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NEW QUESTION # 108
Which the following activities should be performed by the internal audit activity to facilitate an effective relationship with the audit committee?
1. Periodically report about the accounting standards followed by the organization.
2. Provide assurance to the audit committee that its charter, activities, and processes are appropriate.
3. Ensure that the role and activities of the internal audit activity are clearly understood and responsive to the needs of the audit committee.
4. Maintain open and effective communications with the audit committee.

• A. 1 and 2 only
• B. 3 and 4 only
• C. 2, 3, and 4 only
• D. 1, 3, and 4 only

Answer: C

NEW QUESTION # 109
If an engagement client disputes that a specific action or process is within the scope of the internal audit activity, what would be the most appropriate way for the internal audit activity (IAA) to respond?

• A. Seek the approval of senior management or the board in mediation, allowing an overseer to clarify the scope of the audit engagement for the client.
• B. Terminate the audit engagement in full because an operational audit will not be productive without the client's cooperation.
• C. Terminate only the specific action or process with which the client disagrees and work to determine a substitute function that will not impede further IAA or the client-audit relationship.
• D. Refer the client to the IAA's charter and the approved yearly audit plan, which includes the areas designated for audit in the current time period.

Answer: D

NEW QUESTION # 110
According to IIA guidance, which of the following external groups is most likely to represent a liability risk, based on activities associated with the organization's corporate social responsibility program?

• A. Investors.
• B. Consumers.
• C. Suppliers.
• D. Activists.

Answer: D

NEW QUESTION # 111
Which of the following would provide the best guidance to a chief audit executive who is setting internal audit staff requirements?

• A. Information about the audit staff size and composition of comparable organizations.
• B. Results from discussions of audit needs with executive management and the audit committee.
• C. A review of audit staff education and training records.
• D. The results of the audit staff's most recent performance reviews.

Answer: B

NEW QUESTION # 112
An internal auditor finds during an engagement that payment for the organization's general insurance policy is two months overdue. The issue is informally mentioned to the finance department which immediately submits the invoice for payment. The auditor decides to exclude this finding from the final audit report as the oversight was immediately corrected and there were no consequences because of this late payment.
Which of the following rules of conduct as described in the IIA Code of Ethics, did the auditor fail to uphold?

• A. Confidentiality.
• B. Competency.
• C. Objectivity.
• D. Integrity.

Answer: C

NEW QUESTION # 113
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. Use computer software to identify abnormal claims based on the insured's age and medical history.
• B. Require the physician to submit a signed statement attesting that the treatments had been performed.
• C. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.
• D. Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider.

Answer: A

NEW QUESTION # 114
Why is a code of ethics for the internal audit profession necessary?

• A. It ensures that all members of the profession possess the same level of competence.
• B. It requires auditors to exhibit loyalty to their organizations.
• C. It provides auditors with protection from lawsuits.
• D. It guides internal auditors in their service to others.

Answer: D

NEW QUESTION # 115
According to IIA guidance, which of the following is least compliant with the requirements regarding an internal auditor's need for objectivity?

• A. An internal auditor assessed the effectiveness of controls over payroll software, which he had helped implement with a previous employer.
• B. An internal auditor, previously employed in the quality assurance operations area, performed a consulting engagement for the operations manager.
• C. An internal auditor performed an assurance engagement for the effectiveness of accounts payable access controls, one of which he previously helped to design.
• D. An internal auditor participated in an audit of controls around absenteeism, despite providing some consultation on controls in this area earlier in the year.

Answer: C

NEW QUESTION # 116
Which of the following would not be a red flag for fraud?

• A. New employees occasionally fail to meet established project deadlines due to staffing shortages.
• B. A weak control environment has been accepted by management to encourage creativity.
• C. A manager has bragged about multiple extravagant vacations taken within the last year, which are excessive relative to the manager's salary.
• D. Several recent, large expenditures to a new vendor have not been documented.

Answer: A

NEW QUESTION # 117
According to the International Professional Practices Framework, which of the following are allowable activities for an internal auditor?
1. Advocating the establishment of a risk management function.
2. Identifying and evaluating significant risk exposures during audit engagements.
3. Developing a risk response for the organization if there is no chief risk officer.
4. Benchmarking risk management activities with other organizations.
5. Documenting risk mitigation strategies and techniques.

• A. 1.2. 4. and 5 only.
• B. 1.2, and 3 only.
• C. 2. 3. 4. and 5 only.
• D. 4 and 5 only.

Answer: A

NEW QUESTION # 118
During an internal audit, the internal auditor compares the employee turnover rate in the area being audited with the employee turnover rate in the organization as a whole.
This is an example of which of the following analytical auditing procedures?

• A. Regression analysis.
• B. Reasonableness test.
• C. Trend analysis.
• D. Benchmarking.

Answer: D

NEW QUESTION # 119
Which of the following documents is most appropriate in promoting the objectivity of the internal audit activity?

• A. Personal responsibility policy.
• B. Risk management framework.
• C. Acceptance of gifts policy.
• D. Usage of IT system policy.

Answer: C

NEW QUESTION # 120
A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annua snowfall for the coming winter. Which of the following best describes this type of risk?

• A. Net.
• B. Residual.
• C. Accepted.
• D. Inherent.

Answer: D

NEW QUESTION # 121
During an audit, the client questions the internal audit activity's authority to perform procedures over fraud allegations. According to HA guidance, which of the following would provide the most relevant support to respond to the client's concerns?

• A. MA Standards.
• B. Internal audit charter.
• C. Definition of Internal Auditing.
• D. The IIA's Code of Ethics.

Answer: B

NEW QUESTION # 122
Which of the following is not an objective of internal control?

• A. Validation.
• B. Compliance.
• C. Efficiency.
• D. Accuracy.

Answer: A

NEW QUESTION # 123
Which of the following professional development approaches would offer internal auditors the most opportunities to broaden their engagement experiences?

• A. Send internal auditors to external trainings in advanced internal audit topics.
• B. Assign more experienced internal auditors to mentor the less experienced auditors.
• C. Appraise internal auditors' performance and competencies at least annually and issue constructive feedback.
• D. Rotate internal auditors among different engagement assignments.

Answer: D

NEW QUESTION # 124
According to IIA guidance, which of the following statements is false regarding continuing professional education for the internal audit activity (IAA)?

• A. Specialized education that meets unique organizational needs cannot qualify as IAA professional development.
• B. Continuing professional education can be obtained through IAA involvement in research projects.
• C. Completion of self-study courses fulfills IAA continuing professional education requirements.
• D. Employers are responsible for ensuring that the continuing professional education needs of the IAA are met.

Answer: D

NEW QUESTION # 125
In the area of business acumen, which of the following competencies would be the sole responsibility of an internal audit staff member?

• A. Understanding regulatory and legal framework and assessing its relevance.
• B. Maintaining industry-specific knowledge appropriate to the organization.
• C. Assessing how IT contributes to organization objectives, risks, and relevance to audit.
• D. Maintaining technical aspects of accounting standards and reporting processes.

Answer: A

NEW QUESTION # 126
Which type of objectives can best be described as broad goals that promote the effective and efficient use of resources?

• A. Operational objectives.
• B. Reporting objectives.
• C. Strategic objectives.
• D. Compliance objectives.

Answer: A

NEW QUESTION # 127
To fill a critical vacancy, an internal auditor is assigned temporarily to a nonaudit role in the purchasing department, where she worked previously before joining the internal audit activity. According to IIA guidance, which of the following statements is true regarding these circumstances?

• A. Any work performed by the auditor during her temporary assignment must conform to the internal audit charter.
• B. The auditor should obtain the CAE's approval as to the nature and scope of the duties she is permitted to perform during her temporary assignment.
• C. The CAE may conduct audits in the purchasing department during the auditor's temporary assignment.
• D. The chief audit executive (CAE) should review all work performed by the auditor during her temporary assignment to ensure no impairments.

Answer: B

NEW QUESTION # 128
Which of the following best explains why integrity is a necessary personal quality for internal auditors at all levels?

• A. Internal auditor integrity enables users of internal auditors' work to make important business decisions.
• B. Internal auditor integrity enables the internal auditor to avoid being challenged by any party in the organization.
• C. Internal auditor integrity enables stakeholders to constantly question the work of the internal audit activity.
• D. Internal auditor integrity enables the internal audit activity to be able to demonstrate independence.

Answer: A

NEW QUESTION # 129
Which of the following is not a standard technique that the chief audit executive (CAE) would use to provide evidence of supervisory review of working papers?

• A. The CAE initials and dates every working paper after it has been reviewed.
• B. The CAE prepares a memorandum discussing the results of the working paper review.
• C. The CAE completes an engagement working paper checklist.
• D. The CAE utilizes an external third party to make an objective recommendation after each working paper review.

Answer: D

NEW QUESTION # 130
Which of the following statements describes a control failure that is not directly attributable to a customer billing application?
1. End users have raised a number of concerns regarding data integrity.
2. An untested program change is transferred from the test environment to production.
3. Purchase history does not reconcile with accounts receivable for some customers.
4. End user security is inadvertently granted to an unauthorized individual by management.

• A. 1 and 3.
• B. 1 and 4.
• C. 2 and 3.
• D. 2 and 4.

Answer: D

NEW QUESTION # 131
An internal audit activity (IAA) provided assurance services for an activity it was responsible for during the preceding year.
As a result, which IIA Code of Ethics principle is presumed to be impaired?

• A. Competence.
• B. Independence.
• C. Flexibility.
• D. Objectivity.

Answer: D

NEW QUESTION # 132
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