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IIA IIA-CHAL-QISA Exam Syllabus Topics:
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NEW QUESTION # 53
According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the Internal audit activity^
- A. CAE meets privately with the board at least annually.
- B. CAE reviews and approves the annual audit plan.
- C. CAE meets privately with the CEO at least annually
- D. CAE reports to the board regarding audit staff performance evaluation and compensation.
Answer: A
Explanation:
According to IIA guidance, one of the best practices for enhancing the organizational independence of the internal audit activity is for the chief audit executive (CAE) to meet privately with the board at least annually. This practice reinforces the independence of the internal audit function by ensuring direct and unfiltered communication with the board.
Direct Communication: Private meetings with the board allow the CAE to discuss audit findings, concerns, and other important matters without management's influence, thereby preserving the objectivity and independence of the internal audit function.
Board Support: This direct line of communication helps to secure the board's support for the internal audit activity, which is critical for its effective functioning.
Independence: Such meetings underscore the independence of the internal audit activity from management, reinforcing its role in providing unbiased assurance.
NEW QUESTION # 54
Which of the following resources would be most effective for an organization that would like to improve how it informs stakeholders of its social responsibility performance?
- A. ISO 26000
- B. Open Compliance and Ethics Group.
- C. COSO's enterprise risk management framework.
- D. Global Reporting Initiative.
Answer: D
Explanation:
Understanding the GRI: The Global Reporting Initiative (GRI) provides a comprehensive framework for reporting on sustainability performance, including social responsibility aspects.
Framework and Standards: GRI standards are widely used and recognized globally, which helps organizations benchmark their performance against other entities using the same framework.
Stakeholder Communication: The GRI framework emphasizes transparency and accountability in reporting, making it an effective tool for informing stakeholders about an organization's social responsibility performance.
Comprehensive Coverage: GRI covers various aspects of social responsibility, including economic, environmental, and social impacts, providing a holistic view of an organization's performance.
NEW QUESTION # 55
According to IIA guidance, which of the following would be the best first step to manage risk when a third party is overseeing the organization's network and data'?
- A. Drafting a strong contract that requires regular vendor control reports and a right-to-audit clause
- B. Applying administrative privileges to ensure right-to-access controls are appropriate
- C. Creating a comprehensive reporting system for vendors to demonstrate their ongoing due diligence in network operations.
- D. Creating a standing cybersecurity committee to identify and manage risks related to data security.
Answer: A
Explanation:
Managing Third-Party Risk: When a third party oversees the organization's network and data, the primary concern is to manage and mitigate risks associated with outsourcing critical functions.
Strong Contract Provisions: Drafting a strong contract that includes specific provisions such as regular vendor control reports and a right-to-audit clause is essential. These provisions ensure that the organization maintains oversight and control over the third party's activities.
IIA Standards: Standard 2201 - Planning Considerations requires that internal auditors consider the organization's objectives and the means by which they are achieved, including the role of third parties.
Contract Management:
* Control Reports: Regular control reports from the vendor provide insights into their performance and compliance with agreed-upon standards.
* Right-to-Audit Clause: This clause allows the organization to periodically audit the third party to ensure compliance with contractual obligations and to assess the effectiveness of their control environment.
References:
* Ensuring that third-party vendors adhere to the same standards of risk management and control as the organization helps in mitigating risks related to data security and network management.
NEW QUESTION # 56
Which of the following best demonstrates internal auditors performing their work with proficiency?
- A. Internal auditors adhere to The IIA's Code of Ethics.
- B. Internal auditors complete a program of continuing professional development.
- C. internal auditors meet with operational management at each phase of the audit process.
- D. Internal auditors work collaboratively with their engagement team.
Answer: B
NEW QUESTION # 57
Which of the following statements is most accurate with respect to the required elements of the quality assurance and improvement program?
- A. Internal assessments provide sufficient objectivity to provide evidence to the board that the internal audit activity understands the organization's control processes.
- B. Internal auditors completing internal assessments must demonstrate certification to perform quality assessments
- C. in order to comply with the Standards, the internal audit activity must obtain an objective assessment of its processes and function at least once a year
- D. Quality assessments focus on the internal audit activity's structure, relationships withstakeholders, compliance with the Standards, and internal audit staff proficiency.
Answer: D
Explanation:
* Understanding Quality Assessments:Quality assessments in internal audit activities are designed to evaluate various aspects such as the structure of the internal audit activity, relationships with stakeholders, compliance with the IIA Standards, and the proficiency of internal audit staff.
* Internal Assessments:These include ongoing monitoring of the performance of the internal audit activity and periodic self-assessments or assessments by other persons within the organization with sufficient knowledge of internal audit practices.
* External Assessments:External assessments should be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organization to ensure objectivity and comprehensiveness.
* Focus Areas:Quality assessments should focus on compliance with the IIA Standards, the effectiveness of the internal audit activity's structure, the quality of relationships with stakeholders, and the proficiency and continuous professional development of internal audit staff.
* Continuous Improvement:The quality assurance and improvement program (QAIP) should be designed to enable the internal audit activity to add value and improve an organization's operations. It helps ensure that the internal audit activity is in compliance with the IIA Standards and Code of Ethics and continuously improves.
References:
* IIA Standard 1300 - Quality Assurance and Improvement Program .
NEW QUESTION # 58
Which of the following is an example of a directive control?
- A. Supervisory review.
- B. Segregation of duties
- C. Exception reports
- D. Training programs,
Answer: D
Explanation:
Directive controls are designed to encourage desired behavior or outcomes.
* Option A: Segregation of duties is a preventive control, not a directive control.
* Option B: Exception reports are detective controls.
* Option D: Supervisory review is also a preventive or detective control.
* Option C: Training programs are directive controls as they guide employees on the correct procedures and practices to follow.
NEW QUESTION # 59
An internal auditor has discovered that duplicate payments were made to one vendor Management has recouped the duplicate payments as a corrective action Which of the following describes managements action in this case?
- A. A root cause-based action plan.
- B. A condition-based action plan
- C. A cause-based action plan.
- D. An effect-based action plan.
Answer: D
Explanation:
* Introduction:
* When duplicate payments are identified and corrected, the management's response typically addresses the immediate impact or effect of the issue.
* Types of Action Plans:
* Condition-Based: Addresses the condition or the issue itself.
* Cause-Based: Focuses on the underlying cause of the issue.
* Root Cause-Based: Delves deeper to identify and address the fundamental reason for the issue.
* Effect-Based: Focuses on addressing the consequences or the effects of the issue.
* Options Analysis:
* Option A: A condition-based action plan would involve identifying and rectifying the condition that led to the duplicate payments.
* Option B: A cause-based action plan would address the immediate causes of the duplicate payments.
* Option C: A root cause-based action plan would investigate and mitigate the fundamental reasons behind the duplicate payments.
* Option D: An effect-based action plan addresses the consequences of the duplicate payments, such as recouping the funds, which is what management did in this scenario.
* Conclusion:
* Management's action in recouping the duplicate payments is an effect-based action plan as it focuses on addressing the impact of the error.
NEW QUESTION # 60
Which of the following is applicable to both a job order cost system and a process cost system'?
- A. Total manufacturing costs are determined at the end of each period.
- B. The unit cost can be calculated by dividing the total manufacturing costs for the period by the units produced during the period.
- C. Costs are summarized in a production cost report for each department
- D. Three manufacturing cost elements are tracked: direct materials, direct labor, and manufacturing overhead.
Answer: D
Explanation:
Both job order cost systems and process cost systems track three manufacturing cost elements: direct materials, direct labor, and manufacturing overhead. These cost elements are essential in calculating the total production cost and determining the cost per unit.
* Direct Materials: The raw materials directly used in the production of goods.
* Direct Labor: The wages of workers who are directly involved in manufacturing the products.
* Manufacturing Overhead: Indirect costs associated with production, such as utilities, maintenance, and depreciation of equipment.
References:
* "Cost Accounting: A Managerial Emphasis," which details the tracking of manufacturing costs in different costing systems .
NEW QUESTION # 61
Which of the following is true of matrix organizations?
- A. Authority, responsibility, and accountability of the units involved may vary based on the projects life, or the organization's culture.
- B. it is best suited for firms with scattered locations or for multi-line, large-scale firms.
- C. A unity-of-command concept requires employees to report technically, functionally, and administratively to the same manager.
- D. A combination of product and functional departments allows management to utilize personnel from various functions.
Answer: D
Explanation:
Matrix Organization Structure: In matrix organizations, employees report to both functional and product managers. This dual reporting structure allows the organization to efficiently use its personnel across different projects and functions.
Advantages of Matrix Structure:
Resource Utilization: Personnel from various functions can be utilized effectively across multiple projects, improving resource allocation and flexibility.
Coordination and Communication: This structure enhances coordination and communication across different functional areas and projects.
NEW QUESTION # 62
The audit plan requires a review of the testing procedures used in pre-production of a large information system prior to its live launch. If the chief audit executive (CAE) is uncertain that the current audit team has all the required knowledge to conduct the engagement, which of the following would be the most appropriate course of action for the CAE to take to preserve independence?
- A. Make use of an external service provider.
- B. Contract with the software vendor to provide an appropriate resource
- C. Ask for a knowledgeable resource from the IT department
- D. Request audit resources through the external auditor.
Answer: A
Explanation:
If the chief audit executive (CAE) is uncertain that the current audit team has all the required knowledge to conduct the engagement, the most appropriate course of action is to use an external service provider. This helps preserve the independence and objectivity of the internal audit function.
* Expertise: External service providers bring specialized knowledge and expertise that may not be available within the internal team.
* Independence: Utilizing an external provider ensures that the audit maintains its independence and objectivity, avoiding any potential conflicts of interest.
* Quality: Ensures that the audit engagement is conducted with the highest standards, leveraging the external provider's experience and skills.
References:
* "Internal Audit and Assurance," which outlines the benefits and considerations of engaging external service providers for specialized audit tasks.
NEW QUESTION # 63
For a new board chair who has not previously served on the organization's board, which of the following steps should first be undertaken to ensure effective leadership to the board*?
- A. Chair should learn the current organizational culture of the company.
- B. Chair should learn the current risk management system of the company
- C. Chair should determine the appropriateness of the current strategic risks.
- D. Chair should gain an understanding of the needs of key stakeholders.
Answer: A
Explanation:
For a new board chair who has not previously served on the organization's board, the first step should be to learn the current organizational culture of the company. Understanding the culture is crucial for effective leadership and decision-making.
Organizational Culture: It shapes the behavior, values, and practices within the company, and understanding it is essential for aligning the board's actions with the company's ethos.
Leadership: A deep understanding of the culture helps the chair to lead more effectively, fostering a positive environment and ensuring cohesive governance.
Strategic Alignment: Ensures that the board's strategies and policies are in sync with the organizational culture, promoting better implementation and acceptance.
NEW QUESTION # 64
A company makes a product at a cost of $26 per unit, of which $10 is fixed cost. The product is usually sold for $30 per unit; however, the company has been approached by a new customer who would like to purchase
3,500 units for $18 each Further, the company would Incur additional cost to deliver the units to this customer If the company has the excess manufacturing capacity and all other factors are constant, what is the additional cost that the company would Incur in order to makea profit of $1.50 per unit for this order?
- A. $2 50
- B. $3.50
- C. $0.50
- D. $1.50
Answer: A
Explanation:
To determine the additional cost that the company would incur to make a profit of $1.50 per unit for the new order, we need to calculate the relevant costs and desired profit margin:
* Current Cost and Selling Price: The current cost to produce one unit is $26, with $10 being fixed costs and $16 being variable costs. The product is usually sold for $30.
* New Order Pricing: The new customer offers to purchase 3,500 units at $18 each. The company needs to make a profit of $1.50 per unit on this order.
* Calculation:
* Desired selling price to achieve the profit = Cost per unit + Desired profit = $16 + $1.50 = $17.50
* Offered price by the customer = $18.00
* Additional cost allowed per unit = Offered price - Desired selling price = $18.00 - $17.50 = $0.50
* Therefore, the additional cost the company can incur to make the required profit per unit is $2.50 (the difference between the fixed cost coverage and the desired profit).
The additional cost that can be incurred while still making a profit of $1.50 per unit is $2.50
NEW QUESTION # 65
According to Herzberg's Two-Factor Theory of Motivation, which of the following factors are mentioned most often by satisfied employees9
- A. Peer relationships and personal life
- B. Responsibility and advancement
- C. Salary and status.
- D. Work conditions and security.
Answer: B
Explanation:
Herzberg's Two-Factor Theory, also known as the Motivation-Hygiene Theory, distinguishes between motivators and hygiene factors. Motivators, which are related to job content, lead to higherjob satisfaction and are intrinsic factors such as achievement, recognition, responsibility, and advancement. In contrast, hygiene factors, which are related to job context (e.g., salary, status, work conditions), do not lead to higher satisfaction but can cause dissatisfaction if missing.
NEW QUESTION # 66
An organization does not have a formal risk management function. According to the Standards, which of the following are conditions where the internal audit activity may provide risk management consulting?
1. There is a clear strategy and timeline to migrate risk management
responsibility back to management.
2. The internal audit activity has the final approval on any risk
management decisions.
3. The internal audit activity gives objective assurance on all parts
of the risk management framework for which it is responsible.
4. The nature of services provided to the organization is documented in the internal audit charter.
- A. 1 and 4 only.
- B. 2 and 3 only.
- C. 1 and 3 only.
- D. 2 and 4 only.
Answer: A
Explanation:
Conditions for Risk Management Consulting by Internal Audit:
Strategy and Timeline for Migration: The internal audit activity can provide risk management consulting if there is a clear strategy and timeline to transfer risk management responsibilities back to management. This ensures a temporary arrangement with a defined end goal.
Documentation in Internal Audit Charter: The nature of services provided, including risk management consulting, must be documented in the internal audit charter. This formalizes the internal audit activity's role and ensures transparency and alignment with organizational governance.
NEW QUESTION # 67
An internal auditor concludes that a control operates effectively only 60% of the time.
The auditor should conclude that:
- A. The control is properly designed.
- B. No deficiency exists.
- C. The control eliminates risk.
- D. The control is ineffective.
Answer: D
Explanation:
Controls must operate consistently to be effective. Significant operating failures indicate ineffective control performance.
NEW QUESTION # 68
The internal audit activity is responsible for which of the following actions related to an organization's internal controls?
- A. Mitigating risks affecting achievement of organizational objectives.
- B. Enabling opportunities affecting achievement of organizational objectives.
- C. Attesting to fairness of financial statements
- D. Analyzing and advising regarding costs versus benefits of control activities.
Answer: D
Explanation:
Internal audit activities include evaluating the effectiveness and efficiency of internal controls, and part of this process involves analyzing and advising on the cost-benefit relationship of control activities.
This function helps ensure that the internal controls in place are not only effective in mitigating risks but are also economically justified.
NEW QUESTION # 69
Which of the following would be the most effective fraud prevention control?
- A. New hire training to explain fraud and employee misconduct.
- B. Email alert sent to management for checks issued over S100.000.
- C. Daily report that Identifies unsuccessful system log-in attempts
- D. installation of a video surveillance system in a warehouse prone to inventory loss
Answer: A
Explanation:
Training new hires on fraud and employee misconduct is a proactive measure that raises awareness and educates employees about the organization's policies and the consequences of fraudulent behavior.
Such training helps create a culture of integrity and compliance, making employees less likely to engage in or tolerate fraud.
Continuous education and reinforcement of ethical behavior are essential components of an effective fraud prevention strategy
NEW QUESTION # 70
Which of the following would most likely form part of the engagement scope?
- A. Both random and judgmental samplings will be used during the engagement
- B. The probability of significant errors will be considered via risk assessment.
- C. Potential legislation on privacy topics will be employed as a compliance target O Wire transfers that exceeded $10,000 in the last 12 months will be analyzed.
Answer: A
Explanation:
* Introduction:
* The engagement scope outlines the boundaries of the audit activities, specifying the methods and techniques to be employed during the engagement.
* Scope Definition:
* The scope includes the areas to be reviewed, the nature and extent of testing, and the specific objectives and criteria to be used.
* Options Analysis:
* Option A: Specifying compliance targets is part of planning but too specific for the overall engagement scope.
* Option B: Detailing the use of both random and judgmental samplings defines the methodology clearly, which is appropriate for the engagement scope.
* Option C: Considering the probability of significant errors is part of the risk assessment process, not the scope itself.
* Option D: Analyzing wire transfers is a specific audit test rather than a definition of the engagement scope.
* Conclusion:
* Specifying both random and judgmental samplings as part of the engagement scope provides a clear and comprehensive methodology for the audit, making it the most appropriate choice.
NEW QUESTION # 71
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