IIA-CIA-Part2 Exam Dumps - IIA CIA Questions and Answers

Directive controls are designed to encourage desired behavior or outcomes.

Option A: Segregation of duties is a preventive control, not a directive control.

Option B: Exception reports are detective controls.

Option D: Supervisory review is also a preventive or detective control.

Option C: Training programs are directive controls as they guide employees on the correct procedures and practices to follow​​​​.

 Analytical Procedures: These procedures involve evaluating financial information by studying plausible relationships among both financial and non-financial data. They help auditors form expectations about account balances or other financial data and then compare actual results to these expectations.

Purpose: To identify any unusual or unexpected results that might indicate potential misstatements.

 IIA Guidance on Analytical Procedures:

Comparison Against Expectations: This is the core aspect of analytical procedures. Auditors develop expectations based on their knowledge of the business, industry trends, historical data, and other relevant factors.

Engagement Phases: Analytical procedures can be applied in various phases of an audit, not just after the planning phase.

 Other Statements:

Begin After Planning: Analytical procedures are often used during planning to understand the business and during substantive testing and review phases.

Explainable Results: While they can provide insights, the primary purpose is not just to explain results but to identify discrepancies.

Computer-Assisted Techniques: Analytical procedures can be performed manually or with the help of software, but they are not solely defined as computer-assisted techniques.

When significant control issues are identified during a consulting engagement, it is the responsibility of the chief audit executive to ensure that these issues are communicated to senior management and the board. This ensures that the organization is aware of the risks and can take corrective action. Consulting engagements should not overshadow the priority of addressing critical control issues that may affect the organization's risk profile. References:

"International Standards for the Professional Practice of Internal Auditing" (IIA Standards)

"Internal Auditing: Assurance & Advisory Services" (The Institute of Internal Auditors)

If a significant error or omission is found in the final audit report, it is crucial for the internal audit activity to correct the information and redistribute the corrected report to all original recipients. This ensures that all stakeholders are informed of the accurate findings and can take appropriate actions based on correct information.

IIA References:

IIA Standard 2440: Disseminating Results requires that the internal audit activity communicate accurate and complete results. If an error or omission is identified, the corrected information must be promptly communicated to all relevant parties to maintain the integrity of the audit process.

The Practice Guide on Communicating Results emphasizes that errors in audit reports should be corrected and the revised report should be distributed to ensure stakeholders are acting on accurate information.

Introduction:

Review notes are comments or questions posed by engagement supervisors during the review of workpapers to ensure audit quality and completeness.

IIA Guidance on Review Notes:

According to the IIA, review notes serve as a tool for engagement supervisors to seek additional evidence or clarification.

Options Analysis:

Option A: This is correct as per IIA guidance, once concerns have been addressed, review notes can be cleared from the final documentation.

Option B: Management does not typically address review notes; these are internal audit processes.

Option C: The CAE does not need to initial or sign the review notes, as the engagement supervisor's review is sufficient.

Option D: While review notes must be addressed, they do not necessarily need to be retained after being resolved.

Conclusion:

The correct procedure allows for review notes to be cleared once the engagement supervisor’s concerns are addressed, streamlining the documentation process.

IIA’s International Professional Practices Framework (IPPF).

Matrix Organization Structure: In matrix organizations, employees report to both functional and product managers. This dual reporting structure allows the organization to efficiently use its personnel across different projects and functions.

Advantages of Matrix Structure:

Resource Utilization: Personnel from various functions can be utilized effectively across multiple projects, improving resource allocation and flexibility.

Coordination and Communication: This structure enhances coordination and communication across different functional areas and projects.

Unity-of-Command: Option A is incorrect because the unity-of-command principle is compromised in a matrix organization due to dual reporting lines.

Authority and Accountability: Option C is correct to some extent but does not capture the primary benefit of resource utilization.

Suitability: Option D refers to the best use cases for matrix structures, but option B provides a more comprehensive understanding of how matrix organizations function.

Management and Organizational Behavior textbooks.

According to the International Standards for the Professional Practice of Internal Auditing, the Chief Audit Executive (CAE) has a responsibility to ensure that the results of both assurance and consulting engagements are communicated to the appropriate parties. This ensures that the observations and recommendations are acknowledged and acted upon by those who have the authority to implement necessary changes or take corrective actions. This communication is crucial for ensuring that the findings of the internal audit are effectively utilized to improve governance, risk management, and control processes.

The Institute of Internal Auditors (IIA) Standard 2440 – Disseminating Results: "The chief audit executive must communicate results to the appropriate parties."

IIA Practice Guide on "Communicating Results"

A flowchart is primarily used to evaluate the design of controls by visually representing the sequence of operations, decision points, and control activities within a process. This helps the internal auditor identify weaknesses, redundancies, and gaps in internal controls.

Preparing for testing the effectiveness of controls (A) comes later in the audit process, after evaluating the design.

Planning for evaluating potential losses (B) focuses on risk assessment rather than control design.

Preparing a sampling plan (C) is a different step in the audit process, where the auditor determines the scope and sample size.

 Proper engagement planning is essential to ensure that the internal audit engagement is conducted effectively and efficiently.

 Completing and approving the planning phase before starting the fieldwork ensures that all objectives, scope, resources, and methodologies are well-defined and agreed upon.

 This preparation helps in aligning the engagement with the overall audit strategy and reduces the risk of scope changes or misalignments during fieldwork

Strategic goals are long-term, broad, and mission-driven.

Options A, B, and C represent short-term operational or tactical goals.

Option D (carbon neutrality in 5 years) represents a long-term strategic goal.

A finding can be removed from the final audit report if management provides additional information that accurately contradicts the initial findings. This indicates that the initial findings may have been based on incomplete or incorrect information. Disagreements (Option A) or beliefs about the insignificance (Option D) of the finding do not justify removal unless they are supported by new, contradicting evidence. Even if corrective actions are already taken (Option B), the original finding may still be relevant for documentation and historical context.

IIA Standard 2410: Criteria for Communicating.

IIA Practice Guide on Communicating Results.

A control weakness occurs when there is a deficiency in internal controls that could allow errors or fraud to occur. While the act of buyers promptly updating the vendor listing might seem efficient, it could bypass necessary oversight and approval processes. This could lead to unauthorized or inappropriate vendors being added, increasing the risk of fraud or favoritism. Effective internal control requires that such updates be reviewed and approved by an independent party to ensure accuracy and appropriateness.

Best practices in internal control recommend segregation of duties and independent review processes to prevent unauthorized changes and ensure control integrity​​​​.

One disadvantage of using flowcharts during a risk assessment is that they may not capture serious risks that are not part of the linear process flow. Flowcharts are excellent tools for visualizing processes and identifying control points within a structured workflow. However, they might overlook risks that arise from non-linear interactions, external factors, or complex interdependencies that are not easily represented in a flowchart format. This limitation can result in an incomplete risk assessment if the auditor relies solely on flowcharts without considering other methods to identify all potential risks.

Institute of Internal Auditors (IIA), Practice Guide – Auditing the Control Environment.

Comprehensive and Detailed Explanation:

Per IIA Standard 2440 – Disseminating Results, if an engagement reveals issues that require urgent management action, the auditor should issue an interim communication rather than waiting for the final report. This ensures that management is alerted promptly to risks that could materially affect the organization. Option A is not appropriate because developing corrective action plans is management’s responsibility, not audit’s. Option B, direct reporting to regulators, bypasses governance channels unless laws require immediate external reporting. Option C (risk assessment) is part of planning but does not satisfy the urgency of immediate communication. The best response is Option D: communicate the critical inconsistencies promptly to senior management through an interim report, allowing them to take timely corrective measures.

The internal auditor has primarily obtained testimonial evidence. Testimonial evidence is derived from interviews, discussions, and responses from employees or other parties. It involves collecting and analyzing verbal information to draw conclusions, which is precisely what the auditor did by conducting interviews, documenting them, analyzing the summaries, and drawing conclusions based on this information.

IIA Standards: 2310 - Identifying Information

IIA Practice Guide: Audit Evidence