Free Practice Questions for IIA IIA-CIA-Part2 Exam

The International Standards for the Professional Practice of Internal Auditing encourage auditors to acknowledge satisfactory performance to provide a balanced report. However, it is not a mandatory requirement. Including positive observations can help foster a constructive relationship with management and provide a more balanced view of the audited area.References:

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.

An internal control questionnaire (ICQ) is a commonly used tool in the assessment of entity-level controls. It is a structured set of questions that auditors use to gather information about the controls in place within an organization. However, while this method can be efficient for gathering broad-based information, it has certain limitations, one of the most significant being that the information obtained can be repudiated.

Repudiation refers to the possibility that the information provided by respondents can be denied or questioned later. This is a key drawback because the responses in an ICQ are typically self-reported and may not be fully accurate or reliable. Respondents may either misunderstand the questions or provide answers that are overly optimistic, biased, or not fully truthful. This can compromise the reliability of the evidence gathered through this method.

IIA References:

According to IIA's International Professional Practices Framework (IPPF), particularly in the Implementation Guides that accompany the Standards, internal auditors are encouraged to use various techniques for gathering evidence to ensure the completeness, accuracy, and reliability of the information. The guide cautions that self-reported data, such as that obtained through questionnaires, should be corroborated with additional evidence.

IIA Standard 2310: Identifying Information states that internal auditors must identify sufficient, reliable, relevant, and useful information to achieve the engagement’s objectives. The limitations of the ICQ, particularly the risk of repudiation, directly relate to the reliability of the information obtained.

Additionally, the IIA’s Practice Guide on Evaluating Internal Controls suggests that while ICQs are useful in gaining an initial understanding of control environments, they should not be relied upon as the sole source of evidence. This emphasizes the need for corroborative evidence to address the risk of repudiation.

Given these considerations, the correct answer is A. Information obtained by this method can be repudiated because the self-reported nature of ICQs inherently carries the risk of repudiation, thus questioning the reliability of the control assessment finding

The CAE should discuss the concerns with the finance manager and work together to agree on the engagement objectives. This collaborative approach ensures that the engagement objectives are aligned with the finance manager's needs and expectations, and it allows the CAE to provide relevant and tailored assistance regarding the new management system for managing receivables.

A. Determine whether the purchasing department complies with policy by examining a random selection of purchase orders:Correct. Reviewing a random sample of purchase orders is a standard procedure for evaluating compliance with purchasing policies, such as approval requirements, vendor selection, and adherence to budget constraints.

B. Evaluate whether purchasing requests are properly approved by authorized staff by obtaining independent verification from the vendors:Vendor verification is not typically used to evaluate internal approvals as this information is available within the organization’s records.

C. Ascertain whether material receipts are recorded on a timely basis by reviewing physical inventory stock counts:Physical inventory reviews focus on inventory management and reconciliation, not specifically on the timeliness of receipts.

D. Determine whether prices charged for goods received are correct by reviewing the appropriate accounts payable record by vendor:While reviewing accounts payable records helps verify the accuracy of pricing, it does not directly evaluate the purchasing department’s adherence to procedures.

CIA Exam Syllabus Reference:

Domain V: Performing Internal Audit Services – Audit Engagement Objectives and Procedures.

Control Self-Assessment (CSA) is a process through which employees at various levels of an organization can participate in assessing the effectiveness of risk management and control processes. The direct benefits of CSA include allowing process owners to identify, evaluate, and recommend improvements for control deficiencies (Option B), improving the control environment (Option C), and increasing control consciousness (Option D). However, allowing management to have input into the audit plan (Option A) is not a direct benefit of CSA. This involvement is more related to audit planning and risk assessment rather than the CSA process itself. References:

The IIA’s Practice Guide on Control Self-Assessment.

A significant residual risk that would exceed the organization's acceptable risk level is likely to be one that has severe consequences, such as causing injuries or environmental pollution. These types of risks can have substantial legal, financial, and reputational impacts on an organization and are typically beyond acceptable levels of risk tolerance. References:

COSO’s Enterprise Risk Management – Integrating with Strategy and Performance.

The IIA’s Practice Guide on Risk Management.

The most likely reason the chief risk officer (CRO) chose the workshop approach is that it allows workshop participants to learn while contributing ideas toward the objectives. Workshops facilitate an interactive and collaborative environment where participants can share their insights and experiences. This approach helps in generating innovative solutions and fosters a sense of ownership among participants. It also enables participants to gain a better understanding of the issues at hand and the potential improvements that can be made. References: IIA Practice Guide – Facilitation and Collaboration Techniques, COSO Framework on Risk Management

When facilitating a risk and control self-assessment (RCSA) workshop, the internal auditor's most appropriate role is to provide the necessary techniques and guidelines for conducting the exercise. This involves guiding participants on the methodology and framework for identifying and assessing risks and controls without influencing their inputs or conclusions, thereby ensuring an objective and effective self-assessment process. References: = IIA Practice Guide: "Facilitation Skills for Auditors".

Internal control questionnaires are used to determine whether specific control procedures are in place within an organization. They help auditors identify the existence and implementation of controls designed to mitigate risks. These questionnaires can provide a preliminary understanding of the control environment and identify areas that may require further detailed testing.

Broad legislative reforms present the most critical external risk to an organization because they can fundamentally change the regulatory environment in which the organization operates. Such changes can impact compliance requirements, operational processes, and strategic planning. The organization must quickly adapt to remain compliant and avoid penalties or legal issues. This type of risk is external and largely uncontrollable, making it particularly critical compared to internal changes or new market entries.References:

Institute of Internal Auditors (IIA), International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2120 – Risk Management.