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Free IIA-IAP Exam Braindumps (page: 8)

Page 7 of 26
PDF with 100 Questions

An internal auditor is reporting on the organization's asset management system.
Which of the following would likely add the greatest value to the organization?

  1. Confirmation that controls are operating efficiently.
  2. Recommendations aimed at reducing risk exposure.
  3. Reports that state identified deficiencies were remedied during the audit.

Answer(s): B

Explanation:

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

Standard 2410 - Criteria for Communicating: Internal audit reports must provide relevant and constructive information, including recommendations for improvement.

Recommendations focused on reducing risk exposure align with the purpose of internal auditing:
improving governance, risk management, and controls.

Reasoning:

Option B is correct because providing recommendations aimed at reducing risk exposure directly addresses the organization's strategic and operational vulnerabilities, adding significant value.

Option A (confirmation of efficient controls) ensures reliability but does not proactively improve risk management or processes.

Option C (deficiencies remedied during the audit) is informative but lacks the forward-looking impact of targeted recommendations.

Adding Value through Recommendations:

Internal audit recommendations guide management in addressing critical risks, improving operational efficiency, and enhancing organizational resilience.



During engagement planning, which of the following would provide an internal auditor with a sufficient understanding of the process being audited?

  1. The mission, vision, and strategic objectives of the organization.
  2. Management's opinion on the thoroughness of a previous internal audit of the same process.
  3. The objectives and risk management of the process.

Answer(s): C

Explanation:

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

Standard 2200 - Engagement Planning: Internal auditors must develop a plan that considers the objectives, risks, and controls of the area being audited.

Standard 2210 - Engagement Objectives: The objectives of the engagement must be aligned with the organization's processes and risk management practices.

Reasoning:

Option C is correct because understanding the process's objectives and associated risks allows the auditor to design procedures to assess how well risks are managed and objectives are achieved.

Option A (mission, vision, and strategic objectives) provides organizational context but does not give detailed insights into the specific process.

Option B (management's opinion) is subjective and insufficient for developing a comprehensive understanding of the process.

Effective Engagement Planning:

Focus on process-specific objectives, risks, and controls ensures a targeted and effective audit, contributing to meaningful outcomes.



Which of the following is an important consideration when providing quality audit communications?

  1. Include as much detail as possible.
  2. Provide a fair and balanced assessment.
  3. Demonstrate knowledge by using technical language.

Answer(s): B

Explanation:

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

Standard 2420 - Quality of Communications: Audit communications must be accurate, objective, clear, concise, constructive, complete, and timely.

A fair and balanced assessment ensures objectivity and builds credibility.

Reasoning:

Option B is correct because fair and balanced reporting reflects both positive and negative findings, maintaining the credibility and usefulness of the audit report.

Option A (including as much detail as possible) risks overwhelming the audience and detracting from key messages.

Option C (using technical language) can reduce clarity and accessibility for non-technical stakeholders.

Importance of Balanced Reporting:

Objective and balanced communications ensure that the audit report is actionable and supports informed decision-making by management and the board.



An internal auditor is performing an internal control assessment at a manufacturing company. The auditor observed that the accounts payable clerks have the ability to create new vendors without management's review and approval. How should the auditor document this observation?

  1. The observation doesn't affect the adequacy of the internal controls because the existing process controls ensure that invoices are promptly and accurately paid.
  2. The observation is an internal control weakness; therefore, additional testing should be performed to determine whether secondary mitigating controls exist or whether the control should be redesigned.
  3. The observation is a sign of adequate internal controls; however, effectiveness testing should be performed to ensure that the controls are operating as designed and intended.

Answer(s): B

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Internal Control Assessment:

Standard 2130 - Control: Internal auditors must evaluate the adequacy and effectiveness of controls in mitigating risks.

COSO Framework: Proper segregation of duties is essential for preventing unauthorized transactions and fraud.

Reasoning:

Option B is correct because the lack of management review and approval for creating vendors indicates a control weakness, as it creates opportunities for unauthorized vendors or fraud. The auditor should investigate whether mitigating controls exist (e.g., periodic review of vendor lists) or recommend redesigning the process to include managerial oversight.

Option A dismisses the observation without considering its impact on control adequacy. Prompt payment alone does not address risks related to unauthorized vendors.

Option C incorrectly assumes the observation reflects adequate controls, which is not the case given the lack of management approval.

Actionable Next Steps:
Document the observation as a control deficiency.

Perform additional testing to identify whether compensating controls mitigate the risk or recommend enhancements to strengthen controls.






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