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

While a segregation-of-duties policy primarily mitigates the risk of a single individual perpetrating fraud, it introduces the increased risk of collusion between parties. Collusion can circumvent the controls established by the segregation of duties, making it a significant concern for internal auditors to monitor in environments where duties are segregated.

Institute of Internal Auditors (IIA) - Practice Advisories on Assessing Fraud Risks

The principle from the IIA's Code of Ethics that would be violated by not informing the chief audit executive about the lack of required IT expertise is Competency. This principle requires that internal auditors apply the knowledge, skills, and experience needed in the performance of internal audit services. By deciding to perform an engagement without the necessary IT expertise, the auditor fails to meet the standards of competency expected.

The IIA's Code of Ethics, specifically the section on Competency.

The internal audit activity can be considered a type of governance control. Governance controls are those that are designed to ensure that the overall direction, administration, and control of an organization are maintained. The internal audit provides assurance on the effectiveness of governance, risk management, and internal controls.

The IIA's guidance on the role of internal auditing in enterprise-wide risk management.

An appropriate disclosure of potential nonconformance with the Standards would be that an external assessment of the internal audit activity was last performed six years ago. According to IIA standards, external assessments must be conducted at least once every five years. Failing to perform an external assessment within this timeframe constitutes nonconformance with the Standards.

IIA Standard 1312 - External Assessments, which requires that external quality assessments be performed at least once every five years to ensure conformity with the Standards.

In cases where a junior auditor suspects fraud involving an engagement supervisor's associate and the supervisor dismisses these concerns, the most appropriate and ethical action is to escalate the issue to a higher authority within the audit function, such as the chief audit executive (CAE). This ensures that the concern is objectively evaluated and that the auditor adheres to professional standards of independence and objectivity.

Institute of Internal Auditors (IIA) - Code of Ethics and International Standards for the Professional Practice of Internal Auditing

To achieve conformance with the Standards, the chief audit executive must include the activity of reporting the results of the quality assurance and improvement program (QAIP) to senior management and the board. This is essential for maintaining transparency and accountability in the internal audit activity’s efforts to uphold and enhance the quality of its operations.

IIA Standard 1300: Quality Assurance and Improvement Program.

The internal audit charter outlines the internal audit function’s objectives, independence, and scope. IIA guidance specifies the charter as the foundational document defining the internal audit activity's objectivity and position within the organization​​.

According to IIA guidance, a new internal auditor is expected to possess a broad understanding of IT risks and controls. This competency is crucial because:

IT risks and controls are integral to the overall control environment and impact all areas of an organization.

Knowledge of IT risks and controls enables auditors to assess the effectiveness of controls over information systems, data security, and technology infrastructure.

As technology evolves, internal auditors must understand how to evaluate IT-related controls to provide relevant assurance and advisory services.

While technical industry-specific expertise, cybersecurity expertise, and forensic accounting knowledge are valuable, they are not core competencies expected of every new internal auditor according to IIA guidance. The fundamental requirement is a solid grasp of IT risks and controls.

The Institute of Internal Auditors (IIA) Competency Framework.

"Internal Auditing: Assurance & Advisory Services" by IIA, Chapter on IT Risks and Controls.

IIA's Global Internal Audit Competency Framework.

In an organizational culture characterized by fear and blame, where employees are frequently penalized for mistakes, internal auditors are most likely to find low employee morale. Such an environment can lead to a lack of trust and motivation among employees, reducing their willingness to take initiative or innovate. Low morale can negatively impact productivity, increase turnover, and contribute to a toxic workplace culture. Recognizing these signs is crucial for internal auditors when assessing the effectiveness of the organization's control environment and overall governance.

The IIA Standards: Standard 2120 – Risk Management: "The internal audit activity must evaluate the effectiveness and contribute to the improvement of risk management processes."

COSO Framework: Emphasizes the importance of a positive control environment and its impact on employee behavior and organizational performance.

In the context of internal auditing and risk management, the situation described involves the identification of key risks at the beginning of the IT development project, with risk owners appointed. However, the project later faces significant issues such as being over budget, delays, and loss of key personnel. These issues indicate that the ongoing management and oversight of identified risks were insufficient.

Risk monitoring is the continuous process of tracking and evaluating the performance and changes in the risk environment. Effective risk monitoring ensures that risk responses are executed as planned, emerging risks are identified, and necessary adjustments are made. The failure to stay on budget, meet deadlines, and retain key personnel suggests that there were lapses in regularly reviewing and updating the risk management plan and responses as the project progressed. Therefore, the risk management practice that should be improved for future projects is risk monitoring.

Institute of Internal Auditors (IIA), "Risk Management and Internal Audit: Forging a Collaborative Alliance"

ISO 31000:2018 Risk Management – Guidelines

The best evidence of conformance with the Standards concerning the proficiency required of the internal audit activity would be a listing of employee profiles and certifications. This documentation provides concrete evidence of the knowledge, skills, and competencies of the internal audit staff, ensuring that they meet the requirements set forth by the professional standards and are capable of performing their duties effectively. This also aligns with the Standards' requirement for the internal audit activity to possess the knowledge, skills, and other competencies needed to perform its responsibilities.

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

Periodic evaluations are complementary to ongoing monitoring in an organization's risk management process. The frequency and extent of these evaluations often depend on findings from ongoing monitoring, which may highlight areas needing more in-depth review or indicate that existing controls are functioning effectively. This dependency ensures that periodic evaluations are targeted and efficient.

Institute of Internal Auditors (IIA) - Guidance on Risk Management and Monitoring

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The scenario describes a substantial increase in cancelled proposals, which could indicate fraudulent activity. One potential fraud risk scenario is that some electricians might be offering clients reduced fees if they pay with cash, leading to off-the-record transactions. This can result in the cancellation of official proposals and lost revenue for the company, as these transactions might not be recorded in the company’s financial systems. This type of fraud involves bypassing the formal processes and price lists, which impacts the integrity of the procurement and sales processes.

IIA Practice Guide: Fraud and Internal Audit

COSO Fraud Risk Management Guide

According to IIA guidance, an appropriate role for the internal audit activity includes coaching management in responding to risks. This involves providing advice, facilitating workshops, and sharing best practices to help management identify, assess, and mitigate risks effectively. Internal auditors can offer insights and recommendations based on their evaluations but should not take on management responsibilities.

Implementing risk responses on management's behalf (B), imposing risk management processes (C), and setting the risk appetite (D) are not appropriate roles for internal auditors, as these activities fall within the purview of management. The internal audit function should maintain its independence and objectivity while supporting and enhancing the organization's risk management efforts.

IIA Position Paper: The Role of Internal Auditing in Enterprise-Wide Risk Management

IIA Standard 2120: Risk Management