[Feb-2022] IIA-CIA-Part2 exam torrent IIA study guide
Use Valid New IIA-CIA-Part2 Test Notes & IIA-CIA-Part2 Valid Exam Guide
IIA IIA-CIA-Part2 Exam Syllabus Topics:
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NEW QUESTION 247
Which of the following statements is correct regarding the assessment of risk in the annual audit planning process?
1. Activities requested by management should be considered higher risk than those requested by the audit committee.
2. Activities with lower budgets can be as high risk as those with higher budgets.
3. The potential financial or adverse exposure should always be considered in the assessment of risk.
- A. 2 only
- B. 1 only
- C. 3 only
- D. 2 and 3 only
Answer: D
NEW QUESTION 248
Which of the following statements is not true about the oversight and review of working papers by the chief audit executive (CAE)?
- A. The CAE, although having overall responsibility for reviewing work completed, can delegate such task to appropriately experienced internal audit staff.
- B. The CAE has ultimate responsibility for reviewing working papers and remains accountable for the achievement of objectives and the quality of work.
- C. The need for CAE review depends on the proficiency and experience of the internal auditor and the complexity of the task.
- D. The CAE is responsible for all significant professional judgments made during the audit process and should therefore personally review working papers to ensure conclusions were professionally arrived at.
Answer: D
NEW QUESTION 249
A retail company uses a computer program that matches electronic vendor invoices with the applicable purchase orders and receiving information, which are also maintained electronically.
If an invoice does not match the other items within predefined ranges, a report is generated and sent to the accounts payable department for further investigation. All of the applicable documents are electronically marked, cross-referenced, and retained in open files. Both an integrated test facility and a systems control audit review file (SCARF) have been included in the system.
An auditor wants to determine the extent to which items are not matched at year end and to investigate the potential causes of the unmatched items. Which of the following audit procedures would be most effective in determining the items to investigate?
- A. Use the SCARF to identify unusual items. Select an attributes sample and trace to the underlying documentation.
- B. Use generalized audit software to read the electronically marked unmatched items.
- C. Submit test data to identify attributes of unmatched items. Follow up by investigating the identified attributes.
- D. Use generalized audit software to read the purchase orders and trace to applicable receiving and vendor invoice files.
Answer: B
NEW QUESTION 250
The chief audit executive's responsibility regarding control processes includes:
- A. Overseeing the establishment of internal control processes.
- B. Assisting senior management and the audit committee in the development of an annual assessment about internal control.
- C. Maintaining the organization's governance processes.
- D. Ensuring that the internal audit activity assesses all control processes annually.
Answer: B
Explanation:
Section: Volume C
NEW QUESTION 251
An internal auditor is conducting a financial audit. Which of the following audit procedures is most appropriate when existing internal controls are weak?
- A. Test of control.
- B. Test of design.
- C. Analytical procedures.
- D. Detail testing.
Answer: D
NEW QUESTION 252
An internal auditor recommended that an organization implement computerized controls in its sales system in order to prevent sales representatives from executing contracts in excess of their delegated authority levels. A follow-up review found that the sales system had not been modified, but a process had been implemented to obtain written approval by the vice president of sales for all contracts in excess of $1 million. The chief audit executive (CAE) would be justified in reporting this situation to the organization's board iF.
I.In the opinion of the CAE, the level of residual risk assumed by senior management is too high.
II.
Testing of compliance with the new process finds that all new contracts in excess of $1 million have been approved by the vice president of sales.
III.
The cost of modifying the sales system to include a preventive control is less than $100,000.
- A. I only.
- B. I and III only.
- C. III only.
- D. I, II, and III.
Answer: A
NEW QUESTION 253
Which two of the following considerations must an internal auditor take into account while planning an audit of an accounting system/application that has been in use for the last five
years?
The level and manner of linkages between the business' mission, objectives, and structure and the accounting system/application.
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Presence or absence of computerized and manual controls that address risks.
Identification of risks at the application level, e.g. availability and security of the
system.
Testing of the system/application for bugs and errors.
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- A. 2 and 3 only.
- B. 3 and 4 only.
- C. 1 and 3 only.
- D. 2 and 4 only.
Answer: A
NEW QUESTION 254
What would be used to determine the collectability of accounts receivable balances?
- A. The file of related shipping documents.
- B. Negative accounts receivable confirmations.
- C. Positive accounts receivable confirmations.
- D. An aged accounts receivable listing.
Answer: D
NEW QUESTION 255
While investigating a compromised Web server, an auditor found that the Web server logs had been deleted. The auditor should recommend that the Web server logs be:
- A. Generated and maintained on a separate secure server.
- B. Accessible by administrative users only
- C. Encrypted to ensure that the logs cannot be deleted.
- D. Restored automatically to the Web server from backup files.
Answer: A
NEW QUESTION 256
Due to the expanded role of internal audit in the organization, the chief audit executive (CAE) of a construction company decides to employ the services of an outsourced audit service provider to augment the internal audit staff. What does the CAE need to consider in determining whether the outsourced audit service provider possesses the necessary knowledge, skills and other competencies to perform an audit engagement?
- A. The extent of other ongoing services the external service provider may be performing for the organization.
- B. The reputation of the external service provider.
- C. Specific matters expected to be covered in the engagement communications.
- D. The financial interest that the external service provider may have in the organization.
Answer: B
NEW QUESTION 257
An audit engagement objective at a manufacturer is to determine the quality of raw materials purchased. Which of the following actions would best enable an internal auditor to satisfy this objective?
- A. Analyze the percentage of scrap incurred during production.
- B. Evaluate the volume and characteristics of products rejected during processing.
- C. Analyze the provision for sales allowances.
- D. Research the rationale for customer returns.
Answer: B
NEW QUESTION 258
If management expects 100 percent compliance with a procedure, which of the following sampling approaches would be most appropriate?
- A. Discovery sampling.
- B. Attributes sampling.
- C. Variables sampling.
- D. Targeted sampling.
Answer: A
NEW QUESTION 259
Which of The following best describes a risk that is deemed "unacceptable" to the organization?
- 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
Answer: D
NEW QUESTION 260
Checklists used to assess audit risk have been criticized for all of the following reasons except:
- A. Providing a false sense of security that all relevant factors are addressed.
- B. Inappropriately implying equal weight to each item on the checklist.
- C. Being incapable of translating the experience or sound reasoning intended to be captured by each item on the checklist.
- D. Decreasing the uniformity of data acquisition.
Answer: D
NEW QUESTION 261
A large investment organization hired a chief risk officer (CRO) to be responsible for the organization's risk management processes. Which of the following people should prioritize risks to be used for the audit plan?
- A. The CRO, because he is responsible for coordinating and project managing risk activities based on his specialized skills and knowledge.
- B. Operational management, because they are responsible for the day-to-day management of the operational risks.
- C. The CEO, because he has ultimate responsibility for ensuring that risks are managed within the agreed tolerance limits set by the board.
- D. The chief audit executive, although he is not accountable for risk management in the organization.
Answer: D
NEW QUESTION 262
A governmental auditor was assigned to determine reasons why the students in one region scored significantly higher on education evaluation tests than did the students in another region. Previous research showed that there is a direct correlation between public financial support and student results. Which of the following is most likely to explain the difference in the regional results?
- A. The more successful region has increased educational spending by an average of 10 percent each year for the last three years, whereas the other region's increase averaged only three percent.
- B. The more successful region spends more money per student on education than does the other region.
- C. The more successful region spends 30 percent more money on education than does the other region.
- D. A higher percentage of the general tax fund is spent on education in the more successful region than in the other region.
Answer: B
NEW QUESTION 263
A staff auditor, nearly finished with an audit engagement, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing engagement and there is pressure to complete the current engagement. The auditor notes the problem and forwards the information to the chief audit executive but performs no further follow-up. The auditor's actions would:
I. Be in violation of the IIA Code of Ethics for withholding meaningful information.
II. Be in violation of the Standards because the auditor did not properly follow up on a red flag that might indicate the existence of fraud.
III. Not be in violation of either the IIA Code of Ethics or Standards.
- A. II only
- B. I only
- C. III only
- D. I and II only
Answer: C
Explanation:
Section: Volume C
NEW QUESTION 264
An internal audit activity is participating in the due diligence work for an acquisition that a
company is considering. One engagement objective is to determine if the acquisition's accounts payable contain all outstanding liabilities. Which of the following audit procedures would not be relevant for this objective?
- A. Trace receiving reports issued before the period end to the related vendor invoices and accounts payable list.
- B. Select a sample of accounts payable from the accounts payable list and verify the supporting receiving reports, purchase orders, and invoices.
- C. Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.
- D. Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.
Answer: B
NEW QUESTION 265
Which of the following is typically not a reason for committing financial statement fraud?
- A. To disguise a duplicate payment to a vendor.
- B. To receive performance-related bonuses.
- C. To obtain more favorable terms on financing.
- D. To dispel negative market perception.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION 266
Which of the following would provide the best audit evidence regarding the effectiveness of an applied research department?
- A. Develop a cost-per-product analysis for products developed over the past five years.
- B. Compare research as a percentage of revenue between this company and all major competitors in the same industry.
- C. Develop a report on revenue generated by or cost savings directly attributable to newly developed products.
- D. Compare the number of this year's new product developments to the number of new product developments for the past five years.
Answer: C
NEW QUESTION 267
According to IIA guidance, which of the following should be considered when creating policies and procedures for the internal audit activity (IAA)?
- A. Number of auditors, structure of the IAA, and audit staff skills and competencies.
- B. Number of auditors, complexity of audit activities, and audit staff skills and competencies.
- C. Complexity of audit activities, structure of the IAA, and audit staff skills and competencies.
- D. Number of auditors, complexity of audit activities, and structure of the IAA.
Answer: D
Explanation:
Section: Volume C
NEW QUESTION 268
An internal auditor has been asked to participate in an advisory capacity to assist a committee in redesigning the organization's current financial reports to provide better information to management and the board. Which of the following actions on the part of the auditor would provide the greatest value to this project?
- A. The internal auditor interviews each stakeholder and documents the requirements and preferences of each and creates a report template that meets as many of the requirements and preferences as possible.
- B. The internal auditor gathers the stakeholder group and holds a brainstorming session where they generate report requirements and preferences and then rank them in order of importance.
- C. The internal auditor has a set of generic report templates from a former project and presents them to the group because they worked so well for the previous employer.
- D. The internal auditor undertakes a project to gather report templates and formats from other organizations in the same line of business and presents them all to the group for review.
Answer: B
Explanation:
Section: Volume D
NEW QUESTION 269
The chief audit executive (CAE) decided that based on management's oral response, the action taken on an audit observation for a minor improvement in the client's process is sufficient and no further follow-up is necessary. Which of the following would be the best statement regarding the action of the CAE?
- A. The CAE action is acceptable as long as the follow-up is sufficient when weighed against the relative importance of the recommendation.
- B. The CAE action is not acceptable, as follow-up on the issue is critical until a written response is obtained from management.
- C. The CAE action is not acceptable, as a follow-up audit is needed to ensure that action is really taken by management.
- D. The CAE action is acceptable as long as the issue has been escalated to the board to get their position on the issue.
Answer: A
NEW QUESTION 270
A company used simple regression analysis to analyze maintenance costs against machine hours (MH) for a 26-week period when the plant was in full operation. The regression yielded the following estimated cost function:
Maintenance Cost = $60 + $0.25/MH
The regression analysis also generated a coefficient of determination (R2), or goodness of fit, of
0.85. Which of the following statements regarding this regression analysis is appropriate?
- A. The $0.25 component is the slope coefficient of the cost estimate and represents the average variable maintenance cost per machine hour.
- B. This regression can be used to determine the maintenance cost for any period at any activity level by substituting the machine hours in the equation.
- C. The $60 component represents the best estimate of fixed maintenance costs for the company in a shutdown situation.
- D. The coefficient of determination of R2 = 0.85 indicates that the goodness of fit is poor because the value is close to the maximum value of one.
Answer: A
NEW QUESTION 271
Questions used to interrogate individuals suspected of fraud should:
- A. Adhere to a predetermined order.
- B. Direct the individual to a desired answer.
- C. Cover more than one subject or topic.
- D. Move from general to specific.
Answer: D
Explanation:
Section: Volume B
Explanation/Reference:
NEW QUESTION 272
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