QUESTION: 29

Which of the following is an example of criteria in an engagement communication?

Annual business conduct training was not performed over the past two years due to inadequate operating budgets.
The audit test was designed to evaluate compliance with the organization's policies and procedures related to business conduct and ethics.
As a result of inadequate business conduct training, 16% of the executive team was unaware of their obligation to report potential conflicts of interest.

Answer(s): B

Explanation:

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

Definition: Criteria are the standards, policies, or benchmarks used to evaluate the subject matter during an audit.

IIA Standard 2410 - Criteria for Communicating: Audit reports should clearly state criteria to ensure findings are relevant and actionable.

Reasoning:

Option B is correct because it references the organization's policies and procedures, which serve as the criteria for evaluating compliance.

Option A describes the condition (what was observed), not the criteria.

Option C describes the effect (the impact of the observed condition).

Importance of Criteria in Audit Reporting:

Including criteria provides a basis for comparison, helping stakeholders understand why a finding is significant and how it deviates from expectations.

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QUESTION: 30

Which of the following best demonstrates that appropriate and sufficient resources were allocated to an audit engagement to achieve its objectives?

Staff skills audit.
Approved engagement work program.
Post-engagement survey of management of the audited area.

Answer(s): B

Explanation:

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

Standard 2200 - Engagement Planning: The engagement work program outlines the resources, timelines, and procedures necessary to achieve the engagement's objectives.

The work program must be approved to ensure alignment with objectives and resource requirements.

Reasoning:

Option B is correct because an approved engagement work program confirms that the scope, procedures, and resources were planned and allocated effectively.

Option A (staff skills audit) evaluates team competencies but does not confirm specific resource allocation for an engagement.

Option C (post-engagement survey) evaluates the outcome of the audit but does not provide evidence of initial resource planning.

Significance of the Work Program:

The work program ensures that the engagement is structured to meet objectives efficiently, with adequate and relevant resources.

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QUESTION: 31

Operational management has asked the internal auditor for recommendations regarding an ineffective process. According to IIA guidance, which of the following would be the auditor's most appropriate response?

Refrain from providing recommendations to preserve audit independence.
Agree to offer recommendations based on observations and conclusions.
Explain that only management should recommend and implement the corrective action.

Answer(s): B

Explanation:

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

Standard 2410 - Criteria for Communicating: Recommendations should be provided where appropriate to address identified issues and improve processes.

Standard 1100 - Independence and Objectivity: Providing recommendations does not impair independence as long as the auditor does not implement them.

Reasoning:

Option B is correct because providing recommendations based on objective observations is part of an internal auditor's role in adding value and improving operations.

Option A unnecessarily avoids recommendations, misinterpreting independence requirements.

Option C incorrectly suggests that the auditor cannot provide input; while management owns the implementation, the auditor's recommendations can guide effective solutions.

Adding Value Through Recommendations:

Recommendations are a critical output of the audit process, guiding management to address inefficiencies and improve operations.

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QUESTION: 32

During an assurance engagement of an organization's procurement process, an internal auditor obtained the policy that specified the authorized dollar limits for invoices. This document would best support which of the following attributes of an audit report?

Effect
Condition
Criteria

Answer(s): C

Explanation:

Comprehensive and Detailed Step-by-Step Reference to Audit Report Elements:

Criteria: The benchmark or standard used for comparison during the audit (e.g., policies, regulations, contracts).

Condition: The factual observation or evidence identified during the audit.

Effect: The impact or consequence of the condition on the organization.

Reasoning:

Option C is correct because the procurement policy specifies authorized limits, serving as the standard (criteria) against which compliance is assessed.

Option B (condition) refers to the actual state of observed controls, processes, or compliance, not the benchmark.

Option A (effect) describes the potential or realized impact of non-compliance but not the standard itself.

Importance of Criteria:

Criteria provide a clear benchmark, ensuring that findings are communicated with context and actionable insights.

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