IIA-CHAL-QISA Free Practice Test

Which of the following processes does the board manage to ensure adequate governance?

1. A. Establish and measure performance objectives for the internal audit activity
2. B. Select board members with necessary knowledge and skills.
3. C. Develop, approve, and execute the strategic plan of the organization
4. D. Develop strategies to mitigate the risks to achieving the organization's objectives

Correct Answer: C
The board manages several key processes to ensure adequate governance within an organization, one of which is the development, approval, and execution of the strategic plan. This process is critical because it defines the organization's direction, goals, and the actions required to achieve these goals.
✑ Strategic Planning: The board plays a pivotal role in setting the organization's
strategic direction, which includes establishing long-term goals and defining the means to achieve them.
✑ Performance Measurement: While the board may establish and measure performance objectives for the internal audit activity, this is part of a broader governance framework.
✑ Risk Management: The board also develops strategies to mitigate risks, ensuring that the organization can achieve its objectives effectively.
Thus, the most comprehensive governance-related process managed by the board involves strategic planning

According to IIA guidance, which of the following objectives was most likely formulated for a non-assurance engagement?

1. A. The internal audit activity will assess the effects of changes in maintenance strategy on the availability of production equipment
2. B. The internal audit activity will inform management on the possible risks of moving the data warehouse to a cloud server maintained by a third party.
3. C. The internal audit activity will ascertain whether the data center security arrangements are compliant with agreed terms
4. D. The internal audit activity will ensure equipment downtime risks have been managed in accordance with the internal policy.

Correct Answer: B
Non-Assurance Engagements: Non-assurance engagements focus on advisory and consulting services rather than providing an independent assessment. These engagements aim to add value by offering insights and recommendations to management. Objective Characteristics:
✑ Informing Management: Providing information on potential risks and advising on
risk management strategies is typical for non-assurance engagements. This helps management make informed decisions and manage risks effectively.
✑ Assessment and Compliance: Options A, C, and D are more aligned with
assurance engagements, where the internal audit activity provides an independent assessment or ensures compliance with policies and procedures.
IIA Guidance:
✑ Standard 2120 – Risk Management: Internal auditors must evaluate and contribute to the improvement of risk management processes, often through advisory services in non-assurance roles.
References:
✑ Non-assurance engagements focus on informing and advising management about risks, improvements, and strategic decisions, as exemplified by informing management about risks related to moving the data warehouse to a third-party cloud server.

The internal audit activity is responsible for which of the following actions related to an organization??s internal controls9

1. A. Mitigating risks affecting achievement of organizational objectives.
2. B. Enabling opportunities affecting achievement of organizational objectives.
3. C. Analyzing and advising regarding costs versus benefits of control activities.
4. D. Attesting to fairness of financial statements

Correct Answer: C
Internal audit activities include evaluating the effectiveness and efficiency of internal controls, and part of this process involves analyzing and advising on the cost-benefit relationship of control activities.
This function helps ensure that the internal controls in place are not only effective in mitigating risks but are also economically justified

The internal audit activity is asked to review the effectiveness of controls around the
disposal of chemical waste. However, the internal auditors on staff lack the necessary skills to conduct this review Which of the following would be the most appropriate approach?

1. A. An internal auditor who recently attended a three-day workshop on chemical waste disposal, and therefore has the most knowledge on the topic, should lead the engagement.
2. B. A team of available internal auditors should be assembled and should consult with an external nonaudit expert on chemical waste disposal to plan and conduct the engagement.
3. C. A team of the most knowledgeable auditors could be assembled and use the engagement work program from the previous year to gather additional insight regarding recommended audit procedures
4. D. A nonaudit employee from the chemical disposal area may share his expertise with the audit team, provided the internal audit manager conducts a detailed review of all engagement work performed.

Correct Answer: B
✑ Skill Gap Identification:Internal auditors lack the necessary expertise in chemical waste disposal.
✑ Consulting Experts:Engaging an external nonaudit expert ensures that the internal audit team receives the necessary technical knowledge to conduct an effective review.
✑ Team Assembly:By assembling a team of internal auditors and consulting an external expert, the organization leverages both internal audit capabilities and external technical expertise.
✑ Ensuring Competence:This approach ensures that the internal audit activity complies with the IIA Standards, specifically Standard 1210 – Proficiency, which requires internal auditors to possess the knowledge, skills, and other competencies needed to perform their responsibilities.
References:
✑ IIA Standard 1210 – Proficiency .

According to the IIA Code of Ethics, which of the following is required with regard to communicating results?

1. A. The internal auditor should present material information to appropriate personnel within the organization without revealing confidential matters that could be detrimental to the organization
2. B. The internal auditor should disclose all material information obtained by the date of the final engagement communication.
3. C. The internal auditor should obtain all material information within the established time and budget parameters.
4. D. The internal auditor should reveal material facts that could potentially distort the reporting of activities under review

Correct Answer: D
The IIA Code of Ethics sets forth principles and expectations for ethical behavior in internal auditing, particularly regarding the communication of results.
✑ Integrity and Transparency:According to the IIA Code of Ethics, internal auditors
are expected to exhibit integrity and transparency in their reporting, ensuring that material facts are disclosed accurately to avoid misrepresentation.
Reference:IIA Code of Ethics, Principle 4 – Integrity, which emphasizes the need for internal auditors to disclose all material facts known to them that, if not disclosed, could distort the reporting of activities under review.
Revealing Material Facts:The principle of integrity mandates that internal auditors must reveal material facts necessary to avoid any misrepresentation of the activities being reviewed. This ensures that stakeholders receive a truthful and complete picture of the audit findings.
Practical Example:If an auditor discovers significant control weaknesses that could impact financial reporting, these must be disclosed in the audit report to provide a true representation of the entity's control environment.
Confidentiality and Appropriateness:While confidentiality is important, it does not supersede the need to report material facts that are essential for accurate reporting. Confidential matters that are not material or do not distort the reporting can be withheld to protect sensitive information.
Clarification:Option A incorrectly suggests that all confidential matters can be withheld even if they are material and could distort reporting, which contradicts the principle of integrity.
Comprehensive Disclosure:The requirement to disclose all material information by the date of the final engagement communication (Option B) and obtaining all material information within established parameters (Option C) are important but secondary to the fundamental ethical obligation to ensure accurate and truthful reporting.
Clarification:These options focus on procedural aspects rather than the core ethical obligation of integrity and accurate reporting.
Conclusion:The correct answer is D, as it aligns with the IIA Code of Ethics requirement
that internal auditors should reveal material facts that could potentially distort the reporting of activities under review, ensuring transparency and integrity in their communications.