IIA-CIA-PART1 Online Practice Questions and Answers

Risk assessments can vary in format, but generally include.

I. A description of identified risks.

II. Tests of audit controls.

III. A system of rating risks.

IV.

Sample size identification.

A.

I and II only

B.

I and III only

C.

I, III, and IV only

D.

II, III, and IV only

Which of the following is the most important limitation on the effectiveness of audit committees?

A. Audit committees may be composed of independent directors; however, those directors may have close personal and professional friendships with management.

B. Audit committee members are compensated by the organization and thus favor a stockholder view.

C. Audit committees devote most of their efforts to external audit concerns and do not pay much attention to internal auditing and the overall control environment.

D. Audit committee members do not normally have degrees in the accounting or auditing fields.

In preparing for an audit of the footwear division of a major retail organization, an internal auditor gathered the following information about the organization's stores:

In addition to labor costs, the other costs associated with each store are leasing and maintenance expenses. Which of the following is a valid conclusion?

A. Sales per store are directly related to the size of the store.

B. Employees are less productive in larger stores.

C. Gross margin is directly related to the size of the store.

D. Cost of goods sold is directly related to the size of the store.

A small not-for-profit organization with limited resources is unable to adequately maintain appropriate segregation of duties. Considering the organization's resource constraints, which type of controls would best mitigate segregation of duty risks?

A. Application controls.

B. Detective controls.

C. Preventive controls.

D. Compensating controls.

Which of the following policies exemplifies a control weakness in the approval and oversight of credit sales?

A. The credit department is responsible for approving shipments to all customers.

B. The head of the sales department can authorize credit lines for large customers.

C. The finance committee of the board of directors periodically reviews credit standards.

D. Customers who fail to meet credit requirements must pay cash for shipments upon delivery.

An internal auditor for a large retail chain suspects that a store manager has been stealing money from cash sales by listing the sales as accounts receivable and then writing off the accounts as bad debts. Which of the following irregularities is the most likely cause of the auditor's suspicion?

A. A much higher bad debt expense as a percentage of sales than that of previous years.

B. A much higher bad debt expense as a percentage of sales than that of other stores.

C. A much higher percentage of past-due accounts receivable than that of other stores.

D. A much higher percentage of past-due accounts receivable than that of previous years.

An internal audit activity (IAA) provided assurance services for an activity it was responsible for during the preceding year.

As a result, which IIA Code of Ethics principle is presumed to be impaired?

A. Competence.

B. Flexibility.

C. Objectivity.

D. Independence.

According to IIA guidance, which of the following statements is false regarding continuing professional education for the internal audit activity (IAA)?

A. Continuing professional education can be obtained through IAA involvement in research projects.

B. Employers are responsible for ensuring that the continuing professional education needs of the IAA are met.

C. Completion of self-study courses fulfills IAA continuing professional education requirements.

D. Specialized education that meets unique organizational needs cannot qualify as IAA professional development.

Which of the following is a second line of defense in effective risk management and control?

A. Purchasing department.

B. Compliance department.

C. Credit department.

D. Internal audit department.

An accounts receivable clerk receives cash payments, posts the payments to customer accounts, and

prepares the daily cash deposit.

The clerk has been stealing some cash and manipulating the customer payments to hide the theft.

This fraud could be detected with which of the following controls?

A. Monthly bank reconciliations are performed by the clerk on a timely basis.

B. Total cash deposits for the month are reconciled to the cash receipts journal.

C. Names, amounts, and dates on remittance advices are reconciled with the names, amounts, and dates recorded in the cash receipts journal.

D. Total cash deposits are compared with the bank reconciliation.