IIA-CHAL-QISA Exam Questions Instant Access

Question 1

Which of the following is most likely to impair the organizational independence of the internal audit activity?

AThe chief audit executive (CAE) reports administratively to the chief financial officer

BThe CAE oversees the effectiveness of the organization's risk management function.

CThe CAE reports functionally to the CEO.

DThe CAE managed the finance department for the past five years.

Answer : D

Impairment of Independence: The organizational independence of the internal audit activity can be impaired if the CAE has had significant roles in management, such as managing the finance department. This prior involvement may create a conflict of interest or perceived bias.

IIA Standards on Independence: The IIA emphasizes the importance of independence and objectivity in internal auditing. Any prior management role, especially in the department being audited, can compromise the CAE's objectivity.

Examples of Impairment:

Administrative Reporting: While reporting administratively to the CFO (option A) or functionally to the CEO (option C) does not inherently impair independence, managing the finance department previously (option D) creates a direct conflict.

Overseeing Risk Management: Overseeing the risk management function (option B) is part of the CAE's responsibilities and does not impair independence if handled properly.

Question 2

An internal audit activity maintains a quality assurance and improvement program that includes annual self-assessments The internal audit activity includes in each engagement report a clause that the engagement is conducted in conformance with the International Standards for the Professional Practice of Internal Auditing (Standards). Which of the following justifies inclusion of this clause in the reports?

AInternal audit activity policies and engagement records provide relevant, sufficient, and competent evidence that the statement is correct.

BThe audit committee has reviewed the annual self-assessment results and approved the use of the clause.

CThe self-assessment results were validated by a qualified external review team three years prior.

DThe internal audit charter, approved by the audit committee, requires conformance with the Standards

Answer : C

According to the IIA Standards, an internal audit activity must have an external assessment conducted at least once every five years by a qualified, independent reviewer or review team from outside the organization. The validation by an external team ensures that the internal audit activity's self-assessments and quality assurance practices meet the required standards.

Question 3

According to the IIA Code of Ethics, which of the following is required with regard to communicating results?

AThe internal auditor should present material information to appropriate personnel within the organization without revealing confidential matters that could be detrimental to the organization

BThe internal auditor should disclose all material information obtained by the date of the final engagement communication.

CThe internal auditor should obtain all material information within the established time and budget parameters.

DThe internal auditor should reveal material facts that could potentially distort the reporting of activities under review

Answer : D

The IIA Code of Ethics sets forth principles and expectations for ethical behavior in internal auditing, particularly regarding the communication of results.

Integrity and Transparency: According to the IIA Code of Ethics, internal auditors are expected to exhibit integrity and transparency in their reporting, ensuring that material facts are disclosed accurately to avoid misrepresentation.

Revealing Material Facts: The principle of integrity mandates that internal auditors must reveal material facts necessary to avoid any misrepresentation of the activities being reviewed. This ensures that stakeholders receive a truthful and complete picture of the audit findings.

Practical Example: If an auditor discovers significant control weaknesses that could impact financial reporting, these must be disclosed in the audit report to provide a true representation of the entity's control environment.

Confidentiality and Appropriateness: While confidentiality is important, it does not supersede the need to report material facts that are essential for accurate reporting. Confidential matters that are not material or do not distort the reporting can be withheld to protect sensitive information.

Clarification: Option A incorrectly suggests that all confidential matters can be withheld even if they are material and could distort reporting, which contradicts the principle of integrity.

Comprehensive Disclosure: The requirement to disclose all material information by the date of the final engagement communication (Option B) and obtaining all material information within established parameters (Option C) are important but secondary to the fundamental ethical obligation to ensure accurate and truthful reporting.

Clarification: These options focus on procedural aspects rather than the core ethical obligation of integrity and accurate reporting.

Conclusion: The correct answer is D, as it aligns with the IIA Code of Ethics requirement that internal auditors should reveal material facts that could potentially distort the reporting of activities under review, ensuring transparency and integrity in their communications.

Question 4

The organization's internal audit charter was last updated six years ago to update the charter, which of the following actions is most appropriate for the chief audit executive to take?

AWait for the next external assessment and address all of the missing information in the charter based on the recommendations from the external assessment team

BPerform a review of HA guidance to become acquainted with the latest mandatory elements prior to updating the charter

CUse an internal audit charter template from another organization that operates within the same industry.

DIdentify an individual within the internal audit activity who has in-depth knowledge of mandatory IIA guidance elements to address any gaps or areas of the current version of the charter that could be improved

Answer : B

The chief audit executive should review the latest guidance from the Institute of Internal Auditors (IIA) to ensure the internal audit charter complies with current standards. This approach ensures the charter reflects up-to-date practices and mandatory elements, maintaining the integrity and effectiveness of the internal audit function.

'International Standards for the Professional Practice of Internal Auditing,' which provides mandatory guidance on the internal audit charter.

Question 5

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 6

The internal audit activity is responsible for which of the following actions related to an organization's internal controls9

AMitigating risks affecting achievement of organizational objectives.

BEnabling opportunities affecting achievement of organizational objectives.

CAnalyzing and advising regarding costs versus benefits of control activities.

DAttesting to fairness of financial statements

Answer : C

Internal audit activities include evaluating the effectiveness and efficiency of internal controls, and part of this process involves analyzing and advising on the cost-benefit relationship of control activities.

This function helps ensure that the internal controls in place are not only effective in mitigating risks but are also economically justified

Question 7

A regional entertainment organization is in the process of developing a corporate social responsibility (CSR) policy. Management invites ideas from employees when developing the CSR policy Which of the following is the most appropriate idea to include?

AManagement has overall responsibility for the effectiveness of governance, risk management, and internal control processes associated with CSR.

BThe board Is responsible for ensuring that CSR objectives are established, risks are managed, performance is measured, and activities are appropriately monitored and reported

CManagement is responsible for ensuring that the organization's CSR principles are communicated, understood, and integrated into decision-making processes.

DGenerally, CSR activities are limited to the management of the organization, thus, employees do not have a responsibility for ensuring the success of CSR objectives.

Answer : C

CSR Policy Development: In developing a Corporate Social Responsibility (CSR) policy, it is important that the principles of CSR are communicated and understood throughout the organization.

Integration into Decision-Making: Management's responsibility includes ensuring that CSR principles are not only communicated but also integrated into the organization's decision-making processes at all levels. This ensures that CSR is part of the organizational culture and operational strategies.

Board's Role: While the board has a role in overseeing and ensuring that CSR objectives are established and risks are managed, the day-to-day responsibility for integrating CSR into business operations lies with management.

IIA Guidance: According to IIA guidance, internal auditors should evaluate the design, implementation, and effectiveness of the organization's ethics-related objectives, programs, and activities, which include CSR initiatives (Standard 2110 - Governance).

Reference:

Effective communication and integration of CSR principles ensure that the organization operates in a socially responsible manner, aligning its business practices with societal expectations and contributing to sustainable development.

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