Internal Audit Function - IIA-CIA-Part3 Exam Practice Test

Question 1

The chief audit executive (CAE) identified an unacceptable risk and believes that the risk is not being mitigated to an acceptable level. Which of the following is the CAE ' s next step in this situation?

A. Discuss the issue with the members of responsible management

B. Escalate the concern to senior management

C. Send a letter to responsible management and provide a deadline to accept the risk

D. Escalate the concern to the board

Correct Answer: A

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Question 2

An internal auditor was assigned to test for ghost employees using data analytics. The auditor extracted employee data from human resources and payroll. Using spreadsheet functions, the auditor matched data sets by name and assumed that employees who were not present in each data set should be investigated further.
However, the results seemed erroneous, as very few employees matched across all data sets. Which of the following data analytics steps has the auditor most likely omitted?

A. Data diagnostics.

B. Data analysis.

C. Data normalization.

D. Data velocity.

Correct Answer: C

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Question 3

An organization's income and retained earnings statement is as follows:
Sales: $3,000
Cost of goods sold: $1,600
Gross profit: $1,400
Operating expenses: $970
Operating income: $430
Interest expense: $30
Income before tax: $400
Income tax: $200
Net income: $200
Plus Jan. 1 retained earnings: $150
Less dividends: $60
Dec. 31 retained earnings: $290
Which of the following is the dividend payout ratio?

A. 40 percent.

B. 30 percent.

C. 20 percent.

D. 50 percent.

Correct Answer: B

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Question 4

An organization created a formalized plan for a large project. Which of the following should be the first step in the project management plan?

A. Break the project into manageable components.

B. Estimate time required to complete the whole project.

C. Identify resources needed to complete the project

D. Determine the responses to expected project risks.

Correct Answer: A

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Question 5

If an organization has a high amount of working capital compared to the industry average, which of the following is most likely true?

A. Settlement of short-term obligations may become difficult.

B. The organization is efficient in using assets to generate revenue.

C. Cash may be bed up in items not generating financial value.

D. Collection policies of the organization are ineffective.

Correct Answer: C

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Question 6

According to Herzberg ' s Two-Factor Theory of Motivation, which of the following is a factor mentioned most often by satisfied employees?

A. Recognition.

B. Security.

C. Relationship with coworkers

D. Status.

Correct Answer: A

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Question 7

An organization produces products X and Y. The materials used for the production of both products are limited to 500 Kilograms

(kg ) per month. All other resources are unlimited and their costs are fixed. Individual product details are as follows in order to maximize profit, how much of product Y should the organization produce each month?
$10 $13
2 kg
70 units
6 kg
120 units

A. 50 units

B. 70 units

C. 1:20 units

D. 60 units

Correct Answer: D

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Question 8

Which of the following COSO internal control framework components encompasses establishing structures, reporting lines, authorities, and responsibilities?

A. Control activities.

B. Monitoring.

C. Control environment.

D. Information and communication.

Correct Answer: C

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Question 9

Which of the following is an advantage of a decentralized organizational structure, as opposed to a centralized structure?

A. Strong internal controls

B. Larger talent pool

C. Increased economies of scale

D. Greater cost-effectiveness

Correct Answer: B

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Question 10

Which of the following scenarios indicates an effective use of financial leverage?

A. An organization has a profit margin of 30% and an assets turnover of 7%.

B. An organisation has a rate of return on equity of 20% and a rate of return on assets of 15%.

C. An organization has a current ratio of 2 and an inventory turnover of 12.

D. An organization has a debt to total assets ratio of 0.2 and an interest coverage ratio of 10.

Correct Answer: B

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Question 11

According to I1A guidance on IT. which of the following activities regarding information security Is most likely to be the responsibility of line management as opposed to executive management, internal auditors, or the board?

A. Dedicate sufficient security resources.

B. Review and monitor security controls.

C. Assess information control environments.

D. Provide oversight to the security function.

Correct Answer: B

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Question 12

Which of the following descriptions of the internal control system are indicators that risks are managed effectively?
* Existing controls promote compliance with applicable laws and regulations.
* The control environment is designed to address all identified risks to the organization.
* Key controls for significant risks to the organization remain consistent over time.
* Monitoring systems are in place to alert management to unexpected events.

A. 1 and 4.

B. 2 and 4.

C. 1 and 3.

D. 2 and 3.

Correct Answer: A

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Question 13

Which of the following controls would be most efficient to protect business data from corruption and errors?

A. Controls to quickly identify malicious intrusion attempts.

B. Controls to calculate batch totals to identify an error before approval.

C. Controls to ensure data is unable to be accessed without authorization.

D. Controls to encrypt the data so that corruption is likely ineffective.

Correct Answer: B

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Question 14

Which of the following should be the primary consideration of a right-to-audit clause in a contract?

A. It should clearly and concisely describe the conditions and criteria to prohibit an organization ' s ability to conduct an audit.

B. It should be a simple statement to give the contracting organization the right to conduct an audit.

C. It should be a detailed statement to give the contracted organization the right to conduct an audit.

D. It should clearly state the conditions and criteria necessary to conduct an audit under reasonable and acceptable conditions.

Correct Answer: D

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IIA Internal Audit Function - IIA-CIA-Part3 Exam Practice Test

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