IIA-CHAL-QISA Exam Questions Instant Access

Question 1

A newly appointed chief audit executive (CAE) started analyzing the organization's policies in an attempt to customize them to address internal audit specifics. Which of the following organizationwide practices is most likely to be acceptable to the CAE?

AInternal auditors' performance evaluation is primarily based on both client satisfaction surveys and cost savings identified from the audits

BStandard training for each employee, including internal auditors, is 10 hours per year.

CTo enhance efficiency, Internal auditors should not be rotated regularly among engagements

DHiring practices include requiring potential auditors to disclose any significant stock ownership in the organization.

Answer : A

The statistical model indicates that daily sales have a direct relationship with the cost of ingredients used and an inverse relationship with rainy days.

Option A: On a rainy day, if total sales are greater than expected compared to the cost of ingredients used, it may indicate discrepancies that could be a sign of employee theft. For instance, if ingredients are used but not reflected in the sales, it suggests that items might be missing (stolen).

Option B: On a sunny day, lower-than-expected sales compared to the cost of ingredients could indicate wastage but not necessarily theft.

Option C and D: Both scenarios where total sales and the cost of ingredients are higher or lower than expected do not specifically point to theft without additional context.

Question 2

Which of the following is an example of a directive control?

ASegregation of duties

BException reports

CTraining programs,

DSupervisory review.

Answer : C

Directive controls are designed to encourage desired behavior or outcomes.

Option A: Segregation of duties is a preventive control, not a directive control.

Option B: Exception reports are detective controls.

Option D: Supervisory review is also a preventive or detective control.

Option C: Training programs are directive controls as they guide employees on the correct procedures and practices to follow.

Question 3

A bicycle manufacturer incurs a combination of fixed and variable costs with the production of each bicycle. Which of the following statements is true regarding these costs?

Aif the number of bicycles produced is increased by 15 percent, the variable cost per unit will increase proportionally

BThe fixed cost per unit will vary directly based on the number of bicycles produced during the production cycle.

CThe total variable cost will vary proportionally and inversely with the number of bicycles produced during a production run.

Dif the number of bicycles produced is increased by 30 percent, the fixed cost per unit will decline.

Answer : D

Introduction:

Understanding cost behavior is crucial in managing production and financial performance in manufacturing.

Cost Characteristics:

Fixed costs remain constant in total but vary per unit with changes in production volume.

Variable costs vary directly with production volume but remain constant per unit.

Options Analysis:

Option A: Variable costs per unit remain constant regardless of production volume.

Option B: Fixed costs per unit decrease as production volume increases, not directly.

Option C: Total variable costs vary directly with production volume, not inversely.

Option D: Fixed costs per unit will decline as the number of units produced increases due to the spreading of fixed costs over a larger number of units.

Conclusion:

When production increases by 30%, the fixed cost per unit will decline as the same total fixed cost is allocated over a greater number of units.

Cost Accounting Standards and Practices .

Question 4

Which of the following best describes the risk contained in an initial public offering for a new stock?

AResidual risk.

BNet risk.

CInherent risk.

DUnderlying risk

Answer : C

Introduction:

Inherent risk refers to the susceptibility of an assertion to a material misstatement, assuming no related controls.

IPO Risks:

Initial Public Offerings (IPOs) inherently carry a high level of risk due to the uncertainty and complexity involved in the process, the lack of historical data, and market volatility.

Options Analysis:

Option A: Residual risk is the risk remaining after controls are applied.

Option B: Net risk is not a standard term in audit risk assessments.

Option C: Inherent risk is the appropriate term for the risks associated with an IPO, which exist before considering any controls.

Option D: Underlying risk is not a standard audit term.

Conclusion:

The risk associated with an IPO for a new stock is best described as inherent risk due to the nature of the uncertainties involved.

Audit Standards and Securities Regulation Guidelines

Question 5

According to IIA guidance, which of the following corporate social responsibility (CSR) evaluation activities may be performed by the internal audit activity?

1. Consult on CSR program design and implementation

2. Serve as an advisor on CSR governance and risk management.

3. Review third parties for contractual compliance with CSR terms

4 Identify and mitigate risks to help meet the CSR program objectives

A1,2, and 3.

B1.2. and 4.

C1, 3, and 4.

D2. 3. and 4.

Answer : B

According to the Institute of Internal Auditors (IIA) guidance, internal audit activities can encompass several aspects of evaluating corporate social responsibility (CSR) programs.

Consulting on Design and Implementation: Internal auditors can provide valuable insights into the design and implementation of CSR programs to ensure they are well-structured and aligned with organizational objectives.

Advising on Governance and Risk Management: Serving as advisors, internal auditors can help in establishing effective governance structures and identifying and managing risks associated with CSR initiatives.

Mitigating Risks: By identifying and mitigating risks, internal auditors support the achievement of CSR program objectives, ensuring these initiatives are both effective and sustainable.

Reviewing Third Parties: While internal auditors may review third parties for contractual compliance with CSR terms, this activity is more often part of broader compliance audits rather than a specific focus area for CSR evaluations.

'IIA Practice Guide: Auditing Corporate Social Responsibility,' which outlines the role of internal auditors in CSR-related activities.

Question 6

Which of the following activities Is most likely to require a fraud specialist to supplement the knowledge and skills of the internal audit activity?

APlanning an engagement of the area in which fraud is suspected.

BEmploying audit tests to detect fraud

CInterrogating a suspected fraudster.

DCompleting a process review to improve controls to prevent fraud.

Answer : C

Specialized Knowledge: Interrogating a suspected fraudster requires specialized knowledge and skills that go beyond the typical expertise of internal auditors. This includes understanding interrogation techniques, legal implications, and psychological aspects.

Fraud Specialist: A fraud specialist is trained in conducting investigations, including interrogations, and can provide valuable insights and evidence in cases of suspected fraud.

IIA Standards: According to Standard 1210.A2, internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.

Collaborative Approach:

Fraud Investigations: Engaging a fraud specialist ensures that the investigation is conducted thoroughly and professionally, adhering to legal and ethical standards.

Support to Internal Audit: The fraud specialist can provide support and guidance to the internal audit activity, enhancing the overall effectiveness of the fraud investigation.

Reference:

Employing a fraud specialist to interrogate a suspected fraudster ensures that the investigation is handled with the necessary expertise and legal compliance, thereby increasing the chances of uncovering the truth and taking appropriate actions.

Question 7

Which of the following is the most appropriate reason for a chief audit executive to conduct an external assessment more frequently than five years?

ASignificant changes in the organization's accounting policies or procedures would warrant timely analysis and feedback.

BMore frequent external assessments can serve as an equivalent substitute for internal assessments.

CThe parent organization's internal audit activity agreed to perform biennial reciprocal external assessments to provide greater assurance at a reduced cost.

DA change in senior management or internal audit leadership may change expectations and commitment to conformance

Answer : D

Introduction:

The frequency of external assessments for the internal audit activity (IAA) is typically every five years. However, certain circumstances may necessitate more frequent assessments.

Reasons for More Frequent Assessments:

Significant organizational changes or shifts in internal audit leadership can impact the effectiveness and alignment of the internal audit function with organizational goals.

Options Analysis:

Option A: While changes in accounting policies might warrant review, they do not specifically necessitate a more frequent external assessment.

Option B: More frequent external assessments cannot substitute for ongoing internal assessments, which are continuous and serve different purposes.

Option C: Reciprocal external assessments can be cost-effective but are not a primary reason for increased frequency.

Option D: Changes in senior management or internal audit leadership can lead to shifts in expectations and commitment to compliance, thus justifying more frequent external assessments to ensure continued alignment and conformance with standards.

Conclusion:

The most appropriate reason for a chief audit executive (CAE) to conduct an external assessment more frequently than five years is when there is a change in senior management or internal audit leadership, as this may alter expectations and commitment to conformance.

Internal Audit Standards and Practice Guides .

IIA Qualified Info Systems Auditor CIA Challenge IIA-CHAL-QISA Exam Questions