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IIA-CIA-Part1 exam consists of 125 multiple-choice questions that must be completed within 2 hours and 30 minutes. IIA-CIA-Part1 exam is computer-based and is administered at Pearson VUE testing centers worldwide. To be eligible to take the exam, candidates must have a minimum of a high school diploma or equivalent, and they must be a member of the IIA. IIA-CIA-Part1 exam fee varies depending on the candidate's location and membership status with the IIA. Passing the IIA-CIA-Part1 exam is the first step towards obtaining the CIA designation, and candidates must pass all three parts of the CIA exam within four years of passing the first part to earn the certification.
NEW QUESTION # 101
Which of the following would be the most appropriate first step for the board to take when developing an effective system of governance?
- A. Identify key stakeholders and their expectations.
- B. Establish a governance committee.
- C. Delegate authority to members of senior management.
- D. Determine the organization's overall risk appetite.
Answer: A
NEW QUESTION # 102
Which of the following is the first step in the process of identifying relevant fraud risk factors?
- A. Engaging in strategic reasoning to anticipate the fraud scheme
- B. Identifying preventive and detective controls
- C. Gathering information about the organization's business activities to gain an understanding of fraud risks
- D. The use of brainstorming, management interviews, analytical procedures and review of prior frauds.
Answer: D
NEW QUESTION # 103
An internal audit of an organization's disbursement department revealed that multiple payments were made to legitimate vendors bearing fraudulent banking information belonging lo employees in the department. These vendors were initially set up with accurate banking information but were subsequently modified by disbursement officers with access to the vendor management system. Which of the following controls would have likely prevented the fraudulent modification of vendors' banking information?
- A. Management's approval is required for update to vendors' banking information.
- B. Management randomly audits a sample of payments to verify the accuracy of vendors' banking information.
- C. Management's approval is required before payments can be processed.
- D. Management periodically reviews and verifies the information in the vendor master Tile.
Answer: A
Explanation:
The control that would have likely prevented the fraudulent modification of vendors' banking information is management's approval being required for updates to vendors' banking information. This control would provide a layer of verification and oversight, significantly reducing the risk of unauthorized and fraudulent changes.References: Best practices in vendor management and internal controls over payment processes, as advocated by The IIA.
NEW QUESTION # 104
An internal auditor is performing analytical reviews as part of an audit of a supermarket's merchandising department. Because the economy has declined since midyear, the auditor can expect to encounter which of the following?
- A. Lower sales volume.
- B. Higher inventory turnover.
- C. Lower obsolete stock disposal.
- D. Higher operating margin.
Answer: A
NEW QUESTION # 105
According to IIA guidance, which of the following most appropriately justifies the CEO's decision that the internal audit activity shall be responsible for risk management and investigation at a multinational organization?
- A. The level of proficiency of the chief audit executive
- B. The recommendation of the parent office external auditors.
- C. The provisions of the internal audit charter
- D. The authority of the CEO.
Answer: C
NEW QUESTION # 106
Which of the following are core responsibilities to be included in the internal audit charter?
Review reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
Determine the adequacy and effectiveness of the organization's systems of internal accounting and operating controls.
Participate in the planning and performance of audits of potential acquisitions with the organization's outside accountants and other members of the corporate staff.
Report to those members of management who should be informed of results of audit examinations, the audit opinions formed, and the recommendations made.
- A. 1 and 2.
- B. 2 and 4.
- C. 2 and 3.
- D. 1 and 4.
Answer: A
NEW QUESTION # 107
Which of the following actions should the organization's governing body perform to provide the most effective governance over the organization's culture?
- A. Coordinate control activities.
- B. Deliver assurance.
- C. Design key controls.
- D. Provide direction.
Answer: D
Explanation:
To provide effective governance over the organization's culture, the organization's governing body should provide direction. This involves setting a tone at the top that promotes ethical behavior, accountability, and transparency throughout the organization. Providing direction helps ensure that organizational values are communicated and reinforced, influencing the culture and ethical climate of the entire organization.References: IIA guidance on governance and leadership's role in organizational culture.
NEW QUESTION # 108
The director of purchasing, a certified internal auditor (CIA), signs a contract to procure a large order from a supplier whose products provide the best price, quality, and performance. A few days after signing the contract, the supplier presents the CIA with $1, 000 as a gift. Which statement regarding acceptance of the money is correct?
- A. Because the contract was signed before the money was offered, accepting the money would not violate the IIA Code of Ethics.
- B. Because the CIA is not acting as an internal auditor, accepting the money would be governed only by the organization's code of conduct.
- C. Accepting the money would be prohibited only if it were non-customary.
- D. Accepting the money would violate the IIA Code of Ethics.
Answer: D
NEW QUESTION # 109
Which of the following lists these audit steps in the correct chronological order?
I. Create the engagement work program.
II. Conduct the exit conference.
III. Perform fieldwork.
IV. Schedule the audit engagement.
Issue a summary report of audit findings.
- A. IV, III, I, V, II.
- B. I, IV, III, II, V.
- C. I, IV, II, III, V.
- D. IV, I, III, II, V.
Answer: D
NEW QUESTION # 110
A high-volume retailer of consumer goods has used point-of-sale data to record sales and update inventory records for several years. When price changes are scheduled, corporate headquarters downloads a price change file to a computer server system at each store. Each store's assistant manager is responsible for checking the server for downloads and running the program that updates the store's price file at the authorized price update time. In comparison with having headquarters initiate the price update centrally, this approach to price updating will most likely:
- A. Decrease the risk that item prices will sometimes be inaccurate.
- B. Increase the risk that customers will be undercharged consistently for sales items.
- C. Decrease the risk that customers will be undercharged consistently for sales items.
- D. Increase the risk that item prices will sometimes be inaccurate.
Answer: D
NEW QUESTION # 111
Which of the following methods is not valid for completing continuing professional
education hours?
- A. Participating in a formal in-house training program.
- B. Completing all audit engagements in accordance with the Standards.
- C. Publishing an article on the organization's internal audit department.
- D. Attending technical session meetings held by state auditing organizations.
Answer: B
NEW QUESTION # 112
A large commercial bank was fined by regulators for fraudulent practices when employees, over a period of time, opened thousands of new accounts for existing clients without the clients' consent. It was later found that employees were given unrealistic new account targets and were aggressively monitored by management on a daily basis.
Which of the following controls would have most likely reduced the likelihood of the fraudulent practice from occurring?
- A. An evaluation of the current performance and compensation program.
- B. The availability of fraud training to all employees.
- C. The availability of an employee whistleblower hotline
- D. The performance of background investigations on all existing employees.
Answer: A
Explanation:
An evaluation of the current performance and compensation program would be the most effective control to address the underlying cause of fraudulent behavior described. The pressures from unrealistic targets and aggressive monitoring likely encouraged employees to engage in fraudulent account openings. By evaluating and potentially revising these targets and the associated compensation schemes, the bank could mitigate the pressures that lead to such unethical behaviors.References: Standards on the role of internal control systems in preventing and detecting fraud, including guidance on managing performance and compensation to align with ethical standards.
NEW QUESTION # 113
In an environment where employees are frequently penalized for mistakes and the organizational culture is one of fear and blame which of the following is an internal auditor most likely to find?
- A. Careless behavior becomes normal
- B. Management regularly overrides key controls
- C. Employee turnover is tow
- D. Employee morale is low
Answer: D
NEW QUESTION # 114
According to ISO 31000, which of the following statements is correct?
- A. The internal audit activity can give objective assurance on any part of the risk management framework for which it is responsible.
- B. The board is responsible for setting the organizational attitude through tone at the top,
- C. The framework is designed to be effective for organizations no matter how small.
- D. The internal audit activity will provide assurance over operating effectiveness but not over the design of risk management activities,
Answer: C
NEW QUESTION # 115
During an audit of a major contract, an internal auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?
- A. Bid rotation.
- B. Defective pricing.
- C. Fictitious vendor.
- D. Cost mischarging.
Answer: D
NEW QUESTION # 116
To encourage internal audit objectivity, which of the following is an appropriate policy the chief audit executive should establish?
- A. Internal auditors are permitted to audit an entity managed by a close friend or relative, as long as they notify the chief audit executive.
- B. Internal auditors should report their audit findings directly to the audit committee.
- C. Prior to hiring a new internal auditor, the chief audit executive must determine whether the auditor owns stock in the organization.
- D. To receive an outstanding performance rating, internal auditors are required to generate audit findings.
Answer: C
NEW QUESTION # 117
Which of the following risk management activities is most appropriate for an internal auditor to undertake?
- A. Impose risk management processes.
- B. Coordinate risk management activities.
- C. Review the management of key risks.
- D. Implement risk responses on management's behalf.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION # 118
An internal auditor is trying to evaluate what could go wrong after determining that a risk management technique is operating effectively. What type of risk is the auditor assessing?
- A. Detection risk.
- B. Residual risk.
- C. Impact risk.
- D. Inherent risk.
Answer: B
Explanation:
Residual risk is the remaining risk after management has implemented risk responses. The auditor is assessing what could still go wrong despite the effectiveness of the risk management technique in place, which is evaluating the remaining exposure to risk. References:
* IIA Standard 2120: Risk Management.
* COSO Enterprise Risk Management Framework.
NEW QUESTION # 119
An internal audit activity maintains a quality assurance and improvement program that includes annual self-assessments. The internal audit activity includes in each engagement report a clause that the engagement is conducted in conformance with the International Standards for the Professional Practice of Internal Auditing ( Standards) Which of the following justifies inclusion of this clause in the reports?
- A. The audit committee has reviewed the annual self-assessment results and approved the use of the clause
- B. The internal audit charter, approved by the audit committee requires conformance with the Standards
- C. Internal audit activity policies and engagement records provide relevant, sufficient, and competent evidence that the statement is correct
- D. The self-assessment results were validated by a qualified external review team three years prior
Answer: C
Explanation:
The inclusion of a clause in each engagement report stating that the engagement conforms with the International Standards for the Professional Practice of Internal Auditing is justified if the internal audit activity's policies and engagement records provide relevant, sufficient, and competent evidence that this statement is correct. This indicates that the internal audit activity consistently applies the standards in its engagements and the quality assurance and improvement program effectively monitors and ensures this conformance.References:
* IIA Standard 1300: "Quality Assurance and Improvement Program"
NEW QUESTION # 120
Which of the following is an example of risk monitoring to ensure a system is performing as intended?
- A. Communicating to management about risks
- B. Checking the progress of risk treatment plans
- C. Documenting the risks and their areas of impact
- D. Considering the consequence and likelihood of risks
Answer: B
NEW QUESTION # 121
The primary reason that a bank would maintain a separate compliance function is to:
- A. Ensure the independence of line and senior management.
- B. Better manage perceived high risks.
- C. Strengthen controls over the bank's investments.
- D. Better respond to shareholder expectations.
Answer: B
NEW QUESTION # 122
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An employee is more likely to commit fraud if which of the following red flags are present?
The employee believes that he is being underpaid and deserves a higher salary.
The employee is close to retirement and has expressed a desire to take an
expensive trip around the world.
The employee has personal financial problems and seems very unhappy.
The employee is spending much more time at the office than usual and has been
asking about opportunities for professional advancement.
- A. 1 and 3 only.
- B. 2 and 4 only.
- C. 1 and 2 only.
- D. 3 and 4 only.
Answer: A
NEW QUESTION # 123
An organization has implemented a new automated payroll system that contains a table of pay rates that are matched to employee job classifications. Which control should an internal auditor suggest in order to ensure that the table is updated correctly, and is used only for valid pay changes?
- A. Require a manager, who is independent of the system and who cannot change the table, to authorize and sign-off on any employee pay changes.
- B. Restrict data-table access from management and line supervisors who have the authority to determine pay rates.
- C. Ensure that adequate edit and reasonableness checks are built into the automated system.
- D. Require a supervisor in the department, who has the ability to change the table, to compare the changes to a signed management authorization.
Answer: A
Explanation:
Section: Volume E
NEW QUESTION # 124
An internal audit activity encounters a scope limitation from senior management that will affect its ability to meet its goals and objectives for a potential engagement client.
The nature of the scope limitation should be:
- A. Communicated to management, stating that the limitation will not be accepted because it would impair the audit activity's independence.
- B. Communicated to the external auditors so that they can investigate the area in more detail.
- C. Noted in the audit workpapers, but the engagement should be carried out as scheduled, with any necessary adjustments made based on the scope limitation.
- D. Communicated, preferably in writing, to the board.
Answer: D
NEW QUESTION # 125
Which of the following types of policies best helps promote objectivity in the interna! audit activity's work?
- A. Policies that keep internal auditors in areas where they have vast audit expertise.
- B. Policies that are distributed to all members of the internal audit activity and require a signed acknowledgment,
- C. Policies that provide examples of inappropriate business relationships.
- D. Policies that match internal auditors' performance with feedback from management of the area under review.
Answer: C
Explanation:
Policies that provide examples of inappropriate business relationships best promote objectivity in the internal audit activity's work by explicitly defining what constitutes a conflict of interest and guiding auditors on how to avoid situations that might impair their objectivity. This clear delineation helps maintain the independence and unbiased perspective necessary for effective auditing.References: Institute of Internal Auditors (IIA) - Code of Ethics and Professional Standards; literature on maintaining objectivity in internal auditing.
NEW QUESTION # 126
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