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Q166. The first stage in the development of a crisis management program is to:
A. Formulate contingency plans.
B. Conduct a risk analysis.
C. Create a crisis management team.
D. Practice the response to a crisis.
Answer: B
Q167. According to the International Professional Practices Framework, risk is:
I. Defined as the negative effect of events that are expected to occur.
II. Measured in terms of consequences.
III.
Measured in terms of likelihood.
A.
Ionly
B.
I and IIonly
C.
II and IIIonly
D.
I,II,and III.
Answer: C
Q168. According to the International Professional Practices Framework, internal auditors should possess which of the following competencies?
I. Proficiency in applying internal auditing standards, procedures, and techniques.
II. Proficiency in accounting principles and techniques.
III. An understanding of management principles.
IV.
An understanding of the fundamentals of economics, commercial law, taxation, finance, and quantitative methods.
A.
Ionly
B.
IIonly
C.
I and IIIonly
D.
I,III,and IVonly
Answer: D
10. Which of the following is not an appropriate role for internal auditors after a disaster occurs?
A. Monitor the effectiveness of the recovery and control of operations.
B. Correct deficiencies of the entity's business continuity plan.
C. Recommend future improvements to the entity's business continuity plan.
D. Assist in the identification of lessons learned from the disaster and the recovery operations.
Answer: B
Q169. A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?
A. Require the physician to submit a signed statement attesting that the treatments had been performed.
B. Send confirmations to the physicians,requesting them to verify the exact nature of the claims submitted to the insurance provider.
C. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.
D. Use computer software to identify abnormal claims based on the insured's age and medical history.
Answer: D
Q170. Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?
A. Fraud open on the books. B. Fraud hidden on the books. C. Fraud off the books.
D. Fraud on the balance sheet.
Answer: C
509. When auditing the award of a major contract, which of the following should an internal auditor suspect as a red flag for a bidding fraud scheme?
1.
Subsequent change orders increase requirements for low-bid items.
2.
Material contract requirements are different on the actual contract than on the request for bids.
3.
A high percentage of employees are charged to indirect accounts.
4.
Losing bidders are hired as subcontractors.
A. 1only
B. 2only
C. 1 and 3.
D. 2 and 4.
Answer: D
Q171. Which of the following actions does not violate the IIA Code of Ethics or Standards?
A. An internal auditor performing an audit on an operation that they managed less than a year ago.
B. An internal auditor performing an audit on procedures that they were responsible for creating.
C. An internal auditor disclosing details of an audit report to colleagues from a different organization.
D. An internal auditor disclosing confidential information in response to a lawsuit.
Answer: D
Q172. Which of the following data collection strategies systematically tests the effects of various factors on an outcome?
A. Content analysis.
B. Sampling.
C. Evaluation synthesis.
D. Modeling.
Answer: D
Q173. In an audit engagement, a group of internal auditors used an integrated test facility to test payroll processing. The auditors identified the key controls and processing steps in the computer software, and then developed test data. Over the course of 24 months, they submitted test transactions on a regular basis but did not find any differences between payroll processing and integrated test facility results. Based on the data, what can the auditors conclude?
A. Payments to employees during the 24-month period were all correct.
B. The computer application and its control procedures correctly processed payroll over the 24- month period.
C. Employees are properly submitting their hours to payroll.
D. The computer software is flawed.
Answer: B
Q174. During an internal audit, an organization's processing department is found to have incidences of both duplicate invoices and notices from customers that purchased goods were not received. The department under review insists that some of these reports are false and that others were isolated oversights due to understaffing.
Which of the following tests would best help the internal auditor detect fraudulent activity?
A. Check inventory levels.
B. Search for gaps in check numbers.
C. Compare vendor summaries.
D. Review raw material purchase quantities.
Answer: A
Q175. The chief audit executive (CAE) of a small internal audit activity (IAA) performs all high-risk engagements on the annual audit plan to make use of his knowledge and experience and to maximize the efficient use of audit resources. Which of the following statements is most relevant regarding this practice?
A. The CAE's work may be reviewed by any other experienced staff member within the IAA.
B. The CAE's work should be reviewed by an individual with the appropriate background and knowledge.
C. The CAE may self-review his work,provided he discloses this practice in the final report.
D. The CAE should avoid performing engagements to ensure he is able to review all audit work objectively.
Answer: B
516. According to IIA guidance, which of the following is not a responsibility of the chief audit executive pertaining to documenting information to support internal audit engagement results and conclusions?
A. Rating each engagement record to assess its relevance and accessibility for the organization's board.
B. Controlling access to engagement records,including access by senior management.
C. Developing retention requirements for engagement records that are consistent with organizational guidelines.
D. Forming policies governing the custody and retention of consulting engagement records before their release to other parties.
Answer: A
Q176. A former line supervisor from the Financial Services Department has completed six months of a two-year development opportunity with the internal audit activity (IAA). She is assigned to a team that will audit the organization's payroll function, which is managed by the Human Resources Department. Which of the following statements is most relevant regarding her independence and objectivity with respect to the payroll audit?
A. She may participate,but only after she has completed one year with the IAA.
B. She may participate,because she did not previously work in the Human Resources Department.
C. She may participate,but she must be supervised by the auditor in charge.
D. She may participate for training purposes,to build her knowledge of the IAA.
Answer: B
Q177. Which of the following statements describes a control weakness?
A. Purchasing procedures are well designed and are followed even when the purchasing supervisor wishes to direct otherwise.
B. Pre-numbered blank purchase orders are secured within the purchasing department.
C. Normal operational purchases fall in the range from $500 to $1,000,with a single signature required for purchases over $1,000.
D. The purchasing agent in a personal capacity invests in a publicly-traded mutual fund that lists the stock of one of the company's suppliers in its portfolio.
Answer: C
Q178. Which of the following actions indicates a lack of due professional care by an internal auditor performing an audit of a store's cash function?
A. The audit report included a well-supported recommendation for a reduction in staff even though such a reduction might adversely impact morale.
B. The auditor tested samples of transactions to test the cash function's process flows.
C. After determining that the cash function internal controls were strong,the audit report assured senior management that fraud was not present.
D. The auditor discovered an instance of potential fraud and reported it immediately to management,but did not alert authorities outside the organization.
Answer: C
Q179. During a review of a division's operations, an internal auditor notes that sales and customer base are unchanged, while inventory and gross margin have increased significantly. Which of the following audit procedures would be most relevant in substantiating management's assertion that the gross margin increase is due to increased efficiency in manufacturing operations?
A. Obtain a physical count of inventory.
B. For a sample of products,compare costs-per-unit this year to those of last year,test cost build- ups,and analyze standard cost variances.
C. Take a physical inventory of equipment to determine if there were significant changes.
D. Select a sample of finished goods inventory and trace raw materials cost back to purchase prices in order to determine the accuracy of the recorded raw materials price.
Answer: B
Q180. During the course of an audit, an internal auditor discovers that a valuable employee in the research department has been patenting new developments in the employee's name that are unrelated to the basic business of the organization.
The organization does not have a policy addressing this specific issue, but does have a general policy that all important new discoveries by employees are the property of the organization.
Division management views the employee's actions as extra incentive to retain the employee.
A decision to include the employee's action in the engagement final communication would be:
1.
A violation of the IIA Code of Ethics.
2.
A violation of the reporting requirements in the Standards.
3.
Justified and necessary, according to the IIA Code of Ethics and Standards.
A. 1only
B. 2only
C. 3only
D. 1 and 2only
Answer: C