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IIA-CIA-Part2 Practice Questions

Internal Audit Engagement

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Total Questions : 747

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Question # 46

Which of the following is the primary reason to develop an audit work program?

Options:

A.  

To alert operational management to the types of audit tests that will likely be performed.

B.  

To help the engagement team understand which tasks have to be performed and how.

C.  

To assist with communicating all relevant audit findings, conclusions, and recommendations to operational management.

D.  

To facilitate the supervision of the audit engagement and enable the chief audit executive to provide relevant feedback.

Discussion 0
Question # 47

An organization's internal audit plan includes a recurring assurance review of the human resources (HR) department. Which of the following statements is true regarding preliminary communication between the auditor in charge (AIC) and the HR department?

1. The AIC should notify HR management when the draft audit plan is being developed, as a courtesy.

2. The AIC should notify HR management before the planning stage begins.

3. The AIC should schedule formal status meetings with HR management at the start of the engagement.

4. The AIC should finalize the scope of the engagement before communicating with HR management.

Options:

A.  

1 and 3

B.  

1 and 4

C.  

2 and 3

D.  

2 and 4

Discussion 0
Question # 48

An internal auditor discovered fraud while performing an audit of an organization's procurement process. Which of the following describes the greatest benefit of using forensic auditing techniques in this scenario?

Options:

A.  

Enhanced capability to prevent frauds from occurring.

B.  

Greater assurance that procurement frauds will be detected in a timely manner

C.  

Improved capability of evaluating fraud risks within the organization.

D.  

Greater understanding of fraud through better evidence collection

Discussion 0
Question # 49

Which of the following statements is true regarding the reporting of tangible and intangible assets?

Options:

A.  

For plant assets, cost includes the purchase price and the cost of design and construction

B.  

For intangible assets, cost includes the purchase price and development costs.

C.  

Due to their indefinite nature, intangible assets are not subject to amortization.

D.  

The organization must expense any cost incurred in developing a plant asset

Discussion 0
Question # 50

An internal auditor develops an engagement observation related to an organization's accumulation of large travel advances. The auditor observes that the organization's procedures do not require justification for travel advances greater than a specific amount Which of the following best describes the organization's procedures?

Options:

A.  

A criterion of the organization's accumulation of large travel advances

B.  

A condition of the organization's accumulation of large travel advances

C.  

A consequence of the organization's accumulation of large travel advances

D.  

A cause of the organization's accumulation of large travel advances

Discussion 0
Question # 51

A large investment organization hired a chief risk officer (CRO) to be responsible for the organization's risk management processes. Which of the following people should prioritize risks to be used for the audit plan?

Options:

A.  

Operational management, because they are responsible for the day-to-day management of the operational risks.

B.  

The CRO, because he is responsible for coordinating and project managing risk activities based on his specialized skills and knowledge.

C.  

The chief audit executive, although he is not accountable for risk management in the organization.

D.  

The CEO, because he has ultimate responsibility for ensuring that risks are managed within the agreed tolerance limits set by the board.

Discussion 0
Question # 52

The chief audit executive (CAE) of a small internal audit activity (IAA) plans to test conformance with the Standards through a quality assurance review. According to the Standards, which of the following are acceptable practice for this review?

1. Use an external service provider.

2. Conduct a self-assessment with independent validation.

3. Arrange for a review by qualified employees outside of the IA

A.  

4. Arrange for reciprocal peer review with another CA

E.  

Options:

A.  

1 and 2

B.  

2 and 4

C.  

1, 2, and 3

D.  

2, 3, and 4

Discussion 0
Question # 53

Which of the following factors would be the most critical in determining which engagements should be included in the annual internal audit plan?

Options:

A.  

Whether an audit is explicitly required by the internal audit charter

B.  

The extent to which the work to be performed is an assurance or consulting engagement

C.  

The organization's annual risk management strategy

D.  

Risks that are identified by operations staff or senior management

Discussion 0
Question # 54

'Internal policy prohibits employees from entering into contacts with financial obligations without proper approval.

A project manager signed a change to an important service agreement without obtaining the proper approval As a result the organization is receiving $5,000 per month less for its services.’’

Which of the following should be added to the observation?

Options:

A.  

The reason for not following the internal policy

B.  

A description of what constitutes proper approval

C.  

The annual impact of the changed agreement on cash flows

D.  

Details regarding when the change to the agreement was signed

Discussion 0
Question # 55

An organization is expanding into a new line of business selling natural gas. The internal auditor is planning an engagement and wants to obtain a general understanding of the natural gas market the market share that the organization wants to win, and the competitive advantage that the organization may have. Which of the following would be the best source of such information?

Options:

A.  

Interview responsible managers and read strategic documents

B.  

Conduct internet searches on gas sales and analyze market players

C.  

Review gas clients' portfolio and compile statistics on sales margins

D.  

Analyze the organization's revenues and calculate the proportion of gas

Discussion 0
Question # 56

An internal auditor was reviewing the procurement department's tender documentation for completeness He documented all discrepancies but the procurement manager disagreed with his findings Upon further review, the internal auditor noted that all discrepancies had been corrected in the tender database. Which of the following courses of action would have prevented this situation?

Options:

A.  

The auditor should have ensured the preservation of audit evidence by taking screenshots or extracting tender documents

B.  

The auditor should have extracted a list of logs and identified any actions that were executed in the database during the audit

C.  

The auditor should have instructed procurement workers that changes to the database during the course of the audit were strictly forbidden

D.  

The internal auditor should have created a more thorough work program, which would address audit criteria and potential causes in more detail

Discussion 0
Question # 57

After finalizing an assurance engagement concerning safety operations in the oil mining process, the audit team concluded that no key controls were compromised. However, some opportunities for improvement were noted. Which of the following would be the most appropriate way for the chief audit executive (CAE) to report these results?

Options:

A.  

The CAE should send the final report to operational and senior management and the audit committee.

B.  

The CAE should send the final report to operational management only, as there is no need to communicate this information to higher levels.

C.  

The CAE should notify operational and senior management that the audit engagement was completed with no significant findings to report.

D.  

The CAE should send the final report to operational management and notify senior management and the audit committee that no significant findings were identified.

Discussion 0
Question # 58

Management has taken immediate action to address an observation received during an audit of the organization's manufacturing process Which of the following is true regarding the validity of the observation closure?

Options:

A.  

Valid closure requires evidence that ensures the corrected process will function as expected in the future

B.  

Valid closure requires the client lo address not only the condition, but also the cause of the condition

C.  

Valid closure of an observation ensures it will be included in the final engagement report

D.  

Valid closure requires assurance from management that the original problem will not recur in the future

Discussion 0
Question # 59

Which of the following conditions are necessary for successful change management?

1. Decisions and necessary actions are taken promptly.

2. The traditions of the organization are respected.

3. Changes result in improvement or reform.

4. Internal and external communications are controlled.

Options:

A.  

1 and 2

B.  

1 and 3

C.  

2 and 3

D.  

2 and 4

Discussion 0
Question # 60

Which of the following methods is most closely associated to year over year trends?

Options:

A.  

Horizontal analysts

B.  

Vertical analysis.

C.  

Common-size analysis.

D.  

Ratio analysis.

Discussion 0
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