IIA-CIA-Part1 Exam Practice Test Instant Access

Question 1

An IT contractor applied for an internal audit position at a bank. The contractor worked for the bank's IT security manager two years ago. If the audit manager interviewed the contractor and wants to extend a job offer, which of the following actions should the chief audit executive pursue?

AAllow the audit manager to hire the contractor and state that the individual is free to perform IT audits, including security.

BNot allow the audit manager to hire the contractor, as it would be a conflict of interest

CAllow the audit manager to hire the contractor, but state that the individual is not allowed to work on IT security audits for one year.

DNot allow the audit manager to hire the contractor and ask the individual to apply again in one year.

Answer : C

If the IT contractor previously worked under the bank's IT security manager and is now applying for an internal audit position at the bank, the chief audit executive should allow the hiring but restrict the contractor from working on IT security audits for one year. This measure prevents potential conflicts of interest and ensures that the contractor's prior association with the IT security manager does not influence audit objectivity. Reference: IIA Standards for Professional Practice of Internal Auditing, specifically those related to objectivity and conflicts of interest.

Question 2

Which of the following situations undermines the independence of the internal audit activity?

AThe internal audit activity is responsible for the company's risk management function, and its head manager reports to the chief audit executive.

BA senior member of the internal audit activity once worked in the corporate finance department.

CThe organization's CEO reviews the internal audit activity's annual budget per the organization's policies and procedures.

DThe internal audit activity often uses management's risk profile to build its own risk profile for annual planning.

Answer : D

According to IIA standards, particularly Standard 1100 on Independence and Objectivity, using management's risk assessment to build the internal audit's risk profile can potentially undermine the independence of the internal audit activity. This dependence on management's view could bias the audit planning and scope, hence not entirely independent in evaluating management's assertions or risks identified by management alone. Reference: IIA Standard 1100 - Independence and Objectivity.

Question 3

An internal auditor observed that sales staff are able to modify or cancel an order in the system prior to shipping* She wonders whether they can also modify orders after shipping. Which of the following types of controls should she examine?

ABatch controls.

BApplication controls.

CGeneral IT controls.

DLogical access controls

Answer : B

The internal auditor should examine application controls, which directly relate to specific computer applications. These controls ensure the accuracy, completeness, and authorization of transactions processed by the system. Since the auditor's concern is whether sales staff can modify orders after shipping, which involves transactional changes in a specific application, application controls are the appropriate focus. Reference: Information systems auditing standards and best practices.

Question 4

How can an Internal audit activity contribute to Its organization's risk assessment process?

AAssist in reviewing how key risks are reported

BDetermine the risk appetite based on an independent review

CDetermine necessary risk responses based on an assessment

DTake accountability for risk management

Answer : A

One of the roles of internal audit is to provide assurance on the effectiveness of risk management processes3.Internal audit can contribute to the organization's risk assessment process by reviewing how key risks are identified, measured, monitored, and reported by the first and second lines of defense4.Internal audit can also provide recommendations for improving the risk reporting process and ensuring that it aligns with the organization's objectives and risk appetite5.

Some additional information:

The first line of defense is the operational management, who owns and manages the risks. The second line of defense is the risk management and compliance functions, who oversee and support the risk management activities of the first line.The third line of defense is the internal audit function, who provides independent assurance on the effectiveness of risk management and internal control4.

Risk reporting is the process of communicating relevant and timely information about the organization's risks to the stakeholders, such as the board, senior management, regulators, and external auditors. Risk reporting helps to inform decision-making, enhance accountability, and promote a risk-aware culture.

The organization's risk appetite is the amount and type of risk that it is willing to accept in pursuit of its objectives. The risk appetite should be defined by the board and communicated to all levels of the organization. The risk appetite should guide the risk assessment, response, and reporting processes.

Question 5

Which of the following should catch the internal auditor's attention as a potential red flag for fraud?

AThe accounting unit keeps detailed records and preserves supporting documentation in excess of company requirements

BOne of the subsidiaries has more bank accounts than any other comparable subsidiary

CThe same external audit firm has been with the company for three years without rotation

DThe arithmetic median tenure of employees working at production facilities is 15 years

Answer : B

Having more bank accounts than necessary can be a red flag for fraud, especially in a subsidiary compared to its peers. This scenario (option B) might indicate complexity that is unnecessary and could be used to conceal improper transactions or facilitate unauthorized movements of funds. Excessive bank accounts can complicate tracking and reconciling of funds, which can be exploited for fraudulent purposes. This potential red flag should prompt further investigation by the internal auditor. Reference:

IIA guidance on fraud risk indicators

Question 6

An internal audit activity is performing a governance engagement. Which of the following would provide the best evidence for an internal auditor when evaluating the organization's culture?

APersonnel and customer surveys, actual reports, and due diligence results regarding third-party governance practices.

BDetails on mandatory reporting to third parties, disclosure committee charter and responsibilities, and the internal communication system.

CSuccession plans, development programs, and job descriptions with responsibilities and authorities.

DEthics and integrity policy; structured interviews with employees; and established and communicated values, mission, and vision.

Answer : D

Evaluating organizational culture requires insights into ethics, values, and behavior. The combination of the ethics policy, structured employee interviews, and communicated organizational values provides a comprehensive view, as recommended by IIA standards for governance audits.

Question 7

Which of the following options describes the reason that conformance with The IIA's Code of Ethics is mandatory for internal auditors?

AEthical compliance provides the basis for stakeholder confidence in the competence of the internal audit activity and of professional internal auditors.

BEthical compliance is necessary for internal auditors and the internal audit activity to accept responsibility for providing g absolute assurance about the organization's risk management.

CEthical compliance provides the basis for stakeholder trust and confidence in the validity of the profession of internal auditing and the internal audit activity's findings.

DThe internal audit activity's ethical compliance sets the tone for the ethical compliance by the organization's board, management, and employees.

Answer : C

Conformance with The IIA's Code of Ethics is mandatory for internal auditors because it provides the basis for stakeholder trust and confidence in the validity of the profession of internal auditing and the internal audit activity's findings. Ethical behavior in internal auditing ensures that auditors are trusted by those who rely on their conclusions, advice, and information, thereby enhancing the integrity and credibility of the audit results. Reference: Institute of Internal Auditors (IIA) - International Professional Practices Framework (IPPF)

IIA-CIA-Part1 Certified Internal Auditor Exam Practice Test