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IIA-CIA-Part2: Practice of Internal Auditing exam is one of the most sought-after certifications by individuals looking for a career in internal auditing. Practice of Internal Auditing certification is offered by the Institute of Internal Auditors (IIA), a global organization that provides professional development, guidance, and certification to internal auditors worldwide. The IIA-CIA-Part2 exam is designed to test the candidate's knowledge, skills, and abilities in the practice of internal auditing.
IIA-CIA-Part2 Exam is a rigorous and comprehensive exam that tests candidates' knowledge and expertise in the practice of internal auditing. Passing IIA-CIA-Part2 exam is an important step for internal auditors who want to demonstrate their professional competence and advance their careers in the field.
NEW QUESTION # 35
Upon completing a follow-up audit engagement, the chief audit executive (CAE) noted that management has not implemented any mitigation measures to address the high risks that were reported in the initial audit report. What initial step must the CAE take to address this situation?
- A. Report the situation to the external auditors.
- B. Communicate the issue to senior management.
- C. Discuss the issue with members of management responsible for the risk area.
- D. Escalate the issue to the board.
Answer: C
Explanation:
The initial step the CAE should take is to discuss the issue with the members of management responsible for the risk area. This discussion allows the CAE to understand the reasons for the lack of action, provide an opportunity for management to explain their position, and encourage them to implement the necessary mitigation measures. If this discussion does not lead to satisfactory action, the CAE would then escalate the issue to senior management or the board as appropriate.
Reference:
The Institute of Internal Auditors (IIA), International Standards for the Professional Practice of Internal Auditing (Standards)
"Internal Auditing: Assurance and Advisory Services" by Urton L. Anderson et al.
NEW QUESTION # 36
An internal auditor compares real-time gasoline production data to corresponding final gasoline production reports and finds minor but consistent daily discrepancies. If the auditor is concerned about theft, which of the following next steps is most consistent with IIA guidance?
- A. Contact security personnel as evidence suggests gasoline is being stolen from production premises.
- B. Review the processes used to collect the production data and to compile the final production reports.
- C. Reconcile online data and the final production reports to gasoline sales reports.
- D. Confront the production manager and ask her to explain the differences between real-time and reported data.
Answer: B
NEW QUESTION # 37
A manufacturer is under contract to produce and deliver a number of aircraft to a major airline. As part of the contract, the manufacturer is also providing training to the airline's pilots. At the time of the audit, the delivery of the aircraft had fallen substantially behind schedule while the training had already been completed. If half of the aircraft under contract have been delivered, which of the following should the internal auditor expect to be accounted for in the general ledger?
- A. All completed training costs, and the cost of actual production hours completed to date.
- B. All completed training costs, and 50% of the contracted production costs.
- C. Training costs allocated to the number of aircraft delivered, and the cost of actual production hours completed to date.
- D. Training costs allocated to the number of aircraft delivered, and 50% of contracted production costs.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION # 38
Which of the following would be an appropriate role of the internal audit function?
- A. Establish the ethics policies for the organization.
- B. Be responsible for the management of a whistle blowing hotline.
- C. Evaluate the effectiveness of the organization's ethics-related activities.
- D. Determine the consequences for ethics violations.
Answer: C
Explanation:
Section: Volume D
NEW QUESTION # 39
Which of the following is not a primary purpose for conducting a walk-through during the initial stages of an assurance engagement?
- A. To identify residual risks.
- B. To help develop process maps.
- C. To test the adequacy of controls.
- D. To determine segregation of duties.
Answer: C
Explanation:
The primary purposes of a walk-through during the initial stages of an assurance engagement are to help develop process maps (A), determine segregation of duties (B), and identify residual risks (C). Testing the adequacy of controls (D) is generally performed after these initial steps to ensure a thorough understanding of the process and risks involved. References: = IIA Standard 2201 - Planning Considerations and IIA Practice Guide: "Walkthroughs for Internal Auditors".
NEW QUESTION # 40
An organization contracted a third party to construct a new facility that was estimated to cost $25 million. Which of the following is the most pertinent reason for the organization to audit the contractor's records?
- A. The contractor has subcontracted much of the work.
- B. The contractor will be paid on a cost-plus basis.
- C. The estimated cost is high.
- D. The contract includes a right-to-audit clause.
Answer: B
Explanation:
Section: Volume B
NEW QUESTION # 41
The chief executive officer has requested that the chief audit executive (CAE) coordinate the establishment of an enterprise risk management (ERM) program for the organization. Which of the following would be the most appropriate action for the CAE?
- A. Accept the request after consulting with the board and adhering to proper safeguards.
- B. Accept the request as the role of coordinating ERM is a core function of internal audit.
- C. Decline the request as internal audit has limited knowledge and experience of risk at the enterprise level to undertake the assignment.
- D. Decline the request as this role compromises the CAE's objectivity.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION # 42
A chief audit executive (CAE) is determining which engagements to include on the annual audit plan. She would like to consider the organization's attitude toward risk and the degree of difficulty in achieving objectives.
Which of the following resources should the CAE consult?
- A. The strategic plan.
- B. Internal and external audit reports.
- C. The board's meeting records.
- D. The corporate risk register.
Answer: A
Explanation:
Section: Volume E
NEW QUESTION # 43
Which of the following would be the least important reason for a company to merge with another company?
- A. To diversify risk.
- B. To reduce labor costs.
- C. To increase stock prices.
- D. As a response to new government policy.
Answer: C
Explanation:
Section: Volume B
NEW QUESTION # 44
An audit identified a number of weaknesses in the configuration of a critical client/server system. Although some of the weaknesses were corrected prior to the issuance of the audit report, correction of the rest will require between 6 and 18 months for completion. Consequently, management has developed a detailed action plan, with anticipated completion dates, for addressing the weaknesses. What is the most appropriate course of action for the chief audit executive to take?
- A. Assess the effectiveness of corrections by reviewing statistics related to unplanned system outages, and denials of service.
- B. Assess the status of corrective action during a follow-up audit engagement after the action plan has been completed.
- C. Evaluate the ability of the action plan to correct the weaknesses and monitor key dates and deliverables.
- D. Reassign information systems auditors to assist in implementing management's action plan.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION # 45
An internal auditor observes a double payment transaction on a supplier invoice during an accounts payable engagement Which of the following steps would be the most effective in helping the auditor determine whether fraud exists?
- A. Perform data analytics on the supplier's information, invoiced amounts, and payments performed
- B. Review the poor year's transaction volume and amounts paid compared to the poor year's budget
- C. Extend the audit scope and perform additional testing of controls on other related areas
- D. Switch the existing assurance engagement into a fraud investigation engagement
Answer: A
NEW QUESTION # 46
Which of the following statements regarding the use of external contracted services by the chief audit executive (CAE) is false?
- A. The audit report should not disclose the use of contracted services.
- B. The CAE's responsibility is not impaired by engaging an external expert.
- C. The external expert could have a prior relationship with the audit client.
- D. The expert should be directed by the objectives and scope of work.
Answer: A
NEW QUESTION # 47
An internal auditor develops an engagement observation related to an organization's accumulation of large travel advances. The auditor observes that the organization's procedures do not require justification for travel advances greater than a specific amount Which of the following best describes the organization's procedures?
- A. A consequence of the organization's accumulation of large travel advances
- B. A condition of the organization's accumulation of large travel advances
- C. A criterion of the organization's accumulation of large travel advances
- D. A cause of the organization's accumulation of large travel advances
Answer: D
Explanation:
The best description of the organization's procedures in this context is that they represent a cause of the organization's accumulation of large travel advances. The lack of a requirement for justification for travel advances greater than a specific amount is a procedural gap that directly contributes to the accumulation of large travel advances. This gap in the procedure is the root cause that leads to the observed condition of large travel advances accumulating without sufficient oversight or justification.
Reference: IIA's International Standards for the Professional Practice of Internal Auditing, Standard 2310 - Identifying Information, and related practice advisories on root cause analysis in audit observations.
NEW QUESTION # 48
An auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation.
The primary deficiency with the above process is that:
- A. The engagement program was incomplete.
- B. Using a questionnaire precludes the auditor from documenting other information.
- C. The auditor failed to consider the importance of the information offered.
- D. A questionnaire was used in a situation where a structured interview should have been used.
Answer: C
Explanation:
Topic 2, Volume B
NEW QUESTION # 49
An organization has developed a large database that tracks employees, employee benefits,
payroll deductions, job classifications, and other similar information. The internal auditor reviews the retirement benefits plan and determines that the pension and medical benefits have been changed several times in the past ten years. The auditor wishes to determine whether there is justification to perform further audit investigation. The most appropriate audit procedure would be to:
- A. Review the trend of overall retirement expense over the last ten years. If the retirement expense increased, it would indicate the need for further investigation.
- B. Use generalized audit software to select a monetary-unit sample of retirement pay, and determine whether each retired employee was paid correctly.
- C. Use generalized audit software to select an attributes sample of retirement pay, and perform detailed testing to determine whether each person chosen was given the proper benefits.
- D. Review reasonableness of retirement pay and medical expenses on a per-person basis stratified by which plan was in effect when the employee retired.
Answer: D
NEW QUESTION # 50
Which of the following has the greatest effect on the efficiency of an audit?
- A. The complexity of deficiency findings.
- B. The method and amount of supporting detail used for the audit report.
- C. The adequacy of preliminary survey information.
- D. The organization and content of workpapers.
Answer: C
NEW QUESTION # 51
An auditor is scheduled to audit payroll controls for a company which has recently outsourced its processing to an information service bureau. What action should the auditor take, considering the outsourcing decision?
- A. Review only the controls over payments to the service bureau based on the contract.
- B. Review the controls over payroll in both the company and the service bureau.
- C. Review only the company's controls over data sent to and received from the service bureau.
- D. Cancel the engagement because the processing is being performed outside of the organization.
Answer: B
NEW QUESTION # 52
A corporate merger decision prompts the cruel audit executive (CAE) to propose interim changes lo the existing annual audit plan to account for emerging risks. When of the following is the most appropriate action for the CAE to take regarding the changes made to the audit plan?
- A. Communicate with the CCO and present the revised audit plan to the board for approval
- B. Present the revised audit plan directly to the CEO for approval
- C. Present the revised audit plan directly to the board for approval
- D. Communicate with the chief financial officer and present the revised audit plan to the CEO for approval
Answer: C
Explanation:
According to the International Standards for the Professional Practice of Internal Auditing (Standards) issued by The Institute of Internal Auditors (IIA), the Chief Audit Executive (CAE) must communicate and obtain approval from the board for significant changes to the audit plan. A corporate merger is a significant event that introduces emerging risks, necessitating an interim adjustment to the audit plan. The CAE's responsibility includes ensuring that the board is informed and approves the revised audit plan to address these new risks adequately.
Reference:
The Institute of Internal Auditors (IIA) Standard 2020 - Communication and Approval: "The chief audit executive must communicate the internal audit activity's plans and resource requirements, including significant interim changes, to senior management and the board for review and approval."
NEW QUESTION # 53
'Internal policy prohibits employees from entering into contacts with financial obligations without proper approval.
A project manager signed a change to an important service agreement without obtaining the proper approval As a result the organization is receiving $5,000 per month less for its services.'' Which of the following should be added to the observation?
- A. A description of what constitutes proper approval
- B. Details regarding when the change to the agreement was signed
- C. The annual impact of the changed agreement on cash flows
- D. The reason for not following the internal policy
Answer: C
Explanation:
Including the annual impact of the changed agreement on cash flows in the observation provides a clear quantification of the financial effect of the policy violation. This information is critical for understanding the significance of the issue and for decision-making regarding corrective actions. It shows the long-term implications of the unauthorized contract change, which is essential for management and the board to assess the severity of the non-compliance and its impact on the organization's financial health.References:
* The Institute of Internal Auditors (IIA) - Practice Guide: Formulating and Expressing Internal Audit Opinions
NEW QUESTION # 54
The internal audit activity can be involved with systems development continuously, immediately prior to implementation, after implementation, or not at all. An advantage of continuous internal audit involvement compared to the other types of involvement is that:
- A. The threat of lack of audit independence can be minimized.
- B. There are clearly defined points at which to issue audit comments.
- C. Redesign costs can be minimized.
- D. The cost of audit involvement can be minimized.
Answer: C
Explanation:
Section: Volume B
NEW QUESTION # 55
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To qualify for the IIA-CIA-Part2 exam, candidates must meet certain eligibility criteria, including having a minimum of two years of internal auditing or related experience. They must also have completed the IIA-CIA-Part1 exam, which covers the essentials of internal auditing. The IIA-CIA-Part2 exam consists of 100 multiple-choice questions that must be completed within two and a half hours. Candidates who pass the exam will earn the CIA certification, demonstrating their expertise in the practice of internal auditing. Practice of Internal Auditing certification is highly regarded by employers and can lead to career advancement opportunities within the internal auditing profession.
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