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Q61. According to IIA guidance, which of the following must internal auditors consider to conform with the requirements for due professional care during a consulting engagement?
1.
The cost of the engagement, as it pertains to audit time and expenses in relation to the potential benefits.
2.
The needs and expectation of clients, including the nature, timing, and communication of engagement results.
3.
The application of technology-based audit and other data analysis techniques, where appropriate.
4.
The relative complexity and extent of work needed to achieve the engagement's objectives.
A. 1,2,and 3
B. 1,2,and 4
C. 1,3,and 4
D. 2,3,and 4
Answer: B
Q62. The chief commodity trader for a large energy company learns from a friend that a competitor will likely fail its upcoming regulatory audit and will be forced to temporarily decrease production. If the information is true, the trader has short-term opportunities to make trades that will financially benefit the trader's company and will lead to a substantial increase in the trader's performance bonus. However, if the information is not true, making the trades will significantly increase the company's risk of being caught in a long position. From an ethical perspective, which of the following would be the most appropriate course of action for the trader to take?
A. Make the trade because the company and the trader will both benefit.
B. Have another trader on staff make the trade in order to avoid a conflict of interest.
C. Disclose the information to the risk oversight committee but proceed with the trade to capitalize on the opportunity.
D. Defer the decision to management and risk the loss of the trading opportunity.
Answer: D
Q63. A company has established its environmental audit activity as part of its legal department rather than part of its internal audit activity, which reports to the audit committee. The board has requested that the chief audit executive (CAE) provide an annual opinion on whether environmental risks are being properly addressed. In these circumstances, the CAE should recommend to the audit committee that the internal audit activity:
A. Review the recommendations in all environmental audit reports.
B. Discuss with the environmental auditors the results of their reviews.
C. Periodically carry out a quality assessment of the environmental audit activity.
D. Include a review of environmental issues in some internal audit engagements.
Answer: C
Q64. Which of the following situations would most likely result in the auditor in charge (AIC) recommending that the staff auditor further investigate non-compliant items?
A. A staff auditor conducted a test of 25 non-statistical sample items,selected judgmentally,and 5 are not in compliance with organizational policy.
B. A staff auditor conducted a test of 85 non-statistical sample items,selected randomly,and 5 are not in compliance with organizational policy.
C. Before the staff auditor conducted a test of statistical sample items,the AIC was already aware of underlying control weaknesses.
D. A staff auditor conducted a test of statistical sample items,the results of which fall below the acceptable error rate by less than one percentage point.
Answer: A
Q65. When reviewing operational risk for a department whose manager adopts a laissez-faire style of leadership, it is most important for the internal auditor to verify that:
A. Employee decisions follow department and company guidelines.
B. The manager considers employees' input when designing new procedures.
C. Employees are empowered to deal with unusual or emergency situations.
D. Management has adopted an open-door policy to assist with communication.
Answer: A
Q66. Line management of a manufacturing operation requests an operational audit. They are seeking recommendations for policies and procedures to enhance control over the operation. What should the internal audit activity do?
A. Review the effectiveness of current policies and procedures but avoid making control recommendations due to impaired objectivity.
B. Perform the engagement and make appropriate recommendations for policies and procedures.
C. Turn down the engagement because recommending controls would impair future objectivity regarding this client.
D. Turn down the engagement because an operational audit should not review policies and procedures.
Answer: B
Q67. Which of the following is not an objective of internal control?
A. Compliance.
B. Accuracy.
C. Efficiency.
D. Validation.
Answer: D
531. According to the COSO enterprise risk management (ERM) framework, which of the following is not part of the new paradigm in ERM?
A. Assessing the risk factors.
B. Aligning risk appetite and strategy.
C. Enhancing risk response decisions.
D. Reducing operational surprises and losses.
Answer: A
Q68. An internal auditor must determine which components of an organization's telecommunications may introduce the greatest risk. Which of the following tasks should the internal auditor complete first?
A. Review the open systems interconnect network model.
B. Identify the network operating costs.
C. Map the network software and hardware products into their respective layers.
D. Ascertain the business purpose of the network.
Answer: D
Q69. A chief audit executive (CAE) learns that the brother-in-law of a senior auditor who audits the procurement process was hired as the head of the procurement department six months prior. Which of the following is the most appropriate action for the CAE to take?
A. The CAE should not interfere because there is no evidence that a conflict of interest has occurred.
B. The CAE should remind the senior auditor of his obligation to be objective and impartial.
C. The CAE should change the senior auditor's assignment and take corrective action for the auditor's failure to disclose the conflict of interest.
D. The CAE should require the senior auditor to disclose the relationship in writing before continuing his responsibility for monitoring procurement.
Answer: C
Q70. While performing an accounts payable engagement, a senior auditor wants to conduct several tests of controls for travel expenses. Which of the following actions are most appropriate for the senior auditor to undertake?
1.
Ensure all tests use a random sampling technique.
2.
Consider a judgmental approach for the sample size.
3.
Assess testing errors through root cause analysis.
4.
Ensure that the entire data set is tested.
A. 1 and 2.
B. 1 and 3.
C. 2 and 3.
D. 2 and 4.
Answer: C
Q71. Which of the following risk assessment tools would best facilitate the matching of controls to risks?
A. Control matrix.
B. Internal control questionnaire.
C. Control flowchart.
D. Program evaluation and review technique (PERT) analysis.
Answer: A
Q72. Which of the following would be outside the scope of acquiring and developing human resources for an internal audit department?
A. Requiring audit staff to participate in continuing education activities.
B. Writing job descriptions for audit staff,audit managers,and other auditing positions.
C. Conducting individual counseling sessions regarding professional development and performance.
D. Evaluating auditors' compliance with standards and level of audit effectiveness.
Answer: D
Q73. Which of the following audit findings would have the least impact (either positive or negative) on a department's control environment?
A. The department makes long-term investment risk decisions to maximize return on investment.
B. The department manager sets and demonstrates a tone of honesty and integrity in all business dealings.
C. Many department functions are duplicated or verified by other department employees.
D. Deficiencies were found in the appropriate authorization of transactions.
Answer: A
Q74. Which of the following items of evidence is most valid to support a finding that a public utility's repair crews are sometimes required to work under unsafe conditions?
A. Videotapes of repair crews working in a situation that is unsafe.
B. Audio taped testimonials from repair crew members who were required to work under unsafe conditions.
C. Reports showing increases in the number of days of sick leave for individuals on repair crews.
D. Written and signed descriptions from repair crew members of the unsafe conditions that they have had to endure.
Answer: A
Q75. Which of the following decisions made during the testing phase of a compliance audit requires the most judgment by an internal auditor?
A. Which sampling methodology to select for testing.
B. Which fields to examine on each invoice.
C. Whether an individual expenditure is allowable.
D. What level of noncompliance is acceptable.
Answer: D