IIA-CIA-Part1 Exam Dumps - IIA CIA Questions and Answers

Independence is a fundamental principle for internal auditing, ensuring that internal auditors are free from conditions that threaten their ability to carry out their responsibilities in an unbiased manner. Scenario B presents a clear impairment to independence because management's reduction of the internal audit budget, leading to the removal of all IT-related engagements from the audit plan, could limit the internal audit activity's ability to objectively assess areas critical to the organization’s risk profile. This type of management interference compromises the scope and depth of internal audit activities, impacting their ability to provide an unbiased assurance.

IIA Standard 1100: Independence and Objectivity

IIA Standard 1110: Organizational Independence

The best control to detect cash register disbursement fraud in a large retail store is using cash registers with internal tapes that are tamper-proof and require a manager to process voids or refunds. This control directly addresses the risk of cash misappropriation at the point of sale by adding a layer of oversight and security to the transactions, particularly those that are prone to manipulation like voids and refunds. References: Best practices in retail fraud prevention, which often include the use of technology and managerial oversight to control and monitor cash transactions.

The scenario indicates a lack of communication competency. Effective communication involves not only presenting audit findings clearly but also ensuring that management is adequately informed and understands the findings prior to the closing meeting. Sharing draft findings in a way that management was not familiar with and found confusing suggests shortcomings in how information was conveyed.

Option B: Business acumen is understanding the business context, which is not the primary issue here.

Option C: Persuasion involves influencing others, which is secondary to clear communication.

Option D: Critical thinking is about analysis and judgment, not directly related to the communication issues described.

IIA Standard 2420: Quality of Communications.

IIA Practice Guide: Communication.

According to IIA guidance, many aspects of the related enterprise risk management (ERM) program being informal and undocumented is the strongest indicator of deficiencies in the risk management process. Informality and lack of documentation can lead to inconsistencies, errors, and omissions in risk management, impairing the organization's ability to effectively identify, assess, and manage risks.

The IIA's guidance on effective risk management and ERM practices.

An organization's code of ethics typically requires an annual attestation of compliance with the code of conduct by all employees. This practice helps reinforce the importance of ethical standards and ensures that all employees are regularly reminded of their ethical obligations. It is a common element in effective ethics programs, serving both as a reminder and a mechanism for enforcing the code.

Best practices in corporate governance and ethics.QUESTION NO: 457

According to The IIA's Code of Ethics, an internal auditor who has a romantic relationship with an audit client violates which of the following rules of conduct?

A. Confidentiality.

B. Independence.

C. Integrity.

D. Objectivity.

Answer: D

An internal auditor who has a romantic relationship with an audit client violates the rule of objectivity. Objectivity requires that auditors make balanced assessments of all the relevant circumstances and are not unduly influenced by their own interests or by others in forming judgments. A romantic relationship could impair an auditor's objectivity by creating a conflict of interest or the perception of bias.References: The IIA's Code of Ethics.

According to IIA guidance, the internal audit activity should refrain from conducting an assurance engagement for which it lacks the necessary competencies or skills. This requirement ensures that internal audits are carried out effectively and that audit conclusions are reliable. It upholds the integrity and professionalism of the internal audit function by ensuring that all engagements are performed with the requisite level of expertise.

The IIA's International Standards for the Professional Practice of Internal Auditing on proficiency and due professional care.

The International Standards for the Professional Practice of Internal Auditing (Standards) emphasize that internal auditors must be free from interference in determining the scope of internal auditing, performing work, and communicating results. Standard 1110 – Organizational Independence, and Standard 1120 – Individual Objectivity, require that internal auditors have access to all relevant records, personnel, and physical properties within the scope of their audit activities. If an area under review restricts the internal audit activity’s ability to access records, it directly impacts the auditor’s ability to perform their duties objectively and without interference. This scenario undermines the core principles of independence and objectivity, necessitating the CAE to discontinue using statements indicating conformance with the Standards, as the audit results may be compromised.

The IIA's International Standards for the Professional Practice of Internal Auditing (Standards) - Standards 1110 and 1120.

The statement that the internal auditor may initially disagree with management's acceptance of a risk, but reevaluate and agree with management’s judgment after further discussion, is true. This scenario reflects the dynamic nature of risk assessment and management discussions where the auditor, after a comprehensive evaluation and consideration of new information or perspectives, might align with management's decision regarding risk acceptance.

IIA's International Standards for the Professional Practice of Internal Auditing regarding objectivity and professional judgment.

If the internal audit activity lacks the necessary skills and competencies to complete an ad-hoc assurance engagement, the most appropriate and professional action is to politely decline the engagement due to a lack of qualified staff. This decision upholds the IIA's standards on professional proficiency and due professional care.

The Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing.

Detective internal controls are a limitation in fraud management because they are not designed to prevent fraud but to identify fraud after it has occurred. Their primary purpose is to detect and provide feedback on incidents of fraud, thereby allowing corrective action to be taken. However, they do not stop the initial occurrence of fraudulent activities.

IIA guidance on types of controls and their effectiveness in fraud prevention.

According to IIA guidance, the internal audit charter gives the internal audit activity the authority to request supporting documentation for the invoices of a third-party service provider. The charter typically outlines the scope, authority, and responsibilities of the internal audit activity, including access to records necessary to carry out its duties.

IIA Standards on the internal audit charter.

In a consulting engagement regarding a debt collections process, an internal auditor would primarily focus on advising management on streamlining the recording of accounts receivable. This action aims to add value by providing expert advice to improve the efficiency and effectiveness of the process, consistent with the IIA’s guidelines on the role of internal auditors in consulting activities.

IIA Standard 1000 - Purpose, Authority, and Responsibility

The primary responsibility for the internal audit activity in helping management maintain effective controls is promoting continuous monitoring. Continuous monitoring involves regularly reviewing control processes and performance to ensure they are effective and making adjustments as necessary. This proactive approach enables the internal audit activity to assist management in maintaining a robust control environment that can adapt to changes in the organization or its external environment.

The IIA's International Standards for the Professional Practice of Internal Auditing regarding monitoring and control.

The IIA's guidelines suggest that internal audit may provide support by coaching management on risk responses, but it should not take on management’s responsibilities, such as implementing risk responses or setting the risk appetite, as this would impair objectivity​​.