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IIA-CIA-Part1 exam consists of 125 multiple-choice questions and has a time limit of two and a half hours. IIA-CIA-Part1 exam covers four main domains, including the foundations of internal auditing, independence and objectivity, proficiency and due professional care, and quality assurance and improvement. Candidates who successfully pass the exam will be awarded the Certified Internal Auditor (CIA) designation, which is recognized globally as a mark of excellence in the internal auditing profession.
The IIA IIA-CIA-Part1 exam consists of 125 multiple-choice questions and has a time limit of two and a half hours. Candidates must achieve a score of at least 600 out of a possible 800 points to pass the exam. IIA-CIA-Part1 exam is computer-based and can be taken at any Pearson VUE testing center around the world. Candidates can register for the exam online through the IIA's website.
IIA-CIA-Part1 exam consists of 125 multiple-choice questions and has a duration of 2.5 hours. IIA-CIA-Part1 exam covers a wide range of topics including internal control and risk, governance, fraud risks, ethics, and audit engagements. Candidates are expected to have a strong understanding of these topics to pass the exam.
NEW QUESTION # 39
During an internal audit, an organization's processing department is found to have incidences of both duplicate invoices and notices from customers that purchased goods were not received. The department under review insists that some of these reports are false and that others were isolated oversights due to understaffing.
Which of the following tests would best help the internal auditor detect fraudulent activity?
- A. Search for gaps in check numbers.
- B. Review raw material purchase quantities.
- C. Check inventory levels.
- D. Compare vendor summaries.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION # 40
An organization invests its savings in a volatile stock with the potential for high gains rather than a mutual fund with a lower expected return and lower volatility. This best describes which of the following risk concepts?
- A. Risk capacity.
- B. Risk identification.
- C. Risk tolerance.
- D. Risk appetite.
Answer: C
NEW QUESTION # 41
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. Address the risk with senior management and the board.
- B. Evaluate the potential Impact on related controls.
- C. Develop and communicate the scope and evaluation criteria to be used by management.
- D. Recommend a control change and obtain management support.
Answer: B
Explanation:
When an internal auditor identifies a weakness in the control environment relating to the delegation of authority and responsibility, the first action should be to evaluate the potential impact on related controls. This evaluation helps the auditor understand how the identified weakness might affect other control processes within the organization. By assessing the impact, the auditor can gather the necessary information to determine the significance of the weakness and develop a more informed recommendation for addressing the issue.
References:
* The IIA Standards: Standard 2210 - Engagement Objectives: "Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives."
* COSO Framework: Emphasizes the need for evaluating the impact of weaknesses in the control environment on related controls.
NEW QUESTION # 42
Which of the following internal control components has COSO identified as the most important?
- A. Control activities
- B. Control environment
- C. Risk assessment
- D. Information and communication
Answer: B
NEW QUESTION # 43
Which of the following would be considered a preventive control?
- A. A password lock on a server.
- B. A library control log.
- C. A software scan of financial records for irregularities.
- D. A review of exception reports.
Answer: A
NEW QUESTION # 44
If an engagement client disputes that a specific action or process is within the scope of the internal audit activity, what would be the most appropriate way for the internal audit activity (IAA) to respond?
- A. Seek the approval of senior management or the board in mediation, allowing an overseer to clarify the scope of the audit engagement for the client.
- B. Refer the client to the IAA's charter and the approved yearly audit plan, which includes the areas designated for audit in the current time period.
- C. Terminate only the specific action or process with which the client disagrees and work to determine a substitute function that will not impede further IAA or the client-audit relationship.
- D. Terminate the audit engagement in full because an operational audit will not be productive without the client's cooperation.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION # 45
When performing benchmarking during the planning phase of a performance audit, an internal auditor should:
- A. Determine the current performance gap.
- B. Identify comparative organizations.
- C. Project future performance levels.
- D. Develop functional action plans.
Answer: B
NEW QUESTION # 46
Which of the following are core responsibilities to be included in the internal audit charter?
1. Review reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
2. Determine the adequacy and effectiveness of the organization's systems of internal accounting and operating controls.
3. Participate in the planning and performance of audits of potential acquisitions with the organization's outside accountants and other members of the corporate staff.
4. Report to those members of management who should be informed of results of audit examinations, the audit opinions formed, and the recommendations made.
- A. 1 and 2.
- B. 2 and 3.
- C. 2 and 4.
- D. 1 and 4.
Answer: A
Explanation:
Section: Volume F
NEW QUESTION # 47
In addition to data protection, which of the following is a control that is typically used by companies to safeguard the privacy rights of their customers?
I. End-user computing.
II. Encryption of data.
III. Spyware.
IV. Intrusion detection.
- A. II and IV only
- B. II only
- C. I and III only
- D. I, II, and IV only
Answer: A
Explanation:
Section: Volume B
Explanation/Reference:
NEW QUESTION # 48
Which of the following scenarios depicts an appropriate role for the internal audit activity to take regarding an organization's risk management process?
- A. Internal audit designs and implements the organization's controls to help manage risk.
- B. Internal audit is responsible for safeguarding the organization's assets and preventing loss from occurring.
- C. Internal audit sets the organization's risk tolerance and promotes awareness throughout the organization.
- D. Internal audit assesses whether the organization's risk management processes are effective.
Answer: D
Explanation:
The appropriate role for the internal audit activity in relation to an organization's risk management process is to provide assurance on the effectiveness of these processes. This involves evaluating whether risk management practices help the organization manage its risks within defined risk tolerance levels effectively and are aligned with the strategic goals. Internal audit should not be involved in designing controls or setting risk tolerance as this could impair their independence.References: Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing
NEW QUESTION # 49
Which of the following could increase risks to the organization's control environment?
- A. Incentive-based compensation structures.
- B. Implementation of a fraud hotline.
- C. Lower than average employee turnover.
- D. Strong board of directors oversight.
Answer: A
Explanation:
Incentive-based compensation structures can increase risks to the organization's control environment by potentially motivating undesirable behaviors such as taking undue risks or manipulating results to meet targets that trigger compensation rewards. This can undermine the integrity of controls and reporting within the organization.References: Governance and risk management literature, including studies and guidance on compensation structures and their impact on organizational behavior and risk.
NEW QUESTION # 50
Which of the following would not be considered part of preliminary survey of an engagement area?
- A. Sampling scope.
- B. Interviews with individuals affected by the entity.
- C. Functional walk through test.
- D. Analytical reviews.
Answer: A
NEW QUESTION # 51
According to IIA guidance, which of the following best describes the chief audit executive s responsibility for confirming to the board the organizational independence of the internal audit activity'?
- A. The CAE should do this periodically in conjunction with a review of the internal audit charter
- B. The CAE must do this at least once every five years
- C. The CAE must do this upon completion of each external quality assessment
- D. The CAE must do this at least annually
Answer: D
Explanation:
According to IIA standards, the Chief Audit Executive (CAE) is responsible for confirming to the board, at least annually, the organizational independence of the internal audit activity. This is crucial for maintaining the effectiveness of the audit function and ensuring that it operates without undue influence from management, thereby allowing the board to trust in the impartiality and efficacy of the audit reports.References:
* IIA Standard 1110.A1: "Organizational Independence"
NEW QUESTION # 52
An internal auditor is researching the laws and regulations related to a city's grant program. Which of the following procedures is least relevant to this task?
- A. Making inquiries of the audit committee about the nature of the grants.
- B. Reviewing applicable grant agreements.
- C. Discussing the matter with the city's chief financial officer, legal counsel, or grant administrators.
- D. Reviewing prior-year workpapers and asking officials if there have been any changes.
Answer: A
NEW QUESTION # 53
An internal audit activity's work schedule should always provide sufficient information to the audit committee to enable it to determine whether the proposed engagements:
- A. Are likely to detect control deficiencies.
- B. Support the organization's objectives.
- C. Include sufficient fraud awareness.
- D. Will likely result in the detection of any major risk exposures.
Answer: B
Explanation:
Section: Volume B
NEW QUESTION # 54
Which of the following procedures would be most effective in detecting fraud in electronically-submitted claims to insurance companies?
- A. Creating a monitoring program that detects unusual claims to be investigated by the claims department.
- B. Using generalized audit software to match the claimant identification number with a master list of valid policyholders.
- C. Testing the accuracy of processing by using integrated test facilities.
- D. Creating batch controls over all claims arriving from a particular organization and process those claims separately.
Answer: A
NEW QUESTION # 55
During the planning stage of an assurance engagement, a payroll clerk informed the internal auditor that he is often asked to add new employees to the payroll without any formal new-hire documentation from human resources. The auditor is concerned that this increases the risk for fraud. To complete engagement planning, which of the following is the most appropriate next step for the auditor to take?
- A. Advise the chief audit executive of the clerk's assertion, despite the lack of supporting evidence.
- B. Ask the clerk to provide a list of any suspicious new employee names on the payroll.
- C. Investigate the matter further to understand precisely how many payroll records were affected.
- D. Increase the sample size to be tested, ensuring a thorough review of the payroll records.
Answer: B
NEW QUESTION # 56
During an internal audit, the internal auditor compares the employee turnover rate in the area being audited with the employee turnover rate in the organization as a whole.
This is an example of which of the following analytical auditing procedures?
- A. Benchmarking.
- B. Trend analysis.
- C. Reasonableness test.
- D. Regression analysis.
Answer: A
NEW QUESTION # 57
Which of the following would provide the best assessment of an organization's ethical climate?
- A. Frequency of fraud reported and results of subsequent investigations.
- B. Number of years that directors have been appointed to the board.
- C. Clarity and consistency of consequences imposed by the board of directors for ethical violations.
- D. Evidence of training provided to the board of directors on ethical issues.
Answer: C
NEW QUESTION # 58
Which of the following statements is true regarding assurance services provided to clients outside of the organization?
- A. Assurance services for outside clients must be approved on a case-by-case basis by the board of directors.
- B. The nature of assurance services for outside clients should be defined in the internal audit charter.
- C. The nature of assurance services for outside clients is the same as for internal clients.
- D. Assurance services for outside clients are not covered under the internal audit charter.
Answer: B
NEW QUESTION # 59
To promote a positive image within an organization,a chief audit executive (CAE) adjusted the audit plan to focus on assurance engagements that highlighted potential costs to be saved. Negative observations were to be omitted from engagement final communications. Which action taken by the CAE would be considered a violation of the Standards?
I.The focus of the audit function was changed without modifying the audit charter or notifying the audit committee.
II.Negative observations were omitted from the engagement final communications.
III.Cost savings and recommendations were highlighted in the engagement final communications.
- A. I,II,and III.
- B. I and IIonly
- C. I and IIIonly
- D. IIonly
Answer: B
NEW QUESTION # 60
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