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IIA IIA-CIA-Part2 Actual Questions and Braindumps
NEW QUESTION # 139
As part of an operational audit, an auditor compared records of current inventory with usage during the prior two-year period and determined that the spare parts inventory was excessive. What step should the auditor perform first?
- A. Determine whether purchases were properly recorded.
- B. Determine whether a clear policy exists for setting inventory limits.
- C. Determine the effects of a stock-out on the organization's profitability.
- D. Determine who approved the purchase orders for the spare parts.
Answer: B
NEW QUESTION # 140
When determining the nature, timing, and extent of follow up, the chief audit executive considers all of the following factors except:
- A. Complexity of the corrective action and time period involved.
- B. Authority and responsibility of the person required to take corrective action.
- C. Significance of the reported observation or recommendation, degree of effort, and cost needed to correct the reported condition.
- D. Impact that may result should the corrective action fail.
Answer: B
NEW QUESTION # 141
Management requested the chief audit executive (CAE) to include an audit of the organization's health and safety program in next year's annual audit plan. However, the internal audit department has no expertise in this area. Which of the following would be the most appropriate action by the CAE?
- A. Accept the request provided management has conducted a thorough risk assessment prior to the engagement to help guide the audit.
- B. With management's agreement, amend the scope of the audit to ensure that areas examined do not require specialized knowledge and expertise.
- C. Advise management that compliance audits of this type should only be conducted by the corresponding regulatory agency to ensure independence.
- D. Meet with management to explain that the audit cannot be undertaken and discuss alternative strategies that can be implemented until internal audit can develop its capability in the area.
Answer: D
NEW QUESTION # 142
An internal auditor wants to compare performance information from one quarter to another. Which analytics procedure would the auditor use?
- A. Trend analysis
- B. Ratio analysis
- C. Benchmarking analysis
- D. Vertical analysis
Answer: B
NEW QUESTION # 143
A chief audit executive (CAE) of a major retailer has engaged an independent firm of information security specialists to perform specialized internal audit activities. The CAE can rely on the specialists' work only if it is:
- A. Performed in accordance with the terms of the contract.
- B. Carried out using standard review procedures for retailers.
- C. Performed under the supervision of the information technology department.
- D. Carried out in accordance with the Standards.
Answer: D
NEW QUESTION # 144
An organization recently acquired a subsidiary in a new industry, and management asked the chief audit executive (CAE) to perform a comprehensive audit of the subsidiary prior to recommencing operations The CAE is unsure her team has the necessary skills and knowledge to accept the engagement According to IIAguidance, which of the following responses by the CAE would be most appropriate?
- A. The CAE should ask management to hire an external expert who is familiar with the industry to perform an independent audit for management
- B. The CAE should recommend postponing the engagement until the internal audit team is able to develop sufficient knowledge of the new industry
- C. The CAE should accept the engagement and ensure that an of the expertise limitations is included in the final audit report.
- D. The CAE should accept the engagement and hire an external expert to assist the audit team with the audit of the subsidiary
Answer: D
NEW QUESTION # 145
During the planning phase of an audit of the treasury function, an internal auditor conducted a risk assessment of the function in order to:
- A. Report any high-risk exposures of the treasury function to management and the board.
- B. Determine whether appropriate resources are present to carry out the treasury function.
- C. Comply with the internal audit charter and applicable regulatory requirements.
- D. Identify areas of the treasury function that should be considered for potential engagement objectives.
Answer: D
Explanation:
Section: Volume D
NEW QUESTION # 146
During an audit of executive travel, an auditor noted that the president's travel expense reimbursements were approved by an executive secretary who reported to the president. The organization's reimbursement policy requires all travel expense reimbursements to be approved by the traveler's supervisor, but it does not address the president's reimbursements. Which of the following represents the auditor's best recommendation in this situation?
- A. The approval policy for executive travel should be considered at the next meeting of the audit committee of the board of directors.
- B. The organization's reimbursement policy should be amended to grant the president's executive secretary the authority to approve the president's travel expense reimbursements.
- C. The president's travel expense reimbursements should be reviewed and approved by the chief financial officer.
- D. The president's noncompliance should be considered immaterial.
Answer: A
Explanation:
Section: Volume A
NEW QUESTION # 147
An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?
- A. Follow up with the appropriate vice president and include the vice president's acknowledgment of the situation in the engagement final communication.
- B. Report the amounts to the loan committee and leave it up to them to correct. Take no further follow-up action at this time and do not include the items in the engagement final communication.
- C. Examine the seven loans to determine if there is a pattern. Summarize amounts and include in the engagement final communication.
- D. Determine the amount of the differences and make an assessment as to whether the dollar differences are material. If the amounts are not material, not in violation of government regulations, and can be rationally explained, omit the observation from the engagement final communication.
Answer: B
NEW QUESTION # 148
An internal auditor noticed that employees with responsibilities for cash collection had recently issued an unusually large number of credit memos, indicating that the original charges had been made to the wrong customer accounts. From a control standpoint, the auditor would be concerned with the possibility that:
- A. The organization is selling a large number of defective items.
- B. Employees in this function are concealing a theft of cash collected from customers.
- C. Credit memos are not being submitted on a timely basis.
- D. The credit department has not been properly screening customers and, as a result, a large portion of the accounts receivable may not be collectible.
Answer: B
NEW QUESTION # 149
In a payroll audit, a staff auditor suspects that signatures on some of the documents being sampled for examination are not authentic. What action should the auditor take before proceeding with the examination?
- A. Review the suspicious documents with the chief audit executive and seek advice concerning further examination.
- B. Keep the suspicious documents in the workpaper file until the end of the engagement, and then discuss the suspicions with the payroll manager.
- C. Discuss the suspicious documents with payroll staff to seek their views on the authenticity of the signatures.
- D. Suggest to the payroll manager that the suspicious documents should be sent to the organization's security department for forensic review.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION # 150
When interviewing an individual suspected of fraud, what type of questions would be asked after the introductory questions?
- A. Closing questions.
- B. Informational questions.
- C. Assessment questions.
- D. Admission-seeking questions.
Answer: B
NEW QUESTION # 151
When determining the nature, timing, and extent of follow up, the chief audit executive considers all of the following factors except:
- A. Complexity of the corrective action and time period involved.
- B. Authority and responsibility of the person required to take corrective action.
- C. Significance of the reported observation or recommendation, degree of effort, and cost needed to correct the reported condition.
- D. Impact that may result should the corrective action fail.
Answer: B
Explanation:
Section: Volume C
NEW QUESTION # 152
Which of the following might alert an auditor to the possibility of fraud in a division?
I. The division is not scheduled for an external audit this year.
II. Sales have increased by 10 percent.
III. A significant portion of management's compensation is directly tied to reported net income of the division.
- A. I, II, and III
- B. III only
- C. I and II only
- D. I only
Answer: B
NEW QUESTION # 153
The balanced scorecard approach differs from traditional performance measurement approaches because it adds which of the following measures?
I.Financial measures.
II.
Internal business process measures.
III.
Client satisfaction measures.
IV.
Innovation and learning measures.
- A. II, III, and IV only.
- B. II and IV only.
- C. I only.
- D. III and IV only.
Answer: A
NEW QUESTION # 154
Which of the following manual audit approaches describes testing the validity of a document by following it backward to a previously prepared record?
- A. Vouching
- B. Reperformance
- C. Tracing
- D. Walkthrough
Answer: A
Explanation:
Vouching is the manual audit approach that involves testing the validity of a document by following it backward to a previously prepared record. This method helps auditors verify the authenticity and accuracy of transactions by tracing them back to their source documents, such as invoices, receipts, or purchase orders.
Vouching is commonly used to detect errors or fraud.
References:
* The Institute of Internal Auditors (IIA) Standards
* Auditing Techniques and Procedures
NEW QUESTION # 155
The final internal audit report should be distributed to which of the following individuals?
- A. Executive management only
- B. Audit client management, executive management, and any those who request a copy.
- C. Audit client management only
- D. Audit client management, executive management, and others approved by the chief audit executive.
Answer: D
NEW QUESTION # 156
Which of the following actives is an internal auditor most likely to perform when establishing the objectives of an assurance engagement?
- A. Meet with operational management to team about any areas of concern and to agree on the engagement objectives
- B. Discuss the internal audit risk assessment including applicable risks and objectives with internal audit management
- C. Perform a walk-through of the process under review to determine whether control wore operating, effectively
- D. Identify when controls will be tested and the sampling method to be used based on control risk
Answer: A
Explanation:
When establishing the objectives of an assurance engagement, it is crucial for internal auditors to align the engagement objectives with the concerns and priorities of operational management. By meeting with operational management, the internal auditor can gain insights into any specific areas of concern, operational challenges, and potential risks. This collaborative approach ensures that the engagement objectives are relevant and focused on areas that provide the most value to the organization, facilitating a more effective and targeted audit process.References:
* The Institute of Internal Auditors (IIA) - Standards for the Professional Practice of Internal Auditing, Standard 2201 - Planning Considerations
NEW QUESTION # 157
Internal control questionnaires are used to achieve which of the following objectives?
- A. To ascertain the operating effectiveness of a procedure
- B. To verify the accuracy of Information in a report
- C. To assess the controls mitigating major risks
- D. To determine whether specified contra procedures are in place
Answer: D
Explanation:
Internal control questionnaires are used to determine whether specific control procedures are in place within an organization. They help auditors identify the existence and implementation of controls designed to mitigate risks. These questionnaires can provide a preliminary understanding of the control environment and identify areas that may require further detailed testing.
Reference:
The Institute of Internal Auditors (IIA) Practice Guide: Using Internal Control Questionnaires to Assess Risk IIA Standard 2130 - Control
NEW QUESTION # 158
An internal auditor wanted to determine whether the organization's 200 employees are charging their work hours accurately to the correct project. The internal auditor selected a sample of 30 employee time reports for testing. Based on the testing, the internal auditor determined the following:
- 5 Time reports were incorrect.
- 21 Time reports were correct.
- 4 Time reports were not supported.
- A. The organization generally ensured that employee hours charged to each project were accurate and complete. However, there were instances of employee time reports that were incorrect or not supported to justify the multiple project labor coats
- B. The organization has significant flaws in its reporting of employee time, which could lead to the overstatement of project labor costs. The organization's failure to report accurate and complete employee time could lead to potential fraud and abuse.
- C. The organization needs to ensure that all reporting of employee time is accurate and complete for each of its projects By dang so the organization can minimize potential issues related to overstating employee tames and labor project costs.
- D. The organization overstated project costs due to inaccurate and incomplete reporting of employee time charged to the affected accounts As a result the organization cannot ensure at protects costs are accurately reported to stakeholders
Answer: A
Explanation:
In internal auditing, when assessing the accuracy and completeness of employee time reporting, auditors often use sampling to determine the overall compliance of the process. In this scenario, the internal auditor sampled
30 employee time reports and found 5 incorrect and 4 unsupported reports. This indicates that a majority (21 out of 30) were accurate, suggesting that the organization generally ensures accurate reporting. However, the presence of incorrect and unsupported reports indicates deficiencies that need to be addressed, but do not point to systemic fraud or abuse. Thus, option D accurately reflects the findings by acknowledging both the general accuracy and the instances of errors.References:
* The Institute of Internal Auditors (IIA) - Standards for the Professional Practice of Internal Auditing
* COSO Framework - Control Activities and Monitoring
NEW QUESTION # 159
An internal auditor recommended that an organization implement computerized controls in its sales system in order to prevent sales representatives from executing contracts in excess of their delegated authority levels. A follow-up review found that the sales system had not been modified, but a process had been implemented to obtain written approval by the vice president of sales for all contracts in excess of $1 million. The chief audit executive (CAE) would be justified in reporting this situation to the organization's board iF.
I.
In the opinion of the CAE, the level of residual risk assumed by senior management is too high.
II.
Testing of compliance with the new process finds that all new contracts in excess of $1 million have been approved by the vice president of sales.
III.
The cost of modifying the sales system to include a preventive control is less than $100,000.
- A. I, II, and III
- B. I only
- C. I and III only
- D. III only
Answer: B
NEW QUESTION # 160
An internal auditor is conducting a preliminary survey of the investments area, and sends an internal control questionnaire to the management of the function. (An extract of the survey is provided below).
1. Are there any restrictions for any company's investments?
2. Are there any written policies and procedures that document the flow of investment processing?
3. Are investment purchases recorded in the general ledger on the date traded?
4. Is the documentation easily accessible to an persons who need in to perform their job?
Which of the following is a drawback of testing methods like this?
- A. They do not highlight control gaps
- B. They are not useful for identifying areas on which the auditor should locus.
- C. They are limited as there is a risk that management may not answer fairly.
- D. They ore kitted as they do not allow the auditor to test many controls.
Answer: C
NEW QUESTION # 161
Which of the followings statements describes a best practice regarding assurance engagement communication activities?
- A. All assurance engagement observations should be communicated to the audit committee.
- B. All assurance engagement observations should be included in the main section of the engagement communication.
- C. A detailed escalation process should be developed during the planning stage of an assurance engagement.
- D. During the "communicate" phase of an assurance engagement, it is best to define the methods and timing of engagement communications.
Answer: D
Explanation:
Best practices for assurance engagement communication activities include defining the methods and timing of engagement communications during the "communicate" phase. This ensures that all stakeholders are aware of how and when they will receive information about the engagement, facilitating clear and effective communication. While it is important to communicate significant observations to relevant parties, including the audit committee if necessary, and to escalate issues as appropriate, the method and timing of these communications are crucial for maintaining clarity and coordination throughout the engagement. References:
* The IIA's International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 2420 - Quality of Communications.
* The IIA's Practice Guide on Communicating Assurance Engagement Results.
NEW QUESTION # 162
A report prepared by the internal audit activity contains several observations that disclose proprietary information regarding the organization's manufacturing process. According to the International Professional Practices Framework, which of the following is the appropriate treatment for this report?
- A. Disclose and distribute this information in a separate report.
- B. Distribute the report only to the board to protect disclosure.
- C. Remove the observations and report verbally to senior management.
- D. Require a separate non-disclosure statement from each recipient.
Answer: A
Explanation:
Section: Volume D
NEW QUESTION # 163
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