IIA IIA-CIA-Part1 Exam Dumps

Essentials of Internal Auditing

IIA IIA-CIA-Part1 Sample Questions

Question # 1

Some of a company's payroll transactions were batch posted to the payroll file but were not uploaded correctly to the general ledger file on the mainframe. The best control to detect this type of error would be. 

A. Edit controls on the payroll file.
B. Appropriate segregation of duties for batch approval.
C. Validation of hash totals.
D. Reconciliation of paychecks to the bank account.

Answer: C

Show Answer

Question # 2

Which of the following should be the primary objective of an audit of an entity's business continuity plan?

A. Cost of testing and updating the plan.
B. Delegation of responsibilities for the plan.
C. Relationship of the plan to risk exposures.
D. Efficiency of the planning procedures.

Answer: C

Show Answer

Question # 3

A daily report which lists unsuccessful attempts to log on to a computer system is A.  

A. Corrective control.
B. Preventive control.
C. Detective control.
D. Compensating control.  

Answer: C

Show Answer

Question # 4

Which of the following controls would most likely prevent the input of an unreasonable number oflabor hours into a costing system?

A. Recalculation tests during processing.
B. Programmed limit tests of input fields.
C. Reconciliation of input control totals.
D. Consistency checks of data in input fields.

Answer: B

Show Answer

Question # 5

Which of the following internal controls is likely to prevent pollution from waste disposal before it occurs, rather than detect it after it occurs? 

A. Identification of large budget variances in disposal costs for hazardous chemicals.
B. Restricted access to environmental department files.
C. Formal on-the-job training program conducted by the environmental staff.
D. Samples of water and solid waste taken daily with the results recorded in a log.

Answer: C

Show Answer

Question # 6

Which of the following is most likely to be an element of an effective compliance program? 

A. The internal audit activity is assigned responsibility for overseeing the program.
B. The program is communicated to employees in a video format on a one-time basis.
C. The organization uses monitoring systems designed to detect improper activity.
D. The organization obtains as much information as possible when performing background checks on employees.

Answer: C

Show Answer

Question # 7

Which of the following best describes the procedures used by the representatives of anorganization's stakeholders to provide oversight of the processes administered by management?

A. Governance
B. Control
C. Risk management
D. Monitoring

Answer: A

Show Answer

Question # 8

In assessing the independence of the internal audit activity, a member of a peer review teamshould consider all of the following factors except:

A. Access to and frequency of communications with the board of directors or its audit committee.
B. The criteria of education and experience considered necessary when filling vacant positions onthe audit staff.
C. The degree to which auditors assume operating responsibilities.
D. The scope and depth of engagement objectives for the audit engagements included in thereview.

Answer: B

Show Answer

Question # 9

Which of the following actions by a chief audit executive is most likely to prevent exaggeratedsales reports by division management?I. Hire a new internal auditor who has fraud investigation credentials.II. Assist the controller in developing and monitoring a series of business process indicators whichare historically correlated with, but independent of, sales.III. Announce a series of internal audit engagements focusing on compliance with corporate salesreporting policies.IV. Ask the president and the board to issue a statement of corporate policy stressing theimportance of accurate management reporting and the negative consequences of intentionalmisreporting.

A. I and IIonly
B. II and IIIonly
C. III and IVonly
D. I,II,III,and IV. 

Answer: C

Show Answer

Question # 10

It is important for a chief audit executive to seek formal approval from the board regarding an internal audit charter so that: 

A. The effectiveness of the internal audit activity can be measured.
B. The status of the internal audit activity can be more clearly established.
C. There is assurance that all internal audit activities will be completed.
D. Improvements can be implemented in internal audit processes.

Answer: B

Show Answer

Question # 11

When planning the work program for an assurance engagement, an internal auditor should first review the department's business objectives and then:

A. Identify risks.
B. Review controls.
C. Determine scope. 
D. Evaluate vulnerabilities.  

Answer: A

Show Answer

Question # 12

According to the International Professional Practices Framework, risk is:I. Defined as the negative effect of events that are expected to occur.II. Measured in terms of consequences.III. Measured in terms of likelihood.

A. Ionly
B. I and IIonly
C. II and IIIonly
D. I,II,and III.

Answer: C

Show Answer

Question # 13

The percentage of orders that are rush orders and the percentage of returns to total orders are examples of which of the following types of control activities? 

A. Quality control monitoring.
B. Direct functional management.
C. Benchmarking.
D. Performance indicators.

Answer: D

Show Answer

Question # 14

Risk within an internal audit engagement is defined as the:  

A. Probability that a balance or class of transactions and related assertions contain misstatementsthat could be material to the financial statements.
B. Uncertainty of an event occurring that could have an impact on the achievement of objectives.
C. Failure to adhere to organizational policies,plans,and procedures,or the failure to comply withrelevant laws and regulations.
D. Failure to accomplish established objectives and goals for operations or programs.

Answer: B

Show Answer

Question # 15

Reportable audit findings must be:I. Documented by facts.II. Supported by relevant evidence.III. Agreed to by management of the audited area.IV. Convincing enough to compel corrective action.

A. I and IVonly
B. II and IIIonly
C. I,II,and IVonly
D. I,II,III,and IV.

Answer: C

Show Answer

Question # 16

A dental insurance provider has implemented an electronic claim submission process and is concerned that dentists are submitting claims for services that were not provided. Which of the following control procedures would be most effective in preventing this type of fraud? 

A. Develop a program that identifies procedures performed on an individual which are either inexcess of expectations based on the age of the insured or are similar to other procedures recentlyperformed on the individual.
B. Require all submitted claims to be followed by a signed statement by the dentist testifying to thefact that the claimed procedures were performed.
C. Send confirmations to the dentists requesting them to confirm the exact nature of the claimssubmitted to the insurance provider. 
D. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.  

Answer: A

Show Answer

Question # 17

Which of the following elements is important for an internal auditor to consider when performing aprivacy risk assessment of an organization?I. Areas where personal information is collected, used, stored, and disseminated.II. Inherent risk.III. Privacy practices of competitors.IV. Third-party recipients of information.

A. IIIonly
B. I and IIonly
C. I,II,and IVonly
D. I,II,III,and IV.

Answer: C

Show Answer

Question # 18

When developing an effective risk-based plan to determine audit priorities, an internal audit activity should start by: 

A. Identifying risks to the organization's operations.
 B. Observing and analyzing controls. 
C. Prioritizing known risks.
D. Reviewing organizational objectives.

Answer: D

Show Answer

Question # 19

Which of the following audit findings would have the least impact (either positive or negative) on a department's control environment? 

A. The department makes long-term investment risk decisions to maximize return on investment.
B. The department manager sets and demonstrates a tone of honesty and integrity in all businessdealings.
C. Many department functions are duplicated or verified by other department employees.
D. Deficiencies were found in the appropriate authorization of transactions.

Answer: A

Show Answer

Question # 20

If management has not established a risk management process, the internal audit activity could.  

A. Take a proactive role that supplements traditional assurance activities.
B. Identify and mitigate risks to the organization.
C. Assume responsibility for the management of identified risks.
D. Assume primary responsibility for determining if adequate and effective processes are in place.

Answer: A

Show Answer

Question # 21

According to the Standards, which of the following must an internal auditor take into considerationwhen performing an assurance engagement of treasury operations?I. The audit committee has requested assurance of the treasury department's compliance with anew policy on the use of financial instruments.II. Treasury management has not instituted any risk management policies.III. Due to the recent sale of a division, the amount of cash and marketable securities managed bythe treasury department has increased by 350 percent.IV. The external auditors have indicated some difficulties in obtaining account confirmations

A. I and IIonly
B. I and IVonly
C. I,II,and IIIonly
D. II,III,and IVonly

Answer: C

Show Answer

Question # 22

Which of the following is the primary concern of an internal auditor in a comprehensive audit of an organization? 

A. Accuracy of reports on the source and use of funds.
B. Extent of achievement of the organization's mission.
C. Confirmation of compliance with policies and procedures.
D. Appropriateness of procedures related to the budgeting process.

Answer: B

Show Answer

Question # 23

The main reason to establish internal controls in an organization is to:  

A. Encourage compliance with policies and procedures.
B. Safeguard the resources of the organization.
C. Ensure the accuracy,reliability,and timeliness of information.
D. Provide reasonable assurance on the achievement of objectives.

Answer: D

Show Answer

Question # 24

The best reason for separating the cash-receiving function from the related record-keepingfunction is to: 

A. Segregate cash payments from cash receipts.
B. Provide accountability for cash received.
C. Minimize misappropriations in cash receipts.
D. Improve physical security over the cash-receiving function.

Answer: C

Show Answer

Question # 25

The chief commodity trader for a large energy company learns from a friend that a competitor willlikely fail its upcoming regulatory audit and will be forced to temporarily decrease production. If theinformation is true, the trader has short-term opportunities to make trades that will financiallybenefit the trader's company and will lead to a substantial increase in the trader's performancebonus. However, if the information is not true, making the trades will significantly increase thecompany's risk of being caught in a long position. From an ethical perspective, which of thefollowing would be the most appropriate course of action for the trader to take?

A. Make the trade because the company and the trader will both benefit.
B. Have another trader on staff make the trade in order to avoid a conflict of interest.
C. Disclose the information to the risk oversight committee but proceed with the trade to capitalizeon the opportunity.
D. Defer the decision to management and risk the loss of the trading opportunity.

Answer: D

Show Answer

Question # 26

Which of the following elements should an auditor recommend for inclusion in an organization'scode of ethics?I. Ethics should vary with local customs in the organization's foreign operations.II. Whistle-blowing should be discouraged because it can cause distrust among employees andfalse accusations which waste organizational resources on investigations.III. Ethical behavior should not be incorporated into performance evaluations because it is toosubjective and controversial.

A. Ionly
B. IIonly
C. I,II,and III. 
D. None of the above.  

Answer: D

Show Answer

Question # 27

Which of the following statements is correct regarding corporate compensation systems andrelated bonuses?I. A bonus system should be considered part of the control environment of an organization andshould be considered in formulating a report on internal control.II. Compensation systems are not part of an organization's control system and should not bereported as such.III. An audit of an organization's compensation system should be performed independently of anaudit of the control system over other functions that impact corporate bonuses.

A. Ionly
B. IIonly
C. IIIonly
D. II and IIIonly

Answer: A

Show Answer

Question # 28

The primary reason that a chief audit executive (CAE) reviews external audit management letters and management response is to: 

A. Select areas to emphasize in future internal audit engagements.
B. Check the effectiveness of external audit resources used.
C. Ensure that comments in the letter are supported by evidence.
D. Verify that there has been no duplication of internal audit work. 

Answer: A

Show Answer

Question # 29

Management should be included in the development of the audit plan in order to:  

A. Provide assurance that past audit recommendations have been properly implemented.
B. Select the audit tests that will be used for each engagement.
C. Verify that the highest risks are included in the risk-based audit plan.
D. Guarantee access to the organization's sites and records for audit work.

Answer: C

Show Answer

Question # 30

Which fraudulent act is designed primarily to benefit the organization? 

A. Fictitious sale or assignment of assets.  
B. Authorization of payment for hours not worked.  
C. Theft or misappropriation of funds.  
D. Acceptance of bribes or kickbacks.  

Answer: A

Show Answer

Question # 31

While conducting an audit, an internal auditor notices an unusual increase in sales among a small number of units within the organization. The units also experienced persistent negative cash flows despite reported earnings and earnings growth. Which type of fraud do the auditor's findings most likely indicate? 

A. Employee collusion with customer organizations.  
B. Improper asset valuation.  
C. Inventory theft.  
D. Fictitious revenues.  

Answer: D

Show Answer

Question # 32

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 thatmay require action to be taken.
B. Not provide activity reports to senior management because such matters are the sole provinceof the board.
C. Disclose only those matters in the activity reports that pertain to expenditures and financialbudgets of the internal audit activity.
D. Provide information to senior management that pertains only to completed audit engagementsand observations available in published engagement final communications. 

Answer: A

Show Answer

Question # 33

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 138 repaired. Which of the following would be the most persuasive piece of evidence in support of the auditor's suspicions?

A. Credit memos issued after year end for goods shipped before year end.  
B. Evidence of returned goods in the shipping and receiving area.  
C. An unusual number of customer complaints.  
D. The results of a complete physical inventory taken at year end.  

Answer: C

Show Answer

Question # 34

A product manager occasionally overrides established purchasing policies in order to expedite the introduction of new products in a competitive industry. The manager's overrides are:

A. Unacceptable as they are not consistent with the purchasing policy.  
B. Only acceptable if the override is within the manager's spending limit.  
C. Only acceptable if a policy governing such overrides is in place and they are reported.  
D. Acceptable due to the highly competitive nature of the industry.  

Answer: C

Show Answer

Question # 35

Which of the following is accomplished by the internal audit charter? 

A. It establishes the audit committee’s position within the organization.  
B. It authorizes access to records,personnel and physical properties relevant to the performance of engagements. 
C. It defines the scope of internal and external audit activities.  
D. It states the nature of the chief audit executive’s administrative reporting relationship with the board.

Answer: B

Show Answer