IIA-CIA-Part3 Exam Dumps - IIA CIA Questions and Answers

To identify very small control and transaction anomalies, internal auditors should analyze the entire dataset rather than a sample. Full population analysis increases the likelihood of detecting:

Unusual transaction patterns, including fraud, errors, and control weaknesses.

Rare or subtle anomalies that might be missed in sampling-based audits.

Machine-learning-based fraud detection and exception analysis.

A. Analysis of the full population of existing data. (Correct)

This approach ensures complete coverage, reduces sampling risk, and detects rare anomalies.

Modern data analytics tools allow auditors to analyze entire datasets efficiently.

B. Verification of the completeness and integrity of existing data. (Incorrect)

While data integrity checks ensure reliable data, they do not actively identify anomalies or suspicious patterns.

C. Continuous monitoring on a repetitive basis. (Incorrect, but relevant)

Continuous monitoring is useful for ongoing fraud detection, but it does not guarantee full anomaly detection unless it covers all transactions.

Full population analysis is more comprehensive for identifying small anomalies.

D. Analysis of the databases of partners, such as suppliers. (Incorrect)

While analyzing external data sources can uncover vendor fraud, it does not address internal control or transaction anomalies within the organization.

IIA GTAG 3 – Continuous Auditing recommends full population analysis as a best practice for anomaly detection.

IIA Standard 1220 – Due Professional Care requires auditors to use advanced analytical techniques to detect control weaknesses.

COSO Framework – Fraud Risk Management Guide suggests full transaction data analysis for effective fraud detection.

Explanation of Answer Choices:IIA References:Thus, the correct answer is A. Analysis of the full population of existing data.

Understanding Physical Access Controls:

Physical access controls protect assets by preventing unauthorized access and detecting potential security violations.

Controls can be preventive (stop incidents from occurring) or detective (identify incidents after they occur).

Why Surveillance Cameras Function as Both Preventive and Detective Controls:

Preventive: The presence of cameras discourages unauthorized access and malicious activities.

Detective: If an incident occurs, cameras provide recorded evidence for investigation and accountability.

Why Other Options Are Less Suitable:

A. Locked doors – Purely preventive, as they block unauthorized access but do not detect breaches.

B. Firewalls – Primarily an IT security measure, not a physical access control.

D. Login IDs and passwords – These are logical (IT) access controls, not physical controls.

IIA GTAG 15 – Auditing Privacy and Security Risks: Highlights the dual role of surveillance as a preventive and detective control.

IIA Standard 2120 – Risk Management: Encourages controls that both prevent and detect risks.

COSO’s Internal Control Framework: Supports security measures that serve multiple control functions.

Relevant IIA References:✅ Final Answer: Surveillance cameras (Option C).

Earnings management occurs when companies manipulate financial reporting to meet targets, often leading to unethical practices or financial misstatements. The best way to disincentivize earnings management is to link performance to nonfinancial measures such as customer satisfaction and employee training, which cannot be directly manipulated through financial reporting.

Avoiding Short-Term Financial Manipulation:

When performance is tied to financial metrics (e.g., return on investment, stock price, or production quotas), there is a higher risk of earnings manipulation, such as shifting revenues, deferring expenses, or aggressive accounting practices.

Nonfinancial measures, however, emphasize long-term value creation and are harder to manipulate.

Sustainable Business Growth:

Customer satisfaction and employee training foster long-term profitability by improving product quality, brand reputation, and workforce capabilities.

Companies focusing on these measures build sustainable competitive advantages without distorting financial results.

Regulatory and Ethical Considerations:

Internal auditors, following IIA Standard 2120 (Risk Management), must evaluate risks related to unethical financial reporting.

Regulatory bodies (e.g., SEC, PCAOB, and COSO) emphasize reducing the risk of fraudulent financial reporting by incorporating broader performance measures beyond financial results.

A. Linking performance to profitability measures such as return on investment:

ROI and similar metrics can pressure executives to inflate earnings or cut necessary expenses to meet short-term targets.

B. Linking performance to the stock price:

Stock-based incentives can lead to earnings manipulation (e.g., stock buybacks, revenue recognition adjustments) to inflate stock prices artificially.

C. Linking performance to quotas such as units produced:

Production-based targets can result in overproduction or quality compromises, leading to inefficient resource allocation and long-term financial issues.

IIA Standard 2120 (Risk Management): Internal auditors must assess risks related to financial reporting integrity.

COSO’s Internal Control Framework: Emphasizes performance measures beyond financial results to ensure ethical management practices.

IIA Practice Guide: Assessing Organizational Governance: Encourages balanced scorecards, including nonfinancial KPIs, to reduce financial misstatement risks.

Step-by-Step Justification:Why Not the Other Options?IIA References:Thus, the correct answer is D. Linking performance to nonfinancial measures such as customer satisfaction and employee training. ✅

If an organization has an immediate need for servers but lacks time for a capital acquisition, the best solution is Infrastructure as a Service (IaaS).

On-Demand Computing Power: IaaS provides virtual servers, storage, and networking resources on a pay-as-you-go basis, eliminating the need for capital purchases.

Scalability & Flexibility: The organization can quickly deploy the necessary infrastructure without long procurement processes.

Reduced IT Management Overhead: The cloud provider manages the hardware, while the organization manages the applications and data.

Option B (Platform as a Service – PaaS): PaaS offers a development environment for building applications, not infrastructure (e.g., servers and networking).

Option C (Enterprise as a Service – EaaS): EaaS is not a standard cloud service model recognized by NIST (National Institute of Standards and Technology) or ISO 17788.

Option D (Software as a Service – SaaS): SaaS provides software applications over the internet (e.g., Gmail, Microsoft 365) but does not address server needs.

IIA’s Global Technology Audit Guide (GTAG) on Cloud Computing emphasizes IaaS as a viable solution for organizations requiring immediate infrastructure deployment.

NIST Special Publication 800-145 (Cloud Computing Definition) defines IaaS as a method to deliver computing resources efficiently without physical acquisition.

IIA Standard 2110 – IT Governance: Highlights the importance of agile IT solutions for meeting business needs, including cloud computing.

Why Option A is Correct (IaaS):Why Other Options Are Incorrect:IIA References:Thus, the most appropriate answer is A. Infrastructure as a Service (IaaS).

Key Performance Indicators (KPIs) are used to measure and monitor the effectiveness of a process within an organization. In this case, the internal auditor found that 3% of payments did not match submitted invoices, which indicates a potential control weakness in the accounts payable process.

Process Owner’s Tolerance for Performance Deviations (Correct Answer: A)

The most relevant KPI would be one that sets acceptable error limits for invoice payments.

IIA Standard 2120 – Risk Management states that auditors should assess management's risk tolerance and evaluate whether processes are operating within acceptable limits.

If the organization's threshold for errors is 1% and the audit found 3%, it indicates a significant issue requiring corrective action.

This KPI helps the auditor assess materiality and determine the significance of the 3% deviation.

Why the Other Options Are Incorrect:

B. KPI defining the importance of performance levels and disbursement statistics (Incorrect)

While understanding performance levels and disbursement statistics is useful, this KPI does not directly address error tolerance or the impact of deviations.

C. KPI defining timeliness of reporting disbursement errors (Incorrect)

Reporting errors quickly is important, but this KPI does not help in determining whether a 3% error rate is acceptable or excessive.

D. KPI defining operating ratio objectives (Incorrect)

Operating ratio objectives focus on financial efficiency rather than error tolerance or accuracy in invoice processing.

IIA Standard 2120 – Risk Management (Assessing risk tolerance in financial processes)

IIA Standard 2210 – Engagement Objectives (Evaluating process performance against defined thresholds)

IIA Standard 2130 – Compliance (Ensuring adherence to financial control policies)

Step-by-Step Justification:IIA References for This Answer:Thus, the best answer is A. A KPI that defines the process owner's tolerance for performance deviations, as it directly helps the auditor assess the materiality of the 3% error rate in accounts payable.

Understanding a Man-in-the-Middle (MITM) Attack:

A Man-in-the-Middle (MITM) attack occurs when a cybercriminal intercepts, alters, or steals data while it is being transmitted between two parties.

The attacker can modify messages, inject malicious content, or eavesdrop on sensitive communications without the knowledge of the sender or receiver.

How MITM Attacks Work:

Attackers position themselves between two communicating parties (e.g., a user and a banking website) and intercept the data exchange.

This allows them to steal login credentials, financial information, or confidential communications.

Common MITM attack methods include:

Wi-Fi eavesdropping (public network interception).

Session hijacking (stealing active user sessions).

HTTPS spoofing (tricking users into thinking they are on a secure website).

Why Other Options Are Incorrect:

A. The perpetrator is able to delete data on the network without physical access to the device – Incorrect.

This describes a remote cyberattack, such as malware or ransomware, rather than MITM, which focuses on data interception.

B. The perpetrator is able to exploit network activities for unapproved purposes – Incorrect.

This is too broad and could refer to insider threats, malware, or privilege escalation attacks, rather than specifically MITM.

D. The perpetrator is able to disable default security controls and introduce additional vulnerabilities – Incorrect.

This describes a system exploitation attack, such as a rootkit or backdoor installation, not an MITM attack.

IIA’s Perspective on Cybersecurity and IT Risk Management:

IIA Standard 2110 – Governance requires organizations to implement cybersecurity controls to mitigate risks like MITM attacks.

IIA GTAG (Global Technology Audit Guide) on Cybersecurity Risks advises organizations to use encryption (e.g., TLS, VPNs) to protect data in transit.

NIST Cybersecurity Framework recommends multi-factor authentication (MFA) and secure protocols to prevent MITM attacks.

IIA References:

IIA Standard 2110 – IT Security and Cyber Risk Governance

IIA GTAG – Cybersecurity Controls and Threat Mitigation

NIST Cybersecurity Framework – Secure Data Transmission

Thus, the correct and verified answer is C. The perpetrator is able to take over control of data communication in transit and replace traffic.

Database administrators (DBAs) have privileged access, meaning they can make unauthorized or hidden changes to data, database structures, and security settings without detection. This presents a high risk of fraud, data manipulation, and security breaches.

A. The risk that database administrators will disagree with temporarily preventing user access to the database for auditing purposes. (Incorrect)

While resistance from DBAs during an audit can be a challenge, it is not a significant risk compared to the ability to manipulate data unnoticed.

B. The risk that database administrators do not receive new patches from vendors that support database software in a timely fashion. (Incorrect)

Patch management is a security concern but does not directly relate to the unique risk of DBAs abusing privileged access.

C. The risk that database administrators set up personalized accounts for themselves, making the audit time-consuming. (Incorrect)

While personal accounts can complicate audits, the greater risk is that DBAs can make changes without detection.

IIA GTAG 4 – Management of IT Auditing emphasizes the need for controls over privileged access to prevent unauthorized database modifications.

IIA Standard 2110 – Governance requires internal auditors to assess risks related to IT governance and privileged access management.

IIA GTAG 8 – Auditing Application Controls highlights that auditors must review DBA activity logs and ensure segregation of duties.

Explanation of Answer Choices:IIA References:Thus, the correct answer is D. The risk that database administrators could make hidden changes using privileged access.

Understanding Outsourcing:

Outsourcing refers to contracting business processes, functions, or expertise to an external service provider.

Companies use outsourcing to reduce costs, access specialized skills, and improve efficiency.

Why Option B (Contracting Functions or Knowledge-Related Work with an External Provider) Is Correct?

Outsourcing involves delegating specific business functions (e.g., IT support, payroll, customer service) to external specialists.

IIA Standard 2110 – Governance supports evaluating outsourcing risks and effectiveness.

ISO 37500 – Outsourcing Management Framework emphasizes knowledge-based work outsourcing for expertise gains.

Why Other Options Are Incorrect?

Option A (Foreign service providers for cost savings):

While some outsourcing involves foreign providers, outsourcing is not limited to offshoring.

Option C (Internal service provider):

Internal service providers do not involve outsourcing, as the work remains within the company.

Option D (External + internal provider collaboration):

This describes co-sourcing, not pure outsourcing.

Outsourcing involves contracting business functions to an external provider, making option B correct.

IIA Standard 2110 supports governance over outsourcing decisions and risk management.

Final Justification:IIA References:

IPPF Standard 2110 – Governance (Outsourcing & Vendor Risk Management)

ISO 37500 – Outsourcing Management Framework

COSO ERM – Third-Party Risk Management in Outsourcing

To ensure security when employees use their own smart devices to access organizational applications, the best approach is to allow only pre-approved devices that meet the organization’s security standards.

Device Security & Compliance: Approved devices are verified for security measures like encryption, mobile device management (MDM), and antivirus protection.

Risk Management: Restricting access to pre-approved devices reduces the risk of malware, unauthorized access, and vulnerabilities.

IT Control & Monitoring: IT can enforce security updates, compliance policies, and access control mechanisms on pre-approved devices.

Option A (Using a jailbroken or rooted smart device feature): Jailbroken or rooted devices remove security protections and create severe security vulnerabilities.

Option C (Obtaining written assurance from the employee that security policies and procedures are followed): Written assurances alone are not a security measure; technical controls must be enforced.

Option D (Introducing a security question known only by the employee): Security questions are weak authentication measures and do not verify the legitimacy of a device.

IIA's GTAG on Information Security Management stresses the importance of device security and requiring IT-approved devices.

NIST Special Publication 800-124 (referenced in IIA’s IT Audit Guidance) highlights best practices for securing mobile devices in an enterprise setting, recommending pre-approved devices.

Why Option B is Correct:Why Other Options Are Incorrect:IIA References:Thus, the most appropriate answer is B. Using only smart devices previously approved by the organization.

According to Maslow’s hierarchy of needs, once an individual’s lower-level needs (physiological, safety, and social needs) are met, they seek higher-level motivators such as esteem and self-actualization. Recognition falls under esteem needs, which include respect, status, and appreciation. Employees who feel valued and recognized are more likely to stay with an organization.

A. Social benefits – These are lower-level needs (belongingness/social needs), which have already been met in this scenario.

B. Compensation – While salary is important, it primarily addresses physiological and security needs, which are lower on Maslow’s hierarchy. Once these are met, higher-level motivators like recognition become more influential.

C. Job safety – Safety and security are lower-level needs, and in this scenario, they are already met.

D. Recognition (Correct Answer) – Falls under esteem needs, which are crucial for employee retention once basic needs are satisfied.

IIA IPPF Standard 2120 – Risk Management includes talent management as part of organizational sustainability.

COSO ERM Framework – Human Capital Risk highlights employee motivation as a key factor in risk management.

IIA GTAG 7 – Managing IT Security Risks discusses employee satisfaction and its impact on organizational security and retention.

Explanation of Each Option:IIA References:

Performance Measurement Should Provide Meaningful Insights:

While providing detailed statistics on disbursements, the greatest concern is whether the data is relevant to achieving the objective of accurate disbursements.

If the data does not directly support decision-making or process improvements, it may not serve its intended purpose.

IIA Standard 2010 - Planning requires internal auditors to evaluate the relevance of information used in decision-making.

A. Articulation of the data (Incorrect)

The way the data is presented is important but is a secondary concern compared to whether the data is relevant.

B. Availability of the data (Incorrect)

While timely access to data is critical, the primary concern is whether the data is meaningful in evaluating disbursement accuracy.

C. Measurability of the data (Incorrect)

The data is already being measured and reported; the real issue is whether it provides useful insights for improving accuracy.

Explanation of Incorrect Answers:Conclusion:The greatest concern with this performance measurement is whether the data is relevant (Option D) to assessing disbursement accuracy and guiding improvements.

IIA References:

IIA Standard 2010 - Planning

Logging at the database and application levels is a critical security control that enables monitoring, detecting, and investigating potential security incidents. The absence of logging significantly increases cybersecurity risks and can leave an organization vulnerable to undetected attacks.

Incident Response & Forensics: Without logs, the organization will be unable to determine the cause, origin, and impact of cyber incidents or system intrusions.

Compliance Requirements: Many regulatory frameworks (e.g., ISO 27001, NIST 800-53, GDPR, PCI-DSS, SOX) require logging for security monitoring and auditability.

Threat Detection: Logs help in identifying malicious activities, unauthorized access, and data breaches.

Accountability: Ensures that actions taken within the system can be traced back to specific users or administrators.

Option A (The organization will be unable to develop preventative actions based on analytics): While logging helps in analytics, its primary function is incident detection and forensic investigation.

Option B (The organization will not be able to trace and monitor the activities of database administrators): This is partially correct, but logging is not just for administrators—it is essential for monitoring all system activities, including unauthorized access attempts.

Option D (The organization will be unable to upgrade the system to newer versions): Logging does not impact system upgrades; upgrades are related to software lifecycle management, not logging practices.

IIA’s Global Technology Audit Guide (GTAG) – Information Security Controls recommends logging as a fundamental security control.

IIA Standard 2110 – IT Governance: Emphasizes the need for adequate IT risk management, including logging.

COSO Framework (Monitoring Component): Highlights the importance of system monitoring, which includes logging.

Why Option C is Correct:Why Other Options Are Incorrect:IIA References:Thus, the most appropriate answer is C. The organization will be unable to determine why intrusions and cyber incidents took place.

User-Developed Applications (UDAs) are software tools, typically spreadsheets or small databases, created by business users rather than IT professionals. These applications often lack formal security, documentation, and control measures, increasing the risk of data errors, unauthorized access, and compliance failures.

UDAs are often created quickly to meet immediate business needs, without following IT governance, security controls, or development standards.

Unlike traditional IT applications, UDAs lack structured testing, change management, and formal documentation.

The IIA’s GTAG 14 – Auditing User-Developed Applications states that UDAs present higher risks because they are not subject to the same controls as IT-managed applications.

A. UDAs and traditional IT applications typically follow a similar development life cycle → Incorrect. Traditional IT applications follow a formal Software Development Life Cycle (SDLC), whereas UDAs are developed informally by end-users.

B. A UDA usually includes system documentation to illustrate its functions, and IT-developed applications typically do not require such documentation. → Incorrect. IT applications require extensive documentation, whereas UDAs often lack documentation entirely.

D. IT testing personnel usually review both types of applications thoroughly to ensure they were developed properly. → Incorrect. IT applications undergo rigorous testing and quality assurance, while UDAs often bypass IT reviews altogether.

IIA GTAG 14 – Auditing User-Developed Applications highlights the risks of UDAs and emphasizes the need for internal controls.

COBIT Framework (Control Objectives for Information and Related Technologies) recommends IT governance measures for all business-critical applications.

ISO 27001 (Information Security Management System) warns against uncontrolled user-developed applications due to security risks.

Why Option C is Correct?Explanation of the Other Options:IIA References & Best Practices:Thus, the correct answer is C. Unlike traditional IT applications, UDAs typically are developed with little consideration of controls.