According to IIA guidance, which of the following is the most appropriate action for issuing future audit reports?

Options:

A.

Refrain from indicating that the internal audit activity operates in conformance with the Standards until the chief audit executive confirms that the internal audit activity has addressed all areas of nonconformance and the audit committee has been notified.

B.

Refrain from indicating that the internal audit activity operates in conformance with the Standards until another external assessment confirms that the significant areas of nonconformance have been addressed.

C.

Indicate that the internal audit activity operates in partial conformance with the Standards, as the internal audit activity has a quality assurance and improvement program in place to address deficiencies and has met the requirement for conducting an external assessment.

D.

Update and reissue previous audit reports, removing the assertion that the internal audit activity operates in conformance with the Standards, and distribute them to all parties who received the original reports.

Question 21

The chief audit executive (CAE) has assigned an internal auditor to an upcoming engagement. Which of the following requirements would most likely indicate that the internal auditor was assigned to an assurance engagement?

Options:

A.

The assigned internal auditor must determine the objectives, scope, and techniques of the engagement.

B.

The CAE must personally obtain the needed skills, knowledge, or other competencies if the internal auditor does not have them.

C.

The assigned internal auditor must not assume management responsibilities while performing the engagement.

D.

The assigned internal auditor must maintain objectivity while performing the engagement.

Question 22

When taken by a chief audit executive, which of the following actions would be most likely to prevent division exaggerating sales reports?

1) Announcing a series of internal audit engagements focusing on compliance with corporate sales-reporting

2) Asking the president and the board to issue a statement of corporate policy stressing the importance of account reporting and the negative consequences of intentional misreporting.

3) Setting up a hotline for employees to report fraudulent behavior anonymously.

4) Assisting the controller in developing and monitoring a series of business process indicators , which are history with, but independent of sales.

Options:

A.

1 and 2 only

B.

2 and 3 only

C.

2 and 4 only

D.

3 and 4 only

Question 23

A new internal audit activity is creating its first charter. According to IIA guidance, which of the following objectives would be appropriate for inclusion in the charter?

Options:

A.

Continuously monitor the organization's overall risk activities in relation to its risk appetite.

B.

Evaluate the adequacy and effectiveness of the organization's governance activities.

C.

Oversee the establishment and administration of an effective risk management program.

D.

Assist management in implementing recommended control improvements.

Question 24

When auditing the award of a major contract, which of the following should an internal auditor suspect as a red flag for a bidding fraud scheme?

1. Subsequent change orders increase requirements for low-bid items.

2. Material contract requirements are different on the actual contract than on the request for bids.

3. A high percentage of employees are charged to indirect accounts.

4. Losing bidders are hired as subcontractors.

Options:

A.

1 only

B.

2 only

C.

1 and 3.

D.

2 and 4.

Question 25

According to IIA guidance, which of the following statements describes one of the similarities between assurance and consulting services?

Options:

A.

When planning assurance and consulting engagements, internal auditors must consider the strategies and objectives of the activity being reviewed.

B.

Internal auditors determine the engagement objectives, scope, and work program for both assurance and consulting services.

C.

Internal auditors must not provide assurance or consulting services for an activity for which they had responsibility within the previous year.

D.

Both assurance and consulting services generally involve the internal auditor, the area under review, senior management, and the board.

Question 26

An organization is beginning to implement an enterprise risk management program. One of the first steps is to develop a common risk language. Which of the following statements about a common risk language is true?

Options:

A.

Management will be able to reduce inherent risk because they will have a better understanding of risk.

B.

Internal auditors will be able to reduce their sample sizes because controls will be more consistent.

C.

Stakeholders will have more assurance that the risks are assessed consistently.

D.

Decision makers will understand that the likelihood of missing or ineffective controls will be reduced.

Question 27

An internal audit team is performing an audit of workplace accident claims.

Which of the following actions by the audit team best demonstrates due professional care?

Options:

A.

Having an occupational health officer on the engagement team.

B.

Determining that the claims have been classified properly.

C.

Placing reliance on medical reports from the injured worker's doctor.

D.

Reviewing claims to ensure all accidents actually occurred in the workplace.

Question 28

A fraud investigation was completed by management, and a proven fraud was communicated to relevant authorities. According to MA guidance, which of the following roles would be most appropriate for the internal audit activity to undertake after the investigation?

Options:

A.

Plan employee sessions and team building strategies for the organization to improve awareness of fraud among employees.

B.

Review the investigation and implement any improvements to the process.

C.

Conduct lessons learned sessions to ascertain how the fraud occurred and which controls failed.

D.

Determine why The fraud was not detected earlier and design controls to strengthen early detection.

Demo: 28 questions
Total 187 questions