CIA Part 1 - Q25

25. Periodic external assessments of an internal audit activity's quality assurance and improvement program should be undertaken. On completion of such an assessment, a formal report or other communication should be issued expressing an opinion as to the 

a. Adequacy of internal control.

b. Effectiveness of the internal auditing coverage.

c. Conformance with the internal audit activity's charter.

d. Internal audit activity's compliance with the Standards.

25. Solution: d

a. Incorrect. External assessments express an opinion on the overall effectiveness of the quality program, not the adequacy of internal controls.

b. Incorrect. External assessments express an opinion on the overall effectiveness of the quality program, not the effectiveness of the internal auditing coverage.

c. Incorrect. External assessments express an opinion on the overall effectiveness of the quality program, not conforming to the IAA charter.

d. Correct. The external assessment should consist of a broad scope of coverage that includes conformance with the Definition of Internal Auditing; the Code of Ethics; and the Standards (PA 1312-1.10).

CIA Part 1 - Q24

24. Which of the following best describes an internal auditor’s purpose in reviewing the organization’s existing risk management, control and governance processes?

a. To help determine the nature, timing, and extent of tests necessary to achieve engagement objectives.

b. To ensure that weaknesses in the internal control system are corrected.

c. To provide reasonable assurance that the processes will enable the organization’s objectives and goals to be met efficiently and economically.

d. To determine whether the processes ensure that the accounting records are correct and that financial statements are fairly stated.

24. Solution: c
a. Incorrect. This is the purpose of the audit plan.

b. Incorrect. Correcting internal control weaknesses is the function of management, not a function of the internal auditor.

c. Correct. As described by the IIA, the internal auditors’ primary purpose in reviewing an organization’s existing risk management, control, and governance processes is to provide reasonable assurance that these processes are functioning as intended and will enable the organization’s objectives and goals to be met.

d. Incorrect. This is a basic objective from a financial accounting and auditing perspective, but is not broad enough to cover the internal auditor’s entire purpose for review.

CIA Part 1 - Q23

23. According to the Standards, the internal audit activity’s goals should specify

a. Policies and procedures to guide the internal audit staff.

b. Engagement work schedules and activities to be reviewed.

c. Measurement criteria and target dates for completion.

d. Staffing plans and financial budgets.

23. Solution: c

a. Incorrect. Goals are statements of activities that are to be accomplished. Policies and procedures are the means in which the goals are achieved.

b. Incorrect. Goals are statements of activities that are to be accomplished. Engagement work schedules are a means to achieve goals.

c. Correct. The goals of the IAA should be capable of being accomplished within specified operating plans and budgets and, to the extent possible, should be measurable. They should be accompanied by measurement criteria and targeted dates of accomplishment.

d. Incorrect. Staffing plans and financial budgets are a means of accomplishing specified goals.

CIA Part 1 - Q22

22. You were appointed the chief audit executive (CAE) of an organization one week ago. An engagement client has come to you complaining vigorously that one of your internal auditors is taking up an excessive amount of the client’s time on an engagement that seems to be lacking a clear purpose. In handling this conflict with the client, you should consider

a. Promising the client that you will have the internal auditor finish the work within 1 week.

b. Whether existing procedures within the internal audit activity provide for proper planning and quality assurance.

c. Presenting an immediate defense of the internal auditor based upon currently known facts.

d. Discounting what is said, but documenting the complaint.

22. Solution: b

a. Incorrect. Promising the client to have the internal auditor finish the work within one week without proper background information on the current engagement would jeopardize the authority of the CAE.

b. Correct. In this situation the CAE would have a responsibility to review the existing procedures to determine whether the IAA had provided for proper planning and quality assurance. Not doing so would jeopardize the authority of the CAE.

c. Incorrect. Presenting an immediate defense of the internal auditor could potentially harm future communications with the client. It also could jeopardize the authority of the CAE.

d. Incorrect. The CAE has a responsibility to review the existing procedures to determine whether the IAA had provided for proper planning and quality assurance. But, the CAE also has a responsibility not to discard potentially valid complaints.

CIA Part 1 - Q21

21. The Standards require that internal auditors possess which of the following skills?

I. Internal auditors should understand human relations and be skilled in dealing with people.

II. Internal auditors should be able to recognize and evaluate the materiality and significance of deviations from good business practices.

III. Internal auditors should be experts on subjects such as economics, commercial law, taxation, finance, and information technology.

IV. Internal auditors should be skilled in oral and written communication.

a. I and II only.

b. I, II and III only.

c. I, II, III and IV.

d. I, II and IV only.

21. Solution: d (I, II and IV)

I. Correct. Internal auditors need to understand human relations and be skilled in dealing with people.

II. Correct. Internal auditors need to be able to understand what constitutes materiality and significance of deviations from good business practice.

III. Incorrect. Internal auditors are not expected to be experts in a wide variety of fields related to their audit responsibilities.

IV. Correct. Internal auditors should be skilled in oral and written communication.

CIA Part 1 - Q20

20. Independence from outside pressure is an important factor for the internal audit activity (IAA) to work freely and objectively. Which of the following contributes to the internal auditor’s independence?

a. Management should assist the IAA by reviewing, revising and forwarding engagement communications to the audit committee.

b. The IAA reports directly to the audit committee, without corroborating engagement communications with management.

c. Ideally, the IAA functionally reports to the audit committee but reports to the chief operating officer on all engagements relating to operations.

d. The accuracy of the engagement communications should be verified with management, and the IAA should then report to management and the audit committee.

20. Solution: d

a. Incorrect. Engagement communications would go direct to the audit committee, not forwarded by management.

b. Incorrect. Engagements communications should also be communicated with management.

c. Incorrect. Ideally, the CAE would administratively report to the CEO or high enough officer to maintain independence, and functionally to the audit committee or some other appropriate governing board. Under the ideal situation, all engagement communications are sent to the audit committee as well.

d. Correct. Internal auditors should first discuss conclusions and recommendations with management so management is able to verify the accuracy of the engagement communications. Final engagement communications would then be sent to the audit committee.

CIA Part 1 - Q19

19. If a department outside of the internal audit activity (IAA) is responsible for reviewing a function or process, the internal auditor should

a. Consider the work of the other department when assessing the function or process.

b. Ignore the work of the other department and proceed with an independent audit.

c. Reduce the scope of the audit since the work has already been performed by the other department.

d. Yield the responsibility for assessing the function or process to the other department.

19. Solution: a

a. Correct. Review and testing of the other department’s procedures may reduce necessary audit coverage of the function or process.

b. Incorrect. Concentrating on the function or process might lead to a duplication of efforts.

c. Incorrect. The internal auditor cannot rely on the work of others without verifying the results.

d. Incorrect. The internal audit activity’s overall responsibility for assessing the function or process is not affected by the other department’s coverage.