IIA-CIA-Part2 Exam Practice Test Instant Access

Question 1

Which of the following steps should an internal auditor complete when conducting a review of an electronic data interchange application provided by a third-party service?

Ensure encryption keys meet ISO standards.

Determine whether an independent review of the service provider's operation has been conducted.

Verify that the service provider's contracts include necessary clauses.

Verify that only public-switched data networks are used by the service provider.

A1 and 3.

B1 and 4.

C2 and 3.

D2 and 4.
When conducting a review of an electronic data interchange (EDI) application provided by a third-party service, it is essential to determine whether an independent review of the service provider's operation has been conducted and to verify that the service provider's contracts include necessary clauses. These steps ensure that the service provider operates securely and meets the organization's requirements for data protection and service reliability.
IIA Reference:
IIA Standard 2100: Nature of Work indicates that internal audit should evaluate the adequacy and effectiveness of controls, including those at third-party service providers. Verifying that an independent review has been conducted and ensuring that contracts contain the necessary clauses are critical steps in assessing these controls.
The Practice Guide on Third-Party Risk Management advises internal auditors to review the service provider's contractual agreements and independent audit reports to assess the adequacy of controls and compliance with standards.

Answer : C

Question 2

The internal audit activity needs to review the information security function but does not have the IT expertise needed for the engagement. Which of the following actions should the chief audit executive take to ensure the internal audit activity conforms with the Standards?

AAssign the engagement to a staff auditor and closely review his work and report.

BAssign the engagement to a senior auditor, who carefully researches and studies the company's IT infrastructure.

CContract an external service provider auditor with the experience necessary to perform the audit.

DPerform the audit herself and work closely with the information security function to obtain expertise in the area.
When the internal audit activity lacks the necessary IT expertise to review the information security function, the chief audit executive (CAE) should contract an external service provider with the required experience. This ensures that the audit is conducted effectively and in accordance with the Standards, which require internal auditors to have or acquire the necessary skills to perform their work.
IIA Reference:
IIA Standard 1210: Proficiency requires internal auditors to possess the knowledge, skills, and other competencies needed to perform their responsibilities. When the necessary expertise is not available within the internal audit activity, the CAE must obtain competent advice and assistance by either contracting external experts or outsourcing the audit.
The Practice Guide on Engaging External Service Providers suggests that when specialized skills are required, engaging an external service provider is a practical solution to ensure the audit's quality and effectiveness.

Answer : C

Question 3

Which of the following actions should the chief audit executive take when senior management decides to accept risks by choosing to do business with a questionable vendor?

APersuade senior management to take appropriate action.

BCancel issuing the engagement report due to the assumed risks.

CAccept senior management's assumption of the risks.

DDiscuss the issue with the board for them to take appropriate action.
If senior management decides to accept risks, such as doing business with a questionable vendor, and the chief audit executive (CAE) believes this poses a significant risk to the organization, the CAE should escalate the issue to the board. The board has the ultimate responsibility for overseeing risk management and can decide on the appropriate action to take in response to the risk.
IIA Reference:
IIA Standard 2600: Communicating the Acceptance of Risks states that when the CAE believes that senior management has accepted a level of residual risk that may be unacceptable to the organization, the CAE must discuss the matter with senior management. If the decision regarding risk remains unchanged, the CAE must inform the board.
The Practice Guide on Risk Management highlights the importance of the CAE keeping the board informed of significant risks that management has chosen to accept, particularly when these risks could have a material impact on the organization.

Answer : D

Question 4

Which of the following statements is true regarding engagement planning?

AThe scope of the engagement should be planned according to the internal audit activity's budget and then aligned to the risk universe.

BThe audit engagement objectives should be based on operational management's view of risk objectives.

CThe planning phase of the engagement should be completed and approved before the fieldwork of the engagement begins.

DThe main purpose of the engagement work program is to determine the nature and timing of procedures required to gather audit evidence.
The planning phase is crucial for any audit engagement and must be completed and approved before starting fieldwork. This ensures that the engagement has a clear scope, objectives, and methodology, which are necessary for conducting an effective and efficient audit. Without proper planning, the audit team may miss critical areas or waste resources on low-priority risks.
IIA Reference:
IIA Standard 2200: Engagement Planning requires that internal auditors develop and document a plan for each engagement, including the engagement's objectives, scope, timing, and resource allocations, before starting fieldwork.
The Practice Guide on Planning emphasizes that completing and approving the planning phase ensures that all necessary preparations are made, and potential risks are identified and mitigated before fieldwork begins.

Answer : C

Question 5

Which of the following statements is true regarding risk assessments, including the evaluation and prioritization of risk and control factors?

AA risk-by-process matrix enables the user to determine associations between any of the processes and the risks.

BThe risk-factor approach for linking business processes and risks is more direct than the use of a risk-by-process matrix.

CInternal risk factors are built into the environment and the nature of the process itself.

DA risk map is used primarily to depict which risks will be reduced and which will be shared.
A risk-by-process matrix is a tool that allows users to identify and analyze the associations between various business processes and the risks that affect them. This matrix helps in understanding how risks are distributed across different processes and can be instrumental in prioritizing audit activities based on risk.
IIA Reference:
IIA Standard 2210: Engagement Objectives suggests that internal auditors should consider risks when setting audit objectives. A risk-by-process matrix is an effective tool for mapping out these risks in relation to processes, providing a clear visual representation of where the most significant risks lie.
The Practice Guide on Risk Assessment outlines the use of matrices, including risk-by-process matrices, to facilitate the identification and prioritization of risks within different processes.

Answer : A

Question 6

Which of the following would be the most reliable source of documentary evidence?

AConfirmation letters.

BRemittance advices.

CPolicy statements.

DCanceled checks.
Confirmation letters are generally considered the most reliable source of documentary evidence because they involve direct verification of information with an independent third party. This type of evidence is less prone to bias or manipulation compared to internal documents like policy statements or remittance advices.
IIA Reference:
IIA Standard 2310: Identifying Information requires that internal auditors gather sufficient, reliable, relevant, and useful information to support engagement results. Third-party confirmations, such as confirmation letters, are considered highly reliable because they come from independent sources.
The Practice Guide on Audit Evidence highlights that external confirmations provide strong evidence of the accuracy of the information being audited.

Answer : A

Question 7

If there is a significant error or omission in the final audit report that was communicated to management, which of the following is the key action for the internal audit activity?

ACommunicate the corrected information to the manager of the audited department.

BThere should be a follow-up audit to address the error or omission.

CThe auditor should update the scope of the audit to include the omission.

DThe corrected communication should be redistributed to the original recipients.
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 Reference:
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.

Answer : D

IIA-CIA-Part2 Practice of Internal Auditing Exam Practice Test