A fully updated 2021 IIA-CIA-Part2 Exam Dumps exam guide from training expert Prep4King
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NEW QUESTION 187
Which of the following is the least relevant when preparing the internal audit activity's annual engagement plan?
- A. The organization's current risk priority and exposure.
- B. Coordination with the audit plans of the external auditor.
- C. A rotation of internal audit engagements selected on a time basis.
- D. Senior management's requests for internal audit engagements.
Answer: C
NEW QUESTION 188
Which of the following actions are appropriate for the chief audit executive to perform when identifying audit resource requirements?
1. Consider employees from other operational areas as audit resources, to provide additional audit coverage in the organization.
2. Approach an external service provider to conduct internal audits on certain areas of the organization, due to a lack of skills in the organization.
3. Suggest to the audit committee that an audit of technology be deferred until staff can be trained, due to limited IT audit skills among the audit staff.
4. Communicate to senior management a summary report on the status and adequacy of audit resources.
- A. 2 and 4 only
- B. 1 and 3 only
- C. 1, 2, and 4
- D. 2, 3, and 4
Answer: C
NEW QUESTION 189
Which of the following audit planning activities adds the least value in understanding the current risk exposures facing the corporation?
- A. Review of corporate performance reporting and benchmarking.
- B. Consultation with senior management and the audit committee.
- C. Review of the external auditor's risk assessment.
- D. Review of organizational strategic plans and operational plans.
Answer: A
NEW QUESTION 190
A company's cellular phone costs vary significantly by sales representative and by month. Which of the following would be the most appropriate approach for a consulting project concerning this issue?
- A. Business process review of cellular phone needs.
- B. Benchmarking with other cellular phone users.
- C. Control self-assessment involving sales representatives.
- D. Performance measurement and design of the budgeting process.
Answer: A
NEW QUESTION 191
A payroll clerk enters payroll transactions into the general ledger. The staff accountant reconciles the payroll ledgers. The payroll manager issues the manual payroll checks. The checks aremaintained in a locked cabinet. The chief financial officer secures the keys to the cabinet. The payroll clerk distributes the manual checks.
The payroll manager reconciles the bank statements monthly. Which of the following audit steps best addresses the risk of fraud in the payroll process?
- A. Examine whether the payroll manager approves the reconciliations of ledgers.
- B. Determine whether the cabinet keys are secured properly.
- C. Vouch a sample of items on bank reconciliations to supporting documentation.
- D. Determine whether an approved list of voided checks exists.
Answer: C
NEW QUESTION 192
In which of the following situations would it be most appropriate to employ the services of a forensic specialist?
- A. Verification of fixed assets in a manufacturing company.
- B. Review for misapplication of general computer controls over accounts receivable.
- C. Detection of unauthorized changes to source documents.
- D. Investigation of ghost employees in a large business.
Answer: C
NEW QUESTION 193
An internal auditor is assessing the organization's risk management framework. Which of the following formulas should he use to calculate the residual risk?
- A. Option D
- B. Option B
- C. Option A
- D. Option C
Answer: B
NEW QUESTION 194
During a review of performance measures in an organization's purchasing function, the preliminary survey indicates that most of the measures have been in use for some time. The internal auditor should:
- A. Establish the history of the measures and reasons for use.
- B. Review the data that was used to develop the measures.
- C. Report that the measures being used are out-of-date and should be improved.
- D. Perform benchmarking in order to verify that the measures being used are meaningful.
Answer: D
NEW QUESTION 195
Which of the following is an appropriate responsibility for the internal audit activity with regard to the organization's risk management program?
- A. Ensuring that a proper and effective risk management process exists.
- B. Identifying and ensuring that appropriate controls exist to mitigate risks.
- C. Attaining an adequate understanding of the entity's key mitigation strategies.
- D. Identifying and managing risks in line with the entity's risk appetite.
Answer: C
NEW QUESTION 196
An internal audit activity is participating in the due diligence work for an acquisition that a company is considering. One engagement objective is to determine if the acquisition's accounts payable contain all outstanding liabilities. Which of the following audit procedures would not be relevant for this objective?
- A. Select a sample of accounts payable from the accounts payable list and verify the supporting receiving reports, purchase orders, and invoices.
- B. Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.
- C. Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.
- D. Trace receiving reports issued before the period end to the related vendor invoices and accounts payable list.
Answer: A
Explanation:
Section: Volume A
NEW QUESTION 197
A performance audit engagement typically involves:
- A. Evaluation of organizational and departmental structures, including assessments of process flows.
- B. Appraisal of the environment and comparison against established criteria.
- C. Review of financial statement information, including the appropriateness of various accounting treatments.
- D. Tests of compliance with policies, procedures, laws, and regulations.
Answer: B
NEW QUESTION 198
Which of the following situations might allow an employee to steal checks sent to an organization and subsequently cash them?
- A. Only one signature is required on the organization's checks.
- B. Checks are not restrictively endorsed when received.
- C. One employee handles both accounts receivable and purchase orders.
- D. One employee handles both cash deposits and accounts payable.
Answer: B
NEW QUESTION 199
Which of the following statements is true?
- A. Consulting engagements provide the internal audit activity with flexibility to add value and do not need to be included in the long-range audit plan.
- B. The internal audit activity's plan of engagments must be based on a formal quantitative risk assessment.
- C. The chief audit executive should consider changes to the long-range audit plan based on the requests of business unit managers.
- D. A risk assessment on which to base the internal audit activity's long-range plan must be undertaken at least once every three years.
Answer: C
Explanation:
Section: Volume D
NEW QUESTION 200
An organization's policies allow buyers to authorize expenditures up to $50,000 without any other approval. Which of the following audit procedures would be most effective in determining if fraud in the form of payments to fictitious companies has occurred?
- A. Use generalized audit software to take a random sample of all expenditures under $50,000 to determine whether they were properly approved.
- B. Use generalized audit software to select a sample of paid invoices to new vendors and examine evidence that shows that services or goods were received.
- C. Use generalized audit software to list all purchases over $50,000 to determine whether they were properly approved.
- D. Develop a snapshot technique to trace all transactions by suspected buyers.
Answer: B
NEW QUESTION 201
The internal auditor is asked to conduct an investigation involving a suspected fraud. According to the Standards, which of the following statements regarding the investigation process is false?
- A. The auditor should not limit the collection of information by prejudging its relevance to the investigation.
- B. The auditor must give consideration to the risk of unidentified co-conspirators whether indications exist or not.
- C. The auditor should use anonymous surveys of coworkers to assess the character and behavior of the suspect.
- D. The auditor must consider the risk that audit procedures may inadvertently violate the rights of the suspect.
Answer: C
NEW QUESTION 202
An internal auditor was assigned to conduct an inventory control and stock room area engagement. During the audit, the auditor observed that there were some items that have a shelf life expiration date requirement based on a certificate of conformance received with the product. The certificates of conformance are kept on file in the inventory area office and the expiration date is verified at the time the item is taken from stock. The auditor reviewed the items in the stock room and also on the production floor for the expiration dates to see if there was any expired product. All items with a shelf life requirement were found to be within the expiration date requirement. Which of the following recommendations would be appropriate?
- A. Permit production staff the access to files where the certificates of conformity are kept, so they can choose the items with the closest expiration date.
- B. Determine the cost of inventory for the items that have a shelf life and apply a new policy regarding inventory levels to be maintained (i.e., minimums, maximums, reorder points etc.).
- C. Take no action, because all the items were within the expiration date requirement, and no corrective action is needed.
- D. Add to the product label a "use by date" line, enter the expiration at the time of receipt, and perform periodic inventory checks.
Answer: D
Explanation:
Section: Volume D
NEW QUESTION 203
When interrogating an individual who is suspected of fraud, it is appropriate to:
- A. Prepare a list of questions prior to the interrogation and strictly adhere to the list.
- B. Tell the individual that any information disclosed in the interrogation will not be disclosed outside of the company.
- C. Start the interview with questions to which the interviewer already knows the answer.
- D. Discontinue questioning once the individual has confessed to the fraud.
Answer: C
NEW QUESTION 204
Which of the following does not represent a difficulty in using red flags as fraud indicators?
- A. Some red flags are difficult to quantify or to evaluate.
- B. Many common red flags are also associated with situations where no fraud exists.
- C. The red flags literature is not well enough established to have a positive impact on auditing.
- D. Red flag information is only gathered in extraordinary circumstances.
Answer: C
Explanation:
Section: Volume A
NEW QUESTION 205
During an interview with a manager in a company's claims department, an auditor noted that the manager became nervous and changed the subject whenever the auditor raised questions about certain types of claims. The manager's answers were consistent with company policies and procedures. When documenting the interview, the auditor should:
- A. Disregard the interview entirely because the verbal and nonverbal communications were contradictory.
- B. Conclude that the nonverbal communication is persuasive and that sufficient evidence exists to begin a fraud investigation.
- C. Document the manager's answers, noting the nature of the nonverbal communication.
- D. Document the manager's answers but not the nonverbal communication because it is subjective and is not corroborated.
Answer: C
NEW QUESTION 206
All of the following tools are employed to control large-scale projects except:
- A. Critical path method.
- B. Gantt charts.
- C. Program evaluation and review technique (PERT).
- D. Statistical process control.
Answer: D
NEW QUESTION 207
An internal auditor is evaluating controls over the purchasing function. The function includes the material control department, the purchasing department, and the receiving department. Which of the following is true regarding the presentation of the process flow among the three departments?
- A. Flowcharts are not useful for documenting process flow.
- B. A vertical flowchart of each department, showing inputs at the top and outputs at the bottom, would be most useful.
- C. Both a flowchart and narratives are needed due to the number of departments involved.
- D. A horizontal flowchart, with the departments described across the top and the process flowing horizontally, would be most useful.
Answer: D
NEW QUESTION 208
The chief audit executive (CAE) of an organization has established an internal audit activity (IAA) quality assessment program. According to IIA guidance, which of the following would be part of this program?
- A. Assessment of the IAA conducted independently of client feedback, and identified areas of improvement reviewed at the end of the year.
- B. Assessment of the IAA conducted independently of client feedback, and the review of individual audits to determine the quality and timeliness of supervision.
- C. Compliance with a checklist of required audit procedures, and review of individual audits to determine the quality and timeliness of supervision.
- D. Compliance with a checklist of required audit procedures, and identified areas of improvement reviewed at the end of the year.
Answer: C
NEW QUESTION 209
An internal auditor compared the number of human resources professionals per employee with industry standards. This comparison would assist the auditor in evaluating which of the following areas?
- A. Current level of performance of the human resources department.
- B. Sufficiency of controls over payroll rate increases.
- C. Degree of compliance with human resources policies.
- D. Adequacy of controls over hiring new employees.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 210
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