Question 1

Which of the following decisions made during the testing phase of a compliance audit requires the most judgment by an internal auditor?

Accepted Answer

The answer of Which of the following decisions made during...

Question 2

Which of the following best describes the assessment of risks?

Accepted Answer

Risk assessment involves evaluating the likelihood and impact of risks on achieving organizational objectives.

Question 3

An internal auditor would like to identify the involvement of various organizational units in handling employee travel reimbursement claims. Which of the following methods would be most effective and efficient in completing this task?

Accepted Answer

Process mapping is the most effective and efficient method as it visually represents the flow of processes, showing the involvement of different organizational units in handling travel reimbursement claims.

Question 4

A candidate has applied for an entry level internal audit position. The candidate holds a CISA (Certified Information Systems Auditor) designation, and has six months of audit experience, but limited knowledge of accounting principles and techniques. According to the IIA guidance, which of the following is the most relevant reason for the chief audit executive to consider this candidate?

Accepted Answer

The candidate's CISA designation and real-world experience in internal auditing make them valuable for the role, as information systems knowledge is crucial for modern internal audits.

Question 5

According to IIA guidance, which of the following statements is true?

Accepted Answer

Control process risks are found at multiple layers of the IT environment, which aligns with the IIA guidance that emphasizes understanding risks at various levels to ensure comprehensive risk management.

Question 6

This chief audit executive (CAE) engaged an internal auditor to consult on an organization's complex information technology system. Shortly after beginning the engagement, the auditor unexpectedly resigned. Unfortunately, this auditor was the only available auditor with the necessary expertise. The CAE will not be able to hire someone with similar expertise in time to meet a regulatory deadline. Which of the following would be the best course of action for the CAE to take?

Accepted Answer

The answer of This chief audit executive (CAE) engaged an...

Question 7

Allegations have been made that an organization's share price has been manipulated. Which of the following would provide an internal auditor with the most objective evidence in this case?

Accepted Answer

Former financial consultants are likely to have detailed knowledge of the organization's financial practices and can provide objective evidence regarding any manipulation of share prices.

Question 8

During an account receivables audit, an internal auditor found a significant number of input errors resulting in a $500, 000 balance understatement. Which of the following is the most important question the internal auditor should ask to develop an appropriate recommendation for this finding?

Accepted Answer

Understanding "Why" the errors occurred is crucial to addressing the root cause and preventing future occurrences.

Question 9

Which of the following risk management activities is most appropriate for an internal auditor to undertake?

Accepted Answer

Internal auditors are responsible for reviewing and providing assurance on the management of key risks, ensuring that risk management processes are effective and efficient.

Question 10

Which of the following would most likely be considered a red flag for fraud?

Accepted Answer

An employee with significant personal debt is in charge of handling large wire transfers for the organization. This is a red flag for fraud because the employee may be tempted to steal money from the organization to pay off their debts.

Question 11

The director of purchasing, a certified internal auditor (CIA), signs a contract to procure a large order from a supplier whose products provide the best price, quality, and performance. A few days after signing the contract, the supplier presents the CIA with $1, 000 as a gift. Which statement regarding acceptance of the money is correct?

Accepted Answer

Accepting the money would violate the IIA Code of Ethics, which prohibits internal auditors from accepting anything that may impair or be presumed to impair their professional judgment.

Question 12

When conducting an interview, an internal auditor is most likely to ask open-ended questions in order to:

Accepted Answer

Open-ended questions are designed to encourage a full, meaningful answer using the subject's own knowledge and/or feelings, allowing the auditor to obtain information based on the person's own perspective.

Question 13

An internal auditor finds during an engagement that payment for the organization's general insurance policy is two months overdue. The issue is informally mentioned to the finance department which immediately submits the invoice for payment. The auditor decides to exclude this finding from the final audit report as the oversight was immediately corrected and there were no consequences because of this late payment. Which of the following rules of conduct as described in the IIA Code of Ethics, did the auditor fail to uphold?

Accepted Answer

The auditor failed to uphold objectivity by excluding a relevant finding from the audit report, potentially compromising the completeness and accuracy of the report.

Question 14

According to IIA guidance, which of the following best describes processes and tools typically used in ongoing internal assessments?

Accepted Answer

Ongoing internal assessments typically involve the analysis of performance metrics such as cycle times to continuously monitor and improve the efficiency and effectiveness of the internal audit activity.

Question 15

The internal audit supervisor is reviewing the workpapers prepared by the staff. According to the Standards, which of the following statements regarding workpaper supervision is not true?

Accepted Answer

Review notes of questions that arise during the review process do not need to be retained according to the Standards.

Question 16

An internal auditor is reviewing employee travel data to identify opportunities to cut costs while ensuring adequate participation at conferences to support the organization's mission. Which of the following pieces of evidence would be sufficient for completing this task?

Accepted Answer

The log in option A provides comprehensive data including dates, conference titles, objectives, employee names, and costs per trip, which are necessary to analyze travel expenses and participation in relation to the organization's mission.

Question 17

Which of the following is an example of a transaction-level control?

Accepted Answer

Reconciliations of primary accounts are an example of a transaction-level control because they involve the review and verification of individual transactions.

Question 18

According to the Standards, which of the following is not a consideration when exercising due professional care for an assurance engagement?

Accepted Answer

Due professional care does not require that all risks are identified, but rather that the internal auditor considers the extent of assurance services necessary to address significant risks.

Question 19

An internal auditor notes that employees are able to download files from the internet. According to IIA guidance, which of the following strategies would best protect the organization from the risk of copyright infringement and licensing violations resulting from this practice?

Accepted Answer

Installing a software inventory management application helps track and manage software licenses, ensuring compliance and reducing the risk of copyright infringement and licensing violations.

Question 20

During an engagement, an internal auditor decided to use variance analysis as an auditing techniques. Which of the following steps should the auditor pursue if he discovers unexpected deviations of actual results from budget?

Accepted Answer

The auditor should gather additional information to determine the cause of the deviations to understand why the actual results differ from the budgeted figures. This step is crucial for identifying any underlying issues or errors.

Exam 3: The Internal Audit Activity Role in Governance, Risk, and Control