IIA-CHAL-QISA Exam Questions Instant Access

Question 1

Which of the following would be the most effective fraud prevention control?

AEmail alert sent to management for checks issued over S100.000.

Binstallation of a video surveillance system in a warehouse prone to inventory loss

CNew hire training to explain fraud and employee misconduct.

DDaily report that Identifies unsuccessful system log-in attempts

Answer : C

Training new hires on fraud and employee misconduct is a proactive measure that raises awareness and educates employees about the organization's policies and the consequences of fraudulent behavior.

Such training helps create a culture of integrity and compliance, making employees less likely to engage in or tolerate fraud.

Continuous education and reinforcement of ethical behavior are essential components of an effective fraud prevention strategy

Question 2

What would be the effect if an organization paid one of its liabilities twice during the year, in error?

AAssets, liabilities, and owners' equity would be understated.

BAssets, net income, and owners' equity would be unaffected

CAssets and liabilities would be understated.

DAssets, net income, and owners' equity would be understated, but liabilities would be overstated

Answer : D

If an organization pays one of its liabilities twice, its assets (cash) would be reduced more than necessary. This results in an understatement of net income and owners' equity because the additional payment is an expense that should not have been recorded. Liabilities would be overstated because the duplicate payment does not reduce the liability correctly.

'Financial Accounting Principles,' which discusses the impact of errors on financial statements.

Question 3

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 4

Which of the following best describes the internal audit activity's responsibility within a risk and control framework?

AThe internal audit activity constitutes the first line of defense in effective risk management.

BThe internal audit activity provides direction regarding internal controls implementation.

CThe internal audit activity verifies that management has met its responsibility for implementing effective controls.

DThe internal audit activity implements the internal control framework and advises management regarding best practices

Answer : C

Introduction:

The role of the internal audit activity within a risk and control framework is to provide independent assurance that management has established and is maintaining effective internal controls.

Responsibilities of Internal Audit:

Internal auditors evaluate and monitor the effectiveness of internal controls, ensuring they are designed and operating effectively to mitigate risks and achieve organizational objectives.

Options Analysis:

Option A: Internal audit does not constitute the first line of defense; this role is typically held by management.

Option B: While internal audit may provide recommendations, it does not direct the implementation of internal controls.

Option C: Verifying that management has met its responsibility for implementing effective controls aligns with the assurance role of internal audit.

Option D: Implementing the internal control framework is a management responsibility, not internal audit's.

Conclusion:

The best description of internal audit's responsibility within a risk and control framework is to verify that management has met its responsibility for implementing effective controls.

Internal Audit Standards and Practice Guides .

Question 5

An organization's health-care insurance costs have been rising approximately 10 percent per year for several years Which of the following analytical review procedures would best evaluate the reasonableness of the increase in health-care costs?

ADevelop a comparison of the costs incurred with similar costs incurred by other organizations

BObtain the government index of health-care costs for the comparable period of time and compare the rate of increase with that of the cost per employee incurred by the organization.

CObtain a bid from another health-care administrator to provide the same administrative services as the current health-care administrator.

DReview all claims and compare with appropriate procedures to ensure that overpayments have not occurred

Answer : B

Analytical review procedures involve evaluating financial information by studying plausible relationships among financial and non-financial data.

Government Index Comparison: Comparing the organization's increase in health-care costs with a relevant government index provides a benchmark to assess whether the cost increases are in line with broader economic trends.

Claims Review: While reviewing all claims could help identify specific overpayments, it is more labor-intensive and less effective for evaluating overall reasonableness.

Competitive Bids: Obtaining bids from other health-care administrators might control future costs but does not evaluate the reasonableness of past cost increases.

Industry Comparison: Comparing costs with those incurred by similar organizations could be useful but might not provide a standardized measure like a government index.

'Auditing and Assurance Services: An Integrated Approach,' which details the use of analytical procedures in evaluating financial data.

Question 6

Evidence discovered during the course of an engagement suggests that multiple incidents of fraud have occurred. There do not appear to be sufficient controls in place to prevent reoccurrence. Which of the following is the internal auditor's most appropriate next step?

AImmediately notify management of the area under review and the other internal auditors involved in the engagement

BDiscuss the situation with the engagement supervisor to determine whether fraud investigation experts are required to investigate the matter properly.

CFully document in the workpapers the evidence that has been discovered and recommend appropriate controls to address the fraud

DProvide the evidence that was discovered to local lav/ enforcement for possible prosecution of the suspected fraud

Answer : B

IIA Standards on Fraud:

Standard 2120 -- Risk Management: Internal auditors must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk.

Immediate Response: When evidence of fraud is discovered, the internal auditor must ensure that appropriate actions are taken promptly.

Next Steps for Internal Auditor:

Consult with Supervisor: The internal auditor should discuss the findings with the engagement supervisor. This ensures that the situation is assessed by a more experienced individual who can determine the next steps, including the need for specialized fraud investigation resources.

Specialized Expertise: Determining whether fraud investigation experts are needed is crucial for handling the matter appropriately, as they possess the necessary skills to investigate complex fraud cases.

Documenting Evidence:

While documenting the evidence and recommending controls is important (Option C), the immediate step should involve consultation with the supervisor to decide on the investigation approach.

Notifying management directly (Option A) or law enforcement (Option D) should follow internal protocols and often occur after consultation with the supervisor and possibly higher-level approvals.

Reference:

Engaging the engagement supervisor ensures that the appropriate steps are taken to investigate the fraud properly, aligning with professional standards and ensuring a thorough investigation.

Question 7

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.

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