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NEW QUESTION # 164
The chief audit executive (CAE) manages a large internal audit activity (IAA) reporting functionally to the audit committee and administratively to the chief risk officer. During the CAE's recent unplanned medical leave, several internal audit reports were completed and waiting for CAE approval, however, no formal delegation of authority was in place to anticipate this situation. In order to preserve the independence of the IAA, which of the following would be the most appropriate individual to review and approve these reports during the CAE's absence?
- A. External auditor.
- B. Chief risk officer.
- C. Engagement lead auditor.
- D. Audit committee chair.
Answer: C
NEW QUESTION # 165
In a payroll audit, a staff auditor suspects that signatures on some of the documents being sampled for examination are not authentic. What action should the auditor take before proceeding with the examination?
- A. Review the suspicious documents with the chief audit executive and seek advice concerning further examination.
- B. Suggest to the payroll manager that the suspicious documents should be sent to the organization's security department for forensic review.
- C. Keep the suspicious documents in the workpaper file until the end of the engagement, and then discuss the suspicions with the payroll manager.
- D. Discuss the suspicious documents with payroll staff to seek their views on the authenticity of the signatures.
Answer: A
NEW QUESTION # 166
According to IIA guidance, which of the following is least likely to be a key financial control in an organization's accounts payable process?
- A. Require the approval of additions and changes to the vendor master listing, where the inherent risk of false vendors is high.
- B. Monitor amounts paid each period and compare them to the budget to identify potential issues.
- C. Compare employee addresses to vendor addresses to identify potential employee fraud.
- D. Monitor customer quality complaints compared to the prior period to identify vendor issues.
Answer: D
Explanation:
Section: Volume E
NEW QUESTION # 167
According to IIA guidance, which of the following is least likely to be a key financial control in an organization's accounts payable process?
- A. Require the approval of additions and changes to the vendor master listing, where the inherent risk of false vendors is high.
- B. Monitor amounts paid each period and compare them to the budget to identify potential issues.
- C. Compare employee addresses to vendor addresses to identify potential employee fraud.
- D. Monitor customer quality complaints compared to the prior period to identify vendor issues.
Answer: D
NEW QUESTION # 168
The chief audit executive (CAE) of a small internal audit activity (IAA) plans to test conformance with the Standards through a quality assurance review. According to the Standards, which of the following are acceptable practice for this review?
1. Use an external service provider.
2. Conduct a self-assessment with independent validation.
3. Arrange for a review by qualified employees outside of the IAA.
4. Arrange for reciprocal peer review with another CAE.
- A. 2 and 4
- B. 1, 2, and 3
- C. 2, 3, and 4
- D. 1 and 2
Answer: D
NEW QUESTION # 169
An internal auditor and engagement client are deadlocked over the auditor's differing opinion with management on the adequacy of access controls for a major system. Which of the following strategies would be the most helpful in resolving this dispute?
- A. Disclose the client's differing opinion in the final report.
- B. Conduct a joint brainstorming session with management.
- C. Ask the chief audit executive to mediate.
- D. Escalate the issue to senior management for a decision.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION # 170
A consumer electronics company is considering acquiring a small flash memory manufacturer. An internal auditor has been assigned to determine if the manufacturer's accounts payable contain all outstanding liabilities. Which audit procedure is not relevant for this objective?
- A. Trace receiving reports issued before the period end to the accounts payable list and vendor invoices.
- B. Verify a sample of accounts payable by using related invoices, receiving reports, and purchase orders.
- C. Send confirmations, including zero-balance accounts, to vendors with whom the manufacturer normally does business.
- D. Verify the period of liability of subsequent cash disbursements using related supporting documentation.
Answer: B
Explanation:
Section: Volume C
NEW QUESTION # 171
During the planning phase of an audit of the treasury function, an internal auditor conducted a risk assessment of the function in order to:
- A. Determine whether appropriate resources are present to carry out the treasury function.
- B. Identify areas of the treasury function that should be considered for potential engagement objectives.
- C. Comply with the internal audit charter and applicable regulatory requirements.
- D. Report any high-risk exposures of the treasury function to management and the board.
Answer: B
NEW QUESTION # 172
The internal audit activity performs the following sequence of risk management activities: identification, analysis, and evaluation. According to IIA guidance, which of the following assurance approaches does this describe?
- A. Enterprise-wide risk management approach.
- B. Maturity model approach.
- C. Key principles approach.
- D. Process elements approach.
Answer: D
Explanation:
Section: Volume C
NEW QUESTION # 173
Which of the following statements is false regarding roles and responsibilities pertaining to risk management and control?
- A. Operating managers are responsible for assessing risks and controls in their departments.
- B. Senior management is charged with overseeing the establishment risk management and control processes.
- C. The chief audit executive is responsible for overseeing the evaluation risk management and control processes.
Answer: C
NEW QUESTION # 174
Which of the following might alert an auditor to the possibility of fraud in a division?
I. The division is not scheduled for an external audit this year.
II. Sales have increased by 10 percent.
III. A significant portion of management's compensation is directly tied to reported net income of the division.
- A. I and II only
- B. I only
- C. I, II, and III
- D. III only
Answer: D
NEW QUESTION # 175
While conducting a payroll audit, an internal auditor in a large government organization found inadequate segregation in the duties assigned to the assistant director of personnel. When the auditor explained the risk of fraud, the assistant director became upset, terminated the interview, and threatened to sue the organization for defamation of character if the audit engagement was not curtailed. The auditor discussed the situation with the chief audit executive (CAE). The CAE should then:
- A. Add additional testing to determine whether other indicators of fraud exist.
- B. Provide a report to senior management recommending a fraud investigation.
- C. Curtail the audit engagement to avoid potential legal action.
- D. Continue the original engagement program as planned but include a comment about the assistant director's reaction in the engagement final communication.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION # 176
When establishing a quality assurance and improvement program, the chief audit executive should ensure the program is designed to accomplish which of the following objectives?
1.Add value.
2.Improve operations.
3.Provide assurance that the internal audit activity conforms with the Standards.
4.Provide assurance that the internal audit activity conforms with the IIA Code of Ethics.
- A. 1 only
- B. 1 and 2 only
- C. 1, 2, 3, and 4
- D. 1 and 3 only
Answer: C
NEW QUESTION # 177
Which of the following is true regarding roles and responsibilities in risk management processes?
- A. Acceptance of residual risk resides with executive management level.
- B. Ownership of risks resides with the board.
- C. Identifying, assessing, mitigating and monitoring activities on a continuous basis rests with the internal audit activity.
- D. Setting strategic direction resides with senior management.
Answer: A
NEW QUESTION # 178
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. 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.).
- B. Take no action, because all the items were within the expiration date requirement, and no corrective action is needed.
- C. Add to the product label a "use by date" line, enter the expiration at the time of receipt, and perform periodic inventory checks.
- D. 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.
Answer: C
NEW QUESTION # 179
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