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NEW QUESTION # 52
An internal auditor has completed an assurance engagement. Which of the following is most likely true regarding the engagement?
- A. During audit planning the auditor determined that the engagement scope would include a review of the security and privacy of payroll records
- B. During audit planning the auditor provided the client with the scope of the engagement for their agreement
- C. The client requested the review of a new payroll system in order to improve the security of fie system
- D. The results of tie engagement were included m a written report mat was issued to the cleint who requested me engagement
Answer: A
NEW QUESTION # 53
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. Records of drums shipped to the waste disposal site were being maintained.
- B. All hazardous-waste drums in inventory were accounted for.
- C. The amount of hazardous materials being used was accurately recorded.
- D. Hazardous-waste materials were being disposed of as prescribed by company policy.
Answer: B
Explanation:
Section: Volume C
NEW QUESTION # 54
Which of the following is the best way for an internal auditor to demonstrate due professional care?
- A. Execute internal audit work in such a manner as to provide absolute assurance of compliance
- B. Seek feedback from the engagement supervisor during the engagement
- C. Conduct an audit to the same extent that another prudent auditor would under similar circumstances
- D. Request and receive client feedback surveys during the engagement
Answer: C
NEW QUESTION # 55
An internal auditor for a large computer company suspects that returned computer systems are being repackaged as new products and shipped to other customers before the defects have been repaired. Which of the following would be the most persuasive piece of evidence in support of the auditor's suspicions?
- A. The results of a complete physical inventory taken at year end.
- B. An unusual number of customer complaints.
- C. Credit memos issued after year end for goods shipped before year end.
- D. Evidence of returned goods in the shipping and receiving area.
Answer: B
Explanation:
Section: Volume D
Explanation
NEW QUESTION # 56
An organization references a customer order with an approved customer file and credit limit before accepting an order. Which type of control does this process exemplify?
- A. Quality control monitoring.
- B. Information processing.
- C. Performance indicators.
- D. Direct functional management.
Answer: B
NEW QUESTION # 57
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. Check with legal counsel to determine whether the situation can be reported to management before all information has been submitted to the oversight body.
- B. Wait until all of the information has been gathered and reported to the oversight body before reporting the situation to management.
- C. Report the situation to management immediately.
- D. Schedule an engagement to explore the situation in depth, before reporting to either management or the oversight body.
Answer: C
Explanation:
Section: Volume B
NEW QUESTION # 58
Which of the following processes does the board manage to ensure adequate governance?
- A. Develop strategies to mitigate the risks to achieving the organization's objectives
- B. Develop, approve, and execute the strategic plan of the organization.
- C. Establish and measure performance objectives for the internal audit activity.
- D. Select board members with necessary knowledge and skills.
Answer: D
NEW QUESTION # 59
During the course of an audit,an internal auditor discovers that a valuable employee in the research department has been patenting new developments in the employee's name that are unrelated to the basic business of the organization.
The organization does not have a policy addressing this specific issue,but does have a general policy that all important new discoveries by employees are the property of the organization.
Division management views the employee's actions as extra incentive to retain the employee.
A decision to include the employee's action in the engagement final communication wouldbe:
1.A violation of the IIA Code of Ethics.
2.A violation of the reporting requirements in the Standards.
3.Justified and necessary,according to the IIA Code of Ethics and Standards.
- A. 1only
- B. 1 and 2only
- C. 2only
- D. 3only
Answer: D
NEW QUESTION # 60
According to IIA guidance, which of the following actions is a chief audit executive required to take with regard to reporting the results of the quality assurance and improvement program?
- A. Report ongoing monitoring quarterly
- B. Report external assessments at least annually
- C. Report post-engagement reviews at least once every five years
- D. Report external assessments upon completion of such assessments
Answer: D
NEW QUESTION # 61
When performing benchmarking during the planning phase of a performance audit, an internal auditor should:
- A. Project future performance levels.
- B. Identify comparative organizations.
- C. Develop functional action plans.
- D. Determine the current performance gap.
Answer: B
NEW QUESTION # 62
Which of the following is the most effective strategy to manage the risk of foreign exchange losses due to sales to foreign customers?
- A. Hire a risk consultant.
- B. Implement a hedging strategy.
- C. Maintain a large foreign currency balance.
- D. Insist that customers only pay in a stable currency.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION # 63
An internal auditor is designing a sampling plan to test the accuracy of daily production reports over the past three years. All of the reports contain the same information except
that Friday reports also contain weekly totals and are prepared by managers rather than by supervisors. Production normally peaks near the end of a month. If the auditor wants to select two reports per month using an interval sampling plan,which of the following techniques reduces the likelihood of bias in the sample?
- A. Estimating the error rate in the population.
- B. Increasing the precision.
- C. Using multiple random starts.
- D. Increasing the confidence level.
Answer: C
NEW QUESTION # 64
Which should the internal auditor first consider when assessing fraud risks during an engagement?
- A. Communicate any suspicious fraud activities to management.
- B. Compare the organizations fraud strategies with the industry's strategies.
- C. Investigate any related fraud allegations.
- D. Review any related prior fraud investigations.
Answer: D
NEW QUESTION # 65
In an assurance engagement of treasury operations, an internal auditor is required to consider all of the following issues except:
- A. The external auditors have indicated some difficulties in obtaining account confirmations.
- B. Treasury management has not instituted any risk management policies.
- C. The audit committee has requested assurance on the treasury department's compliance with a new policy on the use of financial instruments.
- D. Due to the recent sale of a division, the amount of cash and marketable securities managed by the treasury department has increased by 350 percent.
Answer: A
NEW QUESTION # 66
During a review of a division's operations, an internal auditor notes that sales and customer base are unchanged, while inventory and gross margin have increased significantly. Which of the following audit procedures would be most relevant in substantiating management's assertion that the gross margin increase is due to increased efficiency in manufacturing operations?
- A. Take a physical inventory of equipment to determine if there were significant changes.
- B. For a sample of products, compare costs-per-unit this year to those of last year, test cost build-ups, and analyze standard cost variances.
- C. Select a sample of finished goods inventory and trace raw materials cost back to purchase prices in order to determine the accuracy of the recorded raw materials price.
- D. Obtain a physical count of inventory.
Answer: B
NEW QUESTION # 67
Which of the following statements relating to risk management is true?
- A. A lack of controls is acceptable if the risk is reduced to an acceptable level in some other way
- B. External auditors must be engaged to evaluate the potential for fraud and how the organization manages fraud risk
- C. Internal auditors are responsible for managing the risks of the organization
- D. The high-level risk assessment performed during engagement planning is a detailed step-by-step analytical process
Answer: A
NEW QUESTION # 68
Which of the following activities would be most likely to impair the objectivity of an internal auditor?
- A. Assisting with the development and installation of a new information systems application.
- B. Performing reviews of procedures for a new information systems application before it is installed.
- C. Developing recommended controls for the use of a new information systems application.
- D. Benchmarking controls during the development of a new information systems application.
Answer: A
NEW QUESTION # 69
Which of the following is an appropriate roe fa the internal audit activity?
- A. Validating control assessments performed by the external auditor.
- B. Ensuring the organization's key risks are managed through appropriate controls.
- C. implementing new controls to promote continuous improvement
- D. Assisting the organization in maintaining effective controls.
Answer: B
NEW QUESTION # 70
Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?
- A. Fraud hidden on the books.
- B. Fraud off the books.
- C. Fraud open on the books.
- D. Fraud on the balance sheet.
Answer: B
Explanation:
Section: Volume F
NEW QUESTION # 71
An internal audit charter describes the mission and scope of the internal audit activity (IAA), responsibilities of the IAA, accountability of the chief audit executive, independence of the IAA, and standards followed by the IAA. Which of the following also should be included in the charter?
- A. The IAA's right to have unrestricted access to functions, records, personnel, and physical property.
- B. A detailed audit plan or program for the year.
- C. The job specifications and descriptions of the internal audit staff.
- D. The purpose of the IAA.
Answer: A
NEW QUESTION # 72
Which of the following is a primary responsibility of senior management with respect to ethical violations?
- A. Senior management reviews major ethical policies in the organization for compliance
- B. Senior management assesses the effectiveness of the organization's ethical programs.
- C. Senior management promotes an ethical culture in the organization.
- D. Senior management provides oversight for the organization's ethical climate.
Answer: B
NEW QUESTION # 73
Which type of objectives can best be described as broad goals that promote the effective and efficient use of resources?
- A. Reporting objectives.
- B. Strategic objectives.
- C. Operational objectives.
- D. Compliance objectives.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION # 74
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IIA-CIA-Part1 (Essentials of Internal Auditing) certification exam is an important step for professionals who are interested in pursuing a career in internal auditing. IIA-CIA-Part1 exam, offered by the Institute of Internal Auditors (IIA), is designed to test a candidate's knowledge and understanding of the fundamental principles and practices of internal auditing.
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