IIA-CIA-Part2 Certification - The Ultimate Guide [Updated 2022]
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NEW QUESTION 10
Which of the following conditions is the strongest indicator of possible fraud?
- A. Independent reconciliations of subsidiary to general ledgers that are not always completed on a timely basis.
- B. An assistant treasurer who refuses to take vacations.
- C. A condition of excess manufacturing waste material.
- D. A manager who is often over budget at the end of a reporting period.
Answer: B
NEW QUESTION 11
Which of the following data sources would provide the least valid data for an audit of a retail store's customer service?
- A. A random survey of customer satisfaction given to customers as they leave the store.
- B. Interviews of randomly selected service personnel regarding the quality of service that they provide.
- C. A graph of customer service training across stores, comparing training with overall levels of service satisfaction.
- D. A graph that compares staffing levels for selected times with store traffic (number of customers) over the same time period.
Answer: B
NEW QUESTION 12
A manufacturing organization is considering a merger with a similar firm, and requests that the chief audit executive (CAE) perform a due diligence audit. During the preliminary survey, the CAE notes that inventory management is a high risk area. In consultation with the external auditors and legal advisors, the CAE learns that they share those concerns. Which of the following is the CAE's best course of action?
- A. Advise management that internal audit, external audit, and legal advisors all have concerns about inventory management and, given the high materiality of inventory, management should not proceed with the merger.
- B. Coordinate a review of inventory management with external auditors and legal advisors and ensure each group focuses on their area of expertise to ascertain the extent of the problems, if any.
- C. Perform an independent audit of the merging firm's inventory management practices to verify the concerns and to provide relevant and reliable results to management for their consideration and action.
- D. Coordinate with the merging firm's internal audit department to better understand the inventory management function and whether the concerns are well-founded.
Answer: B
NEW QUESTION 13
Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a follow-up of audit recommendations when developing engagement work schedules. Does the CAE's decision violate the Standards?
- A. No, because when there is evidence of sufficient motivation by the client, there is no need for follow-up action.
- B. Yes, because scarcity of resources is not a sufficient reason to omit follow-up action.
- C. Yes, because the Standards require the auditors to determine whether the client has appropriately implemented all of the auditor's recommendations.
- D. No, because the Standards do not specify whether follow-up is needed.
Answer: B
NEW QUESTION 14
An organization does not have a formal risk management function. According to the Standards, which of the following are conditions where the internal audit activity (IAA) may provide risk management consulting?
1. There is a clear strategy and timeline to migrate risk management responsibility back to management.
2. The IAA has the final approval on any risk management decisions.
3. The IAA does not give objective assurance on any part of the risk management framework for which it is responsible.
4. The nature of services provided to the organization is documented in the internal audit charter.
- A. 2, 3, and 4 only
- B. 1, 2, and 4 only
- C. 1, 3, and 4 only
- D. 1, 2, and 3 only
Answer: C
Explanation:
Section: Volume D
NEW QUESTION 15
Which of the following describes an internal auditor's responsibilities to include audit procedures to detect fraud in audits of a multinational organization?
- A. Proper audit procedures, when carried out with due professional care, will guarantee that fraud, if present, will be detected.
- B. Internal auditors do not have any specific responsibilities with respect to including fraud-related audit procedures.
- C. International Accounting Standards require the internal auditor to include audit procedures which would detect fraud if it would cause a material misrepresentation of the financial statements.
- D. If significant control weaknesses are detected, additional tests should be directed toward other indicators of fraud.
Answer: D
Explanation:
Section: Volume A
NEW QUESTION 16
According to the International Professional Practices Framework, the internal audit activity's decision to defer follow-up of recommendations and management's corrective actions until the next scheduled engagement for the area is justified when:
- A. Management has adequately understood and appropriately accepted the risk of not taking action to implement the recommendation.
- B. The significance of the finding or recommendation will allow auditors to perform monitoring by receiving periodic updates from management on corrective actions taken.
- C. The action taken by management to address the recommendation is sufficient when weighed against the importance of the finding.
- D. The reported findings or recommendations are significant enough to require immediate action by management.
Answer: C
NEW QUESTION 17
What type of analysis is performed when an auditor tests for unusual variations in information by comparing the number of employees working at a factory site with the direct cost of production each month over a period of one year?
- A. Horizontal analysis.
- B. Regression analysis.
- C. Trend analysis.
- D. Ratio analysis.
Answer: B
NEW QUESTION 18
An internal auditor is conducting tests to determine if an organization is in compliance with its payment approval policies. After reviewing a sample of vouchers selected, the internal auditor concluded that there were indicators of fraud. Which of the following would be the most appropriate method to expand the audit test to achieve the audit objective?
I.
Validate the completeness of the accounts payable files.
II.
Examine the sample of vouchers in greater detail.
III.
Increase the number of vouchers in the sample.
IV.
Broaden the scope of the examination to include credits received by accounts payable.
- A. I and II only
- B. II and III only
- C. I, II, and IV only
- D. I, III, and IV only
Answer: B
NEW QUESTION 19
A chief audit executive (CAE) suspects that several employees have used desktop computers for personal gain.
In conducting an investigation, the primary reason that the CAE would choose to engage a forensic information systems auditor rather than using the organization's information systems auditor is that a forensic information systems auditor would possess:
- A. Superior documentation and organization skills that would facilitate in the presentation of findings to senior management and the board.
- B. Knowledge of what constitutes evidence acceptable in a court of law.
- C. Knowledge of the computing system that would enable a more comprehensive assessment of the computer use and abuse.
- D. Superior analytical skills that would facilitate the identification of computer abuse.
Answer: B
NEW QUESTION 20
The chief audit executive's responsibility regarding control processes includes:
- A. Maintaining the organization's governance processes.
- B. Overseeing the establishment of internal control processes.
- C. Ensuring that the internal audit activity assesses all control processes annually.
- D. Assisting senior management and the audit committee in the development of an annual assessment about internal control.
Answer: D
NEW QUESTION 21
What is the most likely source of information for a detailed schedule of a company's insurance policies in force?
- A. Policies and procedures governing insurance coverage.
- B. The files containing insurance policies with various carriers.
- C. Original journal entries found in the cash disbursements journal, along with supporting checks processed by the bank.
- D. The current fiscal year's budget for insurance, together with the beginning balance of the prepaid insurance account.
Answer: B
NEW QUESTION 22
During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?
- A. Cost mischarging.
- B. Fictitious vendor.
- C. Bid rotation.
- D. Defective pricing.
Answer: A
NEW QUESTION 23
Company A has a formal comprehensive corporate code of ethics while company B does not.
Which of the following statements regarding the existence of the code of ethics in company A can be logically inferred?
1. Company A exhibits a higher standard of ethical behavior than does company B.
2. Company A has established objective criteria by which an employee's actions can be evaluated.
3. The absence of a formal corporate code of ethics in company B would prevent a successful audit of ethical behavior in that company.
- A. I and II only
- B. II and III only
- C. III only
- D. II only
Answer: D
NEW QUESTION 24
Audit supervision includes approval of the engagement report in order to ensure that:
- A. Report findings are substantiated.
- B. Senior management supports the report's conclusions.
- C. Report style and grammar are appropriate.
- D. The client's objectives are met.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 25
An internal audit activity is participating in the due diligence work for an acquisition that a
company is considering. One engagement objective is to determine if the acquisition's accounts payable contain all outstanding liabilities. Which of the following audit procedures would not be relevant for this objective?
- A. Select a sample of accounts payable from the accounts payable list and verify the supporting receiving reports, purchase orders, and invoices.
- B. Trace receiving reports issued before the period end to the related vendor invoices and accounts payable list.
- C. Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.
- D. Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.
Answer: A
NEW QUESTION 26
Which of the following is the best approach for obtaining feedback from engagement clients regarding the quality of internal audit work?
- A. Distribute questionnaires to selected engagement clients shortly before preparing the internal audit annual activity report.
- B. Ask questions during the exit interviews and send copies of the documented responses to the clients.
- C. Call engagement clients after the exit interviews and send copies of the documented responses to the clients.
- D. Provide questionnaires to engagement clients at the beginning of each engagement and request that the clients complete and return them after the engagements.
Answer: D
NEW QUESTION 27
When interviewing an individual suspected of fraud, what type of questions would be asked after the introductory questions?
- A. Assessment questions.
- B. Informational questions.
- C. Admission-seeking questions.
- D. Closing questions.
Answer: B
NEW QUESTION 28
Which of the following is not a primary purpose for conducting a walk-through during the initial stages of an assurance engagement?
- A. To help develop process maps.
- B. To determine segregation of duties.
- C. To test the adequacy of controls.
- D. To identify residual risks.
Answer: C
NEW QUESTION 29
According to the International Professional Practices Framework, which of the following situations is an indicator of a healthy relationship between the audit committee and the internal audit function?
- A. The CAE does not distribute audit reports to the audit committee. However, the audit committee is made aware of the scope and findings of audits performed.
- B. The chief audit executive (CAE) has direct access to the audit committee and the board but typically does not interact directly with them unless a material weakness in the control environment is identified.
- C. The CAE sends the audit committee all communications between the internal audit department and the audit client in order to keep the audit committee up to date on the engagement.
- D. Whenever a potential audit finding or testing exception is first identified, the audit committee is immediately notified, as well as for any subsequent changes in the status of the engagement.
Answer: A
Explanation:
Section: Volume D
NEW QUESTION 30
The following is an excerpt from an audit engagement workpaper:
A Company
Accounts Receivable
Date
Objective: To determine if the computer system is correctly recording all accounts receivable transactions.
Procedures: Judgmental selection of a sample of all accounts receivable balances greater than $50,000 for positive confirmation of balances.
Conclusion: Based on the results of testing wherein all but three confirmations were returned, the accounts receivable balance is fairly presented in all material respects.
Which of the following is true regarding the workpaper?
- A. The audit procedures used are not consistent with the audit objective.
- B. It is not appropriate to judgmentally select a sample when testing accounts receivable.
- C. A conclusion should be reached only for the results of overall testing, not for individual procedures.
- D. The format of the workpaper does not conform to the standard format for workpapers.
Answer: A
NEW QUESTION 31
An internal auditor has completed an audit of an organization's activities and is ready to issue a report. However, the client disagrees with the internal auditor's conclusions. The auditor should:
- A. Perform additional work, with the client's concurrence, to resolve the areas of disagreement and delay the issuance of the report until agreement is reached.
- B. Withhold the issuance of the audit report until agreement on the issues is obtained.
- C. Issue the audit report and omit the client's conclusion as it is not the opinion of the internal auditor.
- D. Issue the audit report and state both the auditor and client positions and the reasons for the disagreement.
Answer: D
NEW QUESTION 32
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