Free IIA IIA-CIA-Part1 Practice Exam with Questions & Answers | Set: 5

The principle from the IIA's Code of Ethics that would be violated by not informing the chief audit executive about the lack of required IT expertise is Competency. This principle requires that internal auditors apply the knowledge, skills, and experience needed in the performance of internal audit services. By deciding to perform an engagement without the necessary IT expertise, the auditor fails to meet the standards of competency expected.

The IIA's Code of Ethics, specifically the section on Competency.

To achieve conformance with the Standards, the chief audit executive must include the activity of reporting the results of the quality assurance and improvement program (QAIP) to senior management and the board. This is essential for maintaining transparency and accountability in the internal audit activity’s efforts to uphold and enhance the quality of its operations.

IIA Standard 1300: Quality Assurance and Improvement Program.

The statement that articulating measurable objectives is part of internal control is true. A system of internal control is designed to help an organization achieve its objectives, and these objectives need to be clearly stated and measurable to effectively assess and control risks related to them.

COSO Framework for Internal Control, which emphasizes the importance of clear, measurable objectives in effective internal control systems.

A consulting service is the type of engagement that requires the client to agree with the techniques used by the internal audit activity. In consulting engagements, the scope and objectives, as well as the methodology and techniques to be used, are agreed upon with the client to ensure that the services meet their needs and expectations.

IIA International Standards for the Professional Practice of Internal Auditing.

If a new internal auditor suspects fraud, the appropriate action is to document supporting information and recommend an investigation to the appropriate audit management, such as the chief audit executive (CAE). This approach maintains the auditor's objectivity and ensures that suspicions of fraud are handled by following the proper channels and procedures established within the organization for such matters.

IIA guidance on fraud and the auditor's role in fraud detection, which emphasizes the importance of documenting evidence and escalating fraud concerns through proper management channels.

According to IIA guidance, the internal audit activity may serve as an advisor on CSR governance and risk management, review third parties for compliance with CSR contractual terms, and identify and mitigate risks to help meet CSR program objectives. These roles enable the internal audit to contribute effectively to the organization's CSR initiatives by ensuring governance standards are met, contractual obligations are upheld, and risks are managed proactively.

Institute of Internal Auditors (IIA) - Practice Advisories on Corporate Social Responsibility

According to the Standards, internal audit professional development plans must ensure that staff development activities are based primarily on the skills and competencies needed to complete the audit plan. This requirement ensures that the internal audit staff possesses the necessary expertise and capabilities to effectively carry out the planned audit activities.

IIA Standards related to Continuing Professional Development and Staff Proficiency.

To encourage and maintain internal audit objectivity, it is crucial for internal auditors to have an independent reporting line, preferably directly to the audit committee. This policy helps minimize potential biases or influences from management and ensures that audit findings are communicated openly and transparently without fear of repercussion or conflict of interest, thereby safeguarding the objectivity of the audit function.

Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing

The internal auditor's failure to identify the origins of a significant control issue before concluding the engagement suggests a lack of critical thinking skills. Critical thinking involves analyzing and evaluating an issue thoroughly to understand its root causes before forming a judgment. Improving this skill would enhance the auditor's ability to conduct deeper analyses and provide more valuable insights in audit reports.

Institute of Internal Auditors (IIA) - Competency Framework for Internal Auditors

The most effective risk management strategy for a manufacturer experiencing regular fluctuations in the price of electrical power, which impacts the bottom line, would be to use a forward contract for bulk power purchases. This strategy allows the manufacturer to lock in power prices for a future period, thus reducing the risk associated with price volatility and providing more predictable cost planning.

Risk management strategies in operations and finance, as discussed in business management and internal auditing literature, which advocate using financial instruments like forward contracts to hedge against price fluctuations.

The most accurate statement regarding the internal audit charter according to IIA guidance is that the charter must be approved by both senior management and the board. This ensures that the internal audit activity’s purpose, authority, and responsibility are clearly defined and acknowledged by the organization’s leadership, facilitating alignment with organizational governance.

The IIA’s guidance on internal audit charters, which emphasizes approval by senior management and the board as a key requirement.

According to IIA guidance, the most appropriate role for the internal audit activity after a fraud investigation is to conduct lessons learned sessions to ascertain how the fraud occurred and which controls failed. This approach helps the organization to understand the weaknesses in their controls and processes, thereby facilitating improvements to prevent future occurrences.

IIA Practice Advisories on fraud and the role of internal auditing post-investigation.

In responding to a request from senior management for the internal audit activity to review and amend policies when auditing the purchasing department, the chief audit executive would most likely give primary consideration to maintaining internal audit independence. This request potentially places the internal audit activity into a management role, which could impair its independence and the ability to perform unbiased audits in the future. According to IIA standards, internal auditors should avoid taking on operational responsibilities to preserve their independence.

IIA Standards on independence and objectivity.

While internal auditors are not primarily fraud investigators, their role does include a responsibility to demonstrate adequate professional skepticism. This means being alert to conditions that may indicate possible fraud or error while performing audit engagements. Demonstrating skepticism is essential in enabling auditors to conduct thorough and effective audits, especially concerning fraud risks.

Institute of Internal Auditors (IIA) - Practice Advisories on Fraud and Professional Skepticism.