Based on Official Syllabus Topics of Actual IIA IIA-CHAL-QISA Exam
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IIA IIA-CHAL-QISA Exam Syllabus Topics:
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NEW QUESTION # 11
According to IIA guidance, which of the following describes the primary reason to implement environmental and social safeguards within an organization?
- A. To fulfill regulatory and compliance requirements.
- B. To achieve and maintain sustainable development.
- C. To enable Triple Bottom Line reporting capability.
- D. To facilitate the conduct of risk assessment
Answer: B
Explanation:
Implementing environmental and social safeguards aligns with the broader organizational goal of achieving sustainable development.
These safeguards ensure that the organization operates in a manner that is environmentally responsible and socially conscious, which is crucial for long-term sustainability
NEW QUESTION # 12
When using cost-volume-profit analysis, which of the following will increase operating income once the break-even point has been reached?
- A. Contribution margin per unit for each additional unit sold.
- B. Gross margin per unit for each additional unit sold
- C. Variable costs per unit for each additional unit sold.
- D. Fixed costs per unit for each additional unit sold.
Answer: A
Explanation:
Contribution Margin: Contribution margin is the amount by which the sales price of a product exceeds its variable costs. After reaching the break-even point, each additional unit sold contributes directly to operating income.
NEW QUESTION # 13
A regional entertainment organization is in the process of developing a corporate social responsibility (CSR) policy. Management invites ideas from employees when developing the CSR policy Which of the following is the most appropriate idea to include?
- A. Management is responsible for ensuring that the organization's CSR principles are communicated, understood, and integrated into decision-making processes.
- B. Management has overall responsibility for the effectiveness of governance, risk management, and internal control processes associated with CSR.
- C. Generally, CSR activities are limited to the management of the organization, thus, employees do not have a responsibility for ensuring the success of CSR objectives.
- D. The board Is responsible for ensuring that CSR objectives are established, risks are managed, performance is measured, and activities are appropriately monitored and reported
Answer: A
Explanation:
CSR Policy Development: In developing a Corporate Social Responsibility (CSR) policy, it is important that the principles of CSR are communicated and understood throughout the organization.
Integration into Decision-Making: Management's responsibility includes ensuring that CSR principles are not only communicated but also integrated into the organization's decision-making processes at all levels. This ensures that CSR is part of the organizational culture and operational strategies.
Board's Role: While the board has a role in overseeing and ensuring that CSR objectives are established and risks are managed, the day-to-day responsibility for integrating CSR into business operations lies with management.
IIA Guidance: According to IIA guidance, internal auditors should evaluate the design, implementation, and effectiveness of the organization's ethics-related objectives, programs, and activities, which include CSR initiatives (Standard 2110 - Governance).
References:
* Effective communication and integration of CSR principles ensure that the organization operates in a socially responsible manner, aligning its business practices with societal expectations and contributing to sustainable development.
NEW QUESTION # 14
According to the IIA Code of Ethics, which of the following is required with regard to communicating results?
- A. The internal auditor should disclose all material information obtained by the date of the final engagement communication.
- B. The internal auditor should reveal material facts that could potentially distort the reporting of activities under review
- C. The internal auditor should obtain all material information within the established time and budget parameters.
- D. The internal auditor should present material information to appropriate personnel within the organization without revealing confidential matters that could be detrimental to the organization
Answer: B
Explanation:
The IIA Code of Ethics sets forth principles and expectations for ethical behavior in internal auditing, particularly regarding the communication of results.
* Integrity and Transparency:According to the IIA Code of Ethics, internal auditors are expected to exhibit integrity and transparency in their reporting, ensuring that material facts are disclosed accurately to avoid misrepresentation.
NEW QUESTION # 15
Which of the following is the primary engagement responsibility of an entry-level internal auditor?
- A. Leadership
- B. Documentation.
- C. Reporting
- D. Analysis.
Answer: B
Explanation:
Primary Responsibilities: For entry-level internal auditors, the primary responsibilities focus on learning and supporting tasks. Documentation is a key responsibility as it involves recording the findings and work performed during an audit engagement. This helps in building a foundation for understanding audit processes and methodologies.
NEW QUESTION # 16
According to IIA guidance, which of the following is true regarding typical fraud schemes?
1.A diversion occurs when an employee has an undisclosed personal economic interest in a transaction that adversely affects the organization
2.Tax evasion is intentional reporting of false or misleading information on a tax return by an organization to reduce taxes owed.
3.Skimming involves stealing cash or assets from the organization and is normally concealed by adjusting the organization's records
4Disbursement fraud occurs when a person causes the organization to issue a payment for fictitious goods or services
- A. 2 and 3.
- B. 1 and 3.
- C. 2 and 4
- D. 1 and 4
Answer: C
Explanation:
* Diversion typically involves redirecting resources or assets for personal use, not just having an undisclosed interest.
* Tax evasion involves deliberate falsification of financial information to avoid tax liabilities.
* Skimming is taking cash before it is recorded in the accounting system, usually difficult to detect.
* Disbursement fraud involves creating fictitious invoices or vendors to divert funds.
NEW QUESTION # 17
What is the primary reason that audit supervision includes approval of the engagement report?
- A. To ensure report style and grammar are appropriate.
- B. To ensure the objectives of the area under review are met
- C. To ensure senior management supports the reports conclusions
- D. To ensure report findings are substantiated
Answer: D
Explanation:
The primary reason for audit supervision, including the approval of the engagement report, is to ensure that the findings presented in the report are substantiated by adequate and appropriate evidence. This step is crucial to maintain the credibility and reliability of the audit process and its outcomes.
* Substantiation of Findings: Ensuring that findings are substantiated helps in providing a clear and defensible basis for the conclusions and recommendations made in the report.
* Audit Quality: This step ensures the quality and integrity of the audit process, confirming that the evidence collected during the audit is sufficient and appropriate to support the findings.
* Credibility: By substantiating findings, the report gains credibility, which is essential for the stakeholders who rely on the audit report for decision-making.
References:
* "Internal Audit Standards and Procedures," which outlines the importance of evidence substantiation in audit reports .
NEW QUESTION # 18
A multinational organization has multiple divisions that sell their products internally to other divisions When selling internally, which of the following transfer prices would lead to the best decisions for the organization?
- A. Variable cost plus a markup.
- B. Full cost
- C. Full cost plus a markup.
- D. Market price of the product.
Answer: D
Explanation:
Using the market price of the product for internal transfer pricing leads to the best decisions for the organization because it reflects the true economic value of the goods or services being transferred. This method promotes efficiency and fairness within the divisions.
* Economic Value: Market price reflects the true economic value, ensuring that the internal transactions are conducted at fair and competitive prices.
* Performance Measurement: It provides a consistent basis for evaluating the performance of different divisions, as they are measured against external market conditions.
* Resource Allocation: Helps in optimal allocation of resources by ensuring that internal transactions are economically justified and comparable to external transactions.
References:
* "Management Accounting: Principles and Practices," which discusses the advantages of using market-based transfer pricing .
NEW QUESTION # 19
Which of the following best demonstrates internal auditors performing their work with proficiency?
- A. internal auditors meet with operational management at each phase of the audit process.
- B. Internal auditors work collaboratively with their engagement team.
- C. Internal auditors complete a program of continuing professional development.
- D. Internal auditors adhere to The IIA's Code of Ethics.
Answer: C
Explanation:
Proficiency in internal auditing is not only about technical skills but also involves continuous education and staying updated with the latest practices and standards in the field.
Option D reflects the commitment to ongoing professional development, ensuring that internal auditors maintain and enhance their proficiency over time.
The Institute of Internal Auditors (IIA) emphasizes the importance of continuing professional development as a means to ensure auditors remain competent in their roles
NEW QUESTION # 20
Which of the following best describes the guideline for preparing audit engagement workpapers?
- A. Workpapers should be understandable to the audit client and the board.
- B. Workpapers should be understandable to the auditor in charge and the chief audit executive
- C. Workpapers should be understandable to external auditors and regulatory agencies
- D. Workpapers should be understandable to another internal auditor who was not involved in the engagement.
Answer: D
Explanation:
The guidelines for preparing audit engagement workpapers emphasize clarity, completeness, and accuracy to ensure that they can be easily understood and used by others within the auditing function.
* Option A: Workpapers should be understandable to the auditor in charge and the chief audit executive.
* While workpapers must indeed be clear to the auditor in charge and the chief audit executive, this guideline does not fully capture the broader requirement for understandability to other auditors.
* Option B: Workpapers should be understandable to the audit client and the board.
* Although transparency with the audit client and the board is important, workpapers are primarily internal documents used to support the audit process and conclusions.
* Option C: Workpapers should be understandable to another internal auditor who was not involved in the engagement.
* This is the most comprehensive requirement, ensuring that any internal auditor, even if not originally involved, can review the workpapers, understand the procedures performed, and the conclusions reached. This is crucial for maintaining continuity, quality control, and facilitating reviews or future audits.
* Option D: Workpapers should be understandable to external auditors and regulatory agencies.
* While external auditors and regulatory agencies may review workpapers, the primary audience is internal auditors, who need to ensure the workpapers are detailed and clear enough for effective internal use and review.
NEW QUESTION # 21
A newly appointed chief audit executive (CAE) of a small organization is developing a resource management plan. Which of the following approaches would be most beneficial to help the CAE obtain details of the internal audit activity's collective knowledge, skills, and other competencies?
- A. Review or establish a documented skills assessment of the internal audit staff and gather information from post-audit surveys.
- B. Request the internal audit staff to submit a document that summarizes their most recent performance appraisals and post audit reviews.
- C. Obtain from the human resources department the job descriptions and position requirements forall internal audit staff.
- D. Conduct an objective written test of the internal audit staff to assess their knowledge and skills related to core internal audit competencies.
Answer: A
Explanation:
Conducting a documented skills assessment helps in identifying the existing competencies and any gaps within the internal audit team.
Post-audit surveys can provide feedback on the performance and areas for improvement, which can be used to further refine the skills and competencies of the audit staff (Ref: [16†source])
NEW QUESTION # 22
Which of the following is an example of a directive control?
- A. Exception reports
- B. Segregation of duties
- C. Supervisory review.
- 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 # 23
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. COSO's enterprise risk management framework.
- B. Open Compliance and Ethics Group.
- C. ISO 26000
- 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.
References:
* The Global Reporting Initiative (GRI) .
NEW QUESTION # 24
Which of the following is a true statement regarding whistleblowing?
- A. Whistleblowers should inform the organization about actual criminal circumstances, not assumed allegations.
- B. Whistleblowers are current or former employees who are disgruntled and looking to retaliate.
- C. Whistleblowing programs help employees deal with ethical questions and instill ethical values into everyday behavior
- D. Whistleblowing is one of several possible ethical structures an organization can undertake to encourage ethical behavior.
Answer: D
Explanation:
* Purpose of Whistleblowing:Whistleblowing is a mechanism that allows employees to report unethical or illegal activities within the organization. It is a vital part of an organization's ethical framework, providing a structured way for concerns to be raised and addressed.
NEW QUESTION # 25
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. Ask for a knowledgeable resource from the IT department
- B. Request audit resources through the external auditor.
- C. Make use of an external service provider.
- D. Contract with the software vendor to provide an appropriate resource
Answer: C
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 # 26
According to ISO 31000, which of the following statements is correct?
- A. The internal audit activity will provide assurance over operating effectiveness but not over the design of risk management activities
- B. The internal audit activity can give objective assurance on any part of the risk management framework for which it is responsible.
- C. The framework is designed to be effective for organizations no matter how small.
- D. The board is responsible for setting the organizational attitude through tone at the top.
Answer: C
Explanation:
According to ISO 31000, the risk management framework is scalable and applicable to organizations of all sizes, including small entities. The framework's principles are designed to be flexible and adaptable, ensuring they can be effectively implemented regardless of the organization's size.
* Scalability: The principles and guidelines of ISO 31000 can be tailored to fit the specific context, resources, and complexity of any organization, making it a universal standard.
* Flexibility: The framework supports organizations in integrating risk management practices into their operations at a level that suits their size and complexity.
* Effectiveness: Regardless of the organization's size, the framework aims to enhance risk management practices and support better decision-making.
References:
* "ISO 31000: Risk Management Guidelines," which outlines the applicability and flexibility of the framework for all organizations .
NEW QUESTION # 27
Which of the following is the most important determinant of the objectives and scope of assurance engagements?
The organizational chart, business objectives, and policies and procedures of the area to be reviewed
- A. The most recent risk assessment conducted by management of the area to be reviewed.
- B. The requests of operational and senior management throughout the organization.
- C. The preliminary risk assessment performed by internal auditors planning the engagement.
Answer: C
Explanation:
The primary determinant of the objectives and scope of assurance engagements is the preliminary risk assessment performed by internal auditors. This assessment identifies the key risks associated with the area under review and helps prioritize the audit efforts based on the significance and likelihood of these risks. This approach ensures that the engagement focuses on the most critical areas, thereby adding value to the organization.
NEW QUESTION # 28
Which of the following is true of matrix organizations?
- A. it is best suited for firms with scattered locations or for multi-line, large-scale firms.
- B. Authority, responsibility, and accountability of the units involved may vary based on the projects life, or the organization's culture.
- 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.
* Unity-of-Command: Option A is incorrect because the unity-of-command principle is compromised in a matrix organization due to dual reporting lines.
* Authority and Accountability: Option C is correct to some extent but does not capture the primary benefit of resource utilization.
* Suitability: Option D refers to the best use cases for matrix structures, but option B provides a more comprehensive understanding of how matrix organizations function.
NEW QUESTION # 29
Which of the following statements is true regarding an organization's inventory valuation?
- A. The valuation will be incorrect if the inventory includes goods in transit shipped free on board (FOB) destination to another organization.
- B. The valuation will be correct if the inventory includes goods sent on consignment to another organization
- C. The valuation will be correct if the inventory includes goods received on consignment from another organization.
- D. The valuation will be incorrect if the inventory includes goods in transit shipped FOB shipping point from another organization.
Answer: D
Explanation:
Inventory Valuation Principles: Inventory valuation must accurately reflect the ownership of goods. The accounting treatment of inventory in transit depends on the shipping terms, specifically whether it is FOB (Free on Board) shipping point or FOB destination.
FOB Shipping Point:
* Ownership Transfer: When goods are shipped FOB shipping point, ownership transfers to the buyer as soon as the goods leave the seller's premises.
* Impact on Inventory Valuation: If goods shipped FOB shipping point are in transit at the end of the reporting period, they should be included in the buyer's inventory, not the seller's.
FOB Destination:
* Ownership Transfer: When goods are shipped FOB destination, ownership transfers to the buyer only when the goods arrive at the buyer's premises.
* Impact on Inventory Valuation: Goods in transit under FOB destination terms should remain in the seller's inventory until they reach the buyer.
Consignment:
* Goods Received on Consignment: Goods held on consignment should not be included in the inventory of the consignee (the holder) but remain in the inventory of the consignor (the owner).
* Goods Sent on Consignment: Goods sent out on consignment should still be included in the inventory of the consignor until they are sold by the consignee.
Correct and Incorrect Valuations:
* Incorrect Valuation (Option C): Including goods in transit shipped FOB shipping point in the seller's inventory would be incorrect, as ownership has transferred to the buyer.
* Correct Valuation (Option D): Including goods sent on consignment in the consignor's inventory is correct because ownership has not transferred.
References:
* Correct inventory valuation practices ensure that goods in transit are properly accounted for based on the shipping terms, thus providing an accurate financial picture of inventory.
NEW QUESTION # 30
Which of the following is the next step in understanding a business process once an internal auditor has identified the process?
- A. Determine process outputs
- B. Determine process inputs.
- C. Determine process activities.
- D. Determine process goals
Answer: C
Explanation:
Once an internal auditor has identified a business process, the next step is to understand the specific activities involved in that process. This includes mapping out each step or action taken within the process to gain a detailed understanding of how it operates. Identifying process activities helps in evaluating the efficiency, effectiveness, and potential risks associated with the process
NEW QUESTION # 31
Which of the following processes does the board manage to ensure adequate governance?
- A. Develop strategies to mitigate the risks to achieving the organization's objectives
- B. Select board members with necessary knowledge and skills.
- C. Develop, approve, and execute the strategic plan of the organization
- D. Establish and measure performance objectives for the internal audit activity
Answer: C
Explanation:
The board manages several key processes to ensure adequate governance within an organization, one of which is the development, approval, and execution of the strategic plan. This process is critical because it defines the organization's direction, goals, and the actions required to achieve these goals.
* Strategic Planning: The board plays a pivotal role in setting the organization's strategic direction, which includes establishing long-term goals and defining the means to achieve them.
* Performance Measurement: While the board may establish and measure performance objectives for the internal audit activity, this is part of a broader governance framework.
* Risk Management: The board also develops strategies to mitigate risks, ensuring that the organization
* can achieve its objectives effectively.
Thus, the most comprehensive governance-related process managed by the board involves strategic planning
NEW QUESTION # 32
Which of the following activities would an internal auditor perform as a consulting engagement for an organization?
- A. Advising new internal auditors working for the organization on how to develop strategies on planning audits for the upcoming fiscal year
- B. Briefing the organization's department managers on how to implement risk management processes into their daily operations.
- C. Communicating with senior management to better understand how new purchasing controls will minimize payment processing time
- D. Assessing whether the organization's corporate social responsibility program is meeting its yearly goals to reduce carbon emissions.
Answer: B
Explanation:
* Consulting Engagements:Consulting engagements are advisory in nature and are intended to add value and improve an organization's governance, risk management, and control processes.
* Role of Internal Auditor:In a consulting role, an internal auditor provides advice, facilitates risk management, and helps enhance the efficiency and effectiveness of operations.
* Briefing Managers:By briefing department managers on how to implement risk management processes into their daily operations, the internal auditor is providing valuable advice that can help improve the organization's risk management framework.
* IIA Standards:The IIA's standards emphasize that consulting activities should aim at improving governance, risk management, and control processes without taking on management responsibilities.
References:
* IIA Standard 2010 - Planning .
NEW QUESTION # 33
The internal audit activity is currently working on several engagements, including a consulting engagement on the management process in the human resources department. Which of the following actions should the chief audit executive take to most efficiently and effectively ensure the quality of the engagement?
- A. Employ fieldwork peer review to enhance the work quality.
- B. Require internal auditors to follow a standardized work program.
- C. Personally supervise the engagement
- D. Assign an experienced manager to monitor the whole engagement process.
Answer: A
Explanation:
Ensuring Quality: To ensure the quality of the consulting engagement in the human resources department, the chief audit executive (CAE) can implement a fieldwork peer review process. This involves having experienced auditors review the work of their colleagues to ensure adherence to audit standards and procedures.
Efficiency and Effectiveness:
* Peer Review: This method helps identify any issues or improvements needed in real-time, enhancing both the efficiency and effectiveness of the audit process.
* Standardized Work Programs: While standardized work programs (option C) provide consistency, peer review adds a layer of quality assurance.
* Supervision: Personal supervision by the CAE (option D) is not practical for ensuring the quality of all engagements.
NEW QUESTION # 34
Which of the following is most likely to be considered a control weakness?
- A. Vendor invoice payment requests are accompanied by a purchase order and receiving report.
- B. Department managers initiate purchase requests that must be approved by the plant superintendent
- C. Buyers promptly update the official vendor listing as new supplier sources become known.
- D. Purchase orders are typed by the purchasing department using prenumbered forms
Answer: C
Explanation:
A control weakness occurs when there is a deficiency in internal controls that could allow errors or fraud to occur. While the act of buyers promptly updating the vendor listing might seem efficient, it could bypass necessary oversight and approval processes. This could lead to unauthorized or inappropriate vendors being added, increasing the risk of fraud or favoritism. Effective internal control requires that such updates be reviewed and approved by an independent party to ensure accuracy and appropriateness.
NEW QUESTION # 35
According to IIA guidance, which of the following statements about analytical procedures is true?
- A. Analytical procedures begin after the engagements planning phase.
- B. Analytical procedures provide internal auditors with explainable results.
- C. Analytical procedures compare information against expectations
- D. Analytical procedures are computer-assisted audit techniques
Answer: C
Explanation:
Analytical Procedures: These procedures involve evaluating financial information by studying plausible relationships among both financial and non-financial data. They help auditors form expectations about account balances or other financial data and then compare actual results to these expectations.
* Purpose: To identify any unusual or unexpected results that might indicate potential misstatements.
IIA Guidance on Analytical Procedures:
* Comparison Against Expectations: This is the core aspect of analytical procedures. Auditors develop expectations based on their knowledge of the business, industry trends, historical data, and other relevant factors.
* Engagement Phases: Analytical procedures can be applied in various phases of an audit, not just after the planning phase.
Other Statements:
* Begin After Planning: Analytical procedures are often used during planning to understand the business and during substantive testing and review phases.
* Explainable Results: While they can provide insights, the primary purpose is not just to explain results but to identify discrepancies.
* Computer-Assisted Techniques: Analytical procedures can be performed manually or with the help of software, but they are not solely defined as computer-assisted techniques.
NEW QUESTION # 36
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