IIA-IAP Exam Practice Test Instant Access

Question 1

Which of the following would be the best indicator that the organization's risk management processes are operating effectively?

AManagement openly discusses both risks and opportunities facing the organization.

BManagement established policies and procedures that state risk will be considered.

CThe organization implemented formal operational risk management processes.

Answer : A

Comprehensive and Detailed Step-by-Step Explanation:

Open Discussions of Risks and Opportunities: The best indicator of effective risk management is a culture where management actively identifies, evaluates, and discusses risks and opportunities, integrating them into decision-making processes.

Other Options:

Option B: Policies and procedures are a baseline requirement but do not alone indicate effectiveness.

Option C: Implementing risk management processes is important but does not confirm their operational effectiveness.

Thus, the correct answer is A.

Question 2

Which of the following is considered an organization-level control, as opposed to process-level or transaction-level?

APersonnel policies requiring the employment of competent personnel, based on training and experience, to manage complex functions such as accounting and financial reporting.

BSupervision of finance employees, including day-to-day oversight and periodic performance evaluations.

CSegregated budgeting responsibilities of finance employees, including review and approval of financial reports.

Answer : A

Comprehensive and Detailed Step-by-Step Explanation:

Organization-Level Controls: These controls address risks at the entity-wide level, such as governance, tone at the top, and policies affecting multiple processes. Personnel policies requiring qualified employees are an organization-level control as they apply broadly across the organization.

Other Options:

Option B: Supervision is a process-level control, as it directly relates to overseeing specific activities within a department.

Option C: Segregated budgeting responsibilities are a transaction-level control, focused on specific tasks within a process.

Thus, the correct answer is A.

Question 3

What is the primary purpose of a preliminary survey?

ATo develop a risk and control matrix for the process under review.

BTo gain an understanding of the process under review.

CTo determine why the engagement is being performed.

Answer : B

Comprehensive and Detailed Step-by-Step Explanation:

Preliminary Survey Purpose: The survey is conducted to gather sufficient information to understand the process, environment, and related risks. This understanding serves as a foundation for planning the engagement.

Other Options:

Option A: Developing a risk and control matrix is a subsequent step after understanding the process.

Option C: Determining the purpose of the engagement is established before conducting the survey.

Thus, the correct answer is B.

Question 4

An internal auditor was assigned to a payroll process audit engagement. At which stage of engagement planning would the auditor conduct a risk assessment?

AAfter allocating resources.

BAfter determining audit engagement objectives.

CAfter documenting the process.

Answer : C

Comprehensive and Detailed Step-by-Step Explanation:

Risk Assessment in Planning: Conducting a risk assessment typically follows documentation of the process, as understanding the process provides the necessary context for identifying and evaluating risks.

Other Options:

Option A: Resource allocation happens after risk assessment determines the scope and focus of the engagement.

Option B: Determining objectives usually occurs after assessing risks.

Thus, the correct answer is C.

Question 5

According to IIA guidance, which of the following is the primary criterion that should determine the extent of supervision required for an audit engagement?

AThe number of hours approved by the board for that engagement.

BThe proficiency of the internal auditors and the complexity of the engagement.

CWhether the engagement involves possible violations of laws and governmental regulations.

Answer : B

Comprehensive and Detailed Step-by-Step Explanation:

Extent of Supervision: The level of supervision required is determined by the auditors' proficiency (experience and skill set) and the complexity of the engagement. This ensures the work is executed effectively while maintaining compliance with IIA standards.

Other Options:

Option A: The number of hours approved is not a primary factor; it is more relevant to resource planning.

Option C: While regulatory violations may require heightened attention, they do not solely dictate supervision levels.

Thus, the correct answer is B.

Question 6

Which of the following best describes an audit engagement in which the objective is to appraise the economy of an oil shale mining process and the degree to which yearly production targets are being achieved?

ADue diligence

BBusiness process improvement

COperational

Answer : C

Comprehensive and Detailed Step-by-Step Explanation:

Operational Audit: This type of audit focuses on evaluating the efficiency, effectiveness, and economy of operations, such as the mining process and production targets in this case.

Other Options:

Option A: Due diligence typically relates to evaluating financial or operational risks in transactions, such as mergers or acquisitions.

Option B: Business process improvement aims to enhance workflows but is not the primary objective of this audit.

Thus, the correct answer is C. Operational.

Question 7

Management requested that the chief audit executive (CAE) include an audit of the organization's health and safety program in next year's annual audit plan. However, the internal audit activity has no expertise in this are

a. Which of the following would be the most appropriate actions for the CAE?

AWork with an internal subject matter expert to complete the audit.

BWith management's agreement, amend the audit scope so that specialized expertise is not needed.

CAccept the request, provided management has conducted a thorough risk assessment prior to the engagement to help guide the audit.

Answer : A

Comprehensive and Detailed Step-by-Step Explanation:

Reference to IIA Standards:

Standard 1210 - Proficiency: The internal audit activity must possess or obtain the knowledge, skills, and competencies needed to perform its responsibilities effectively.

If internal expertise is lacking, external resources or subject matter experts should be engaged.

Reasoning:

Option A is correct because collaborating with an internal expert ensures that the audit is performed competently while addressing the health and safety risks comprehensively.

Option B (amending the scope) avoids addressing critical risks, which may undermine the value of the audit.

Option C (relying on management's risk assessment) is inappropriate, as the internal audit function must independently evaluate the area.

Mitigating Lack of Expertise:

Leveraging subject matter experts ensures compliance with professional standards and the integrity of the audit process.

IIA-IAP Internal Audit Practitioner Exam Practice Test