CIA Exam Part Two: Practice of Internal Auditing IIA-CIA-Part2 Exam Questions

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IIA Certified Internal Auditor certification requires to complete three parts as listed:

Part 1 – Essentials of Internal Auditing
Part 2 – Practice of Internal Auditing
Part 3 – Business Knowledge for Internal Auditing

CIA Exam Part Two: Practice of Internal Auditing IIA-CIA-Part2 exam questions are available to help you complete the part 2 successfully. IIA-CIA-Part2 exam questions help you in preparing for the IIA-CIA-Part2 CIA Exam Part Two: Practice of Internal Auditing within the most efficient way. While alternatively, the IIA-CIA-Part2 exam questions and answers aids you in acquiring to understand the real IIA-CIA-Part2 exam.

Read IIA-CIA-Part2 Practice of Internal Auditing Free Questions First

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1. What would be used to determine the collectability of accounts receivable balances?

The file of related shipping documents.

Negative accounts receivable confirmations.

Positive accounts receivable confirmations.

An aged accounts receivable listing.

2. 1.An internal auditor provided the following statement about division A's performance during the month: "Because supplies of raw material X were scarce, division A's profits declined by 15 percent."

Which of the following can be validly concluded from the auditor's statement?

I. Division A's production level declined by 15 percent.

II. Division A could have sold more products than it produced.

III. Division A usually sells all of the products that it produces.

I only

II only

III only

I and II only

3. A governmental auditor was assigned to determine reasons why the students in one region scored significantly higher on education evaluation tests than did the students in another region. Previous research showed that there is a direct correlation between public financial support and student results.

Which of the following is most likely to explain the difference in the regional results?

The more successful region spends 30 percent more money on education than does the other region.

A higher percentage of the general tax fund is spent on education in the more successful region than in the other region.

The more successful region spends more money per student on education than does the other region.

The more successful region has increased educational spending by an average of 10 percent each year for the last three years, whereas the other region's increase averaged only three percent.

4. Access control software on an organization's mainframe computer records detailed information concerning both successful and unsuccessful log-on attempts to applications.

Which of the following audit tools would be best suited to review the access information that has been recorded?

Generalized audit software.

Flowcharting.

Integrated test facility.

Test data.

5. An internal auditor is discussing an audit problem with an engagement client.

While listening to the client, the internal auditor should:

Prepare a response to the client.

Take mental notes on the speaker's nonverbal communication, as it is more important than what is being said.

Make sure that all details, as well as the main ideas of the client, are remembered.

Integrate the incoming information from the client with information that is already known.

6. Which of the following trends found on financial reports would most likely indicate a possible problem?

A material decrease in the receivables turnover.

A material increase in inventory turnover.

A material increase in daily sales compared to total outstanding receivables.

A material increase in the acid-test ratio.

7. What does the following scatter gram suggest?

Sales revenue is related to training costs.

The training program is not effective.

Increases in training costs consistently increase sales revenue.

One data point is incorrectly plotted.

8. Which of the following, if observed, would not indicate the need to extend the search for other indicators of fraud in a purchasing department?

The standard of living of one of the purchasing agents has increased.

The internal control structure has significant weaknesses.

The purchasing agents have convinced management to adopt a policy of paying vendors on a more timely basis in order to avoid incurring penalty charges.

The cost of goods procured seems to be excessive in comparison with previous years.

9. Many questionnaires are made up of a series of different questions that use the same response categories (for example: strongly agree, agree, neither, disagree, strongly disagree). Some designs will have different groups of respondents answer alternate versions of the questionnaire that present the questions in different orders and reverse the orientation of the endpoints of the scale (for example: agree on the right and disagree on the left).

The purpose of such questionnaire variations is to:

Eliminate intentional misrepresentations.

Reduce the effects of pattern response tendencies.

Test whether respondents are reading the questionnaire.

Make it possible to get information about more than one population parameter using the same questions.

10. Which of the following would provide the greatest assurance of the accuracy of a computer program's computation of freight charges for catalog sales?

Use discovery sampling, selecting transactions from invoices which should have freight charges added to them.

Use either test data or parallel simul-ation to test the computer application.

Use difference estimation, selecting transactions from invoices which should have freight charges added to them.

Use generalized audit software to select a monetary-unit sample of invoices that have been billed to customers.

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11. An auditor prepared a workpaper that consisted of a list of employee names and identification numbers as well as the following statement:

“A statistical sample of 40 employee personnel files was selected to verify that they contain all documents required by company policy 501 (copy attached). No exceptions were noted.”

The auditor did not place any audit verification symbols on this workpaper.

Which of the following changes would most improve the auditor's workpaper?

Use of audit verification symbols to show that each file was examined.

Removal of the employee names to protect their confidentiality.

Justification for the sample size.

Listing of the actual documents examined for each employee.

12. Which of the following would be a red flag that indicates the possibility of inventory fraud?

I. The controller has assumed responsibility for approving all payments to certain vendors.

II. The controller has continuously delayed installation of a new accounts payable system, despite a corporate directive to implement it.

III. Sales commissions are not consistent with the organization's increased levels of sales.

IV. Payments to certain vendors are supported by copies of receiving memos, rather than originals.

I and II only

II and III only

I, II, and IV only

I, III, and IV only

13. Which of the following performance criteria would be most useful when measuring the performance of a customer service desk?

The number of customer inquiries recorded per day.

The percentage of customer issues resolved within 24 hours.

The number of customer complaints recorded per day.

The percentage of total customers served per day.

14. When assessing the risk associated with an activity, an internal auditor should:

Determine how the risk should best be managed.

Provide assurance on the management of the risk.

Modify the risk management process based on risk exposures.

Design controls to mitigate the identified risks.

15. Company A has a formal comprehensive corporate code of ethics while company B does not.

Which of the following statements regarding the existence of the code of ethics in company A can be logically inferred?

I. Company A exhibits a higher standard of ethical behavior than does company B.

II. Company A has established objective criteria by which an employee's actions can be evaluated.

III. The absence of a formal corporate code of ethics in company B would prevent a successful audit of ethical behavior in that company.

II only

III only

I and II only

II and III only

16. Which of the following would be most helpful to a governmental auditor searching for the existence of multiple welfare claims that were filed under different names but used the same address?

Tagging and tracing.

Generalized audit software.

Integrated test facility.

Spreadsheet analysis.

17. Which of the following is the best problem-solving technique to use when analyzing performance and cost?

Value analysis.

Attribute listing.

Brainstorming.

Component analysis.

18. A film company determined that income level impacts the number of films that people watch per month, as shown by the graph below:

The graph indicates that:

A richer person always sees more films than a poorer person.

The number of films seen per month is a linear function of income level.

A 20 percent pay increase is more likely to increase film viewing at lower income levels than at higher income levels.

A 20 percent pay increase is likely to increase film viewing by a constant amount regardless of income level.

19. In which of the following situations would it be most appropriate to employ the services of a forensic specialist?

Detection of unauthorized changes to source documents.

Review for misapplication of general computer controls over accounts receivable.

Investigation of ghost employees in a large business.

Verification of fixed assets in a manufacturing company.

20. Which of the following audit techniques provides for continuous monitoring and analysis of computer transactions for detailed auditing?

Integrated test facility.

Parallel simul-ation.

Test data.

Embedded audit routines.

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21. Which of the following does not represent a difficulty in using red flags as fraud indicators?

Many common red flags are also associated with situations where no fraud exists.

Some red flags are difficult to quantify or to evaluate.

Red flag information is only gathered in extraordinary circumstances.

The red flags literature is not well enough established to have a positive impact on auditing.

22. Which of the following situations would best support the decision of a chief audit executive (CAE) to defer follow-up activity at a branch office until the next audit engagement?

An audit of the branch office is routinely scheduled every three years.

On-site follow-up of a remote branch may not be feasible due to travel costs.

Branch office management states that correction of the audit issue may take longer than expected.

The CAE and management agree that the corrective action taken to date is sufficient.

23. Which of the following is used to identify and prioritize critical business applications to determine those that must be restored and the order of restoration in the event that a disaster impairs information systems processing?

Contingent facility contract analysis.

System backup analysis.

Vendor supply agreement analysis.

Risk analysis.

24. A retail company uses a computer program that matches electronic vendor invoices with the applicable purchase orders and receiving information, which are also maintained electronically.

If an invoice does not match the other items within predefined ranges, a report is generated and sent to the accounts payable department for further investigation. All of the applicable documents are electronically marked, cross-referenced, and retained in open files. Both an integrated test facility and a systems control audit review file (SCARF) have been included in the system.

An auditor wants to determine the extent to which items are not matched at year end and to investigate the potential causes of the unmatched items.

Which of the following audit procedures would be most effective in determining the items to investigate?

Use generalized audit software to read the electronically marked unmatched items.

Use generalized audit software to read the purchase orders and trace to applicable receiving and vendor invoice files.

Use the SCARF to identify unusual items. Select an attributes sample and trace to the underlying documentation.

Submit test data to identify attributes of unmatched items. Follow up by investigating the identified attributes.

25. The efficiency of internal audit operations is best enhanced if workpaper standards:

Permit the extent of documentation to vary according to engagement objectives.

Require supervisors to initial and date each workpaper that they review.

Allow access to workpapers by external parties if approved by senior management or the audit committee.

Mandate the workpaper retention period.

26. An auditor receives anonymous information that fraud is occurring in the operation being audited, but no details are given as to the type of fraud or the individuals involved. There are several areas in which fraud could occur.

The auditor should:

Identify the area that has the greatest volume of transactions and design a sampling plan for substantive testing.

Apply analytical procedures to areas that might be impacted by possible fraudulent activities.

Interview employees to identify areas where the fraud could be occurring.

Plan detailed tests of the areas that have the highest dollar amount of transactions.

27. During the development of a purchasing system, an auditor reviewed the payment authorization program.

Which of the following actions should the auditor recommend for a situation in which the quantity invoiced is greater than the quantity received?

Issue an exception report.

Pay the amount billed and adjust the inventory account for the difference.

Return the invoice to the vendor for correction.

Authorize payment of the full invoice, but maintain an open purchase order record for the missing goods.

28. When conducting research, which of the following is most important?

Using computer databases or the Internet to find all relevant sources.

Providing documentation of the reference sources.

Presenting only those facts that support the conclusion.

Presenting all contrary views to balance the opinion.

29. Which of the following is a weakness that is inherent in the use of the test data method to test internal controls in a computer-based accounting system?

The auditor must test many transactions with the same condition in order to achieve assurance that the condition is being detected.

Conditions that were not specifically considered by the auditor may go untested.

The approach requires the creation of "dummy companies," possibly destroying or altering actual company data in the process.

Inclusion of atypical data in the test data may cause errors to be noted on the exception report.

30. Which of the following processes real-transaction data through auditor-developed test programs?

Generalized audit software.

Tracing.

Parallel simul-ation.

Mapping.

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31. An auditor plans to analyze customer satisfaction, including. (1) customer complaints recorded by the customer service department during the last three months; (2) merchandise returned in the last three months; and (3) responses to a survey of customers who made purchases in the last three months.

Which of the following statements regarding this audit approach is correct?

Although useful, such an analysis does not address any risk factors.

The survey would not consider customers who did not make purchases in the last three months.

Steps 1 and 2 of the analysis are not necessary or cost-effective if the customer survey is comprehensive.

Analysis of three months' activity would not evaluate customer satisfaction.

32. As part of an operational audit of the shipping department, an auditor selected a sample of 45 daily shipping logs from the department's files. On 44 of the days, the log contained a sufficient number of shipments to meet the department's daily quota. Based on this test, the auditor concluded that the shipping department was effective at meeting its quotas.

Which of the following is true about the auditor's conclusion?

The number of items selected for testing is inadequate to justify the conclusion.

The shipping department is effective in meeting its responsibilities.

This conclusion would negate any need to perform tests of efficiency.

None of the above.

33. In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:

Activities and cost drivers.

Information processing procedures.

Current product cost structures.

Internal control alternatives.

34. 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?

Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.

Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.

Select a sample of accounts payable from the accounts payable list and verify the supporting receiving reports, purchase orders, and invoices.

Trace receiving reports issued before the period end to the related vendor invoices and accounts payable list.

35. Which of the following would constitute a violation of the IIA Code of Ethics?

An internal auditor, who has recently joined the organization, has accepted an assignment to audit the electronics manufacturing division. The auditor previously served as senior auditor for the external audit of that division and has audited many electronics companies during the past two years.

An internal auditor has accepted an assignment to audit the warehousing function six months from now. The auditor has no expertise in that area but has signed up for courses in warehousing that will be completed before the assignment begins.

An internal auditor has no ambitions for promotion and has not engaged in training or other professional development activities during the last three years. The auditor's performance assessments indicate consistent quality of work.

An internal auditor discovered an internal financial fraud during the year, and the financial statements were adjusted to properly reflect the loss associated with the fraud. The auditor discussed the fraud with the external auditor during the external auditor's review of the working papers detailing the incident.