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The internal audit activity is planning a procurement audit and needs to obtain a thorough understanding of the subcontracting process, which can involve multiple individuals in multiple countries.
Which of the following internal audit tools would be most effective to document the process and the key controls?

  • A. Internal control checklist.
  • B. Procurement employee survey.
  • C. Cross-functional flow chart.
  • D. Segregation of duties matrix.

Answer: C

According to IIA guidance, which of the following describes the primary reason to implement environmental and social safeguards within an organization?

  • A. To enable Triple Bottom Line reporting capability.
  • B. To facilitate the conduct of risk assessment.
  • C. To achieve and maintain sustainable development.
  • D. To fulfill regulatory and compliance requirements.

Answer: C

According to COSO, which of the following is not considered one of the components of an organization's internal environment?

  • A. Authority and responsibility to resolve issues.
  • B. Framework to plan, execute and monitor activities.
  • C. Integrated responses to multiple risks.
  • D. Knowledge and skills needed to perform activities.

Answer: C

Which of the following best ensures the independence of the internal audit activity?
* 1. The CEO and audit committee review and endorse any changes to the approved audit plan on an annual basis.
* 2. The audit committee reviews the performance of the chief audit executive (CAE) periodically.
* 3. The internal audit charter requires the CAE to report functionally to the audit committee.

  • A. 3 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2, and 3

Answer: C

Which of the following actions would be characterized as a preventive control to safeguard inventory from the risk of theft?
* 1. Locking doors and physically securing inventory items.
* 2. Independently observing the receipt of materials.
* 3. Conducting monthly inventory counts.
* 4. Requiring the use of employee ID badges at all times.

  • A. 1 and 3.
  • B. 1 and 4.
  • C. 2 and 3.
  • D. 2 and 4.

Answer: B

Which of the following items should the chief audit executive disclose to senior management regarding the results of the internal audit activity's quality assessments?

  • A. The internal audit activity's plan for resource allocation.
  • B. The amount of the organization's potential loss prevented by the risk-based auditing of the internal audit activity.
  • C. The number of audits from the annual internal audit plan that were completed last year.
  • D. The qualifications and independence of the assessment Team.

Answer: B

To fill a critical vacancy, an internal auditor is assigned temporarily to a nonaudit role in the purchasing department, where she worked previously before joining the internal audit activity. According to IIA guidance, which of the following statements is true regarding these circumstances?

  • A. The chief audit executive (CAE) should review all work performed by the auditor during her temporary assignment to ensure no impairments.
  • B. The CAE may conduct audits in the purchasing department during the auditor's temporary assignment.
  • C. The auditor should obtain the CAE's approval as to the nature and scope of the duties she is permitted to perform during her temporary assignment.
  • D. Any work performed by the auditor during her temporary assignment must conform to the internal audit charter.

Answer: C

While auditing an organization's credit approval process, an internal auditor learns that the organization has made a large loan to another auditor's relative. Which course of action should the auditor take?

  • A. Proceed with the audit engagement, but do not include the relative's information.
  • B. Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.
  • C. Disclose in the engagement final communication that the relative is a customer.
  • D. Immediately withdraw from the audit engagement.

Answer: B

According to the COSO enterprise risk management framework, which of the following best describes the activity that helps ensure risk responses are carried out effectively?

  • A. Objective setting.
  • B. Control activities.
  • C. Information and communication.
  • D. Event identification.

Answer: B

What is the additional advantage of facilitated workshops, in comparison with structured interviews, used when testing the effectiveness of entity-level controls?

  • A. During facilitated workshops, people more openly say things to internal auditors than during private interviews.
  • B. Internal auditors do not need other sources of information, as the data gathered during facilitated workshops is sufficient.
  • C. Facilitated workshops create a synergy of discussion that can bring multiple perspectives to the same issue.
  • D. The testimonial evidence obtained during facilitated workshops is generally considered more reliable.

Answer: C

Which of the following would be the most important consideration by the internal audit activity when selecting employees to perform an internal quality assessment?

  • A. Their understanding of auditing standards.
  • B. Previous experience working with the internal audit activity.
  • C. Their reporting line within the organization.
  • D. The nature of their regular duties and responsibilities.

Answer: A

Which of the following is an example of collusion?

  • A. An employee includes a faked receipt in his expense claim, and the claim is signed by the employee's manager.
  • B. A vendor inflates the price of an item and remits a portion of the excess to the purchasing manager.
  • C. A vendor sends a duplicate invoice with a new invoice number, and the accounts payable system fails to detect the duplication.
  • D. An employee works with the IT manager to develop a program for identifying duplicate invoice payments.

Answer: B

According to The MA Code of Ethics, which of the following is one of the rules of conduct for objectivity?

  • A. Internal auditors shall continually improve their proficiency and effectiveness and quality of their services.
  • B. Internal auditors shall respect and contribute to legitimate and ethical objectives of the organization.
  • C. Internal auditors shall not accept anything that may impair or be presumed to impair their professional judgment.
  • D. Internal auditors shall be prudent in the use and protection of information acquired in the course of their duties.

Answer: C

An internal audit team is performing an audit of workplace accident claims.
Which of the following actions by the audit team best demonstrates due professional care?

  • A. Having an occupational health officer on the engagement team.
  • B. Determining that the claims have been classified properly.
  • C. Placing reliance on medical reports from the injured worker's doctor.
  • D. Reviewing claims to ensure all accidents actually occurred in the workplace.

Answer: A

As a matter of policy, the chief audit executive routinely rotates internal audit staff assignments and periodically interviews the staff to discuss the potential for conflicts of interest. These actions help fulfill which of the following internal audit mandates?

  • A. Organizational independence.
  • B. Professional objectivity.
  • C. Due professional care.
  • D. Individual proficiency.

Answer: B

A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annua snowfall for the coming winter. Which of the following best describes this type of risk?

  • A. Residual.
  • B. Net.
  • C. Inherent.
  • D. Accepted.

Answer: C

If appropriate safeguards exist, which of the following is considered a legitimate internal audit role within risk management at an organization?

  • A. Imposing risk management processes.
  • B. Providing consolidated reporting on risks.
  • C. Taking accountability for risk management.
  • D. Making decisions on risk responses.

Answer: B

An organization has implemented a software system that requires a supervisor to approve transactions that would cause treasury dealers to exceed their authorized limit. This is an example of which of the following types of controls?

  • A. Preventive controls.
  • B. Detective controls.
  • C. Soft controls.
  • D. Directive controls.

Answer: A

A large sales organization maintains a system of internal control according to the COSO model and has updated its code of conduct. This change relates to which component of the COSO framework?

  • A. Control activities.
  • B. Information and communication.
  • C. Commitment.
  • D. Control environment.

Answer: D


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