IIA-CHAL-QISA Exam Practice Test Instant Access

Question 1

According to IIA guidance, which of the following statements is true regarding due professional care?

AInternal auditors must exercise due professional care to ensure that all significant risks will be identified.

BInternal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.

CDue professional care requires the internal auditor to conduct extensive examinations and verifications to ensure fraud does not exist.

DDue professional care is displayed during a consulting engagement when the internal auditor focuses on potential benefits of the engagement rather than the cost

Answer : B

Due professional care is a critical concept in internal auditing, ensuring that auditors conduct their work with the necessary diligence and competence.

Definition and Standards: According to the IIA's International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 1220 -- Due Professional Care, internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.

Expectation of Competence: The standard requires auditors to use their professional judgment and to exercise the level of skill and care that a reasonably prudent internal auditor would use in similar circumstances.

Practical Example: This includes evaluating the nature and complexity of the engagement, the adequacy and effectiveness of risk management, and control processes relevant to the engagement.

Comprehensive, Not Excessive: While due professional care involves being thorough, it does not mandate exhaustive procedures such as those implied in options A and C.

Clarification: Option A overstates the requirement by implying that all significant risks must be identified, which is not always feasible.

Clarification: Option C misinterprets due professional care by suggesting that extensive examinations and verifications to ensure fraud does not exist are always necessary, which is beyond the typical scope of many audits.

Cost vs. Benefit in Consulting: Option D refers to consulting engagements and the consideration of benefits over cost, which is a part of due professional care but does not capture the comprehensive expectation of care and skill.

Clarification: Due professional care in consulting engagements is about balancing benefits and costs but also involves ensuring quality and thoroughness appropriate to the engagement's objectives.

Conclusion: The correct answer is B, as it accurately reflects the IIA's guidance that internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.

Question 2

Which of the following methods is most closely associated to year over year trends?

AHorizontal analysts

BVertical analysis.

CCommon-size analysis.

DRatio analysis.

Answer : A

Introduction:

Horizontal analysis involves comparing financial data across multiple periods to identify trends and patterns over time.

Year-over-Year Trends:

This method helps in understanding changes in financial performance and position year-over-year.

Options Analysis:

Option A: Horizontal analysis is directly related to comparing data year-over-year.

Option B: Vertical analysis involves comparing items on a financial statement as a percentage of a base figure within the same period.

Option C: Common-size analysis is a type of vertical analysis where all items are expressed as a percentage of a common base.

Option D: Ratio analysis evaluates relationships between different financial statement items but is not primarily focused on year-over-year trends.

Conclusion:

Horizontal analysis is most closely associated with year-over-year trends as it involves reviewing financial data across periods.

Financial Analysis and Reporting Guidelines

Question 3

Which of the following is the most important determinant of the objectives and scope of assurance engagements?

The organizational chart, business objectives, and policies and procedures of the area to be reviewed

AThe most recent risk assessment conducted by management of the area to be reviewed.

BThe requests of operational and senior management throughout the organization.

CThe preliminary risk assessment performed by internal auditors planning the engagement.

Answer : C

The primary determinant of the objectives and scope of assurance engagements is the preliminary risk assessment performed by internal auditors. This assessment identifies the key risks associated with the area under review and helps prioritize the audit efforts based on the significance and likelihood of these risks. This approach ensures that the engagement focuses on the most critical areas, thereby adding value to the organization.

Question 4

The internal audit activity is currently working on several engagements, including a consulting engagement on the management process in the human resources department. Which of the following actions should the chief audit executive take to most efficiently and effectively ensure the quality of the engagement?

AAssign an experienced manager to monitor the whole engagement process.

BEmploy fieldwork peer review to enhance the work quality.

CRequire internal auditors to follow a standardized work program.

DPersonally supervise the engagement

Answer : B

Ensuring Quality: To ensure the quality of the consulting engagement in the human resources department, the chief audit executive (CAE) can implement a fieldwork peer review process. This involves having experienced auditors review the work of their colleagues to ensure adherence to audit standards and procedures.

Efficiency and Effectiveness:

Peer Review: This method helps identify any issues or improvements needed in real-time, enhancing both the efficiency and effectiveness of the audit process.

Standardized Work Programs: While standardized work programs (option C) provide consistency, peer review adds a layer of quality assurance.

Supervision: Personal supervision by the CAE (option D) is not practical for ensuring the quality of all engagements.

Question 5

According to IIA guidance, which of the following is true regarding typical fraud schemes?

1. A diversion occurs when an employee has an undisclosed personal economic interest in a transaction that adversely affects the organization

2. Tax evasion is intentional reporting of false or misleading information on a tax return by an organization to reduce taxes owed.

3. Skimming involves stealing cash or assets from the organization and is normally concealed by adjusting the organization's records

4 Disbursement fraud occurs when a person causes the organization to issue a payment for fictitious goods or services

A1 and 3.

B1 and 4

C2 and 3.

D2 and 4

Answer : D

Diversion typically involves redirecting resources or assets for personal use, not just having an undisclosed interest.

Tax evasion involves deliberate falsification of financial information to avoid tax liabilities.

Skimming is taking cash before it is recorded in the accounting system, usually difficult to detect.

Disbursement fraud involves creating fictitious invoices or vendors to divert funds.

Question 6

Which of the following is the most appropriate way to ensure that a newly formed internal audit activity remains free from undue influence by management?

AAppoint the chief audit executive as a member of the board.

BAdopt written policies and procedures for the internal audit activity, approved by the board.

CEnsure the chief audit executive reports administratively to the audit committee.

DEstablish the internal audit activity's position within the organization in an audit charter

Answer : D

The internal audit charter is a formal document that defines the internal audit activity's purpose, authority, and responsibility.

Establishing the internal audit activity's position within the organization in an audit charter ensures independence and objectivity by clearly stating the internal audit's role and its reporting lines.

The charter should be approved by the board and senior management to reinforce its authority and protect the internal audit activity from undue influence by management

Question 7

At a conference an internal auditor presented a new computer-assisted audit technique developed by his organization The presentation included sample data derived from performing audit engagements for the organization. Travel costs were paid by the conference organizers and the trip was approved by the chief audit executive (CAE). However, neither management nor the CAE was aware that the internal auditor would be making a presentation based on work completed for the organization According to IIA guidance, which of the following statements is most relevant regarding the actions of the auditor?

AThe auditor did not violate the standard of objectivity because the presentation had no impact on the organization.

BThe auditor violated the principle of confidentiality by disclosing information about the organization without approval.

CThe auditor should have obtained permission before using the material, but did not violate the IIA Code of Ethics or Standards

DThe auditor breached the conflict of interest standard by accepting payment for travel costs

Answer : B

Understanding Confidentiality: According to the IIA Code of Ethics, internal auditors are required to respect the value and ownership of information they receive and not disclose information without appropriate authority unless there is a legal or professional obligation to do so.

Presentation Details: In this scenario, the internal auditor presented sample data derived from audit engagements performed for the organization. Even though the travel costs were covered by the conference organizers and the trip was approved by the CAE, neither the CAE nor management was aware of the specific content of the presentation.

Violation of Confidentiality: By disclosing information related to the organization's audit engagements without prior approval from management or the CAE, the auditor breached the confidentiality principle. The auditor should have sought permission before using and presenting any material related to the organization's internal operations.

IIA Standards: Standard 1310 -- Requirements of the Quality Assurance and Improvement Program -- states that internal auditors must adhere to the IIA's Code of Ethics and Standards. This includes maintaining confidentiality and obtaining necessary approvals before disclosing any organizational information.

Reference:

The principle of confidentiality is clearly violated when information is shared without proper authorization, regardless of the perceived impact on the organization. The IIA Code of Ethics emphasizes the importance of obtaining appropriate permissions to prevent unauthorized disclosures.

IIA-CHAL-QISA Qualified Info Systems Auditor CIA Challenge Exam Practice Test