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NEW QUESTION # 147
Which of the following statements is true regarding the use of non-statistical sampling in auditing control tests?
- A. It considers tolerable deviation rate more effectively than does statistical sampling.
- B. Sampling risk will be accurately quantified through non-statistical sampling.
- C. Lesser evidence is required to support a conclusion than for statistical sampling.
- D. Non-statistical sample results must be projected to the population.
Answer: D
NEW QUESTION # 148
Which statement accurately describes the authority of the internal audit activity as outlined in the audit charter?
- A. The CAE shall provide senior management and the board with performance updates quarterly.
- B. The internal audit team shall have full access to the organization's records, physical property, and personnel required to conduct audit engagements.
- C. The chief audit executive (CAE) shall report directly to the board and administratively to the CEO.
- D. The internal audit activity shall maintain a quality assurance and improvement program in conformance with the Standards.
Answer: B
NEW QUESTION # 149
A new internal audit activity is considering the adoption of a risk and control framework. Which of the following is the most appropriate consideration during this process?
- A. The framework should always be tailored to the organization
- B. The framework should apply to individual projects rather than the organization as a whole
- C. The framework should not be developed by the internal audit activity
- D. The framework should require fewer resources to implement
Answer: A
NEW QUESTION # 150
Which of the following would provide the best evidence of errors in the quantities of items received from suppliers?
- A. Suppliers' reports of overshipments.
- B. Purchase requisitions and purchase orders.
- C. Warehouse receiving logs.
- D. Observation and inspection of inventory.
Answer: C
NEW QUESTION # 151
Which of the following represents the correct order of the risk management process?
- A. Resource allocation, risk monitoring, risk assessment, feedback, post-mortem analysis.
- B. Risk assessment, resource allocation, risk governance and reporting, post-mortem analysis, feedback.
- C. Resource allocation, risk management metrics, risk assessment, post-mortem analysis, effective communication.
- D. Risk management metrics, resource allocation, risk assessment, effective communication, post-mortem analysis.
Answer: B
NEW QUESTION # 152
A dental insurance provider has implemented an electronic claim submission process and is concerned that dentists are submitting claims for services that were not provided. Which of the following control procedures would be most effective in preventing this type of fraud?
- A. Require all submitted claims to be followed by a signed statement by the dentist testifying to the fact that the claimed procedures were performed.
- B. Send confirmations to the dentists requesting them to confirm the exact nature of the claims submitted to the insurance provider.
- C. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.
- D. Develop a program that identifies procedures performed on an individual which are either in excess of expectations based on the age of the insured or are similar to other procedures recently performed on the individual.
Answer: D
NEW QUESTION # 153
Which of the following is a control that is used mainly to check the integrity of data entered into a business application, whether the data is entered directly by staff, remotely by a business partner, or through a web-enabled application?
- A. Integrity control
- B. Processing control.
- C. General IT control.
- D. Input control
Answer: A
NEW QUESTION # 154
Which of the following techniques would provide the most compelling evidence that a safety hazard exists within a manufacturing facility?
- A. Analysis of facility operating reports, focusing on instances when breakdowns occurred.
- B. Questioning of facility management, including the facility safety officer.
- C. Review of records involving safety violations, filed by facility production employees.
- D. Observation of the facility during operations.
Answer: D
NEW QUESTION # 155
The manager for an organization's accounts payable department resigned her post in that capacity. Three months later, she was recruited to the internal audit activity and has been working with the audit team for the last eight months. Which of the following assignments would the newly hired internal auditor be able to execute without any impairments to independence or objectivity?
- A. A review of the employees' sports club finances, which are overseen by the chief audit executive.
- B. An assurance review for a sales program on which she previously provided consultation.
- C. An operations audit of the accounts payable department.
- D. A consulting engagement related to a new accounts payable optimization initiative.
Answer: A
NEW QUESTION # 156
An internal auditor is planning an operational audit of the accounts payable function. Which of the following best mitigates the risk of the organization being a victim of disbursement fraud by employees?
- A. The accounts payable trial balance is reconciled to the general ledger.
- B. The accounts payable function is properly segregated from the cash custody function.
- C. Accounts payable payment records are checked against supplier invoices.
- D. Accounts payable are aged by vendors.
Answer: B
Explanation:
Section: Volume D
NEW QUESTION # 157
Upon completion of an external quality assessment, which of the following would the chief audit executive be required to report to the board?
- A. The detailed evaluation results of the external assessment
- B. The competency and independence of the external assessment team
- C. The timetable and schedule of the next external assessment
- D. The total time spent to accomplish the external assessment
Answer: A
Explanation:
Upon completion of an external quality assessment, the chief audit executive is required to report the detailed evaluation results of the external assessment to the board. This disclosure is crucial as it provides the board with insights into the effectiveness and efficiency of the internal audit function, highlighting areas of strength and opportunities for improvement. It facilitates informed decision-making regarding the internal audit activity's practices and processes.
IIA Standard 1320 - Reporting on the Quality Assurance and Improvement Program
NEW QUESTION # 158
Which of the following activities best ensures that internal auditors grow professionally in alignment with current industry trends to meet the expectations of primary stakeholders?
- A. Acquiring memberships in professional organizations.
- B. Deploying self-assessments against a competency benchmark.
- C. Developing professional succession plans.
- D. Obtaining subscriptions to professional journals in their area of interest.
Answer: B
NEW QUESTION # 159
Line management of a manufacturing operation requests an operational audit. They are seeking recommendations for policies and procedures to enhance control over the operation. What should the internal audit activity do?
- A. Turn down the engagement because recommending controls would impair future objectivity regarding this client.
- B. Review the effectiveness of current policies and procedures but avoid making control recommendations due to impaired objectivity.
- C. Perform the engagement and make appropriate recommendations for policies and procedures.
- D. Turn down the engagement because an operational audit should not review policies and procedures.
Answer: C
NEW QUESTION # 160
According to the Standards,which of the following statements best describes the required content of the chief audit executive's (CAE) report to senior management and the board on the internal audit activity (IAA)?
- A. The CAE must report on quality assurance techniques,statistical analysis methods,and other analytical processes used.
- B. The CAE must report on auditors' continuing education activities,staffing changes,and any outsourcing to external parties.
- C. The CAE must report on significant risk exposures,control issues,and governance issues.
- D. The CAE must report on policies,procedures,and best practices of the IAA.
Answer: C
NEW QUESTION # 161
The head of human resources notified the internal audit activity that a key account manager was fired because he did not register a large number of contracts with clients As a result the organization was unaware of its duties and would suffer some financial loss Which of the following should be expected from a competent internal auditor who is analyzing this situation?
- A. The ability to evaluate whether such attributes as intent and personal gain were present
- B. The ability to conduct admission-seeking interviews with potential suspects
- C. The ability to apply forensic methods to obtain legally admissible evidence
- D. The ability to retrieve concealed or deleted information from the former employee's laptop
Answer: A
Explanation:
In analyzing the situation where a key account manager failed to register a large number of contracts, a competent internal auditor should evaluate whether attributes such as intent and personal gain were present.
This involves assessing whether the individual's actions were deliberate and motivated by personal benefits.
Understanding these attributes is crucial for determining the root cause of the issue and identifying potential fraud or misconduct. It also helps in making recommendations to prevent future occurrences.
IIA Practice Guide: Fraud and Internal Audit
IIA Standard 1210.A2: Proficiency - Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization
NEW QUESTION # 162
Two individuals are being considered for an audit team that is to perform a highly technical review. Which of the following situations would preclude selection of the individual for the audit due to an objectivity concern?
I. Person A is a member of the internal audit staff and has the required technical skills. Person A participated in a controls review of the system to be audited when it was being developed.
II. Person B is a technical specialist who understands the audit area but is not a member of the internal audit staff. Although person B has personal credibility in the information systems department to be audited, person B works for another department in the organization.
- A. Neither I nor II.
- B. Both I and II.
- C. I only.
- D. II only.
Answer: A
NEW QUESTION # 163
An accounts payable clerk has recently transferred into the internal audit activity and has been assigned to an engagement related to accounts payable processes for which he was previously responsible. Which of the following is the best action for the new internal auditor to take?
- A. If it is an assurance engagement, accept the assignment because the chief audit executive had knowledge of the internal auditor's previous role when this engagement was assigned.
- B. If it is a consulting engagement, accept the assignment because direct knowledge of the existing accounts payable processes will provide depth and add more value.
- C. If it is an assurance engagement, accept the assignment because direct knowledge of the existing accounts payable processes wifi provide depth and add more value.,
- D. If it is a consulting engagement, decline the assignment and ask to be reassigned, because in a consulting engagement the auditor must not assess operations for areas in which they were previously responsible.
Answer: D
Explanation:
If the assignment is a consulting engagement, the best action for the new internal auditor, who recently transferred from being an accounts payable clerk, is to decline the assignment and ask to be reassigned. This avoids any conflict of interest and maintains objectivity, as the auditor would be evaluating processes for which they were previously responsible, potentially compromising the independence and objectivity required in consulting engagements.
IIA Standards 1120 - Objectivity
NEW QUESTION # 164
Which of the following represents the most effective governance structure?
I.
Operating
Executive
Internal
Management
Management
Auditing
Responsibility for risk
Oversight role
Advisory role
II.
Oversight role
Responsibility for risk
Advisory role
III.
Responsibility for risk
Advisory role
Oversight role
IV.
Oversight role
Advisory role
Responsibility for risk
- A. III
- B. IV
- C. I Only
- D. II
Answer: C
NEW QUESTION # 165
An internal auditor is assessing how the organization processes financial transactions and whether written policies and procedures are followed. The auditor requested to meet with certain employees to understand their related roles and responsibilities. However the employees refuse to meet with the auditor claiming they are too busy. Which of the following responses would best demonstrate the auditor's conflict-resolution skills?
- A. The auditor meets with senior management of the organization to discuss the employees' behavior and possible resolutions that would satisfy all parties
- B. The auditor considers other options to determine whether the employees are processing financial transactions as required by the organization
- C. The auditor considers the employees to be unresponsive and proceeds to document the actions and concerns as a scope limitation that can affect the engagement
- D. The auditor meets with the department supervisor and staff to discuss the employees' actions in order to obtain an understands and potential resolution
Answer: A
Explanation:
Demonstrating conflict-resolution skills involves addressing the issue through appropriate channels and seeking a resolution that satisfies all parties involved. By meeting with senior management, the auditor acknowledges the employees' refusal to meet and elevates the concern to a higher level. This approach allows senior management to understand the situation and take appropriate actions to facilitate the audit process while considering the employees' workload and potential constraints. It demonstrates the auditor's ability to handle conflicts professionally and seek collaborative solutions.
The IIA Standards: Standard 2400 - Communicating Results: "Internal auditors must communicate the results of engagements." IIA Practice Guide: "Interpersonal Skills for Internal Auditors": Discusses the importance of effective communication and conflict-resolution skills in internal auditing.
NEW QUESTION # 166
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