IIA CIA Certification Exam Questions with AI Explanations

QUESTION: 126

A chief audit executive (CAE) has learned that a system currently being installed in the CAE's organization is identical to one that suffered a catastrophic failure in another organization. The CAE should

Disregard the issue because there has been no audit work undertaken or any type of reliable information provided.
Notify senior management and request that the installation be halted.
Add the issue to the annual audit plan and schedule an engagement when time is available.
Investigate the issue further even though there is no provision in the audit plan for this work.

Answer(s): D

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QUESTION: 127

Assessments of the independence of an organization's external auditors should

I). Be carried out only when the external auditor is appointed.
II). Be carried out when the external auditor is appointed and regularly thereafter.
III). Not include any participation by the internal audit activity.
IV). Include participation by the internal audit activity.

I and III only.
I and IV only.
II and III only.
II and IV only.

Answer(s): D

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QUESTION: 128

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

Audit committees may be composed of independent directors; however, those directors may have close personal and professional friendships with management.
Audit committee members are compensated by the organization and thus favor a stockholder view.
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.
Audit committee members do not normally have degrees in the accounting or auditing fields.

Answer(s): A

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QUESTION: 129

Which of the following management actions would be most effective in order to strengthen ethical awareness within an organization?

Require employees to certify that they have read and understand the organization's code of conduct.
Ensure that all employees pass a criminal background check prior to being hired.
Mandate that employees follow documented departmental procedures and processes.
Request that the internal audit activity test departments with a higher risk of employee fraud.

Answer(s): A

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QUESTION: 130

An internal auditor has been asked to review the treasury department's compliance with corporate policy related to the use of forward trading to manage currency valuation risk. The auditor finds no related policies in the corporate policy manual but does discover that the department is following a policy developed by the company's bank. The most appropriate response from the auditor would be to

Withdraw from the audit engagement because there is nothing to audit due to the lack of a corporate policy.
Perform no further audit work and report the lack of a corporate policy as an audit observation.
Postpone the audit engagement until a corporate policy can be established.
Use the bank's policy as the audit criteria and determine whether formal adoption should be recommended in the engagement final communication.

Answer(s): D

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QUESTION: 126

QUESTION: 127

QUESTION: 128

QUESTION: 129

QUESTION: 130