IIA-CIA-Part1 Exam Practice Test Instant Access

Question 1

Once an organization's risks are identified, what would be the next step to ensure resources are properly allocated to manage those risks?

ARisk responses must be selected.

BRisks must be assessed.

CThe risk universe must be established.

DRisk responses must be aligned.

Answer : B

After identifying an organization's risks, the next crucial step is to assess those risks. Risk assessment involves evaluating the identified risks to determine their potential impact and likelihood. This assessment helps prioritize the risks, enabling the organization to allocate resources effectively to manage the most significant risks. Without assessing the risks, the organization would lack the necessary information to make informed decisions on how to respond to and mitigate these risks.

The Institute of Internal Auditors (IIA) Standards and Practice Advisories.

COSO Enterprise Risk Management (ERM) Framework.

'Internal Auditing: Assurance & Advisory Services' by IIA, Chapter on Risk Assessment.

Question 2

Which of the following represents a deficiency in the control environment?

AThe sales department has failed to achieve targets for the last nine months.

BEmployees report suspicious activity by calling the organization's ethics hotline.

CHiring procedures do not include background checks for prospective job candidates.

DManagement reports three potential ethics issues to the board of directors.

Answer : C

A deficiency in the control environment is represented by hiring procedures not including background checks for prospective job candidates. This lack of background checks can lead to hiring personnel who may not have integrity or the appropriate qualifications, increasing risk to the organization. Reference: COSO Framework, which discusses components of a strong control environment, including the importance of conducting thorough background checks as part of personnel standards.

Question 3

Management assessed the organization's risk of expanding operations into a new, but volatile, region and began looking for a compatible local partner to manage sales and distribution. Which of the following best describes this risk management technique?

AAvoidance.

BAcceptance.

CReduction.

DSharing

Answer : D

The risk management technique described by finding a local partner to manage sales and distribution in a new, volatile region is best characterized as 'Sharing.' This approach involves sharing the risk with another party that can better manage or absorb part of the risk, thus reducing the organization's direct exposure to potential adverse outcomes. Reference: Risk management literature and practices, including frameworks such as ISO 31000.

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

In the context of an initial public offering (IPO), the best description of the risk involved is 'inherent risk.' Inherent risk refers to the exposure inherent in the company's operations or industry without considering the effectiveness of any risk management measures. An IPO's inherent risks include market volatility, investor sentiment, regulatory changes, and economic factors that could affect the offering's success. Reference: Financial risk management literature and common usage in financial audits.

Question 5

Which of the following statements is true regarding how the scope of a consulting engagement should be established?

AThe engagement client should be able to determine the scope to be applied to the engagement

BThe internal auditor should establish a scope that does not impair her objectivity

CAny attempts by the engagement client to limit the scope should be considered a scope limitation

DThe scope should include reviewing the effectiveness of the internal control environment

Answer : A

In a consulting engagement, it is generally acceptable and often expected that the engagement client will determine the scope of the engagement to ensure that the consulting services meet their specific needs. This collaborative approach helps in aligning the audit services with the desired outcomes of the client while maintaining the flexibility needed in consulting engagements. However, the internal auditor must ensure that such scope setting does not impair their objectivity. Reference: The IIA's Practice Advisories on Consulting Engagements

Question 6

During an audit of the purchasing department, an internal auditor identifies significant issues that could affect the organization's financial reporting. Management disagrees with the audit results. Which of the following responses best demonstrates the internal auditor has the necessary competencies related to professional Judgment and conflict management?

AThe auditor maintains his convictions and continues to proceed with the review process despite management's concerns related to the results.

BThe auditor bypasses management, discusses the results with the board, and seeks the board's input on how best to address the recommendations.

CThe auditor consults with other members of the audit team, and together they develop alternative recommendations that management may be more likely to accept.

DThe auditor meets with management to discuss the results and obtain a better understanding of the specific concerns.

Answer : D

Demonstrating competencies in professional judgment and conflict management involves engaging in dialogue to understand differing viewpoints and resolve disagreements. By meeting with management to discuss their concerns, the auditor shows a commitment to understanding the issues and working collaboratively to address any misunderstandings or disagreements, which is a critical aspect of effective audit practice. Reference: Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing and Practice Advisories on Conflict Resolution

Question 7

Which of the following should a general internal auditor be able to characterize as an IT-related risk?

AComputer servers are in a room that is accessible to all employees,

BAn IT architect avoids taking vacations and sharing his workload with coworkers,

CHours billed by IT developers exceed 24 hours daily.

DAudit logs are lacking in a system that processes personal data.

Answer : D

Audit logs are crucial for monitoring and reviewing the activities within IT systems, especially those processing personal data. The lack of audit logs presents a significant IT-related risk as it undermines the ability to trace any unauthorized or inappropriate access and actions within the system, thereby impacting the integrity and security of data. Reference: Best practices in IT security and internal control frameworks like COBIT and ISO/IEC 27001.

IIA-CIA-Part1 Certified Internal Auditor Exam Practice Test