IIA-CIA-Part1 Practice Exam Tests Latest Updated on Mar-2022
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NEW QUESTION 108
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. 1 and 2 only
- B. 2 and 3 only
- C. 2 only
- D. 3 only
Answer: C
NEW QUESTION 109
An internal auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation. The primary deficiency with the above process is that:
- A. The use of a questionnaire precluded the auditor from documenting other information.
- B. The engagement program was incomplete.
- C. The auditor failed to consider the importance of the information offered.
- D. A questionnaire was used in a situation where a structured interview should have been used.
Answer: C
NEW QUESTION 110
A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annua snowfall for the coming winter. Which of the following best describes this type of risk?
- A. Net.
- B. Accepted.
- C. Residual.
- D. Inherent.
Answer: D
NEW QUESTION 111
According to the COSO Enterprise Risk Management - Integrated Framework, which of the following statements is true regarding the role of risk appetite in an organization?
- A. Risk appetite is determined in part by how an entity allocates its resources.
- B. Risk appetite reflects the organization's risk philosophy and influences its operating style.
- C. Risk appetite is often best measured in the same units as its related objective.
- D. A high risk appetite may limit capital investment in high risk areas.
Answer: B
NEW QUESTION 112
Which of the following scenarios would represent the greatest threat to the authority of the internal audit activity (IAA)?
- A. A change was implemented requiring the IAA to report administratively to the organization's chief legal counsel rather than the board.
- B. Responsibility for risk management processes were removed from the IAA and placed under a newly created chief risk officer.
- C. An internal auditor was informed by the chief financial officer that client survey results would be unfavorable unless the auditor changed a finding in the report.
- D. The IAA was denied access to expenditure and budget requirement reports because the reports were considered to be financial administrative matters.
Answer: D
Explanation:
Section: Volume E
NEW QUESTION 113
Which of the following would provide the best evidence of errors in the quantities of items received from suppliers?
- A. Purchase requisitions and purchase orders.
- B. Warehouse receiving logs.
- C. Suppliers' reports of over shipments.
- D. Observation and inspection of inventory.
Answer: B
NEW QUESTION 114
An internal auditor has taken an attributes sample of a bank's existing loan portfolio. Out of a sample of 60 loans, the auditor founD.
Four that were not properly collateralized.
Five that were not in compliance with bank policies (other than lack of collateralization).
Four that were part of a related-party group, but were set up as separate loan entities.Of the 60 loans selected in the sample, these errors were noted on a total of 10 loans. Several loans had multiple problems. Which of the following conclusions can the auditor reach from these observations?
There is sufficient evidence that fraudulent activity is taking place by one or more of the bank's lending officers.
The financial statements will be misstated as a result of these actions.
There are significant noncompliance audit findings that should be reported.
- A. 1 and 2 only.
- B. 2 and 3 only.
- C. 3 only.
- D. 1 and 3 only.
Answer: C
NEW QUESTION 115
After several years in the engineering department, an engineer was transferred to the internal audit department. One month later, the new auditor was assigned to an assurance engagement for the engineering department. When the auditor's former engineering supervisor suggested a change in the sample selection method, the auditor consulted with the audit supervisor. They determined that the suggested method would not be as representative and that the original selection method should be used.
In this situation, the auditor:
- A. Does not have independent organizational status since the auditor recently transferred from the engineering department.
- B. Does not have objectivity since the auditor recently transferred from the engineering department.
- C. Maintained an independent mental attitude and is therefore objective.
- D. Has subordinated professional judgment, and objectivity is therefore impaired.
Answer: B
NEW QUESTION 116
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. Engaging an external industry associate that performed a similar review for a supplier of the organization.
- B. Using a team under the direction of the organization's chief audit executive, and obtaining validation from a former manager of the internal audit activity.
- C. Using the same external service provider because of its competency and experience with the organization.
- D. Selecting a team from an independent entity that previously employed the chief audit executive of the organization.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 117
The chief audit executive for an organization has just completed a risk assessment process, identified the areas with the highest risk, and assigned an audit priority to each. Which of the following statements is true and consistent with the International Professional Practices Framework?
I. Items should be ranked in the order of quantifiable dollar exposure to the organization.
II. The audit priorities should be in order of major control deficiencies.
III. The risk assessment, though quantified, is the result of professional judgments about both exposures and probability of occurrences.
- A. I only
- B. II and III only
- C. I, II, and III.
- D. III only
Answer: D
NEW QUESTION 118
A chief audit executive used risk assessment to prepare the audit work schedule. Which of the following would be the least appropriate reason to modify the schedule?
- A. Budget constraints or expansions.
- B. Change in the relative risk of auditable activities during the year.
- C. Request for postponement since the audit would be too complicated.
- D. Need for coordination of audit activities with the external auditors.
Answer: C
NEW QUESTION 119
A chief audit executive (CAE) submits internal audit activity (IAA) plans and information about significant interim changes to senior management and the board for review. Which other piece of information should the CAE provide to senior management and the board?
- A. The CAE's preferred statistical analysis methods and relevant software to be utilized.
- B. Resource requirements and resource limitations.
- C. Identification of proposed consultants and support staff for the IAA.
- D. The most recent engagement of each member of the audit staff and its duration.
Answer: B
NEW QUESTION 120
Which of the following is most likely to function as a directive control?
- A. Insurance claims.
- B. Security dogs.
- C. Cycle counts.
- D. Alert employees.
Answer: D
NEW QUESTION 121
An engagement manager is reviewing the results of sampling work performed by staff internal auditors. Which interim report statement should immediately give the engagement manager cause for concern about the nature and quality of the sampling procedure?
- A. The acceptable risk of assessing control risk too low is 5%, the tolerable deviation rate is 5%, the expected population deviation rate is 1%, the confidence expressed is 95%.
- B. The acceptable risk of assessing control risk too low is 10%, the tolerable deviation rate is 5%, the true, but unknown population rate is less than 5%, the achieved upper deviation limit is 4.8%.
- C. The acceptable risk of assessing control risk too low is 10%, the tolerable deviation rate is 5%, the expected population deviation rate is 1%, sample size is 80 out of a large population.
- D. The acceptable risk of assessing control risk too low is 5%, the tolerable deviation rate is 5%, the expected population deviation rate is 5%, the sample size is 1580.
Answer: D
NEW QUESTION 122
Upon joining the internal audit activity, each new auditor receives a copy of the audit handbook. Which of the following handbook policies has the greatest risk of compromising audit objectivity?
- A. Internal auditors should rotate to other areas of the organization for nonaudit assignments to gain an understanding of the organization's operations.
- B. Internal auditors should have direct and unrestricted access to personnel and information throughout the organization and the governing board.
- C. Internal auditors should obtain 80 hours of continuing professional education every two years, 20 of which should be audit-related, and the remainder may be operations-related.
- D. Internal auditors should undergo annual performance appraisals conducted by the chief audit executive, who reports administratively to the chief financial officer.
Answer: A
NEW QUESTION 123
Which of the following is an example of a risk management avoidance response?
- A. Recalling a product.
- B. Outsourcing production.
- C. Obtaining product insurance.
- D. Exiting a marketplace.
Answer: D
NEW QUESTION 124
Which of the following controls is not appropriate for sales in a manufacturing organization?
- A. Goods shipped are matched with valid customer orders.
- B. Goods returned are inspected for damage by the receiving department for proper disposition.
- C. Sales department approval is required for credit sales transactions.
- D. Customers' orders are recorded promptly.
Answer: C
NEW QUESTION 125
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