QUESTION: 53

A regional entertainment organization is in the process of developing a corporate social responsibility (CSR) policy. Management invites ideas from employees when developing the CSR policy Which of the following is the most appropriate idea to include?

Management has overall responsibility for the effectiveness of governance, risk management, and internal control processes associated with CSR.
The board Is responsible for ensuring that CSR objectives are established, risks are managed, performance is measured, and activities are appropriately monitored and reported
Management is responsible for ensuring that the organization's CSR principles are communicated, understood, and integrated into decision-making processes.
Generally, CSR activities are limited to the management of the organization, thus, employees do not have a responsibility for ensuring the success of CSR objectives.

Answer(s): C

Explanation:

CSR Policy Development: In developing a Corporate Social Responsibility (CSR) policy, it is important that the principles of CSR are communicated and understood throughout the organization. Integration into Decision-Making: Management's responsibility includes ensuring that CSR principles are not only communicated but also integrated into the organization's decision-making processes at all levels. This ensures that CSR is part of the organizational culture and operational strategies.
Board's Role: While the board has a role in overseeing and ensuring that CSR objectives are established and risks are managed, the day-to-day responsibility for integrating CSR into business operations lies with management.
IIA Guidance: According to IIA guidance, internal auditors should evaluate the design, implementation, and effectiveness of the organization's ethics-related objectives, programs, and activities, which include CSR initiatives (Standard 2110 - Governance).

Reference:

Effective communication and integration of CSR principles ensure that the organization operates in a socially responsible manner, aligning its business practices with societal expectations and contributing to sustainable development.

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QUESTION: 54

According to IIA guidance, which of the following would be the best first step to manage risk when a third party is overseeing the organization's network and data'?

Creating a comprehensive reporting system for vendors to demonstrate their ongoing due diligence in network operations.
Drafting a strong contract that requires regular vendor control reports and a right-to-audit clause
Applying administrative privileges to ensure right-to-access controls are appropriate
Creating a standing cybersecurity committee to identify and manage risks related to data security.

Answer(s): B

Explanation:

Managing Third-Party Risk: When a third party oversees the organization's network and data, the primary concern is to manage and mitigate risks associated with outsourcing critical functions. Strong Contract Provisions: Drafting a strong contract that includes specific provisions such as regular vendor control reports and a right-to-audit clause is essential. These provisions ensure that the organization maintains oversight and control over the third party's activities. IIA Standards: Standard 2201 Planning Considerations requires that internal auditors consider the organization's objectives and the means by which they are achieved, including the role of third parties.
Contract Management:
Control Reports: Regular control reports from the vendor provide insights into their performance and compliance with agreed-upon standards.
Right-to-Audit Clause: This clause allows the organization to periodically audit the third party to ensure compliance with contractual obligations and to assess the effectiveness of their control environment.

Reference:

Ensuring that third-party vendors adhere to the same standards of risk management and control as the organization helps in mitigating risks related to data security and network management.

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QUESTION: 55

Which of the following activities Is most likely to require a fraud specialist to supplement the knowledge and skills of the internal audit activity?

Planning an engagement of the area in which fraud is suspected.
Employing audit tests to detect fraud
Interrogating a suspected fraudster.
Completing a process review to improve controls to prevent fraud.

Answer(s): C

Explanation:

Specialized Knowledge: Interrogating a suspected fraudster requires specialized knowledge and skills that go beyond the typical expertise of internal auditors. This includes understanding interrogation techniques, legal implications, and psychological aspects. Fraud Specialist: A fraud specialist is trained in conducting investigations, including interrogations, and can provide valuable insights and evidence in cases of suspected fraud. IIA Standards: According to Standard 1210.A2, internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.
Collaborative Approach:

Fraud Investigations: Engaging a fraud specialist ensures that the investigation is conducted thoroughly and professionally, adhering to legal and ethical standards. Support to Internal Audit: The fraud specialist can provide support and guidance to the internal audit activity, enhancing the overall effectiveness of the fraud investigation.

Reference:

Employing a fraud specialist to interrogate a suspected fraudster ensures that the investigation is handled with the necessary expertise and legal compliance, thereby increasing the chances of uncovering the truth and taking appropriate actions.

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QUESTION: 56

Which of the following is most likely the subject of a periodic report from the chief audit executive to the board?

A complete, accurate, and comprehensive account of engagement observations and recommendations.
Oversight of the coordination between the internal audit activity and independent outside auditors
The internal audit activity's purpose, authority, responsibility, and performance relative to plan.
Management's assertions regarding the system of internal controls.

Answer(s): C

Explanation:

Introduction:
The chief audit executive (CAE) has a crucial role in reporting to the board on various aspects of the internal audit activity (IAA).
Importance of Reporting:
Periodic reports from the CAE to the board are essential for ensuring transparency and providing oversight on the IAA's performance and alignment with organizational objectives.
Options Analysis:
Option A: A complete, accurate, and comprehensive account of engagement observations and recommendations is generally part of the audit reports but not typically the subject of periodic reports from the CAE to the board.
Option B: Oversight of the coordination between the internal audit activity and independent outside auditors is important but does not comprehensively cover the CAE's reporting responsibilities.

Option C: The internal audit activity's purpose, authority, responsibility, and performance relative to plan encompass the core aspects of the IAA's alignment with organizational goals, effectiveness, and efficiency, making it the most comprehensive subject of periodic reports. Option D: Management's assertions regarding the system of internal controls are often part of audit findings but not the primary subject of CAE reports to the board.
Conclusion:
The CAE's periodic reports to the board should cover the IAA's purpose, authority, responsibility, and performance relative to the plan, ensuring that the board is well-informed about the internal audit's alignment with the organization's objectives and its overall performance.

Reference:

Institute of Internal Auditors (IIA) Standard 2060: Reporting to Senior Management and the Board.

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