Free Practice Questions for IIA IIA-CIA-Part2 Exam

Analytical procedures involve evaluating financial and operational information by comparing it with expected values. These expectations can be based on historical data, industry benchmarks, budgets, or other relevant criteria. The primary purpose of analytical procedures is to identify any unusual or unexpected variations that could indicate potential issues or areas requiring further investigation.

IIA References:

IIA Standard 2320: Analysis and Evaluation requires internal auditors to analyze and evaluate the information gathered during an engagement. Analytical procedures are a critical part of this process, as they help auditors identify trends, anomalies, and areas of risk by comparing actual results with expectations.

The Practice Guide on Analytical Procedures defines these procedures as the analysis of relationships between different sets of data, with the goal of identifying inconsistencies or unexpected patterns.

If the chief audit executive (CAE) determines that management has chosen to accept a high-level risk that may be unacceptable to the organization, the CAE should first discuss the matter with senior management. If senior management does not address the concern, the CAE should escalate the issue to the board. This escalation process ensures that the highest levels of governance are aware of significant risks and can take appropriate action if necessary. It also aligns with the CAE's responsibility to ensure that risks are properly managed within the organization.References:

The Institute of Internal Auditors (IIA) - Standards for the Professional Practice of Internal Auditing, Standard 2600 - Communicating the Acceptance of Risks

A. ICQs are most useful in more organic, decentralized organizations with specialized departmental or regional characteristics:ICQs are standard tools and can be used in a variety of organizational structures, not just decentralized ones.

B. An ICQ can be used effectively either by sending it in advance for management of the area under review to complete or by testing each procedure and recording the results:Correct. ICQs are versatile tools that can be used for both self-assessment by management and as part of a detailed audit procedure.

C. An ICQ is not an efficient tool, as it can only inquire about controls and it does not test them:ICQs can test controls indirectly by revealing whether they are documented and applied properly.

D. ICQs are also known as checklist audits and encourage management of the area under review to answer "no" or "yes" more accurately:ICQs are not limited to a checklist format and their value goes beyond simple yes/no answers.

CIA Exam Syllabus Reference:

Domain V: Performing Internal Audit Services – Tools for Assessing Internal Controls.

The most effective step in helping the auditor determine whether fraud exists after observing a double payment transaction on a supplier invoice is to perform data analytics on the supplier's information, invoiced amounts, and payments performed. Data analytics allows the auditor to systematically analyze large volumes of transactions to identify patterns, anomalies, and potential fraudulent activities. This approach is more comprehensive and effective in uncovering fraud than simply extending the audit scope or switching to a fraud investigation engagement without a thorough initial analysis.

Management testimony of improper segregation of duties in the cash receipt process can be considered relevant. Relevant evidence directly relates to the matter being examined, which in this case is the proper segregation of duties in the cash receipt process. Testimony from management can provide insights and context that are pertinent to understanding and assessing this specific control issue.

The most important determinant of the objectives and scope of assurance engagements is the preliminary risk assessment performed by internal auditors. This assessment identifies the key risks that the engagement should address and ensures that the audit is focused on areas of highest risk and significance to the organization. While organizational charts, business objectives, and management requests are important inputs, the internal auditors' preliminary risk assessment ensures that the audit addresses the most critical areas. References:

The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 2210 - Engagement Objectives.

The IIA’s Practice Guide on Engagement Planning.

An internal auditor's primary role is to evaluate and improve the effectiveness of risk management, control, and governance processes. To test the reliability of a customer database, the auditor would focus on identifying potential issues that could affect the accuracy and completeness of the data. This involves reviewing records, reports, and conducting data analysis to identify anomalies, inconsistencies, or patterns that suggest problems with the data. This step directly assesses the reliability of the database, which is crucial for ensuring that the information is accurate and reliable.

According to MA (Management Accounting) guidance and internal auditing standards, when assessing the likelihood of fraud risk, internal auditors should consider historical data and patterns within the organization. Past fraud allegations and actual occurrences provide valuable insights into potential vulnerabilities and areas where controls might have previously failed. This historical perspective helps in evaluating the current fraud risk environment and in identifying areas that require stronger controls or more vigilant monitoring.

According to the IIA Standards, particularly Standard 2500 - Monitoring Progress, internal auditors are responsible for monitoring the disposition of results communicated to management. They need to assess whether management has taken appropriate action to address audit findings or has consciously accepted the risk of not taking action. The follow-up process is crucial to ensure that identified risks are managed effectively. References: = IIA’s Standard 2500 - Monitoring Progress and Practice Guide on Follow-up Processes.