IIA-CIA-Part1 Exam Practice Test Instant Access

Question 1

The level of authority for the internal audit activity is granted by which of the following?

AThe chief audit executive.

BThe internal audit charter.

CThe International Professional Practices Framework.

DThe IIA's Code of Ethics.

Answer : B

The internal audit charter formally grants the internal audit activity its authority, as per IIA standards. It outlines the audit function's scope, responsibilities, and independence within the organization.

Question 2

Which of the following circumstances would most likely be considered a potential red flag for fraud by the internal audit activity?

AThe monthly payroll reports are not vetted to ensure terminated employees have been removed from the payroll system.

BThe volume of nonroutine journal entries has steadily increased over time.

CThe database of approved suppliers has not been reviewed in the last year.

DThe recent employee survey indicates that some employees remain unaware of the organization's whistleblower hotline.

Answer : B

An increase in nonroutine journal entries is a classic red flag for potential fraud, as such entries may be used to adjust financials inappropriately. IIA guidance identifies unusual patterns in financial transactions as significant indicators of potential fraud risks.

Question 3

An internal audit activity is performing a governance engagement. Which of the following would provide the best evidence for an internal auditor when evaluating the organization's culture?

APersonnel and customer surveys, actual reports, and due diligence results regarding third-party governance practices.

BDetails on mandatory reporting to third parties, disclosure committee charter and responsibilities, and the internal communication system.

CSuccession plans, development programs, and job descriptions with responsibilities and authorities.

DEthics and integrity policy; structured interviews with employees; and established and communicated values, mission, and vision.

Answer : D

Evaluating organizational culture requires insights into ethics, values, and behavior. The combination of the ethics policy, structured employee interviews, and communicated organizational values provides a comprehensive view, as recommended by IIA standards for governance audits.

Question 4

Which of the following is the primary benefit of establishing a formal training program for the internal audit activity?

AIt is useful to reinforce the independence of the internal audit activity.

BIt is useful to guide internal auditors as they perform specific engagements.

CIt is useful to maintain the skills and competencies of internal audit staff.

DIt is useful to measure the effectiveness and maturity of the internal audit activity.

Answer : C

A formal training program is essential for maintaining and enhancing the skills and competencies of internal audit staff. IIA guidance encourages continuous learning to ensure auditors remain proficient and up-to-date with auditing standards and practices.

Question 5

Which of the following is most likely to result in the impairment of independence for the internal audit activity?

AThe chief audit executive (CAE) has a dual reporting relationship within the organization.

BThe CAE performs an audit of a functional area that is also under the CAE's oversight.

CThe CAE has unrestricted access to information throughout the organization and to the board.

DThe board is involved in decisions to hire or remove the CAE and in drafting and approving an internal audit charter.

Answer : B

IIA standards state that independence is impaired if a CAE audits an area over which they have oversight responsibilities, as this creates a conflict of interest. The CAE's dual role compromises objectivity, a key requirement for effective internal auditing.

Question 6

A new internal auditor was recently recruited to the internal audit activity from the organization's finance department. What is likely to be the chief audit executive's greatest concern regarding assigning the new auditor to upcoming audits in the finance department?

AThe time it may take the new auditor to complete the assignment and report the findings to management.

BThe qualifications of the new auditor and whether the auditor's business knowledge is relevant to the assignment.

CThe potential for a conflict of interest to exist or appear to exist if the new auditor undertakes these assignments.

DThe knowledge the new auditor may have of control weaknesses in the finance department.

Answer : C

The IIA emphasizes the need for internal auditors to maintain independence and avoid situations that might impair objectivity. Assigning a recent finance employee to audit finance-related activities may lead to actual or perceived conflicts of interest, compromising the integrity of the audit findings.

Question 7

Nine months ago, an employee who was responsible for collections in the accounts receivables department joined the internal audit team. There is an accounts receivables assurance audit scheduled as part of this year's approved audit plan, which will include a review of the collections unit. With the knowledge and experience of this individual in the area, which of the following is the best approach for the chief audit executive (CAE) to take?

AHave the auditor formerly with the collections unit assist with planning and documenting the audit field work.

BHave the auditor formerly with the collections unit not participate on the audit team.

CHave the auditor formerly with the collections unit conduct the fieldwork and ensure it is reviewed by the CAE.

DHave the auditor formerly with the collections unit review all fieldwork done to ensure that there was adequate coverage.

Answer : B

According to IIA standards, assigning an auditor to review an area where they previously had responsibilities may compromise objectivity. The best approach is for the auditor to abstain from participation in the audit of the collections unit to avoid any perceived conflicts.

IIA-CIA-Part1 Certified Internal Auditor Exam Practice Test