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IIA IIA-CIA-Part1 Exam
CIA Part 1 - Essentials of Internal Auditing (Page 21 )

Updated On: 1-Feb-2026
Page 21 of 115
PDF with 1175 Questions

Regarding an organization's decision to retain an external audit firm, the chief audit executive (CAE) should:

  1. Work with the organization's chief financial officer to evaluate the external auditor's performance and together make the decision.
  2. Not be involved in this decision process as it would compromise the CAE's objectivity.
  3. Evaluate the external auditor's performance and retain the external auditor if quality and cost criteria are met.
  4. Assist the audit committee by facilitating the development of an appropriate evaluation process.

Answer(s): D



Which of the following would provide the most reliable information on the risk associated with an auditable activity?

  1. Event scenarios with regression analysis.
  2. Past audit findings and instances of management failures.
  3. Consequences and economic predictability of loss.
  4. Management assessment and corroboration by the internal audit activity.

Answer(s): D



At the beginning of fieldwork in an audit of investments, an internal auditor noted that the interest rate had declined significantly since the engagement work program was created. The auditor should:

  1. Proceed with the existing program since this was the original scope of work that was approved.
  2. Modify the audit program and proceed with the engagement.
  3. Consult with management to verify the interest rate change and proceed with the engagement.
  4. Determine the effect of the interest rate change and whether the program should be modified.

Answer(s): D



In publicly held companies, management often requires the internal audit activity's involvement with quarterly financial statements that are made public and used internally. Which of the following is generally not a reason for such involvement?

  1. Management may be concerned about its reputation in the financial markets.
  2. Management may be concerned about potential penalties that could occur if quarterly financial statements are misstated.
  3. The Standards state that internal auditors should be involved with reviewing quarterly financial
    statements.
  4. Management may perceive that having quarterly financial information examined by the internal auditors enhances its value for internal decision making.

Answer(s): C



Overall audit efficiency is enhanced between the internal and external audit functions when:

  1. Internal audit coverage is reduced to avoid potential conflicts of interest.
  2. Audits of the same department are conducted at different times.
  3. The internal audit department reviews functions or departments prior to the external audit.
  4. External audit scope is reduced based on the internal audit department's activities.

Answer(s): D



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