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Free IIA-IAP Exam Braindumps (page: 11)

Page 10 of 26
PDF with 100 Questions

Which of the following statements is appropriate to include in a high-quality internal audit engagement communication?

  1. The internal audit team conducted a review of the financial reporting process prior to year-end.
    The overall findings have been provided for management's consideration prior to the completion of the organization's annual external financial audit.
  2. The internal audit team noted numerous weaknesses in the organization's internal controls over financial reporting. The team recommends that management determine the root cause of the weaknesses.
  3. The internal audit team conducted an engagement under the assumption that significant control weaknesses were likely. The purpose of the review was to uncover those weaknesses.

Answer(s): A

Explanation:

Comprehensive and Detailed Step-by-Step Reference to IIA Standards:

Standard 2420 - Quality of Communications: Reports should be accurate, objective, clear, concise, constructive, and complete.

Findings must be presented factually and free from assumptions or bias.

Reasoning:

Option A is correct because it presents the purpose, timing, and findings in a clear and professional manner, allowing management to take informed action.

Option B lacks balance and shifts responsibility for identifying root causes to management without actionable recommendations.

Option C includes a biased assumption, undermining the report's objectivity and professionalism.

Impact of Quality Communication:

High-quality communications support decision-making by presenting findings and recommendations constructively.



According to The IIA's Code of Ethics, which of the following best illustrates the principle of confidentiality?

  1. The auditor refused to use information learned during an audit to diversify his financial portfolio.
  2. The auditor declined to delegate critical audit lead responsibilities to a new auditor.
  3. The auditor declined to lead an audit of a department in which his nephew is the manager.

Answer(s): A

Explanation:

Comprehensive and Detailed Step-by-Step Reference to the IIA Code of Ethics - Confidentiality:

The principle of confidentiality requires internal auditors to respect and protect the value of information obtained during the course of their work and to avoid using it for personal gain.

Reasoning:

Option A is correct because refusing to use audit information for personal financial gain directly aligns with the principle of confidentiality.

Option B relates to competency and professional judgment, not confidentiality.

Option C pertains to avoiding conflicts of interest, which is an example of the principle of objectivity.

Application of Confidentiality:

Internal auditors must safeguard sensitive information and use it solely for legitimate audit purposes.



To be organizationally independent, the chief audit executive should administratively report to which of the following?

  1. The audit committee.
  2. The board of directors.
  3. The chief executive officer.

Answer(s): C

Explanation:

Comprehensive and Detailed Step-by-Step Reference to IIA Standards:

Standard 1110 - Organizational Independence: Organizational independence is achieved when the CAE reports functionally to the board or audit committee and administratively to the CEO or equivalent.

Reasoning:

Option C is correct because administrative reporting to the CEO ensures the CAE has access to resources, support, and operations without impairing functional independence.

Option A and Option B describe functional reporting lines (e.g., approval of the audit charter and plans), which are distinct from administrative reporting.

Significance of Reporting Structure:

Administrative reporting ensures the day-to-day management of the internal audit function, while functional reporting maintains independence and alignment with governance.



Which of the following is an example of a detective control?

  1. Segregation of duties.
  2. Reconciliations.
  3. Required authorizations.

Answer(s): B

Explanation:

Comprehensive and Detailed Step-by-Step
Definition of Detective Controls:

Detective controls are designed to identify errors, irregularities, or fraudulent activities after they occur, enabling corrective action.

Reasoning:

Option B is correct because reconciliations compare records (e.g., bank statements against ledgers) to detect discrepancies.

Option A (segregation of duties) and Option C (required authorizations) are preventive controls designed to stop errors or fraud before they occur.

Role of Detective Controls:

Detective controls play a critical role in monitoring and identifying issues, supporting the overall control environment.






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