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IIA-CIA-Part1 Exam Prep Guide: Prep guide for the IIA-CIA-Part1 Exam
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IIA-CIA-Part1 exam consists of 125 multiple-choice questions, and candidates are given 2.5 hours to complete the exam. IIA-CIA-Part1 exam is computer-based and is administered at Pearson VUE testing centers worldwide. IIA-CIA-Part1 exam is available in multiple languages, including English, Spanish, French, German, Portuguese, and Chinese.
NEW QUESTION # 422
According to IIA guidance, which of the following statements is correct concerning the knowledge, skills, and competencies required to fulfill the responsibilities of the internal audit activity (IAA)?
- A. The competencies of external service providers must be assessed by the chief audit executive before the IAA can use external service providers' work.
- B. The IAA must collectively possess the knowledge, skills, and competencies needed to perform all engagements.
- C. The IAA must not decline any engagement based solely on a lack the necessary knowledge, skills, and competencies to perform it.
- D. Each internal auditor in the IAA must possess the competencies required to detect and investigate fraudulent transactions.
Answer: A
NEW QUESTION # 423
The work papers for an audit of hazardous-materials handling and disposal at an engineering research facility provide evidence that the following procedures were performed.
Drums of hazardous waste not yet shipped off-site were inventoried. The physical count agreed with the company's inventory records.
A sample of hazardous-waste shipments received at the disposal site was compared to bills of lading and company records. No errors were detected.
The audit staff observed engineering personnel during the handling of hazardous materials. No company policy violations were noted.
The reconciliation of waste drums to the inventory records provides evidence that:
- A. The amount of hazardous materials being used was accurately recorded.
- B. Records of drums shipped to the waste disposal site were being maintained.
- C. All hazardous-waste drums in inventory were accounted for.
- D. Hazardous-waste materials were being disposed of as prescribed by company policy.
Answer: C
NEW QUESTION # 424
Which of the following should be incorporated in a risk management policy?
I.Boundaries and limit structures. II.Requirements for reporting risk. III.Risk authorities.
- A. I and IIIonly
- B. I and IIonly
- C. II and IIIonly
- D. I,II,and III.
Answer: D
NEW QUESTION # 425
According to IIA guidance, which of the following is the strongest indicator of deficiencies in the risk management process?
- A. Management's primary objective is minimizing changes to the structure and operation of the risk management process.
- B. The periodic evaluation of risk ratings is primarily dependent on subjective assessments.
- C. Many aspects of the related enterprise risk management program are informal and undocumented.
- D. Separate evaluations of the risk management process were conducted, but the results were never integrated.
Answer: C
Explanation:
According to IIA guidance, many aspects of the related enterprise risk management (ERM) program being informal and undocumented is the strongest indicator of deficiencies in the risk management process.
Informality and lack of documentation can lead to inconsistencies, errors, and omissions in risk management, impairing the organization's ability to effectively identify, assess, and manage risks.References: The IIA's guidance on effective risk management and ERM practices.
NEW QUESTION # 426
Which of the following statements best describes the difference between risk appetite and risk tolerance?
- A. There is no significant difference between the two terms.
- B. Risk appetite refers to an organization's general level of acceptance, while risk tolerance is a more specific and subordinate concept.
- C. Risk appetite applies to specific objectives, while risk tolerance refers to an organization's general attitude toward risk,
- D. Risk appetite refers to the degree of risk acceptance for a particular objective, while risk tolerance is one approach to risk management.
Answer: B
Explanation:
The statement that best describes the difference between risk appetite and risk tolerance is that risk appetite refers to an organization's general level of acceptance of risk, while risk tolerance is a more specific and subordinate concept. Risk appetite is the broad-based amount of risk an organization is willing to accept in pursuit of its mission, while risk tolerance defines the acceptable level of variation that management is willing to allow for any particular risk as it pursues its objectives.References: The Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing
NEW QUESTION # 427
The chief audit executive (CAE) routinely provides activity reports to the board during quarterly board meetings. Senior management has asked to review the CAE's board presentation before each board meeting so that any issues or questions can be discussed beforehand. The CAE should:
- A. Provide the activity reports to senior management as requested and discuss any issues that may require action to be taken.
- B. Provide information to senior management that pertains only to completed audit engagements and observations available in published engagement final communications.
- C. Not provide activity reports to senior management because such matters are the sole province of the board.
- D. Disclose only those matters in the activity reports that pertain to expenditures and financial budgets of the internal audit activity.
Answer: A
NEW QUESTION # 428
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. Report the matter to regulatory authorities since senior management is implicated.
- C. Discuss the matter with audit management and ensure that the audit committee is informed.
- D. Send an informative memo to the external auditors.
Answer: C
NEW QUESTION # 429
At a construction company, supervisors are entitled to bonus payments if there are no safety rule violations on their teams. There are several channels available for workers to report accidents and violations, and all reported violations are investigated. Bonus payment calculations are approved by managers and the head of safety. Which of the controls best addresses the risk that supervisors will conceal accidents on their teams in order to receive the bonus?
- A. The authorization process for bonus calculations
- B. The variety of reporting channels
- C. The investigation of all reported violations
- D. The presence of safety rules
Answer: B
NEW QUESTION # 430
A multinational organization has asked the internal audit activity to assist in setting up the organization's risk management system. The chief audit executive (CAE) agrees to take on the engagement as a consultant. Which of the following tasks is appropriate for the CAE to undertake?
- A. Establish the degree of risk appetite for management to accept.
- B. Set risk indicators and mitigation plans for management to implement.
- C. Coordinate and facilitate risk workshops for management to attend.
- D. Determine the number of significant risks for management to report to the board.
Answer: D
NEW QUESTION # 431
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. Check inventory levels.
- C. Review raw material purchase quantities.
- D. Compare vendor summaries.
Answer: B
NEW QUESTION # 432
According to MA guidance, which of the following statements is true regarding an effective governance process?
- A. It relies on effective risk management when establishing the organization's risk appetite.
- B. It relies on the board to devise ways to communicate the effectiveness of internal controls.
- C. It encourages strict segregation of the risk management and internal control processes.
- D. It stipulates that risk needs to be considered when making strategic decisions.
Answer: A
NEW QUESTION # 433
A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annual snowfall for the coming winter. Which of the following best describes this type of risk?
- A. Inherent.
- B. Accepted.
- C. Net.
- D. Residual.
Answer: A
Explanation:
Inherent risk is the exposure to loss in an organization that arises from the nature of its activities without taking into account any actions the organization takes to alter that risk level. A scenario planning exercise that considers a significant reduction in annual snowfall addresses inherent risk, as it relates to potential impacts that naturally arise from changes in weather patterns, which are intrinsic to the business of a snow removal company.References: Risk management terminology and frameworks.
NEW QUESTION # 434
An internal auditor is using a spreadsheet application to review a cash flow forecast prepared by management.
Which of the following correctly identifies the type of evidence this information represents?
- A. Competent, corroborative evidence of future working capital requirements.
- B. Sufficient, circumstantial evidence of the future solvency of the organization.
- C. Competent, documentary evidence of future cash flow changes within the organization.
- D. Sufficient, analytical evidence of the cash flow position at a given point of time in the future.
Answer: C
NEW QUESTION # 435
A chief audit executive (CAE) is obtaining information required by a regulatory oversight body and discovers a situation that requires management to take immediate corrective action. What is the best course of action for the CAE to take?
- A. Wait until all of the information has been gathered and reported to the oversight body before reporting the situation to management.
- B. Report the situation to management immediately.
- C. Check with legal counsel to determine whether the situation can be reported to management before all information has been submitted to the oversight body.
- D. Schedule an engagement to explore the situation in depth, before reporting to either management or the oversight body.
Answer: B
NEW QUESTION # 436
Which of the following definitions best describes enterprise risk management?
- A. Enterprise risk management is narrower than internal control and focuses on managing the risk of loss resulting from external events.
- B. Enterprise risk managment is narrower than internal control and focuses on risk mitigation strategies across the enterprise.
- C. Enterprise risk management is broader than internal control and focuses on risk identification and mangement, and assurance that business objectives will be met.
- D. Enterprise risk mangement is broader than governance and internal control, and focuses on activities designed to ensure that risks are contained at a level acceptable to the enterprise.
Answer: C
NEW QUESTION # 437
During an audit of an organization's accounts payable area, an internal auditor identified anomalies in the information examined that may indicate potential fraud. Which test should the auditor perform first to verify this?
- A. Verify the completeness and integrity of the data being analyzed.
- B. Check control totals that have may have been falsified.
- C. Identify duplicated organizational transactions.
- D. Analyze all transactions within the targeted area.
Answer: A
NEW QUESTION # 438
According to IIA guidance, which of the following statements regarding the internal audit charter is true?
- A. The CEO periodically should assess whether the terms of the charter continue to be adequate.
- B. The charter should describe the purpose and authority of the internal audit activity, consistent with the Standards.
- C. The charter should define the consulting services that the internal audit activity is permitted to perform.
- D. Senior management should approve the charter before it is submitted to the board.
Answer: D
NEW QUESTION # 439
The audit committee has asked the chief audit executive (CAE) to assist in the selection of a new external audit firm. Which of the following is an appropriate action by the CAE?
- A. The CAE declines to participate in the process because providing this assistance would result in compromising the internal audit activity's objectivity.
- B. The CAE and two managers from the audit staff review the bids and select one firm to meet with the audit committee for the committee's approval.
- C. The CAE develops a formal set of criteria for the audit committee to use in selecting the external auditor.
- D. The CAE, chief financial officer, and controller review the bids, interview two firms, and recommend one of the two firms to the audit committee for its approval.
Answer: C
NEW QUESTION # 440
During an assurance engagement, an internal auditor uses benchmarking research to support preparation of a report to stakeholders that contains significant findings about control deficiencies. Which of the following skills did the auditor demonstrate?
- A. Persuasion and collaboration.
- B. Critical thinking.
- C. Conflict negotiation.
- D. Internal audit management.
Answer: B
NEW QUESTION # 441
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