[Nov 25, 2024] IIA-CHAL-QISA certification guide Q&A from Training Expert Fast2test
IIA-CHAL-QISA Certification Overview Latest IIA-CHAL-QISA PDF Dumps
NEW QUESTION # 46
Which of the following should be included in a company's year-end inventory valuation?
- A. Goods on consignment, which the company is trying to sell for its customers.
- B. Company goods that were sold during the year, free on board shipping point, that have been shipped but not yet received by the customer
- C. Company goods for sale on consignment at a consignment shop
- D. Goods purchased by the company, free on board destination, that have not yet been received.
Answer: C
Explanation:
Year-end inventory valuation should include all goods owned by the company, regardless of their location.
This includes goods for sale on consignment at a consignment shop, as these items remain the property of the company until sold. Goods sold FOB shipping point and goods purchased FOB destination that have not yet been received are not included, as ownership has transferred or not yet been acquired respectively. Goods on consignment that the company is trying to sell for others are also excluded because the company does not own them
NEW QUESTION # 47
Which of the following types of policies best helps promote objectivity in the internal audit activity's work?
- A. Policies that match internal auditors' performance with feedback from management of the area under review
- B. Policies that keep internal auditors in areas where they have vast audit expertise.
- C. Policies that provide examples of Inappropriate business relationships
- D. Policies that are distributed to all members of the internal audit activity and require a signed acknowledgment.
Answer: C
Explanation:
Promoting objectivity in internal auditing involves ensuring that auditors avoid conflicts of interest and maintain independence in both fact and appearance. Policies that clearly define and give examples of inappropriate business relationships help auditors understand and avoid situations that could impair their objectivity.
NEW QUESTION # 48
When taken by a chief audit executive, which of the following actions would be most likely to prevent division management from exaggerating sales reports
1.Announcing a series of internal audit engagements focusing on compliance with corporate sales-reporting policies.
2.Asking the president and the board to issue a statement of corporate policy stressing the importance of accurate management reporting and the negative consequences of intentional misreporting
3.Setting up a hotline for employees to report fraudulent behavior anonymously.
4.Assisting the controller in developing and monitoring a series of business process indicators, which are historically correlated with, but independent of. sales.
- A. 3 and 4 only.
- B. 2 and 4 only.
- C. 1 and 2 only.
- D. 2 and 3 only.
Answer: B
Explanation:
Corporate Policy Statement: Having the president and the board issue a statement stressing the importance of accurate management reporting and the negative consequences of intentional misreporting can help set a tone at the top. This reinforces the significance of ethical behavior and compliance with reporting policies across the organization.
NEW QUESTION # 49
Which of the following best describes why an internal audit activity would consider sending written preliminary observations to the audit client?
- A. Written and verbal observations are equally effective.
- B. Written observations limit premature agreement
- C. Written observations help the internal auditors express the significance.
- D. Written observations allow for more interpretation.
Answer: A
Explanation:
Audit workpapers are essential documents that provide evidence of the audit work performed and the conclusions reached.
* Option A: While review notes can be useful, they do not need to be retained if they do not add value to the audit evidence.
* Option B: Audit workpaper documentation policies are typically established by the internal audit department, not reviewed or approved by the audit committee.
* Option C: Management should not review the workpapers for accuracy as this could compromise the independence of the audit.
* Option D: Preparing workpapers helps auditors document their work thoroughly, facilitating learning and professional development.
NEW QUESTION # 50
Which of the following statements best demonstrates application of due professional care during an assurance engagement?
- A. The engagement supervisor had no significant comments in the supervisory review.
- B. The engagement objectives were designed to assist the engagement client
- C. The audit procedures were systematically planned: executed, and documented.
- D. The engagement detected irregularities and noncompliance instances.
Answer: C
Explanation:
* Introduction:
* Due professional care requires auditors to plan, execute, and document their work meticulously, ensuring that their findings and conclusions are based on a thorough and objective assessment.
* Application of Due Professional Care:
* It involves following a structured approach to audit engagements to ensure that all necessary steps are taken to gather sufficient and appropriate evidence.
* Options Analysis:
* Option A: Detecting irregularities and noncompliance instances are outcomes of the engagement but do not inherently demonstrate due professional care.
* Option B: Lack of significant comments from the supervisor suggests quality but does not demonstrate the systematic approach needed for due professional care.
* Option C: Systematically planning, executing, and documenting audit procedures directly reflects the auditor's adherence to due professional care principles.
* Option D: While important, designing engagement objectives to assist the client does not cover the comprehensive nature of due professional care.
* Conclusion:
* The best demonstration of due professional care during an assurance engagement is the systematic planning, execution, and documentation of audit procedures.
NEW QUESTION # 51
Which of the following internal audit activities is performed in the design evaluation phase?
- A. The internal auditor communicates the audit results to management
- B. The internal auditor identifies the controls over segregation of duties.
- C. The internal auditor checks a process for completeness.
- D. The internal auditor reviews prior audits and workpapers
Answer: B
Explanation:
To determine which internal audit activity is performed in the design evaluation phase, it's essential to understand what each phase in the audit process entails. The design evaluation phase involves assessing whether the design of controls is adequate to mitigate risks to acceptable levels.
* Option A: The internal auditor reviews prior audits and workpapers.
* This activity typically occurs during the planning phase of an audit. Reviewing prior audits and workpapers helps the auditor understand the scope, findings, and context of previous audits, providing valuable information for planning the current audit.
* Option B: The internal auditor identifies the controls over segregation of duties.
* Identifying controls, particularly those related to segregation of duties, is a key part of the design evaluation phase. In this phase, the auditor assesses whether the control design, including segregation of duties, is sufficient to prevent or detect errors and fraud.
* Option C: The internal auditor checks a process for completeness.
* Checking a process for completeness is more aligned with the testing phase, where the auditor evaluates the operational effectiveness of controls. During this phase, the auditor ensures that all parts of a process are functioning as intended.
* Option D: The internal auditor communicates the audit results to management.
* Communicating audit results occurs in the reporting phase, after the audit fieldwork is complete.
In this phase, the auditor summarizes findings, conclusions, and recommendations and presents them to management.
NEW QUESTION # 52
The board of directors of a global organization has found an increased number of reported cases of unethical practices since last year. To assist the board in gaining a better understanding of the degree of ethics awareness within the organization, which of the following actions should be undertaken?
- A. Conduct an organization wide employee survey on ethical practices.
- B. Reaffirm the importance of the organization's code of ethics to all employees
- C. Offer in-house ethics-related training seminars for employees to attend
- D. Request the internal audit activity to perform an ethics-related assurance engagement.
Answer: A
Explanation:
To assist the board of directors in understanding the degree of ethics awareness within the organization, an organization-wide employee survey on ethical practices (option D) is the most effective action. Here's why:
* Direct Insight from Employees: Surveys can capture the perspectives of a broad employee base, providing direct insights into the awareness and attitudes towards ethics within the organization.
* Quantitative and Qualitative Data: A well-designed survey can gather both quantitative data (e.g., percentage of employees aware of the code of ethics) and qualitative data (e.g., specific instances of ethical dilemmas faced by employees).
* Identifying Areas of Improvement: Surveys can identify specific areas where employees feel the organization is lacking in terms of ethical practices, which can guide targeted improvements.
* Confidentiality and Anonymity: Surveys often ensure confidentiality and anonymity, encouraging more honest and comprehensive responses from employees, which might not be achievable through other means.
* Comprehensive Scope: Compared to internal audits or training, surveys can provide a comprehensive overview of the entire organization's ethical climate, from various departments and levels.
This approach aligns with the best practices in internal auditing and organizational assessments as outlined by the Institute of Internal Auditors (IIA) and other related guidance.
NEW QUESTION # 53
A manager has allowed a subordinate employee to have greater control and responsibility over the tasks that he performs This is an example of which of the following?
- A. Job enlargement
- B. Job rotation.
- C. Job enrichment
- D. Horizontal loading of the job.
Answer: C
Explanation:
Job enrichment involves giving an employee more responsibility and control over their work, which increases the employee's sense of ownership and involvement in the task. This concept is about enhancing the role by adding more meaningful tasks and duties to it, rather than simply increasing the quantity of tasks (which would be job enlargement).
NEW QUESTION # 54
Which of the following activities demonstrates an example of the chief audit executive performing residual risk assessment?
- A. Soliciting management's feedback after completion of the audit engagement.
- B. Reporting the status of every observation for every engagement in a detailed manner.
- C. Cost-benefit analysis of management not implementing a recommendation to address an observation.
- D. Inquiry of corrective action to be completed within a certain period
Answer: C
Explanation:
Performing a cost-benefit analysis when management decides not to implement a recommendation is a prime example of residual risk assessment. This involves evaluating the potential impacts and remaining risks associated with the decision, thereby determining the residual risk that the organization will continue to face.
* Cost-Benefit Analysis: This helps in understanding the financial implications and benefits that would have been realized had the recommendation been implemented versus the risks of not implementing it.
* Risk Assessment: By assessing the residual risk, the CAE can provide a clearer picture of the ongoing risks that the organization needs to manage.
* Management Decision Impact: This analysis assists in making informed decisions and understanding the trade-offs involved in addressing audit observations.
References:
* "Audit and Assurance Services: An Integrated Approach," which explains residual risk assessment and the importance of cost-benefit analysis in audit recommendations .
NEW QUESTION # 55
The audit plan requires a review of the testing procedures used in pre-production of a large information system prior to its live launch. If the chief audit executive (CAE) is uncertain that the current audit team has all the required knowledge to conduct the engagement, which of the following would be the most appropriate course of action for the CAE to take to preserve independence?
- A. Make use of an external service provider.
- B. Ask for a knowledgeable resource from the IT department
- C. Request audit resources through the external auditor.
- D. Contract with the software vendor to provide an appropriate resource
Answer: A
Explanation:
If the chief audit executive (CAE) is uncertain that the current audit team has all the required knowledge to conduct the engagement, the most appropriate course of action is to use an external service provider. This helps preserve the independence and objectivity of the internal audit function.
* Expertise: External service providers bring specialized knowledge and expertise that may not be available within the internal team.
* Independence: Utilizing an external provider ensures that the audit maintains its independence and objectivity, avoiding any potential conflicts of interest.
* Quality: Ensures that the audit engagement is conducted with the highest standards, leveraging the external provider's experience and skills.
References:
* "Internal Audit and Assurance," which outlines the benefits and considerations of engaging external service providers for specialized audit tasks.
NEW QUESTION # 56
According to Herzberg's Two-Factor Theory of Motivation, which of the following factors are mentioned most often by satisfied employees9
- A. Responsibility and advancement
- B. Salary and status.
- C. Peer relationships and personal life
- D. Work conditions and security.
Answer: A
Explanation:
Herzberg's Two-Factor Theory, also known as the Motivation-Hygiene Theory, distinguishes between motivators and hygiene factors. Motivators, which are related to job content, lead to higherjob satisfaction and are intrinsic factors such as achievement, recognition, responsibility, and advancement. In contrast, hygiene factors, which are related to job context (e.g., salary, status, work conditions), do not lead to higher satisfaction but can cause dissatisfaction if missing.
NEW QUESTION # 57
An organization has a mature control environment but limited internal audit resources. Given this scenario, on which of the following should the internal auditors focus their testing?
- A. Preventive compensating controls.
- B. Preventive key controls
- C. Detective compensating controls
- D. Detective key controls.
Answer: B
Explanation:
When internal audit resources are limited, it is crucial to focus on the most critical aspects of the control environment. Preventive key controls are designed to prevent errors or irregularities from occurring, which are essential for maintaining a strong control environment. Given the mature control environment of the organization, prioritizing preventive key controls ensures that potential issues are addressed before they materialize, providing a proactive approach to risk management.
NEW QUESTION # 58
An organization invests excess short-term cash in trading securities Which of the following actions should an internal auditor take to test the valuation of those securities'*
- A. Confirm the securities held by the broker.
- B. Compare the carrying value with current market quotations
- C. Perform a calculation of premium or discount amortization.
- D. Use the equity method to recalculate the investment carrying value
Answer: B
Explanation:
* Testing Valuation:The valuation of trading securities requires comparing their carrying value with current market prices to ensure accuracy.
* Market Quotations:Current market quotations provide the most reliable and up-to-date information on the fair value of securities.
* Accounting Standards:This approach is consistent with accounting standards that require securities to be reported at fair value, reflecting any unrealized gains or losses.
* Verification Process:Comparing the carrying value with market quotations helps verify that the securities are appropriately valued on the financial statements.
References:
* International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) regarding fair value measurement.
NEW QUESTION # 59
If the skills and competencies are not present within the internal audit activity to complete an ad-hoc assurance engagement, which of the following is an acceptable resolution?
- A. Consider using employees from other departments in the organization on the audit team.
- B. Change the scope of the testing to ensure that only available staff proficiencies are used
- C. Complete the engagement as requested, with the best of the current staff's abilities.
- D. Politely decline the engagement due to a lack of qualified staff available at the time.
Answer: A
Explanation:
* Introduction:
* When the internal audit team lacks necessary skills for an ad-hoc assurance engagement, leveraging internal resources can be a practical solution.
* Resolving Skill Gaps:
* Using employees from other departments can provide the needed expertise while maintaining the engagement's integrity.
* Options Analysis:
* Option A: Declining the engagement may not be feasible and does not address the need.
* Option B: Completing the engagement without the required skills can compromise quality.
* Option C: Using employees from other departments brings in the necessary competencies and supports cross-functional collaboration.
* Option D: Changing the scope may limit the effectiveness of the engagement.
* Conclusion:
* The acceptable resolution is to consider using employees from other departments in the organization to bring in the required skills for the engagement.
NEW QUESTION # 60
Which of the following situations is most likely to heighten an internal auditors professional skepticism regarding potential fraud?
- A. The accounts payable supervisor has requested advances against her monthly salary on several occasions
- B. A procurement manager does not have the expected academic credentials for his position
- C. A financial accountant is absent from work frequently due to regular medical procedures
- D. A salesperson frequently complains about the organization's policy on sales commissions.
Answer: B
Explanation:
Professional skepticism is an essential attitude for internal auditors, particularly when assessing the risk of fraud. According to the IIA's Practice Guide "Internal Auditing and Fraud", one of the red flags that may heighten an internal auditor's professional skepticism is the presence of employees whose qualifications or credentials do not match the requirements of their positions. In this case, a procurement manager lacking the expected academic credentials raises concerns because it could indicate potential fraudulent activities such as unqualified decision-making or manipulation of procurement processes.
NEW QUESTION # 61
Which of the following is most likely to impair the organizational independence of the internal audit activity?
- A. The CAE reports functionally to the CEO.
- B. The CAE managed the finance department for the past five years.
- C. The CAE oversees the effectiveness of the organization's risk management function.
- D. The chief audit executive (CAE) reports administratively to the chief financial officer
Answer: B
Explanation:
* Impairment of Independence: The organizational independence of the internal audit activity can be impaired if the CAE has had significant roles in management, such as managing the finance department.
This prior involvement may create a conflict of interest or perceived bias.
* IIA Standards on Independence: The IIA emphasizes the importance of independence and objectivity in internal auditing. Any prior management role, especially in the department being audited, can compromise the CAE's objectivity.
* Examples of Impairment:
* Administrative Reporting: While reporting administratively to the CFO (option A) or functionally to the CEO (option C) does not inherently impair independence, managing the finance department previously (option D) creates a direct conflict.
* Overseeing Risk Management: Overseeing the risk management function (option B) is part of the CAE's responsibilities and does not impair independence if handled properly.
NEW QUESTION # 62
An internal auditor is asked to determine why the production line for a large manufacturing organization has been experiencing shutdowns due to unavailable parts The auditor learns that production data used for generating automatic purchases via electronic interchange is collected on personal computers connected by a local area network (LAN) Purchases are made from authorized vendors based on both the production plans for the next month and an authorized materials requirements plan (MRP) that identifies the parts needed per unit of production. The auditor suspects the shutdowns are occurring because purchasing requirements have not been updated for changes in production techniques. Which of the following audit procedures should be used to test the auditor's theory?
- A. Select a sample of production estimates and MRPs for several periods and trace them into the system to determine that input is accurate
- B. Compare the parts needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period
- C. Develop a report of excess inventory and compare the inventory with current production volume.
- D. Compare purchase orders generated from test data Input into the LAN with purchase orders generated from production data for the most recent period.
Answer: B
Explanation:
To test the theory that shutdowns are due to outdated purchasing requirements, the auditor should compare the parts needed according to the revised production techniques with the purchase orders generated. This comparison will reveal whether the system has been updated to reflect changes in production techniques, thereby identifying any discrepancies causing the unavailability of parts.
NEW QUESTION # 63
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