IIA IIA Certifications IIA-CIA-PART1 Questions & Answers

• Question 391:

  The chief commodity trader for a large energy company learns from a friend that a competitor will likely fail its upcoming regulatory audit and will be forced to temporarily decrease production. If the information is true, the trader has short-term opportunities to make trades that will financially benefit the trader's company and will lead to a substantial increase in the trader's performance bonus. However, if the information is not true, making the trades will significantly increase the company's risk of being caught in a long position. From an ethical perspective, which of the following would be the most appropriate course of action for the trader to take?

  A. Make the trade because the company and the trader will both benefit.

  B. Have another trader on staff make the trade in order to avoid a conflict of interest.

  C. Disclose the information to the risk oversight committee but proceed with the trade to capitalize on the opportunity.

  D. Defer the decision to management and risk the loss of the trading opportunity.

  Correct Answer: D

• Question 392:

  Which of the following elements should an auditor recommend for inclusion in an organization's code of ethics?

  I. Ethics should vary with local customs in the organization's foreign operations.

  II. Whistle-blowing should be discouraged because it can cause distrust among employees and false accusations which waste organizational resources on investigations.

  III.

  Ethical behavior should not be incorporated into performance evaluations because it is too subjective and controversial.

  A.

  I only

  B.

  II only

  C.

  I, II, and III.

  D.

  None of the above.

  Correct Answer: D

• Question 393:

  Which of the following statements is correct regarding corporate compensation systems and related bonuses?

  I. A bonus system should be considered part of the control environment of an organization and should be considered in formulating a report on internal control.

  II. Compensation systems are not part of an organization's control system and should not be reported as such.

  III.

  An audit of an organization's compensation system should be performed independently of an audit of the control system over other functions that impact corporate bonuses.

  A.

  I only

  B.

  II only

  C.

  III only

  D.

  II and III only

  Correct Answer: A

• Question 394:

  The primary reason that a chief audit executive (CAE) reviews external audit management letters and management response is to:

  A. Select areas to emphasize in future internal audit engagements.

  B. Check the effectiveness of external audit resources used.

  C. Ensure that comments in the letter are supported by evidence.

  D. Verify that there has been no duplication of internal audit work.

  Correct Answer: A

• Question 395:

  Management should be included in the development of the audit plan in order to:

  A. Provide assurance that past audit recommendations have been properly implemented.

  B. Select the audit tests that will be used for each engagement.

  C. Verify that the highest risks are included in the risk-based audit plan.

  D. Guarantee access to the organization's sites and records for audit work.

  Correct Answer: C

• Question 396:

  Which of the following processes should be included in a benchmarking activity?

  I. Identify key measures.

  II. Collect data on performances and practices.

  III.

  Identify opportunities for improvement.

  A.

  II only

  B.

  I and III only

  C.

  II and III only

  D.

  I, II, and III.

  Correct Answer: D

• Question 397:

  The chief audit executive (CAE) routinely provides activity reports to the board during quarterly board meetings. Senior management has asked to review the CAE's board presentation before each board meeting so that any issues or questions can be discussed beforehand. The CAE should:

  A. Provide the activity reports to senior management as requested and discuss any issues that may require action to be taken.

  B. Not provide activity reports to senior management because such matters are the sole province of the board.

  C. Disclose only those matters in the activity reports that pertain to expenditures and financial budgets of the internal audit activity.

  D. Provide information to senior management that pertains only to completed audit engagements and observations available in published engagement final communications.

  Correct Answer: A

• Question 398:

  In a well-developed management environment, the internal audit activity would.

  A. Report the results of audit engagements to line management as well as to senior management.

  B. Conduct regularly scheduled audits of existing systems and initial audits of new computer systems after they have begun operating.

  C. Interface primarily with senior management, minimizing interactions with line managers who are the subjects of internal audit work.

  D. Focus on the maintenance of accounting controls (such as segregation of the duties of authorization, recording, and custody) and report results to the audit committee.

  Correct Answer: A

• Question 399:

  Which of the following is a key performance indicator for an internal audit function?

  A. Audit expenditures compared to financial budgets.

  B. Percent of required continuing education hours completed.

  C. Implementation of new audit computer software.

  D. Frequency of meetings with the board members.

  Correct Answer: B

• Question 400:

  In order to effectively handle conflict between audit team members, an audit team leader should:

  A. Avoid addressing the conflict until the leader is sure that there is a problem.

  B. Be assertive and keep the team members focused on a resolution.

  C. Ask one of the team members to resolve the issue by being more conciliatory.

  D. Transfer one of the team members to another assignment.

  Correct Answer: B