Certified Internal Auditor Governance & Organizational Structure 2

Question 1

An independent board director is best characterized as someone who:

Accepted Answer

Has no material relationship with the company that could influence their judgment

Answer

Holds a significant equity ownership stake in the company

Answer

Serves simultaneously on all standing board committees

Answer

Is appointed directly by the chief executive officer

Question 2

Under Sarbanes-Oxley and stock exchange rules, an audit committee should be composed of:

Accepted Answer

A majority of independent directors, with at least one member qualifying as a financial expert

Answer

At least one internal auditor and two senior executives

Answer

Equal representation of management nominees and major shareholders

Answer

Exclusively members of the external audit firm

Question 3

According to IIA Standards, what is the recommended reporting relationship for the chief audit executive (CAE)?

Accepted Answer

Functionally to the audit committee and administratively to senior management

Answer

Functionally to the CFO and administratively to the CEO

Answer

Functionally to the external auditors and administratively to the board chair

Answer

Exclusively to the CEO for all reporting purposes

Question 4

A 'staggered board' (also called a classified board) in corporate governance means:

Accepted Answer

Directors are divided into classes elected in rotation, so only a portion of the board faces election each year

Answer

Board members receive compensation payments on staggered schedules throughout the year

Answer

The board includes both executive and non-executive directors in defined ratios

Answer

Committee assignments rotate among all board members on an annual basis

Question 5

A board-level risk committee is primarily responsible for:

Accepted Answer

Overseeing the enterprise risk management framework and the organization's risk appetite

Answer

Conducting internal audits of the organization's highest-risk areas

Answer

Approving all individual transactions above a defined materiality threshold

Answer

Setting the internal audit function's annual risk-based audit priorities

Question 6

In the IIA's Three Lines Model (2020), what role does the governing body (board) play?

Accepted Answer

The governing body sits above the three lines, providing accountability and oversight to stakeholders

Answer

The governing body represents the first line, owning and managing operational risks

Answer

The governing body represents the second line, overseeing risk and compliance functions

Answer

The governing body represents the third line, directing internal audit activities

Question 7

A nominating/governance committee of the board is primarily responsible for:

Accepted Answer

Identifying and recommending director candidates and overseeing corporate governance practices

Answer

Designing and approving executive compensation and incentive packages

Answer

Overseeing financial reporting quality and managing the relationship with external auditors

Answer

Monitoring and approving enterprise risk management policies and limits