CIA Pre Test- Pat 1
CIA Pre Test - Part 1
Welcome to the CIA Pre Test - Part 1! This quiz is designed to test your knowledge of internal auditing principles and ethics as outlined by The IIA. Whether you are preparing for a certification exam or just want to enhance your understanding of internal auditing, this quiz is for you.
Here are some features of the quiz:
- 11 well-crafted multiple-choice questions
- Insight into the IIA Code of Ethics
- Focus on real-world scenarios faced by internal auditors
A company with a whistleblowing hotline has received an anonymous tip that three senior internal auditors are in violation of the HA Code of Ethics. The company has adopted the HA Code as a part of the corporate ethical code. Among the allegations against the auditors were the following:
1. Auditor 1 has a part-time job outside of office hours as a visiting professor at a local community college.
2. Auditor 1 owns stock in the employer company.
3. Auditor 1 told his next-door neighbor to start looking for a new job because an audit of the executive office indicated that the neighbor's division was going to be closed down in about six months.
4. Auditor 2 received an item of value from a local nonprofit organization of purchasing agents for whom he gave a speech.
5. Auditor 2 received an item of value from a customer of the employer.
6. Auditor 2 has a part-time job as president of a local charitable organization.
7. Auditor 2 shared audit techniques with auditors from another company while attending a professional meeting.
8. A buyer accepted a kickback of $500 to give bid amounts to a supplier to enable that supplier to bid the contract. Auditor 2 omitted this information from the audit report since the contract amount was not material to the financial statements.
9. Auditor 3 received royalties from a publisher for authoring a professional book on internal auditing.
10. Auditor 3 has a part-time job as a real estate broker, and his real estate firm recently received a commission from the employer company.
11. Auditor 3 received an item of value from a fellow employee in the same company whose department has never been audited and whose department is not scheduled to be audited in the foreseeable future.
12. Auditor 3 did not include in an audit report that the bottlenecks in a shipping department were caused by the absence of the supervisor. The supervisor was the auditors friend and neighbor who had a hospitalized child requiring him to miss work off and on for several weeks.
How many of the allegations about Auditor 2 represent violations of the IIA Code of Ethics?
Two
Three
One
Four
Accepting the concept that internal auditing should be an integral part of an organization can involve a major change of attitude on the part of top management. Which of the following would be the best way for internal auditors to convince management regarding the need for and benefits of internal auditing?
Educating top managers about the benefits and communicating with them on a regular basis.
Negotiating with top management to provide them with rewards, such as favorable audits.
Involving top management in deciding which audit findings will be reported.
Persuading top managers to accept the idea of internal audits by contacting company shareholders and regulatory agencies.
The internal auditing profession is believed to have advanced primarily as a consequence of
Increased complexity and sophistication of business operations.
Increased interest by graduating students and experienced auditors.
The limitation of the external audit's scope.
Job qualification specifications that include added emphasis on background knowledge and skills.
In some countries, governmental units have established audit standards. For example, in the United States, the General Accounting Office has developed standards for the conduct of governmental audits, particularly those that relate to compliance with government grants. In performing governmental grant compliance audits, the auditor should
Be guided by the more general standards that have been issued by the public accounting profession.
Be guided only by The IIA Standards because they are more encompassing.
Follow both The IIA Standards and any additional governmental standards.
Be guided only by the governmental standards.
The chief audit executive (CAE) of internal auditing of a mid-sized internal auditing organization was concerned that management might outsource the internal auditing function. Therefore, the CAE adopted a very aggressive program to promote the internal auditing department within the organization. The CAE planned to present the results to management and the audit committee and recommend modification of the Internal Audit Charter after using the new program. The following lists six actions the CAE took to promote a positive image within the organization:
1. Audit assignments concentrated on economy and efficiency audits. The audits focused solely on cost savings and each audit report highlighted potential costs to be saved. Negative findings were omitted. The focus on economy and efficiency audits was new, but the auditees seemed very happy.
2. Drafts of all audit reports were carefully reviewed with the auditee to get their input. Their comments were carefully considered when developing the final audit report.
3. The EDP auditor participated as part of a development team to review the control procedures to be incorporated into a major computer application under development.
4. Given limited resources, the CAE performed a risk analysis to determine which locations to audit. This was a marked departure from the previous approach of ensuring that all operations are reviewed on at least a three-year interval.
5. In order to save time, the CAE no longer required that a standard internal control questionnaire be completed for each audit.
6. When the auditors found that management and the auditee had not developed specific criteria or data to evaluate the operations of the auditee, the audit team was instructed to perform research, develop specific criteria, review the criteria with the auditee, and if acceptable, use it to evaluate the auditees operations. If the auditee disagreed with the criteria, a negotiation took place until acceptable criteria could be agreed upon.
Considering Actions 2, 3 and 4 that were taken, which would be considered a violation of the Standards
Actions 2, 3, and 4.
Action 2 and 3 only.
Action 4 only.
None of the Actions.
A service organization is currently experiencing a significant downsizing and process reengineering. Its board of directors has redefined the business goals and established initiatives using in-house developed technology to meet these goals. As a result, a more decentralized approach has been adopted to run the business functions by empowering the business branch managers to make decisions and perform functions traditionally done at a higher level. The internal auditing staff is made up of the chief audit executive (CAE), two managers, and five staff auditors, all with financial background. In the past, the primary focus of successful internal audit activities (IAA) has been the service branches and the six regional division headquarters, which support the branches. These division headquarters are the primary targets for possible elimination. The support functions such as human resources, accounting, and purchasing will be brought into the national headquarters, and technology will be enhanced to enable and augment these operations. 23 Up to this point, the IAA has reported to the chief operating officer. Due to the significant changes, there has been some discussion as to changing this reporting relationship. What would be the best reporting relationship?
Administratively and functionally to the chief operating officer.
Administratively and functionally to the president.
Administratively to the president, functionally to the board.
Administratively to the chief financial officer and functionally to the president.
The benefits from internal auditing include all of the following except
Management benefits because the internal audit activity is able to help them identify and minimize risks.
Employees benefit because the internal audit activity can help them effectively perform their jobs.
The external auditor benefits because the internal audit activity is able to provide an opinion about the accuracy and completeness of the annual financial statements.
Society benefits from internal auditing because the internal auditor promotes the efficient and effective use of resources.
A major reason for establishing an internal audit activity (IAA) is to
Safeguard resources entrusted to the organization.
Relieve overburdened management of the responsibility for establishing effective controls.
Evaluate and improve the effectiveness of control processes.
Ensure the reliability and integrity of financial and operational information.
Today's internal auditor will often encounter a wide range of potential ethical dilemmas, not all of which are explicitly addressed by The IIA's Code of Ethics. If the internal a encounters such a dilemma, the internal auditor should always
Apply and uphold the principles embodied in The IIA Code of Ethics.
Seek the counsel of the board before deciding on an action
Act consistently with the code of ethics adopted by the organization even if such action is not consistent with The IIA's Code of Ethics.
Seek counsel from an independent attorney to determine the personal consequences of potential actions.
The chief audit executive (CAE) of internal auditing of a mid-sized internal auditing organization was concerned that management might outsource the internal auditing function. Therefore, the CAE adopted a very aggressive program to promote the internal auditing department within the organization. The CAE planned to present the results to management and the audit committee and recommend modification of the Internal Audit Charter after using the new program.
The following lists six actions the CAE took to promote a positive image within the organization:
1. Audit assignments concentrated on economy and efficiency audits. The audits focused solely on cost savings and each audit report highlighted potential costs to be saved. Negative findings were omitted. The focus on economy and efficiency audits was new, but the auditees seemed very happy.
2. Drafts of all audit reports were carefully reviewed with the auditee to get their input. Their comments were carefully considered when developing the final audit report.
3. The EDP auditor participated as part of a development team to review the control pro-cedures to be incorporated into a major computer application under development.
4. Given limited resources, the CAE performed a risk analysis to determine which locations to audit. This was a marked departure from the previous approach of ensuring that all operations are reviewed on at least a three-year interval.
5. In order to save time, the CAE no longer required that a standard internal control questionnaire be completed for each audit.
6. When the auditors found that management and the auditee had not developed specific criteria or data to evaluate the operations of the auditee, the audit team was instructed to perform research, develop specific criteria, review the criteria with the auditee, and if acceptable, use it to evaluate the auditee's operations. If the auditee disagreed with the criteria, a negotiation took place until acceptable criteria could be agreed upon. The audit report commented on the auditee's operations in conjunction with the agreed-upon criteria.
Which of the following elements of Action 1 taken by the CAE would be considered a violation of the Standards
I. The type of audits was changed before modifying the charter and going to the audit committee.
II. Negative findings were omitted from the audit reports.
III. Cost savings and recommendations were highlighted in the report.
I and II.
I Only.
I and III.
II and III.
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