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IIA-IAP: Internal Audit Practitioner
Free Practice Exam Questions (page: 3)
Updated On: 2-Jan-2026

Page 3 of 26
PDF with 100 Questions

Which of the following statements best describes quality audit workpapers?

  1. They should be relevant and interesting.
  2. They should be electronic and indexed.
  3. They should be understandable and complete.

Answer(s): C

Explanation:

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

Standard 2330 - Documenting Information: Workpapers must be sufficient, reliable, relevant, and useful to support audit findings and conclusions.

Practice Advisory: Clear and complete documentation enhances understanding and ensures consistency in audit conclusions.

Characteristics of Quality Workpapers:

They should clearly articulate audit procedures, results, and conclusions in a way that another auditor or stakeholder can understand and rely on them.

While electronic and indexed workpapers (Option B) are desirable for organization, they are not defining characteristics of quality.



Which of the following would have the most direct impact on management's decision regarding the amount of risk that is considered acceptable?

  1. Risk capacity.
  2. Risk appetite.
  3. Risk perception.

Answer(s): B

Explanation:

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

Standard 2120 - Risk Management: Internal audit should evaluate the organization's risk appetite and alignment with decision-making processes.

Definitions:

Risk Appetite (Option B): The level of risk an organization is willing to accept in pursuit of its objectives, making it the most direct determinant of acceptable risk levels.

Risk Capacity (Option A): The organization's ability to absorb risk, which is more strategic and long- term.

Risk Perception (Option C): Subjective views of risk, which can influence decisions but do not directly determine acceptable risk.



An internal auditor discovers that a vendor had submitted invoices and was paid for services not rendered.
Which of the following controls is most appropriate to address this type of issue?

  1. The accounts payable clerk should compare the acknowledgment of goods and services to the invoice.
  2. The supervisor should observe the input of invoices into the payment system.
  3. The supervisor should verify that the amount paid agrees with the contracted amount.

Answer(s): A

Explanation:

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

Standard 2130 - Control: Internal audit must assess whether controls ensure compliance and prevent fraud.

Reasoning:

Option A directly addresses the root cause: payment for unrendered services. Requiring acknowledgment of receipt ensures only valid invoices are paid.

Option B (observing invoice input) ensures data entry accuracy but does not address fraud.

Option C (verifying amounts) ensures correct payments for legitimate invoices but does not prevent unauthorized payments.

Best Practice:

Verifying acknowledgment of services before payment is a preventive control, reducing fraud risk.



Which of the following describes an internal auditor's use of external benchmarking?

  1. The auditor calculates the net profit margin for a business segment to analyze the profitability.
  2. The auditor compares return on equity for a beverage company against its competitor to analyze profitability.
  3. The auditor evaluates operating income margin between geographical areas within an organization to analyze its profitability.

Answer(s): B

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Benchmarking:

External benchmarking involves comparing the organization's metrics with those of other entities, typically competitors or industry averages.

Standard 1210 - Proficiency: Internal auditors must have knowledge to evaluate performance against external benchmarks effectively.

Reasoning:

Option B demonstrates external benchmarking by comparing the organization's return on equity with a competitor's performance.

Option A and Option C focus on internal analysis within the organization and do not use external references.

Application in Internal Auditing:

External benchmarking identifies competitive gaps, informs strategic decisions, and supports recommendations for improvement.



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