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IIA-CIA-Part2 certification is an important credential for internal auditors who want to advance their careers and demonstrate their commitment to the profession. It is recognized globally as a mark of excellence in the field of internal auditing and is highly valued by employers. Practice of Internal Auditing certification provides internal auditors with the knowledge and skills they need to be effective in their roles and to contribute to the success of their organizations.
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NEW QUESTION # 208
When interviewing an individual in relation to a fraud investigation, which course of action should the internal auditor follow?
- A. Assure the individual that the results of the interview will remain confidential.
- B. Refrain from deviating from the list of questions prepared before the interview.
- C. Discontinue questioning once the individual has confessed to the fraud.
- D. Establish a rapport with the subject to encourage openness.
Answer: D
Explanation:
Section: Volume C
NEW QUESTION # 209
Which of the following is not an outcome of control self-assessment?
- A. Informal, soft controls are omitted, and greater focus is placed on hard controls.
- B. The entire objectives-risks-controls infrastructure of an organization is subject to greater monitoring and continuous improvement.
- C. Internal auditors become involved in and knowledgeable about the self-assessment process.
- D. Nonaudit employees become experienced in assessing controls and associating control processes with managing risks.
Answer: A
Explanation:
Section: Volume E
NEW QUESTION # 210
Which of the following does not represent a difficulty in using red flags as fraud indicators?
- A. Many common red flags are also associated with situations where no fraud exists.
- B. Red flag information is only gathered in extraordinary circumstances.
- C. Some red flags are difficult to quantify or to evaluate.
- D. The red flags literature is not well enough established to have a positive impact on auditing.
Answer: D
NEW QUESTION # 211
A retail sales company has discontinued a product that normally sold for $100. During the first month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced by an additional 40 percent. What was the overall discount from the original selling price?
- A. 52 percent.
- B. 30 percent.
- C. 48 percent.
- D. 60 percent.
Answer: A
NEW QUESTION # 212
While conducting a payroll audit, an internal auditor in a large government organization found inadequate segregation in the duties assigned to the assistant director of personnel. When the auditor explained the risk of fraud, the assistant director became upset, terminated the interview, and threatened to sue the organization for defamation of character if the audit engagement was not curtailed. The auditor discussed the situation with the chief audit executive (CAE). The CAE should then:
- A. Add additional testing to determine whether other indicators of fraud exist.
- B. Curtail the audit engagement to avoid potential legal action.
- C. Continue the original engagement program as planned but include a comment about the assistant director's reaction in the engagement final communication.
- D. Provide a report to senior management recommending a fraud investigation.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION # 213
The internal auditor of a bank has developed a multiple regression model which has been used for a number of years to estimate the amount of interest income from commercial loans. During the current year, the auditor applies the model and discovers that the R2 value has decreased dramatically, but that the model otherwise seems to be working correctly. Which of the following conclusions is justified by the change?
- A. A linear regression analysis would increase the model's reliability.
- B. Regression analysis is no longer an appropriate technique to estimate interest income.
- C. Some new factors, not included in the model, are causing interest income to change.
- D. Changing to a cross-sectional regression analysis should cause the R2 to increase.
Answer: C
Explanation:
Section: Volume B
Explanation
NEW QUESTION # 214
Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?
- A. An increase in the discount offered for early payment.
- B. Increased cash sales.
- C. Invoices provided on a weekly rather than a monthly basis.
- D. A more liberal credit policy.
Answer: D
Explanation:
Section: Volume B
NEW QUESTION # 215
An internal auditor recommended that an organization implement computerized controls in its sales system in order to prevent sales representatives from executing contracts in excess of their delegated authority levels. A follow-up review found that the sales system had not been modified, but a process had been implemented to obtain written approval by the vice president of sales for all contracts in excess of $1 million. The chief audit executive (CAE) would be justified in reporting this situation to the organization's board if:
I. In the opinion of the CAE, the level of residual risk assumed by senior management is too high.
II. Testing of compliance with the new process finds that all new contracts in excess of $1 million have been approved by the vice president of sales.
III. The cost of modifying the sales system to include a preventive control is less than $100,000.
- A. I only
- B. I, II, and III
- C. III only
- D. I and III only
Answer: A
Explanation:
Section: Volume C
NEW QUESTION # 216
An organization has developed a large database that tracks employees, employee benefits, payroll deductions, job classifications, and other similar information. The internal auditor reviews the retirement benefits plan and determines that the pension and medical benefits have been changed several times in the past ten years. The auditor wishes to determine whether there is justification to perform further audit investigation. The most appropriate audit procedure would be to:
- A. Use generalized audit software to select an attributes sample of retirement pay, and perform detailed testing to determine whether each person chosen was given the proper benefits.
- B. Use generalized audit software to select a monetary-unit sample of retirement pay, and determine whether each retired employee was paid correctly.
- C. Review reasonableness of retirement pay and medical expenses on a per-person basis stratified by which plan was in effect when the employee retired.
- D. Review the trend of overall retirement expense over the last ten years. If the retirement expense increased, it would indicate the need for further investigation.
Answer: C
NEW QUESTION # 217
Which of the following are typical steps in the design of an organization's performance measurement system?
- A. Perform a situational assessment; generate macro measurements; review measurement data; and change strategy based upon measurement results.
- B. Understand organizational strategy; perform a situational assessment; establish measurement categories; and take actions based upon measurement results.
- C. Establish a measurement plan; create an organizational strategy linked to those measurements; trend measurement data; and measure data variability.
- D. Categorize performance measures; establish a data collection plan; analyze data; and predict future performance.
Answer: B
NEW QUESTION # 218
Which of the following statements is false regarding audit criteria?
- A. Audit criteria should be consistent across audit assignments.
- B. Audit criteria should provide flexibility but allow identification of nonadherence.
- C. Audit criteria should represent reasonable standards against which to assess existing conditions.
- D. Audit criteria should equate to good or acceptable management practices.
Answer: A
NEW QUESTION # 219
Management has asked the internal audit activity to perform an operational audit of a division that recently reported an increase in expenditures in addition to a decrease in profits. However, existing internal audit resources are currently engaged in a legal compliance audit. Which factor would be considered least important in deciding whether resources should be removed from the legal compliance audit to the operational audit?
- A. The potential for regulatory fines associated with the legal compliance audit.
- B. The probability that the legal compliance audit will detect fraud.
- C. The results of the external auditor's most recent financial audit.
- D. The increase in expenditures at the division over the past year.
Answer: C
Explanation:
Section: Volume C
NEW QUESTION # 220
During an audit of a branch bank, an internal auditor learned that a series of system failures had resulted in a four-day delay in processing customers' scheduled payroll direct deposits. The first failure was that of a disk drive, followed by software and other minor failures. Which of the following controls should the auditor recommend to avoid similar delays in processing?
- A. Contingency planning.
- B. Preventive maintenance.
- C. Process monitoring.
- D. Redundancy checks.
Answer: A
Explanation:
Section: Volume A
NEW QUESTION # 221
An organization has adopted an enterprise-wide risk management process and has appointed a chief risk officer (CRO) to manage the process. The board has requested that the audit committee have oversight over the risk management function. Which of the following statements is not true regarding this situation?
- A. The audit committee, on behalf of the board, has overall responsibility for the risk management process in the organization.
- B. The chief audit executive has the mandate to conduct risk assessments and give assurance to the audit committee.
- C. The audit committee should get assurance on the adequacy and effectiveness of the risk management process from the CRO.
- D. Senior management is accountable to the board for monitoring the system of internal controls.
Answer: C
NEW QUESTION # 222
Which of the following actions has the least influence on the chief audit executive's development of an audit plan?
- A. Input from senior management and the board.
- B. Changes in the organizations structure or budget.
- C. An assessment of risk and exposures affecting the organization.
- D. An evaluation of the complexity of each audit engagement.
Answer: D
NEW QUESTION # 223
The internal audit activity of an organization obtained approval to add a senior auditor to its staff. The chief audit executive, audit manager, and audit supervisor each will interview the candidates.
According to the Standards, which of the following best explains the involvement of management in the interview process?
- A. Provides audit management with the opportunity to communicate expectations regarding ethical behavior standards.
- B. Allows audit management to explain the criteria that will be used to evaluate the senior auditor's performance.
- C. Assists audit management in planning by more effectively allocating the senior auditor to appropriate audits.
- D. Enables audit management to outline its quality assurance and improvement program with the senior auditor.
Answer: C
NEW QUESTION # 224
Which of the following statements is true regarding internal control questionnaires?
- A. internal control questionnaires provide reliable documents allowing internal auditors to cover many control procedures in little time
- B. Internal control questionnaires are useful m evaluating the effectiveness of standard operating procedures
- C. Internal control questionnaires can be used by internal auditors as an interview guide
- D. Internal control questionnaires provide direct audit evidence which may need corroboration
Answer: D
NEW QUESTION # 225
Which of the following actions are appropriate for the chief audit executive to perform when identifying audit resource requirements?
1. Consider employees from other operational areas as audit resources, to provide additional audit coverage in the organization.
2. Approach an external service provider to conduct internal audits on certain areas of the organization, due to a lack of skills in the organization.
3. Suggest to the audit committee that an audit of technology be deferred until staff can be trained, due to limited IT audit skills among the audit staff.
4. Communicate to senior management a summary report on the status and adequacy of audit resources.
- A. 1, 2, and 4
- B. 2, 3, and 4
- C. 1 and 3 only
- D. 2 and 4 only
Answer: A
Explanation:
Section: Volume E
NEW QUESTION # 226
When forming an opinion on the adequacy of management's systems of internal control, which of the following findings would provide the most reliable assurance to the chief audit executive?
- During an audit of the hiring process in a law firm, it was discovered that potential employees' credentials were not always confirmed sufficiently. This process remained unchanged at the following audit.
- During an audit of the accounts payable department, auditors calculated that two percent of accounts were paid past due. This condition persisted at a follow up audit.
- During an audit of the vehicle fleet of a rental agency, it was determined that at any given time, eight percent of the vehicles were not operational. During the next audit, this figure had increased.
- During an audit of the cash handling process in a casino, internal audit discovered control deficiencies in the transfer process between the slot machines and the cash counting area. It was corrected immediately.
- A. 2 and 4 only.
- B. 2 and 3 only.
- C. 1 and 3 only.
- D. 1 and 4 only.
Answer: D
NEW QUESTION # 227
While reviewing the draft report of an audit engagement, the chief audit executive (CAE) is not in agreement with management's acceptance of the potential risk exposure resulting from an observed key control weakness. Which of the following actions by the CAE would be appropriate for addressing this concern?
* Meet with the auditor-in-charge.
* Discuss with senior management.
* Monitor the result of the accepted risk.
* Report the matter to the board.
- A. 1, 2, and 3 only
- B. 1, 3, and 4 only
- C. 1, 2, and 4 only
- D. 2, 3, and 4 only
Answer: C
NEW QUESTION # 228
Which of the following is correct with respect to roles within an enterprise-wide risk management process?
1. The board provides oversight to the risk management process.
2. Executive management owns the risk management framework.
3. Senior management is assigned ownership of risks.
4. Internal audit modifies the risk assessment determined by management.
- A. 1, 2, 3, and 4
- B. 1, 2, and 3 only
- C. 3 and 4 only
- D. 1 and 2 only
Answer: B
Explanation:
Section: Volume D
NEW QUESTION # 229
Which of the following is the primary reason the chief audit executive should consider the organization's strategic plans when developing the annual audit plan?
- A. Strategic plans are helpful to identify major areas of activity, which may direct the allocation of internal audit activity resources.
- B. Strategic plans are likely to show areas of weak financial controls.
- C. The strategic plan is a relatively stable document on which to base audit planning.
- D. Strategic plans reflect the organization's business objectives and overall attitude toward risk.
Answer: D
NEW QUESTION # 230
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