CIA P1 (Section I)

Part 1 (3-Part) : CIA P1 (Section I) Question 1 - CIA 1194 3.14 - Charter, Independence & Objectivity In some cultures and organizations, managers insist that the internal auditing activity (IAA) is not needed to provide a critical assessment of the organization's operations. A management attitude such as this will most probably have an adverse affect on the internal auditing department's: A. Charter. B. Policies and procedures. C. Performance appraisals. D. Operating budget variance. CIAA Question 2 - CIA 1194 I.49 - Charter, Independence & Objectivity Internal auditors must be objective in performing their work. Assume that the chief audit executive (CAE) received an annual bonus as part of that individual's compensation package. The bonus may impair the CAE's objectivity if A. The bonus is based on monetary amounts recovered or recommended future savings as a result of engagements. B. The scope of internal auditing work is evaluating control rather than account balances. C. The bonus is administered by the board of directors or its salary administration committee. D. All of the answers are correct. Question 3 - CIA 598 1.54 - Charter, Independence & Objectivity Which of the following actions would be a violation of auditor independence? A. Reviewing a purchasing agent's contract drafts prior to their execution. B. Reducing the scope of an audit due to budget restrictions. C. Continuing on an audit assignment at a division for which the auditor will soon be responsible as the result of a promotion. D. Participating on a task force which recommends standards for control of a new distribution system. Question 4 - CMA 682 3.17 - Introduction to Internal Auditing From a modern internal auditing perspective, which one of the following statements represents the most important benefit of an internal auditing activity to management? A. Assurance that published financial statements are correct. B. Assurance that there is reasonable control over day-to-day operations. C. Assurance that the organization is complying with legal requirements. D. Assurance that fraudulent activities will be detected. Question 5 - CIA 1190 II.45 - Ethics Internal auditors should be prudent in their relationships with persons and organizations external to their employers. Which of the following activities will most likely not adversely affect internal auditors’ ethical behavior? (c) HOCK international, page 1 Part 1 (3-Part) : CIA P1 (Section I) A. Serving as consultants to suppliers. B. Serving as consultants to competitor organizations. C. Accepting compensation from professional organizations for consulting work. D. Discussing engagement plans or results with external parties. Question 6 - CIA 598 2.45 - Quality Assurance & Improvement Program Which of the following is the best means of determining if an internal audit activity's goals are being met? A. Having the external auditors review and evaluate the work of the department. B. Scheduling an outside peer review of the department every three years. C. Developing measurement criteria to accompany departmental goals. D. Having the audit committee periodically review the quality of the department’s work. Question 7 - CIA 1195 I.47 - Charter, Independence & Objectivity Management has requested the internal audit activity to perform an engagement to recommend procedures and policies for improving management control over the telephone marketing operations of a major division. The chief audit executive should A. Accept the engagement, but indicate to management that, because recommending controls impairs independence, future engagements in the area will be impaired. B. Not accept the engagement because internal audit activities are presumed to have expertise regarding accounting controls, not marketing controls. C. Not accept the engagement because recommending controls would impair future objectivity regarding this operation. D. Accept the engagement because objectivity will not be impaired. Question 8 - CIA 595 I.60 - Charter, Independence & Objectivity It has been established that an internal auditing charter is one of the more important factors positively affecting the internal auditing department's independence. Which of the following would not be an important element to include in the Charter? A. The length of tenure for the chief audit executive. B. The scope of internal auditing activities. C. The departmennt's access to personnel within the organization. D. The department's access to records within the organization. Question 9 - CIA 1195 I.18 - Proficiency & Due Professional Care Use of outside service providers with expertise in health care benefits is appropriate when the internal audit activity is A. Comparing the cost of the organization's health care program with other programs offered in the industry. B. Training its staff to conduct an audit of health care costs in a major division of the organization. C. Evaluating the organization's estimate of its liability for postretirement benefits, which include health care benefits. D. All of the answers are correct. (c) HOCK international, page 2 fb .c om /c ia ao ffi ci al The establishment of the internal audit activity is documented in the bylaws. D. 6. 4. Because cash operations is a high-risk area.Charter. Question 12 .CIA 1194 I. B. Country X has legislated internal auditing requirements.44 .CIA 1194 1. (c) HOCK international. The company has adopted the IIA Code as a part of the corporate ethical code. Among the allegations against the auditors were the following: 1. The internal auditor acted with due professional care because an appropriate statistical sample of material transactions was tested. The CAE is to be a certified internal auditor. C.52 . Auditor 1 owns stock in the employer company. Question 11 . A buyer accepted a kickback of $500 to give bid amounts to a supplier to enable that supplier to bid the contract.CIA 590 I. Auditor 2 received an item of value from a local nonprofit organization of purchasing agents for whom he gave a speech. Auditor 2 shared audit techniques with auditors from another company while attending a professional meeting.Ethics A company with a whistleblowing hotline has received an anonymous tip that three senior internal auditors are in violation of the IIA Code of Ethics. B. Country X has legislated internal auditing requirements for government-owned organizations. Auditor 1 has a part-time job outside of office hours as a visiting professor at a local community college. A review of the working papers indicated that the fraudulent transaction was not included in a properly designed statistical sample of transactions tested. The organization changed the bylaws to reflect the establishment of the internal audit activity. 8. D. Auditor 2 received an item of value from a customer of the employer. Auditor 3 received royalties from a publisher for authoring a professional book on internal auditing. Independence & Objectivity A medium-sized publicly owned organization operating in Country X has grown to a size that the governing authority believes warrants the establishment of an internal audit activity. 5. page 3 . The CAE will report to the audit committee. Extraordinary care is necessary in the performance of a cash operations engagement. 100% testing of transactions should have been performed. 3.Part 1 (3-Part) : CIA P1 (Section I) Question 10 . Auditor 1 told his next-door neighbor to start looking for a new job because an audit of the executive office indicated that the neighbor's division was going to be closed down in about six months.56 . Which of the following applies to this situation? A. The governing authority decided that the chief audit executive (CAE) must be a certified internal auditor and will report directly to the newly established audit committee.Proficiency & Due Professional Care The chief audit executive (CAE) is concerned that a recently disclosed fraud was not uncovered during the last engagement to evaluate cash operations. Auditor 2 has a part-time job as president of a local charitable organization. Which of the items discussed above will contribute the most to the new CAE's independence? A. 2. C. 9. Auditor 2 omitted this information from the audit report since the contract amount was not material to the financial statements. Fraud should not have gone undetected in a recently reviewed area. and the internal auditor should be held responsible for the oversight. 7. Independence & Objectivity An element of authority that should be included in the charter of the internal audit activity (IAA) is A. Independence & Objectivity om /c ia ao ffi ci al .CIA 1190 II. C.c Question 14 . B. III only. One. Access to records. Which of the following activities is not presumed to impair the objectivity of an internal auditor? I. Auditor 3 received an item of value from a fellow employee in the same company whose department has never been audited and whose department is not scheduled to be audited in the foreseeable future. Performing reviews of procedures for a new computer application before it is installed A. Due professional care includes A. The supervisor was the auditors friend and neighbor who had a hospitalized child requiring him to miss work off and on for several weeks. 11. page 4 fb . Identification of the types of disclosures that should be made to the audit committee. D. B. and his real estate firm recently received a commission from the employer company. C. personnel. D. B.Proficiency & Due Professional Care An internal auditor should exercise due professional care in performing engagements. and physical properties relevant to the performance of engagements.CIA 1193 I. Two.CIA 597 I. Question 15 . I and III. I only. Three. Auditor 3 has a part-time job as a real estate broker. D. Question 13 . D. II only. Auditor 3 did not include in an audit report that the bottlenecks in a shipping department were caused by the absence of the supervisor. C.Part 1 (3-Part) : CIA P1 (Section I) 10. Drafting procedures for running a new computer application to ensure that proper controls are installed III. C.Charter. Recommending standards of control for a new information system application II.49 . B. Identification of the organizational units where engagements are to be performed. Establishing suitable criteria of education and experience for filling internal auditing positions. Accumulating sufficient information so that the internal auditor can give absolute assurance that irregularities do not exist.3 . Establishing direct communication between the chief audit executive and the board of directors. None.Charter. (c) HOCK international. 12. Evaluating established operating standards and determining whether those standards are acceptable and are being met. How many of the allegations about Auditor 1 represent violations of the IIA Code of Ethics? A.62 . Access to the external auditor's engagement records. C.CIA 598 3. Question 18 . Mission statement of the audit committee. Purpose statement within applicable audit reports.CIA 589 I. Question 17 .3 .Charter. D.Part 1 (3-Part) : CIA P1 (Section I) Question 16 . Until a reasonable period of time has elapsed. Safeguard resources entrusted to the organization.Charter. Engagement memo issued prior to each audit assignment.9 . The internal audit department's responsibility to perform follow-up activities as required should be defined in the A. B. Until after the next annual review by the external auditors. Directing the implementation of the redesigned process. B. Independence & Objectivity Follow-up activity may be required to ensure that corrective action has taken place for certain findings. B.Introduction to Internal Auditing A major reason for establishing an internal audit activity (IAA) is to A. Developing audit plans for the new system. Independence & Objectivity An internal auditor who had been supervisor of the accounts payable section should not perform an assurance review of that section A.60 . Evaluate and improve the effectiveness of control processes.CIA 580 I. D. Ensure the reliability and integrity of financial and operational information. Internal auditing department's written charter.CIA 581 I. D. Question 19 . Until it is clear that the new supervisor has assumed the responsibilities. Because there is no way to measure a reasonable period of time in which to establish independence.Charter.CIA 596 1.Introduction to Internal Auditing One of the purposes of the International Standards for the Professional Practice of Internal Auditing as stated in the Introduction to the current version of the Standards is to (c) HOCK international.8 . C. Recommending areas for consideration. Question 20 . B. Determining whether the process has senior management’s support.5 . Relieve overburdened management of the responsibility for establishing effective controls. C. page 5 . D. C. Independence & Objectivity An internal auditor’s involvement in reengineering should include all of the following except: A. The best way to achieve independence is through A. Exercise of due professional care. Organizational status and objectivity. An internal auditor audited an area for which they will be responsible for in the near future.Charter.47 . and responsibility enhances its A. Encourage external auditors to make more extensive use of the work of internal auditors. D. C. Marketing techniques.Charter. D. Under what situations would objectivity not be perceived impaired? A. Internal auditing procedures and techniques. Independence. B.Charter. page 6 fb . Supervision within the organization. Question 24 . An internal auditor was given a small token of appreciation from a client after the completion of an audit. An internal auditor accepted a sizable gift from a client after the successful completion of an audit. C. B. C. Encourage the professionalization of internal auditing.CIA 592 I. Independence & Objectivity Independence permits internal auditors to render impartial and unbiased judgments. D. authority. Relationship with management. (c) HOCK international. D. Independence & Objectivity Individual objectivity is vital for internal auditors to conduct their work.Proficiency & Due Professional Care An understanding is required of internal auditors with respect to which discipline? A. B. Management principles. Individual knowledge and skills.2 . Accounting principles and techniques. B.70 .Part 1 (3-Part) : CIA P1 (Section I) A. Proficiency. Question 22 . Question 23 . Question 21 .c om /c ia ao ffi ci al . An internal auditor designs some control procedures for an engagement client. C.CIA 594 I. Establish the basis for evaluating internal auditing performance.9 . C. Establish the independence of the internal audit activity and emphasize the objectivity of internal auditing. B.CIA QZP1A. Independence & Objectivity A written charter approved by the board that formally defines the internal audit activity's purpose. Organizational knowledge and skills. D.CIA 1194 I. The ability to conduct training sessions in quantitative methods. D. Question 28 .Proficiency & Due Professional Care Internal auditors should possess all of the following except A.CIA 592 II. to the board. D. C. B.Introduction to Internal Auditing The primary objective of internal auditing is to: A.CIA 1196 III.Charter.A . Communicated to management stating that the limitation will not be accepted because it would impair the internal audit activity's independence. Should be sufficient to permit the accomplishment of its responsibilities. Independence & Objectivity The organizational status of the internal audit activity A.Charter. They typically consist of a group of five to fifteen employees who meet regularly. To tap the creative problem-solving potential of every employee. Is guaranteed when the charter specifically defines its independence. Question 27 .Part 1 (3-Part) : CIA P1 (Section I) Question 25 . Proficiency in applying internal auditing standards. page 7 . (c) HOCK international. D. Provide an opinion about the accuracy and completeness of the quarterly financial statements.1. Find errors and fraud within the company. D.3 . To improve communications between employees and managers by providing a formal communication channel. and financial budget. B. Is best when the reporting relationship is direct to the board of directors. The nature of the scope limitation should be A. To improve the quality of leadership in the organization. Question 29 . C. Requires the board's annual approval of the engagement work schedule.5 . Help the employees of the company to effectively perform their jobs. Question 26 . but the engagement should be carried out as scheduled and the scope limitation worked around.54 .CIA 593 II. Communicated.Quality Assurance & Improvement Program Quality control circles are now used all over the world. Communicated to the external auditors so they can investigate the area in more detail. staffing plan. if possible. preferably in writing. C. Independence & Objectivity The internal auditing activity encounters a scope limitation from senior management that will affect its ability to meet its goals and objectives for a potential engagement client. Perform the preliminary work of external financial statement audit. B.27 . B.CIA 595 I. B. The primary goal of these circles is A. Noted in the engagement working papers. To allow for the emergence of team leaders who can be targeted for further leadership development. C. Keeping external and internal auditing work separated to maintain independence.Ethics A primary purpose for establishing a code of conduct within a professional organization is to A. C.3 .CIA 1193 I.Purpose. B. Since cash operations are a high-risk area. Viewing internal auditing as a transient profession -. Gain familiarity with systems for use in subsequent reviews. Authority & Responsibility Which of the following actions is an appropriate response by organizations wishing to improve the public's perception of their financial reporting? A.a stepping stone to managerial positions. page 8 fb . ao ffi ci al The major reason for the internal auditor's involvement in information system development is for the internal auditor to . Increased adoption of audit committees composed of independent non-executive directors. B. D. Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization. D. Requiring internal auditors to report all significant observations of illegal activity to the chief executive officer. Help minimize the cost and development time for new systems. D. Question 33 . (c) HOCK international. An understanding of management principles.27 . Help assure that systems have adequate control procedures. The audit was performed with due professional care since an appropriate statistical sample of material transactions was tested. B. D. Fraud should not have gone undetected in a recently audited area. C. Ensure that all members of the profession perform at approximately the same level of competence.CIA 591 II.Proficiency & Due Professional Care If a review of the working papers of the last audit of cash operations revealed that a recently discovered fraudulent transaction was not included in a properly designed statistical sample of transactions tested. a test of all transactions should have been performed. Propose enhancements for subsequent development and implementation. Question 30 .CIA 598 2. Independence & Objectivity Question 32 .45 . C. Extraordinary care is required in the performance of a cash operations audit and the auditor should be held responsible for the oversight.35 .CIA 1191 I. B.Part 1 (3-Part) : CIA P1 (Section I) C. The ability to maintain good interpersonal relations. Promote an ethical culture among professionals who serve others.Charter. which of the following is a valid conclusion? A. Reduce the likelihood that members of the profession will be sued for substandard work.c om /c ia A. C. Question 31 . D. Introduction to Internal Auditing The internal auditing profession is believed to have advanced primarily as a consequence of A. Question 37 . May lose independence by being perceived as making operational decisions. C. Question 38 .Charter.Introduction to Internal Auditing Auditing standards state that "reports may include recommendations for potential improvements. The IIA’s Code of Ethics. Increased complexity and sophistication of business operations. Assign more experienced personnel to the engagement. D. C. page 9 . The criteria of education and experience considered necessary when filling vacant positions on the audit staff. B. The International Standards for the Professional Practice of Internal Auditing.18 . the chief audit executive (CAE) should A. None of the above. B. . Job qualification specifications that include added emphasis on background knowledge and skills. Question 35 . Increased interest by graduating students and experienced auditors. D. Both the International Standards for the Professional Practice of Internal Auditing and The IIA’s Code of Ethics. you should consider all of the following factors except: A.CIA 598 1. In assessing the independence of the internal audit department being reviewed. D.CIA 594 1. Does not have sufficient time to formulate a recommendation due to audit budget pressures. (c) HOCK international.CIA 594 1. D. Independence & Objectivity You have been asked to be a member of a peer review team. Delay the audit until the scope limitation is removed.6 . Independence & Objectivity When faced with an imposed scope limitation.Part 1 (3-Part) : CIA P1 (Section I) Question 34 . C. Access to and frequency of communications with the board of directors or its audit committee.Charter. B.CIA 584 I. B. Communicate the potential effects of the scope limitation to the audit committee of the board of directors.44 . The limitation of the external audit's scope. C. B. . Can avoid the confrontation by letting management solve its own problems. Question 36 .Ethics Internal auditors who fail to maintain their proficiency through continuing education could be found to be in violation of A. The scope and depth of audit objectives for the audits included in the review. Increase the frequency of auditing the activity in question. C.1 . The degree to which auditors assume operating responsibilities. May not always understand the true cause of the finding being reported." Which of the following would be a valid justification for omitting recommendations in an audit report? The auditor A.69 .CIA 589 I. . D. B. Under which of the following conditions would this arrangement be appropriate? I. A.Proficiency & Due Professional Care What is the most appropriate solution to resolve staff communication problems with engagement clients? A. Question 40 . page 10 fb CIAA . D. Neither I nor II. I only. The senior internal auditor is skilled in the area and closely supervises the staff internal auditor.CIA 1195 I. C. Provide staff with sufficient training to enhance communication skills. II only.Proficiency & Due Professional Care A new staff internal auditor's first assignment is to review the cash management operations of the organization.c om /c ia ao ffi ci al . C. Avoid unnecessary communication with engagement clients.CIA 591 II.13 . The staff internal auditor has no background in cash management.48 .Part 1 (3-Part) : CIA P1 (Section I) Question 39 . D. Discuss communication problems with staff auditors. The staff internal auditor performs the work and prepares an engagement communication that is reviewed in detail by the chief audit executive. (c) HOCK international. Meet with engagement clients to resolve communication problems. Both I and II. B. II. Internal audit activities cannot assure compliance with legal requirements.CIA 1194 3.54 . Internal audit activities cannot assure that published financial statements are correct. Independence & Objectivity A. Question 4 . D. An auditor may review contracts prior to their execution.CMA 682 3. designing.Part 1 (3-Part) : CIA P1 (Section I) Question 1 . In this type of situation. D. An operating budget variance report is a control device used to monitor actual performance versus budget.CIA 1194 I. management is highly averse to analysis or possible criticism of their actions and will not grant the internal auditors an adequate charter. Question 3 . Objectivity would be impaired if compensation is based on monetary amounts recovered. C. or recommendations for future savings as a result of engagements. as well as risk management and governance. (c) HOCK international. B.Charter. Independence & Objectivity A. installing. An auditor who has been promoted to an operating department should not continue on an audit of the new department. Question 2 . page 11 . Policies and procedures of the internal audit activity (IAA) are developed by the internal audit department and should not be affected by non-audit management. Budget restrictions do not constitute a violation of an auditor's independence. Only compensation based on monetary amounts recovered. An unbiased evaluation of audit staff would not be affected by lack of cooperation on the part of non-audit management. B. or operating such systems might impair objectivity. or recommendations for future savings would be considered impairment to objectivity. but favorable variances could also occur if many audits were cut short due to scope impairments. The scope of the auditing work is to evaluate control processes. Internal audit activities can assist the management of a company in its responsibility of maintaining effective controls by evaluating the effectiveness of those controls with the goal of continuous improvement. Management foot-dragging could cause unfavorable variances.Charter. B. C. However. It is presumed that a bonus based on either of these could unduly influence the judgment of the CAE.14 . Independence & Objectivity A. C. D.17 . B.CIA 598 1. C. The board of directors should administer the CAE's compensation package.Charter.Introduction to Internal Auditing A. The Standards states that an auditor may recommend standards of control for new systems.49 . B. Accepting compensation from professional organizations for consulting work is not likely to impair.47 . Question 6 . installs. B. Independence & Objectivity .Quality Assurance & Improvement Program A. Serving as consultants to suppliers might create a conflict of interest. The charter defines the scope of internal audit activities. The engagement should be accepted because the IAA is to evaluate the adequacy and effectiveness of controls. B.60 .Part 1 (3-Part) : CIA P1 (Section I) D. Rule of Conduct 3. page 12 fb Question 7 .CIA 1190 II. Question 8 . day-to-day management is required. This is not timely enough. The CAE may use these criteria on a timely basis to monitor goal accomplishment.CIA 595 I. .Charter. C. A. The auditor's objectivity is considered to be impaired if the auditor designs. ci al B. D.CIA 598 2. or operates such systems (PA 1120-1). The charter does not specify the length of tenure of the chief audit executive. Question 5 .CIA 1195 I.1 states that internal auditors shall be prudent in the use and protection of information in the course of their duties. day-to-day management is required. The charter authorizes access to personnel within the organization. The engagement should be accepted because recommending procedures and policies are not considered impairment to objectivity. (c) HOCK international.45 .c om /c ia D. ao ffi C. C. The charter authorizes the internal audit activity's access to records within the organization.Charter.Ethics A. D. drafts procedures for. This would get the audit committee too involved with the day-to-day management of the department. C. This is not timely enough.45 . The CAE should accept the engagement because recommending procedures and policies are not considered impairment to objectivity. Serving as consultants to competitor organizations might create a conflict of interest. Independence & Objectivity A. The engagement should be accepted because recommending controls will not impair independence and objectivity. or be presumed to impair the internal auditors’ professional judgment. D. Internal audit activities cannot assure that fraudulent activities will be detected. CIA 1194 1. Being a CIA does not ensure organizational independence.Part 1 (3-Part) : CIA P1 (Section I) Question 9 . not absolute. The internal auditor is not able to give 100% absolute assurance that fraud will not go undetected. C. Due to the complexity of calculating health care costs an outside consulting service may be required to assist the internal auditor perform all or some of the engagement. Thus. Reviewing all transactions is not required and in most cases. Country X requiring internal auditing will not promote independence. telling the neighbor about the plant closing would be considered a violation of the (c) HOCK international. and the internal auditor may not possess all of the necessary knowledge or skills to adequately complete the engagement.Proficiency & Due Professional Care A. Reporting to the audit committee will enhance the CAE's independence. In this case. The internal auditor is only able to give reasonable assurances.Charter. due care was applied because the internal auditor used appropriate sampling methods. The internal auditor should not be held responsible for the oversight since appropriate sampling methods were used.52 . not feasible.CIA 590 I. D. C.44 . page 13 .2 states that internal auditors shall not use information for any personal gain or in any manner that would be contrary to the law or detrimental to the legitimate and ethical objectives of the organization.Proficiency & Due Professional Care A. B. Due to the complexity of calculating health care costs an outside consulting service may be required to assist the internal auditor perform all or some of the engagement.Ethics A. Question 11 . Question 12 .18 . Telling the neighbor about a plant closing is the only violation of the IIA Code of Ethics. it would be appropriate to employ an outside consulting service company who has the necessary skills to perform all or some of the engagement. Independence & Objectivity A.CIA 1195 I. D. Calculating health care benefits can be very complex. D. B. B. The CAE should report to a level within the organization that allows the IAA to fulfill its responsibilities.CIA 1194 I. Question 10 . B.56 . Rule of Conduct 3. C. Due to the complexity of calculating health care costs an outside consulting service may be required to assist the internal auditor perform all or some of the engagement. The establishment of the IAA being documented in the bylaws will do little to enhance the CAE's independence. In this case. CIA 1190 II. Exercising due professional care has to do with the internal auditor considering the adequacy and effectiveness of risk management. Independence & Objectivity ci al . Question 15 .3 .CIA 1193 I. Establishing suitable criteria of education and experience for filling internal auditing positions has to do with proficiency.CIA 598 3. Question 16 . Question 13 .49 . Also. Telling the neighbor about a plant closing is the only violation of the IIA Code of Ethics. /c ia A. Evaluating established operating standards and determining whether those standards are acceptable and are being met is exercising due professional care. Drafting procedures for running a new computer application system would be considered impairment to objectivity. D. C. Disclosures made to the audit committee are a responsibility of the internal audit activity. D. D. C. installs. control. C.Charter. drafts procedures for. . and governance processes. B.CIA 597 I.c om B. Independence & Objectivity (c) HOCK international. not an element of authority.Charter. Reviewing procedures is not considered impairment to objectivity.62 . D. This situation has to do with maintaining the independence of the IAA. not with exercising due professional care. Final approval of the internal audit charter resides with the board. Recommending standards of control and reviewing procedures are not considered impairments to objectivity for new systems. Internal auditors are not able to give absolute assurance that irregularities do not exist. page 14 fb C. not due professional care.8 . The auditor's objectivity is considered to be impaired if the auditor designs. The charter should establish the internal audit activity's position within the organization.Charter.Proficiency & Due Professional Care A. not the charter. Access to the external auditors engagement records will depend on the external auditor. Recommending standards of control is not presumed to impair objectivity. authorizes access to records. The charter will not specifically identify the subjects of the engagements. personnel. B. reviewing procedures is also not considered to impair objectivity. Independence & Objectivity A. and physical properties relevant to the performance of engagements. ao ffi Question 14 .Part 1 (3-Part) : CIA P1 (Section I) confidentiality code. or operates such systems (PA 1120-1). Telling the neighbor about a plant closing is the only violation of the IIA Code of Ethics. and defines the scope of internal audit activities. Question 19 . but the definition should be first contained in the departmental charter. Independence & Objectivity A. (c) HOCK international. D. C.Introduction to Internal Auditing A. B. The internal auditing activity "helps an organization accomplish it objectives by bringing systematic. B.CIA 581 I. Management is still responsible for establishing the organization's controls. B. This is the major reason for establishing the internal audit activity. the IAA should not be assigned to audit those activities they previously performed or for which they had management responsibility until at least one year has elapsed.5 . Management needs to ensure the reliability and integrity of financial and operational information. Internal auditors should perform this service. or temporarily engaged by. Therefore. It is assumed that the supervisor would immediately take over the department's responsibilities.Charter. D.A1-1). The external audit review will not have any bearing on the restoration of the internal auditor's objectivity. C." B. Question 17 . Question 18 . and additional consideration should be exercised when supervising the engagement work and communicating engagement results (PA 1130. D. This would impair their independence and objectivity. and governance processes. This memo may contain a statement about responsibility for follow-up. disciplined approach to evaluate and improve the effectiveness of risk management. D. Follow-up authority and responsibility may be cited in applicable audit reports. Responsibility for follow-up should be defined in the internal auditing department's written charter.3 . Internal auditors should perform this service.Charter. Management is responsible to safeguard the organization's resources. C.CIA 596 1. page 15 .60 . Internal auditors should perform this service. Independence & Objectivity A. Follow-up is not specified in the content of the audit committee's mission statement. Independence is maintained if a reasonable period of time (at least one year) has elapsed. but such a statement should be based on the wording and authority of the departmental charter. Internal auditors should not become directly involved in the implementation of the redesigned process. control. Such assignments are presumed to impair objectivity.CIA 589 I. a reasonable period of time would not have elapsed.Part 1 (3-Part) : CIA P1 (Section I) A. C. Persons transferred to. D. and physical properties relevant to the performance of engagements. (3) Establish the basis for evaluating internal auditing performance.Charter. and responsibility. but supervision will not ensure that independence is maintained. Objectivity is considered to be impaired if the auditor designs. the Standards are intended to: (1) State basic principles for the practice of internal auditing. and defines the scope of internal audit activities. authorizes access to records. According to the IIA. but not ensure independence of the IAA. skill and other competencies possessed by the internal auditor.CIA 592 I. C. authority. C. Supervision of the IAA will ensure objectives are achieved. C. (c) HOCK international. Independence and objectivity are aspects of the internal audit activity. Independence of the IAA is promoted through organizational status and objectivity. The charter will not enhance the internal auditor's relationship with management. The acceptance of a gift or money from a client will impair objectivity of the auditor. page 16 fb .CIA 580 I. installs. B.Part 1 (3-Part) : CIA P1 (Section I) Question 20 .Introduction to Internal Auditing A. Accepting a small token after the completion of an audit would not impair objectivity.9 . The professionalization of internal auditing is important. C.CIA 594 I. Question 21 . Proficiency deals with the knowledge.CIA QZP1A. Independence & Objectivity om /c ia ao D. Objectivity is assumed to be impaired if the auditor performs an assurance review of an activity for which they will be responsible for in the near future. B. or drafts procedures for. Question 23 . and (4) Improve organizational processes and operations. Independence & Objectivity A. personnel. but not one of the purposes of the Standards. The internal audit charter establishes the IAA's position within the organization.Charter. and staff is developed.Charter.2 .70 . or operates such systems. The charter defines the IAA's purpose. B.c Question 22 . (2) Provide a framework for performing and promoting value added internal audit activities. but it is not one of the purposes of the Standards. The exercise of due professional care deals with work performed. B. D. Independence & Objectivity A. ffi ci al . This is not one of the purposes of the Standards. quality is assured.9 . Organizational knowledge and skills promotes professional proficiency within the organization. A. or a proficiency in marketing techniques. and increased employee commitment. B. B. The IAA should be independent. D. and be able to carry out the research necessary to arrive at reasonable solutions (PA 1210-1).Charter. The charter outlines the reporting structure. not independence. B. Senior management will approve the IIA's work schedule. Quality control circles are used because it offers management opportunity to tap the creative problem-solving potential of the employees. Question 27 . D. staffing plan.Proficiency & Due Professional Care A. B.CIA 595 I. (c) HOCK international. Improving communication between employees and managers can be a consequence of the quality control circles. to recognize significant deviations. It would be required to have a proficiency in internal auditing procedures and techniques. not an understanding. or an appreciation. C.47 . Question 24 . Independence & Objectivity A.Charter. Conflicts with management should be communicated to the board.CIA 1194 I. The upside to quality control circles is the potential to lower costs. and financial budget.Quality Assurance & Improvement Program A.3 . D. It is only required to have an appreciation of accounting principles and techniques. Identifying potential candidates for further leadership development can be a consequence of the quality control circles. Question 26 . The board will play a support and oversight role. An understanding means the ability to apply broad knowledge to situations likely to be encountered.CIA 593 II. Individual knowledge and skills promotes professional proficiency. Internal auditors generally do not need to have an understanding. page 17 . Independence & Objectivity A. improved employer-employee relations. Question 25 .CIA 1196 III. The IAA will still need to report to management. Ideally. Improving the quality of leadership is not the primary goal of quality control circles. An understanding of management principles is required to recognize and evaluate the materially and significance of deviations from good business practices.Part 1 (3-Part) : CIA P1 (Section I) D. and internal auditors must be objective in performing their work. C. but it does not guarantee independence.54 . C. the CAE should administratively report to the CEO. There is no requirement for a scope limitation to be communicated to the external auditor.27 . B. not a function of the IAA. If employees can more effectively perform their jobs then there is greater chance that the goals and objectives of the company will be realized. Independence & Objectivity A.CIA 592 II. objective assurance and consulting activity designed to add value and improve an organization's operation.CIA 1191 I. Internal auditing is an independent.1.A . which would require a high degree of proficiency. C. Proposing enhancements for subsequent development and implementation would be considered managerial responsibilities. D. Internal auditors cannot give absolute assurance that noncompliance or irregularities do not exist.Part 1 (3-Part) : CIA P1 (Section I) C. not have the ability to conduct training sessions. Due professional care requires the auditor to conduct examinations and verifications to a reasonable extent. om B.c C. A proficiency in applying internal auditing standards would be a requirement. page 18 fb . The internal auditor can assist the external audit. A scope limitation must be communicated to the board. The external auditor will form an opinion on the accuracy and completeness of the quarterly financial statements. A scope limitation along with its potential effect must be communicated preferably in writing. D. Due professional care implies reasonable care and competence. D. Question 30 .Introduction to Internal Auditing A. Question 28 . The internal auditing function would be evaluate and assess controls so errors and fraud can be minimized. Question 31 .27 . ffi ci Question 29 . not the internal auditor. but this is not the primary objective of internal auditing. (c) HOCK international. The internal auditor would be required to have an understanding of management principles. not infallibility.Proficiency & Due Professional Care al . C. but does not require detailed audits of all transactions. not infallibility or extraordinary performance. Due care implies reasonable care and competence. /c ia ao A.CIA 598 2. or other appropriate governing authority. D. B. The internal auditor would need to have the ability to maintain good interpersonal relations.35 . audit committee. The internal auditor is required only to have an appreciation of quantitative methods.5 .Proficiency & Due Professional Care A. to the board.Charter. Question 32 . Gaining familiarity with the system would not be a primary reason to be involved in the system development. The scope limitation and its potential effects should be communicated to the audit committee of the board of directors. Although. reduced lawsuits might result from establishing a code of conduct. objective assurance and consulting activity designed to add value and improve operations. Question 34 . Helping to minimize costs and development time would be not be considered a primary reason to be involved in the system development. C.Purpose. Internal auditors should report illegal activities to the audit committee.Part 1 (3-Part) : CIA P1 (Section I) B. Responsibility to the public takes precedence over the loyal to one’s organization. C. These illegal activities might involve senior management. it would be impossible for all members of the profession to have approximately the same level of competence. C. D.Charter. The public's perception of an organization's financial reporting will improve if it is perceived that the audit committee is independent of management influence.CIA 598 1. B. The audit may be conducted under a scope limitation. B. Objectivity is not presumed to be impaired if involvement is limited to recommending standards of control or reviewing procedures before they are implemented. The work of the external and internal auditors should be coordinated in order to help minimize the duplication of efforts. D. (c) HOCK international.CIA 1193 I.Ethics A. The transience of internal auditors would impair the IAA's objectivity. installs. There are different levels of competence. Question 33 . this is not its primary purpose. not to the CEO.3 . A scope limitation would not necessarily cause the need for more experienced personnel. page 19 . C. The auditor's objectivity is considered to be impaired if the auditor designs. D.CIA 591 II. The purpose of the internal auditing activity is to be an independent. drafts procedures for.6 . Independence & Objectivity A. and thus. or operates such systems (PA 1120-1). The IIA Code of Ethics is intended to be the ethical guide of conduct for internal auditors. D.45 . Authority & Responsibility A. A scope limitation would not necessarily cause the need for more frequent audits. B. B.CIA 584 I. Rule of Conduct 4. C. The increased interest by graduate students and experienced auditors has added to the advancement of the profession. D.2 states that internal auditors shall perform internal auditing services in accordance with the International Standards for the Professional Practice of Internal Auditing. time must be found to determine what action would solve the deficiency. The internal audit activity adds value by evaluating and contributing to the improvement of the risk management.18 . D." Rule of Conduct 4.Ethics A. Assumption of operating duties is related to independence.CIA 594 1. Communication is related to independence.CIA 594 1. Independence & Objectivity . Recommendations do not impair an auditor's independence. control and governance processes. D. A. The increase complexity and sophistication of the business operations required management to rely more on the internal audit activity." Thus. not independence.1 . and competencies through continuing professional development. Management is responsible for decision making and implementing suggestions or formulating new solutions. Question 38 . B. Standard 1230 states that internal auditors must enhance their knowledge.Introduction to Internal Auditing A.69 .3 states that internal auditors shall continually improve their proficiency and the effectiveness and quality of their services. page 20 fb Question 37 . B. If the finding is significant enough to report. but is not the primary reason for the advancement. skills.CIA 589 I. B. both the ISPPIA and The IIA’s Code of Ethics are violated by failing to maintain proficiency through continuing education. Question 36 .44 . These criteria are related to skill. The limitation of the external auditors scope has not contributed to the advancement of the internal auditing profession. (c) HOCK international.c om /c ia ao ffi C. The improved job qualifications were the direct result of the increased complexity and sophistication of the business operations. C.Introduction to Internal Auditing A. Avoiding honest difference of opinion is not an acceptable reason for deleting a recommendation. ci al . The scope and depth of the audit objectives reflect on the department's indepen-dence.Charter." Moreover. The true cause of a finding may require additional expertise and may only be determi-nable through additional management study. Both The IIA’s Code of Ethics and the ISPPIA are violated by failing to maintain proficiency through continuing education.Part 1 (3-Part) : CIA P1 (Section I) Question 35 . Supervision entails more than reviewing the engagement. not by meeting with the engagement clients. evaluations. Internal auditors must have skills in oral and written communications so that they can clearly and effectively convey such matters as engagement objectives. (c) HOCK international. Part I is correct. Part I is correct. skills. B. and other competencies needed to perform their individual responsibilities. but Part II is not correct. and other competencies needed to perform its responsibilities (Standard 1210).13 .48 . Both The IIA's Code of Ethics and the ISPPIA are violated by failing to maintain proficiency through continuing education. C. Poor staff communication skills can be resolved with training. C. The internal audit activity collectively should have or obtain the knowledge. Question 39 . The issue is with quality of communication.Proficiency & Due Professional Care A. As long as the senior internal auditor closely supervises the staff internal auditor then this would be an appropriate arrangement. D. rather than quantity of communication.Proficiency & Due Professional Care A. and recommendations (PA 1210-1).CIA 1195 I. B. Question 40 . Staff communication problems can be resolved with training.CIA 591 II. D. Both the ISPPIA and The IIA's Code of Ethics are violated by failing to maintain proficiency through continuing education. page 21 . Internal auditors must possess the knowledge. D. skills.Part 1 (3-Part) : CIA P1 (Section I) C. In this case the CAE should provide staff with sufficient training to enhance communication skills. conclusions.