Certified Internal Auditor Certified Internal Auditor 5 — Questions and Answers
Question 1: Which analytical procedure involves comparing current-period financial data with prior-period data to identify unusual fluctuations?
- Ratio analysis
- Trend analysis (Correct answer)
- Benchmarking
- Regression analysis
Correct answer: Trend analysis
Trend analysis compares data across multiple periods to identify patterns or unusual changes that may indicate risk or error.
Question 2: An internal auditor is reviewing a third-party vendor contract. Which risk is MOST unique to outsourced activities compared to in-house operations?
- Operational risk from process failures
- Lack of direct control over the vendor's internal controls and activities (Correct answer)
- Risk of financial misstatement
- Reputational risk from product quality issues
Correct answer: Lack of direct control over the vendor's internal controls and activities
Outsourcing creates unique risk because the organization cannot directly oversee or enforce controls over the third party's processes.
Question 3: The IIA Code of Ethics requires internal auditors to respect the value and ownership of information they receive. This obligation BEST reflects which principle?
- Integrity
- Objectivity
- Confidentiality (Correct answer)
- Competency
Correct answer: Confidentiality
Confidentiality requires auditors to respect and protect information acquired during the course of their work.
Question 4: During follow-up on a prior audit, management reports that a recommended control has been implemented. The auditor should:
- Accept management's representation without further verification
- Verify implementation through independent testing or observation (Correct answer)
- Close the finding immediately and issue a clean opinion
- Recommend that external auditors confirm the remediation
Correct answer: Verify implementation through independent testing or observation
Auditors should independently verify that corrective actions have been effectively implemented, not simply rely on management's assertion.
Question 5: An internal auditor notices that a newly implemented ERP system is processing duplicate vendor payments. This finding most likely indicates a weakness in:
- Strategic planning controls
- Application-level preventive controls in the ERP system (Correct answer)
- Physical access controls to the server room
- Board-level oversight of IT strategy
Correct answer: Application-level preventive controls in the ERP system
Duplicate payments processed by the ERP indicate a failure in application-level preventive controls designed to detect and block duplicates before processing.
Question 6: Which of the following BEST describes the purpose of a control self-assessment (CSA)?
- Replace the internal audit function with management-led reviews
- Enable management and staff to assess and improve their own controls collaboratively (Correct answer)
- Provide external assurance on the effectiveness of internal controls
- Document audit findings for regulatory submission
Correct answer: Enable management and staff to assess and improve their own controls collaboratively
CSA is a facilitated process in which management and staff collectively examine and assess the effectiveness of controls in their own areas.
Question 7: When determining the reliance an internal auditor can place on the work of external auditors, the MOST important consideration is:
- Whether the external auditors hold a CPA license
- The size of the external audit firm
- The competence and objectivity of the external auditors and relevance of their work (Correct answer)
- Whether the external audit was completed before the internal audit began
Correct answer: The competence and objectivity of the external auditors and relevance of their work
Internal auditors may rely on external auditor work after evaluating their competence, objectivity, and whether their findings are relevant to the internal audit's objectives.
Certified Internal Auditor Certified Internal Auditor 5
Which analytical procedure involves comparing current-period financial data with prior-period data to identify unusual fluctuations?