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IIA IIA-CIA-Part1 Exam Dumps

Essentials of Internal Auditing

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IIA IIA-CIA-Part1 Sample Questions

Question # 1

Which of the following would be the best example of a monitoring control for a chain of restaurants?

A. Each restaurant manager reconciles the cash received with the food orders recorded on the computer.
B. All food orders must be entered through the computer,and there is segregation of duties between the food servers and the cooks.
C. Corporate management prepares a detailed analysis of gross margin per restaurant and investigates those showing a significantly lower gross margin.
D. Proof of bank deposit is transmitted to corporate headquarters on a daily basis.

Question # 2

Why is the concept of residual risk important?

A. Because residual risk is difficult to measure.
B. Because residual risk is all of the risk that remains after controls are established.
C. Because the cost-benefit analysis supporting control design is part of the measure of residual risk.
D. Because the risk that remains after control design and implementation needs to be acceptable to senior management.

Question # 3

The first stage in the development of a crisis management program is to:

A. Formulate contingency plans.
B. Conduct a risk analysis.
C. Create a crisis management team.
D. Practice the response to a crisis.

Question # 4

A major corporation is considering significant organizational changes. Which of the following groups would not be responsible for implementing these changes?

A. Employees.
B. Senior management.
C. Common stockholders.
D. Outside consultants.

Question # 5

According to the International Professional Practices Framework, a review team must express an opinion on which of the following when performing an external assessment of an internal audit activity? I. Conformance with the Standards and IIA Code of Ethics.II. Effectiveness of continuous improvement activities. III. Feedback from internal audit customers and other stakeholder groups. IV. Efficiency and effectiveness of the internal audit activity's administration processes.

A. Ionly
B. IIIonly
C. I and IIonly
D. II and IVonly

Question # 6

When planning an audit engagement, what should an internal auditor first consider when assessing the risk of fraud in the area to be audited?

A. Impact of and exposure to fraud.
B. Existence of evidence of fraud.
C. Organizational structure.
D. Management's risk appetite.

Question # 7

Which of the following risk factors is most subjective?

A. Changes in staff,systems,or the environment.
B. Prior audit findings.
C. Size of the unit being audited.
D. Competency of operating management.

Question # 8

Which aspect of the audit function would be most impacted by a lack of coordination between an organization's internal and external auditors?

A. Responsiveness.
B. Timeliness.
C. Effectiveness.
D. Efficiency.

Question # 9

An organization's chief audit executive (CAE) has been asked to monitor and report on any violations of the organization's code of conduct. The CAE should:

A. Review and adjudicate all complaints.
B. Lead the committee responsible for the oversight of the code.
C. Develop specific procedures to ensure that the code is clearly communicated to all employees.
D. Participate in an advisory capacity on the committee that adjudicates any violations.

Question # 10

Which of the following is least likely to enhance the independence of an internal audit activity?

A. The existence of a formal written charter for the internal audit activity.
B. Submission of an annual internal audit work plan to the audit committee.
C. A direct reporting relationship to the audit committee.
D. Adherence to the organization's position classification structure.

Question # 11

Which of the following reporting relationships results in the greatest impairment to the independence of the chief audit executive (CAE)?

A. The CAE reports administratively and functionally to the president.
B. The CAE reports administratively to the president and functionally to the board.
C. The CAE reports administratively to the chief financial officer and functionally to the president.
D. The CAE reports administratively to the audit committee and functionally to the chief operating officer.

Question # 12

An employee who recently transferred into the internal audit activity has been assigned to audit the accounts payable system. Which function, if previously performed by this employee, would represent a conflict of interest?

A. Monitoring the allowance for doubtful accounts.
B. Writing procedures for the handling of duplicate payments.
C. Signing timekeeping cards for subordinates.
D. Reviewing shipping documents for accuracy.

Question # 13

A company's chief audit executive determines that the internal audit staff does not have the requisite skills to conduct an audit of the financial derivatives area. Which of the following actions would be the least acceptable?

A. Notify the audit committee of the problem and consult with them regarding outsourcing the audit engagement to a qualified external auditing firm.
B. Determine the requisite knowledge needed and obtain the proper training for auditors if such training is available within the appropriate time framework outlined by the audit committee.
C. Notify the audit committee of the problem and assign the most competent auditors to perform the audit engagement.
D. Employ the skills of a financial derivatives expert to consult on the project, and supplement the consulting with a local seminar on financial derivatives.

Question # 14

During an audit engagement in an insurance company, an internal auditor discovered that senior management had purposely misclassified $200, 000 in assets on financial statements submitted to regulatory authorities in order to avoid significant statutory penalties. To remain in compliance with the IIA Code of Ethics, what would be the most appropriate action for the auditor to take?

A. Note the situation in the workpapers and inform the chief executive officer.
B. Send an informative memo to the external auditors.
C. Discuss the matter with audit management and ensure that the audit committee is informed.
D. Report the matter to regulatory authorities since senior management is implicated.

Question # 15

During an audit of financial contracts, an internal auditor learns that a relative has a substantial loan with the organization. The auditor should:

A. Exclude the relative's information from the audited work and proceed with the audit engagement.
B. Proceed with the audit engagement but disclose in the engagement final communication that the relative is a customer
C. Immediately withdraw from the audit engagement.
D. Notify management and the chief audit executive (CAE) and have the CAE determine whether the auditor should continue with the audit engagement.

Question # 16

The top three sales representatives for a company consistently include non-allowable charges on their expense reports. Line management is reluctant to deny reimbursement of the charges for fear of losing the sales representatives. This situation has the greatest negative impact on which of the following internal control components?

A. Monitoring.
B. Control environment.
C. Information and communication.
D. Control activities.

Question # 17

Which of the following factors affects the control risk of a company?

A. Potential problems like technological obsolescence.
B. Unusual pressures on management.
C. Complex accounts that require expert valuations.
D. Segregation of duties.

Question # 18

Human resources and payroll are separate departments. Which of the following combinations would provide the best segregation of duties?

A. Human resources personnel add employees,payroll personnel process hours,and humanresources personnel deliver paychecks to employees.
B. Human resources personnel add employees,review and submit payroll hours to the payrolldepartment for processing,and deliver paychecks to employees.
C. Human resources personnel add employees,and payroll personnel process hours and enteremployee bank account numbers. Paychecks are automatically deposited in the employee's bankaccount.
D. Payroll personnel add employees and enter employee bank account numbers but processhours only as approved by the human resources department. Paychecks are automaticallydeposited in the employee's bank account.

Question # 19

Which of the following is an appropriate role for the board in governance?

A. Preparing written organizational policies that relate to compliance withlaws,regulations,ethics,and conflicts of interest.
B. Ensuring that financial statements are understandable,transparent,and reliable.
C. Assisting the internal audit activity in performing annual reviews of governance.
D. Working with the organization's attorneys to develop a strategy regarding currentlitigation,pending litigation,or regulatory proceedings governance.

Question # 20

According to the International Professional Practices Framework, which of the following is the appropriate division of responsibilities for the coordination of internal and external audit efforts? I. Oversight of WorkCoordination of ActivitiesChief audit executiveSenior managementII. BoardChief audit executiveIII. Chief financial officerChief audit executive3IV. BoardChief financial office

A. I
B. II.
C. III.
D. IV.

Question # 21

According to the Standards, the organizational status of the internal audit activity:

A. Must be sufficient to permit the accomplishment of its audit responsibilities.
B. Is best when the reporting relationship is direct to the board of directors.
C. Requires the board's annual approval of the audit schedules,plans,and budgets.
D. Is guaranteed when the charter specifically defines its independence.

Question # 22

A high-volume retailer of consumer goods has used point-of-sale data to record sales and update inventory records for several years. When price changes are scheduled, corporate headquarters downloads a price change file to a computer server system at each store. Each store's assistant manager is responsible for checking the server for downloads and running the program that updates the store's price file at the authorized price update time. In comparison with having headquarters initiate the price update centrally, this approach to price updating will most likely:

A. Decrease the risk that customers will be undercharged consistently for sales items.
B. Decrease the risk that item prices will sometimes be inaccurate.
C. Increase the risk that customers will be undercharged consistently for sales items.
D. Increase the risk that item prices will sometimes be inaccurate.

Question # 23

An internal auditor is reviewing a new automated human resources system. The system contains a table of pay rates which are matched to the employee job classifications. The best control to ensure that the table is updated correctly for only valid pay changes would be to:

A. Limit access to the data table to management and line supervisors who have the authority todetermine pay rates.
B. Require a supervisor in the department,who does not have the ability to change the table,tocompare the changes to a signed management authorization.
C. Ensure that adequate edit and reasonableness checks are built into the automated system.
D. Require that all pay changes be signed by the employee to verify that the change goes to abona fide employee.

Question # 24

According to the International Professional Practices Framework, internal auditors should possesswhich of the following competencies?I. Proficiency in applying internal auditing standards, procedures, and techniques.II. Proficiency in accounting principles and techniques.III. An understanding of management principles.IV. An understanding of the fundamentals of economics, commercial law, taxation, finance, andquantitative methods.

A. Ionly
B. IIonly
C. I and IIIonly
D. I,III,and IVonly

Question # 25

Which of the following is not an appropriate role for internal auditors after a disaster occurs?

A. Monitor the effectiveness of the recovery and control of operations.
B. Correct deficiencies of the entity's business continuity plan.
C. Recommend future improvements to the entity's business continuity plan.
D. Assist in the identification of lessons learned from the disaster and the recovery operations.

Question # 26

Which of the following lists the audit activities in the order in which they would generally becompleted during a preliminary survey?I. Write detailed audit procedures.II. Identify client objectives, goals, and standards.III. Identify risks and controls intended to prevent associated losses.IV. Determine relevant engagement objectives.

A. II,I,IV,III.
B. II,III,IV,I.
C. III,IV,II,I.
D. II,IV,I,III.

Question # 27

During the planning phase of an audit of suspected overbilling on contracts for security services, an auditor should perform all of the following except:

A. Interviewing an official of the security services company to determine the cause of recentincreases in billings for services.
B. Interviewing the manager who requested the audit engagement.
C. Obtaining a copy of the contract between the two organizations.
D. Preparing an engagement program.

Question # 28

Which of the following statements regarding segregation of duties is true?

A. When evaluating an organization's policy on segregation of duties,employee competence doesnot need to be considered.
B. An organizational chart provides an accurate definition of segregation of duties.
C. A restrictive segregation-of-duties policy can help improve an organization's communication.
D. Policies on segregation of duties in information systems must recognize the difference betweenlogical and physical access to assets.

Question # 29

An auditor plans to analyze customer satisfaction, including. (1) customer complaints recorded bythe customer service department during the last three months; (2) merchandise returned in the lastthree months; and (3) responses to a survey of customers who made purchases in the last threemonths.Which of the following statements regarding this audit approach is correct?

A. Although useful,such an analysis does not address any risk factors.
B. The survey would not consider customers who did not make purchases in the last threemonths.
C. Steps 1 and 2 of the analysis are not necessary or cost-effective if the customer survey iscomprehensive.
D. Analysis of three months' activity would not evaluate customer satisfaction.

Question # 30

If an internal auditor discloses confidential information in response to a lawsuit, the internal auditor has violated.

A. The IIA Code of Ethics.
B. The Standards.
C. Both the IIA Code of Ethics and the Standards.
D. Neither the IIA Code of Ethics nor the Standards.

Question # 31

In developing an appropriate work program for an audit engagement, the most important factor for an audit supervisor to consider is the:

A. Availability of records and data.
B. Potential impact of risks.
C. Audit personnel's knowledge and experience.
D. Time required to complete the engagement.

Question # 32

An organization has a policy requiring two signatures on all checks written for amounts in excess of $10, 000. When evaluating controls over disbursements, an auditor would conclude that a greater risk exists if.

A. The auditor located two checks for $9,000 each that contained one authorized signature.
B. The $10,000 was an immaterial amount to the organization and very few cash disbursementsrequired an amount in excess of $10,000.
C. The director of accounting was not one of the authorized signers.
D. There were several instances in which successively numbered checks for amounts between$5,000 and $10,000 were made payable to the same vendor.

Question # 33

Which of the following is not an appropriate type of coordination between the internal audit activity and regulatory auditors?

A. Regulatory auditors share their perspective on risk management,control,and governance withthe internal auditors.
B. Internal auditors perform fieldwork at the direction of the regulatory auditors.
C. Internal auditors review copies of regulatory reports in planning related internal engagements.
D. Regulatory and internal auditors exchange information about planned activities.

Question # 34

Which of the following activities most significantly increases the risk that a bank will make poorquality loans to its customers?

A. Borrowers may not sign all required mortgage loan documentation.
B. Fees paid by the borrower at the time of the loan may not be deposited in a timely manner.
C. The bank's loan documentation may not meet the government's disclosure requirements.
D. Loan officers may override the lending criteria established by senior management.

Question # 35

An organization that outsources much of its internal audit work to an external service provider is planning for an external quality assessment. Which of the following options would accomplish this task and be in conformance with the Standards?

A. External industry associate that performed a similar review for a supplier of the organization.
B. A team from an independent entity that previously employed the chief audit executive of theorganization.
C. A team under the direction of the organization's chief audit executive with validation by a formermanager of the internal audit activity.
D. The same external service provider because of its competency and experience with theorganization.