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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

An organization is experiencing a significant risk that threatens its financial well-being Senior management requested that the chief audit executive (CAE) meet with them to discuss the risk. Which of the following would best describe the CAE ' s responsibility at the meeting?

Options:

A.  

Inform senior management of the appropriate actions they should take to control the risk

B.  

Recommend that the internal audit activity provide consulting services to help minimize the risk

C.  

Assume the responsibility of resolving the significant risk that will affect the organization

D.  

Determine whether senior management accepted risk that may be deemed unacceptable for the organization

Discussion 0
Question # 47

A multinational organization has multiple divisions that sell their products internally to other divisions When selling internally, which of the following transfer prices would lead to the best decisions for the organization?

Options:

A.  

Full cost

B.  

Full cost plus a markup.

C.  

Market price of the product.

D.  

Variable cost plus a markup.

Discussion 0
Question # 48

Which of The following best describes a risk that is deemed " unacceptable " to the organization?

Options:

A.  

A risk where likelihood and impact are high

B.  

A risk where inherent risk exceeds its residual risk

C.  

A risk where inherent risk exceeds the tolerance level

D.  

A risk where residual risk exceeds the tolerance level

Discussion 0
Question # 49

An internal auditor is conducting an assurance engagement in the procurement area. The auditor follows a checklist of tasks prepared for the engagement. During the process, the auditor notices some deviations from the procurement procedure requirements. However, these deviations are not directly linked to and do not prevent the auditor from completing the checklist tasks. So, the auditor does not investigate these deviations further. Which checklist drawback most likely applies to this situation?

Options:

A.  

Over-reliance and a false sense of security

B.  

Limited flexibility

C.  

Inability to keep the checklist up to date

D.  

Standardization and a systematic approach

Discussion 0
Question # 50

An internal auditor is performing a review of an organization ' s vendor for any possible conflicts of interest. Which of the following would provide the greatest assistance to the auditor in meeting this objective?

Options:

A.  

Vendor contracts.

B.  

Employee master list.

C.  

Payment records.

D.  

Purchasing policy.

Discussion 0
Question # 51

Which of the following best exemplifies having effective risk management and internal control processes?

Options:

A.  

Relevant risk indicators and mitigation plans are in place

B.  

All risks are identified and assessed

C.  

Business profitability is likely to be achieved

D.  

Risk information is communicated to customers and suppliers

Discussion 0
Question # 52

The board of directors expressed concerns about potential external risks that could impact the organization s ability to meet its annual objectives and goals The board requested consulting services from the internal audit activity to gain insight regarding the external risks Which of the following engagement objectives would be appropriate to fulfill this request?

Options:

A.  

Assess the organization ' s ability to minimize potential external risks

B.  

Assess the organization ' s process of vetting vendors that provide necessary services to the organization

C.  

Assess the organization ' s risk impacts from the markets in which it operates

D.  

Assess the organization ' s controls implemented that would help minimize risks

Discussion 0
Question # 53

Which of the following is an advantage of nonstatistical sampling over statistical sampling?

Options:

A.  

Nonstatistical sampling provides more objective recommendations for management.

B.  

Nonstatistical sampling provides an opportunity to select the minimum sample size required to satisfy the objectives of the audit tests.

C.  

Nonstatistical sampling provides for the use of subjective judgment in determining the sample size.

D.  

Nonstatistical sampling permits the auditor to specify a level of reliability and the desired degree of precision.

Discussion 0
Question # 54

Which of the following are advantages of flowcharts over internal control questionnaires ' '

1 Flowcharts reduce the need to test whether employees are observing internal control processes

2 Flowcharts provide a visual depiction of the processes in the area under review 3. Flowcharts identify and prioritize internal control design weaknesses.

4 Flowcharts highlight the control points to help internal auditors evaluate control design

Options:

A.  

1 and 3 only

B.  

2 and 4 only.

C.  

1.2. and 3 only

D.  

2. 3 and 4 only

Discussion 0
Question # 55

An internal auditor is planning an engagement at a financial institution. Toe engagement objective is to identify whether loans were granted in accordance with the organization ' s policies. When of the following approaches would provide the auditor with the best information?

Options:

A.  

Randomly select 30 cases of loans and verify whether they were repaid timely and in full

B.  

Randomly select 30 cases of loans and validate them against applicable underwriting guidelines

C.  

Randomly select 30 employees to complete a survey regarding whether policies and standards are followed

D.  

Randomly select several months obtain ageing reports for these months and compare them with the poor year

Discussion 0
Question # 56

The internal audit manager has been delegated the task of preparing the annual internal audit plan for the forthcoming fiscal year All engagements should be appropriately categorized and presented to the chief audit executive for review Which of the following would most likely be classified as a consulting engagement?

Options:

A.  

Evaluating procurement department process effectiveness

B.  

Helping in the design of the risk management program

C.  

Assessing financial reporting control adequacy

D.  

Reviewing environmental, social, and governance reporting compliance

Discussion 0
Question # 57

An internal auditor accessed accounts payable records and extracted data related to fuel purchased tor the organization ' s vehicles As a first step, she sorted the data by vehicle and used spreadsheet functions to identify all instances of refueling on the same or sequential dates She then performed other tests Based on the auditor ' s actions which of the following is most likely the objective of this engagement1?

Options:

A.  

To identify whether fuel was purchased for work-related purposes

B.  

To estimate future fuel costs for the organization ' s fleet of vehicles

C.  

To determine trends in average fuel consumption by vehicle

D.  

To determine whether the organization is paying more than the industry average for fuel

Discussion 0
Question # 58

A bicycle manufacturer incurs a combination of fixed and variable costs with the production of each bicycle. Which of the following statements is true regarding these costs?

Options:

A.  

if the number of bicycles produced is increased by 15 percent, the variable cost per unit will increase proportionally

B.  

The fixed cost per unit will vary directly based on the number of bicycles produced during the production cycle.

C.  

The total variable cost will vary proportionally and inversely with the number of bicycles produced during a production run.

D.  

if the number of bicycles produced is increased by 30 percent, the fixed cost per unit will decline.

Discussion 0
Question # 59

What is the most likely reason an internal auditor would interview operational management during engagement planning?

Options:

A.  

To validate the engagement work program.

B.  

To help the internal auditor understand the objectives of the area or process under review.

C.  

To determine whether operational management has sufficient knowledge of risks and controls.

D.  

To determine whether management followed through on action plans from a previous consulting engagement.

Discussion 0
Question # 60

During an assurance engagement an internal auditor uses benchmarking research to support preparation of a report to stakeholders that contains significant findings about control deficiencies. Which of the following skills did the auditor demonstrate?

Options:

A.  

Internal audit management

B.  

Conflict negotiation.

C.  

Critical thinking

D.  

Persuasion and collaboration

Discussion 0
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