IIA IIA Certifications IIA-CIA-PART2 Questions & Answers

• Question 401:

  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.

  I only

  B.

  II only

  C.

  III only

  D.

  I and II only

  Correct Answer: C

• Question 402:

  During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?

  A. Defective pricing.

  B. Cost mischarging.

  C. Fictitious vendor.

  D. Bid rotation.

  Correct Answer: B

• Question 403:

  Which of the following is the correct ratio to use in calculating the dollar value of the population if the auditor is using ratio estimation?

  Number of Items Audited Value Carrying Amount Sample $500,000 $480,000 Population 3,000 $5,000,000

  A. 0.10

  B. 0.96

  C. 1.04

  D. 10.00

  Correct Answer: C

• Question 404:

  To furnish useful and timely information and promote improvements in operations, internal auditors should provide:

  A. Senior management with reports that emphasize the operational details of defective conditions.

  B. Operating management with reports that emphasize general concerns and risks.

  C. Information in written form before it is discussed with the engagement client.

  D. Reports that meet the expectations of both operational and senior management.

  Correct Answer: D

• Question 405:

  An auditor evaluating excessive product rejection rates should investigate:

  I. Communication between sales and production departments on sales returns.

  II. Volume of product sales year-to-date in comparison to prior year-to-date.

  III. Changes in credit ratings of customers versus sales to those customers.

  IV.

  Detailed product scrap accounts and accumulations.

  A.

  I and III only

  B.

  I and IV only

  C.

  II, III, and IV only

  D.

  I, II, III, and IV.

  Correct Answer: B

• Question 406:

  Which of the following is a red flag associated with improper asset valuation?

  A. Unusual increase in gross margin.

  B. Unusual decrease in the number of days' purchases in inventory.

  C. Recurring positive cash flows from operations.

  D. Allowance for bad debts that is increasing in percentage terms.

  Correct Answer: A

• Question 407:

  Which of the following is a red flag associated with fictitious revenues?

  A. Slow growth or unusually low profitability.

  B. Unusual decrease in the number of days' sales in receivables.

  C. Substantial increase in receivables turnover.

  D. Significant transactions with related parties.

  Correct Answer: D

• Question 408:

  Which of the following is typically not a reason for committing financial statement fraud?

  A. To dispel negative market perception.

  B. To disguise a duplicate payment to a vendor.

  C. To obtain more favorable terms on financing.

  D. To receive performance-related bonuses.

  Correct Answer: B

• Question 409:

  What is the primary reason for having audit management approve audit engagement reports?

  A. To ensure that client concerns are appropriately addressed.

  B. To confirm proper format, grammar, and punctuation.

  C. To verify that senior management supports the report's conclusions.

  D. To validate that report findings are substantiated.

  Correct Answer: D

• Question 410:

  Which of the following best defines an audit opinion?

  A. A summary of the significant audit observations and recommendations.

  B. An auditor's evaluation of the effects of the observations and recommendations on the activities reviewed.

  C. A conclusion which must be included in the audit report.

  D. A recommendation for corrective action.

  Correct Answer: B