IIA-CIA-Part2 Exam Practice Test Instant Access

Question 1

An internal auditor selects a sample of paid invoices and matches them to receiving reports. What is the most likely purpose for this procedure?

ATo ensure all customer shipments are billed appropriately.

BTo ensure invoices are only paid for goods received.

CTo ensure all liabilities have been satisfied.

DTo ensure invoices are only paid for goods ordered.

Answer : B

Matching invoices to receiving reports ensures the organization only pays for goods it has actually received, addressing completeness and accuracy in financial transactions. This procedure aligns with the COSO Internal Control Framework's principles regarding transaction processing and control activities. It mitigates risks of paying for unordered or unreceived goods, a common source of errors and potential fraud in the accounts payable process. The IIA's CIA Part 2 syllabus emphasizes testing of key controls in financial systems, including those preventing overpayments (Section II: Audit Engagements).

Question 2

While reviewing warehouse inventory records, an internal auditor noticed that the warehouse has a surprisingly high number of products in storage. Over the past three years, the auditor had visited this particular warehouse numerous times for previous engagements and remembered that the warehouse was rather small. The auditor then decided to compare the square footage of the warehouse to the recorded number of products in storage. The auditor's action is an example of which of the following?

APerforming a reasonableness test.

BConducting a fraud investigation.

CConducting trend analysis.

DOperating with impaired objectivity.

Answer : A

A reasonableness test involves comparing data against logical expectations or constraints to identify anomalies. In this case, the comparison of warehouse size to inventory levels represents a reasonableness test. Conducting a fraud investigation (Option B) would require stronger evidence of wrongdoing. Trend analysis (Option C) examines patterns over time, which is not the auditor's approach here. Option D is irrelevant, as the auditor's actions do not impair objectivity.

Question 3

The chief audit executive (CAE) of an organization has completed this year's risk-based audit plan and realized that current staff resources are insufficient to meet the needs of the plan. What course of action should the CAE take?

AAmend the audit plan so that available audit resources are adequate to meet the plan's requirements.

BInform the board and senior management of the resources needed, as well as the associated risks.

CCommunicate early to those unit managers whose areas would most likely not be able to get reviewed.

DGet approval from human resources regarding overtime payment to be made in an effort to complete the audit plan.

Answer : B

Per IIA Standard 2020: Communication and Approval, the CAE must inform senior management and the board if the audit plan cannot be executed as approved due to resource constraints. This allows senior leaders to decide whether to provide additional resources or adjust the plan. Option A would bypass the necessary approval process. Option C shifts responsibility without addressing the root issue, while Option D may not adequately resolve resource constraints.

Question 4

During a previous audit engagement, an internal auditor recommended that management implement a whistleblowing process. During follow-up, the auditor discovered that the process has been outsourced. Which of the following is the most appropriate response for the internal auditor?

AInsist on establishing an internal whistleblowing process, as originally recommended, because this is a key control.

BReview the agreement with the third-party service provider and ensure that appropriate controls are in place.

CRaise the issue to a higher level of management, as outsourcing the process was not previously discussed or agreed upon.

DTake no action, as management has accepted the risk of moving to a third party for this whistleblowing process.

Answer : B

Outsourcing the whistleblowing process is acceptable if proper controls are established to maintain confidentiality and effectiveness. IIA Standard 2600 requires auditors to monitor the implementation of recommendations and assess changes. Reviewing the third-party agreement ensures compliance with the original recommendation's intent. Insisting on an internal process (Option A) or escalating the issue (Option C) may not be necessary if outsourcing meets objectives. Taking no action (Option D) overlooks the auditor's responsibility for follow-up.

Question 5

Which of the following would offer the strongest evidence to support the internal auditor's conclusion that a product is in stock, as stated in the accounting records?

AThe auditor performs an observation.

BThe vendor provides third-party confirmation.

CThe auditor documents interviews with multiple warehouse personnel.

DWarehouse management submits photographs of the product on the inventory shelf.

Answer : A

Direct observation by the auditor provides the strongest and most reliable evidence of inventory existence, per IIA Standard 2310: Identifying Information. Observational evidence is primary and directly verifiable, whereas third-party confirmations (Option B) or photographs (Option D) may be manipulated. Interviews with personnel (Option C) provide insight but lack objectivity and reliability compared to physical observation. This aligns with the CIA syllabus emphasis on collecting sufficient and appropriate audit evidence (Part 2: Section II).

Question 6

What information would be most useful to an internal auditor who is attempting to identify specific processes to include in the scope of an assurance engagement?

ARecent organizationwide recognition awards given to employees within the area.

BThe timing of the most recent audit of the area.

CManagement's presentation to the board regarding recent area achievements.

DRecent area performance indicators against productivity metrics.

Answer : D

When identifying specific processes to include in the scope of an assurance engagement, the most useful information for an internal auditor is recent area performance indicators against productivity metrics. This data helps the auditor identify areas with potential risks or inefficiencies that might warrant further examination.

Detailed Explanation:

IIA Standard 2200 -- Engagement Planning:

This standard requires auditors to develop a plan for each engagement, including objectives and scope, based on a thorough understanding of the area under review. Performance indicators provide valuable insights into areas that may not be meeting productivity or efficiency targets.

Use of Performance Indicators:

Performance indicators allow the auditor to identify processes that may be underperforming or where there may be significant variances from expected outcomes. This helps in focusing the audit on areas with the greatest potential for improvement or risk.

IIA Practice Advisory 2201-2:

The advisory suggests that auditors should consider using performance data, such as productivity metrics, to determine where to focus their audit efforts. This data-driven approach ensures that the audit is relevant and adds value.

Why Not Other Options?

Option A (Recognition awards): Awards do not provide insight into risks or underperformance that might require audit attention.

Option B (Timing of the last audit): While useful, the timing alone does not indicate current risks or issues.

Option C (Management's presentation): This may provide some insights, but it is often more narrative and less data-driven than performance indicators.

Conclusion: Option D is correct because recent performance indicators against productivity metrics provide the most relevant information for identifying processes to include in the scope of an assurance engagement, ensuring that the audit is focused on areas of significant risk or opportunity for improvement, in line with IIA standards.

Question 7

What is the primary reason that audit supervision includes approval of the engagement report?

ATo ensure the objectives of the area under review are met.

BTo ensure senior management supports the report's conclusions.

CTo ensure report style and grammar are appropriate.

DTo ensure report findings are substantiated.

Answer : D

The primary reason for audit supervision to include the approval of the engagement report is to ensure that the findings and conclusions presented in the report are substantiated by adequate and appropriate evidence. This is critical for maintaining the credibility and reliability of the audit function.

Detailed Explanation:

IIA Standard 2340 -- Engagement Supervision:

This standard requires that engagements be properly supervised to ensure that objectives are achieved, audit work is performed according to appropriate standards, and that the results are supported by sufficient, reliable, and relevant evidence.

Substantiation of Findings:

Approval of the engagement report by the supervisor ensures that the findings and conclusions are not only accurate but also supported by documented evidence. This substantiation is essential for the report to be credible and for the audit to fulfill its purpose.

IIA Practice Advisory 2340-1:

The advisory emphasizes the role of supervisors in reviewing and approving the engagement report to ensure that all findings are well-founded and appropriately supported by the audit evidence.

Why Not Other Options?

Option A (Ensure objectives are met): While meeting objectives is important, the primary focus of report approval is to ensure that the findings are substantiated.

Option B (Ensure senior management support): Support from management is necessary, but it should be based on a report that is well-supported by evidence.

Option C (Ensure style and grammar): Style and grammar are secondary considerations; the primary focus should be on the accuracy and substantiation of findings.

Conclusion: Option D is correct because the primary reason for the supervisor's approval of the engagement report is to ensure that the findings are substantiated by evidence, ensuring the credibility and reliability of the audit report, in line with IIA standards.

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