IIA-IAP Exam Practice Test Instant Access

Question 1

Which of the following is an important consideration when providing quality audit communications?

AInclude as much detail as possible.

BProvide a fair and balanced assessment.

CDemonstrate knowledge by using technical language.

Answer : B

Comprehensive and Detailed Step-by-Step Explanation:

Reference to IIA Standards:

Standard 2420 - Quality of Communications: Audit communications must be accurate, objective, clear, concise, constructive, complete, and timely.

A fair and balanced assessment ensures objectivity and builds credibility.

Reasoning:

Option B is correct because fair and balanced reporting reflects both positive and negative findings, maintaining the credibility and usefulness of the audit report.

Option A (including as much detail as possible) risks overwhelming the audience and detracting from key messages.

Option C (using technical language) can reduce clarity and accessibility for non-technical stakeholders.

Importance of Balanced Reporting:

Objective and balanced communications ensure that the audit report is actionable and supports informed decision-making by management and the board.

Question 2

During an accounts payable audit engagement, the internal auditor identified a risk that vendor invoices may be paid multiple times. Which of the following would be appropriate preventive controls to mitigate this risk?

ASystem controls to identify identical invoice amounts from the same vendor that prohibit payment after the initial invoice.

BSystem controls to identify identical invoice numbers and dates from the same vendor prior to payment.

CManual controls requiring the reconciliation of paid vendor invoices to monthly invoice statements provided by the vendor.

Answer : B

Comprehensive and Detailed Step-by-Step Explanation:

Preventive System Controls: Identifying duplicate invoice numbers and dates is a robust preventive control, as it helps flag duplicate invoices before payment is processed.

Other Options:

Option A: Identical invoice amounts alone may not always indicate duplicates, as different invoices can share the same amount.

Option C: Manual reconciliations are detective controls, not preventive ones.

Thus, the correct answer is B.

Question 3

Which of the following best demonstrates that appropriate and sufficient resources were allocated to an audit engagement to achieve its objectives?

AStaff skills audit.

BApproved engagement work program.

CPost-engagement survey of management of the audited area.

Answer : B

Comprehensive and Detailed Step-by-Step Explanation:

Reference to IIA Standards:

Standard 2200 - Engagement Planning: The engagement work program outlines the resources, timelines, and procedures necessary to achieve the engagement's objectives.

The work program must be approved to ensure alignment with objectives and resource requirements.

Reasoning:

Option B is correct because an approved engagement work program confirms that the scope, procedures, and resources were planned and allocated effectively.

Option A (staff skills audit) evaluates team competencies but does not confirm specific resource allocation for an engagement.

Option C (post-engagement survey) evaluates the outcome of the audit but does not provide evidence of initial resource planning.

Significance of the Work Program:

The work program ensures that the engagement is structured to meet objectives efficiently, with adequate and relevant resources.

Question 4

Which of the following would have the most direct impact on management's decision regarding the amount of risk that is considered acceptable?

ARisk capacity.

BRisk appetite.

CRisk perception.

Answer : B

Comprehensive and Detailed Step-by-Step Explanation:

Reference to IIA Standards:

Standard 2120 - Risk Management: Internal audit should evaluate the organization's risk appetite and alignment with decision-making processes.

Definitions:

Risk Appetite (Option B): The level of risk an organization is willing to accept in pursuit of its objectives, making it the most direct determinant of acceptable risk levels.

Risk Capacity (Option A): The organization's ability to absorb risk, which is more strategic and long-term.

Risk Perception (Option C): Subjective views of risk, which can influence decisions but do not directly determine acceptable risk.

Question 5

What are the typical elements of a risk and control matrix used in the engagement planning process?

AExperience level of key management personnel, susceptibility of the process to fraud, and process automation.

BInherent process risks, as defined in a globally accepted risk and control framework.

CBusiness objectives, risks to the objectives, and impact and likelihood of the risk occurring.

Answer : C

Comprehensive and Detailed Step-by-Step Explanation:

Risk and Control Matrix: A risk and control matrix links business objectives, the risks threatening those objectives, and the likelihood and impact of the risks. It is used to prioritize areas for review and identify necessary controls.

Other Options:

Option A: While relevant factors for assessment, these do not represent the structure of a typical risk and control matrix.

Option B: Inherent process risks are part of the matrix but need to be contextualized with objectives and controls.

Thus, the correct answer is C. Business objectives, risks to the objectives, and impact and likelihood of the risk occurring.

Question 6

During which stage of an audit engagement would the engagement supervisor identify the tasks that were already completed and the remaining tasks to be performed?

AWhen allocating resources.

BWhen developing the test approach.

CWhen documenting the work program.

Answer : C

Comprehensive and Detailed Step-by-Step Explanation:

The engagement supervisor identifies tasks that are completed and remaining tasks during the process of documenting the work program.

Reference to IIA Standards:

According to the IIA's Performance Standards 2200 - Engagement Planning, an internal audit work program should detail the procedures necessary to achieve the engagement's objectives.

Standard 2240 - Engagement Work Program explicitly states that internal auditors must develop and document work programs that achieve the objectives of the engagement.

Key Responsibilities:

Documenting the work program involves listing tasks already performed to avoid redundancy and tasks remaining to ensure coverage of all planned activities.

Supervisors are responsible for overseeing this process and ensuring the work aligns with the overall engagement plan.

Relevance to Audit Practice:

The work program serves as a roadmap for auditors, detailing specific steps to be taken.

Identifying completed and pending tasks ensures proper time management and resource allocation during the engagement.

Question 7

Duties in a purchasing system are segregated and performed by different people. One person orders the goods, another person receives the goods, and another pays for the goods. This is an example of which of the following controls?

APreventive

BDirective

CDetective

Answer : A

Comprehensive and Detailed Step-by-Step Explanation:

Reference to Internal Controls:

Preventive controls are designed to prevent errors, fraud, or irregularities before they occur by ensuring that processes and activities are performed correctly from the start.

Standard 2130 - Control: Internal auditors assess the design and effectiveness of controls to prevent risks from materializing.

Reasoning:

Option A is correct because segregation of duties (ordering, receiving, and paying) is a preventive control, as it prevents a single person from having the authority to initiate, authorize, and complete a transaction, reducing the risk of fraud or errors.

Option B (Directive) would focus on guiding behavior, such as setting policies or expectations.

Option C (Detective) refers to controls that identify and detect errors after they occur, such as audits or reviews.

Impact of Segregation of Duties:

By ensuring duties are segregated, organizations minimize the risk of fraudulent activities and errors, thus acting as a preventive measure.

IIA Internal Audit Practitioner IIA-IAP Exam Practice Test