Certified Internal Auditor Internal Audit Standards & Ethics 4 — Questions and Answers
Question 1: Under the IIA Standards, a consulting engagement differs from an assurance engagement primarily because:
- Consulting engagements require no documentation
- The nature and scope of consulting work is agreed upon with the client (Correct answer)
- Consulting engagements cannot identify control weaknesses
- Only external auditors may perform consulting engagements
Correct answer: The nature and scope of consulting work is agreed upon with the client
In consulting engagements, the nature and scope are agreed upon with the engagement client, whereas assurance engagements are defined by the auditor's professional judgment.
Question 2: The IIA Code of Ethics applies to:
- Only CIA-certified professionals
- Only members of the IIA
- All individuals and entities that provide internal audit services (Correct answer)
- External auditors who rely on internal audit work
Correct answer: All individuals and entities that provide internal audit services
The Code of Ethics applies to all individuals and entities that provide internal audit services, whether or not they are IIA members or hold IIA certifications.
Question 3: Standard 2010 requires the CAE to establish a risk-based audit plan. Which factor should be the PRIMARY driver of this plan?
- Prior year's audit findings
- Management's requested areas for review
- The organization's risk assessment (Correct answer)
- Available internal audit resources
Correct answer: The organization's risk assessment
Standard 2010 requires the audit plan to be based on a documented risk assessment, ensuring coverage is aligned with the organization's highest risks.
Question 4: Which situation would most likely impair an internal auditor's objectivity?
- Auditing a department the auditor supervised two years ago
- Auditing a function the auditor's spouse currently manages (Correct answer)
- Auditing a process the auditor helped design five years ago
- Auditing a new business unit the auditor has never reviewed
Correct answer: Auditing a function the auditor's spouse currently manages
A current family relationship with the process owner creates a direct conflict of interest that impairs objectivity, unlike historical associations which may require only a one-year cooling-off period.
Question 5: According to the IIA Standards, final engagement communications must include:
- Management's action plans for all findings
- Objectives, scope, conclusions, recommendations, and action plans where appropriate (Correct answer)
- The CAE's signature and board approval
- A comparison to prior period audit results
Correct answer: Objectives, scope, conclusions, recommendations, and action plans where appropriate
Standard 2410 requires final communications to include the engagement's objectives, scope, applicable conclusions, recommendations, and action plans where appropriate.
Question 6: An internal auditor is offered a substantial gift by a vendor being audited. Under the Code of Ethics, the auditor should:
- Accept the gift if it is below the organization's materiality threshold
- Decline the gift to avoid compromising objectivity and integrity (Correct answer)
- Accept the gift and disclose it to the CAE
- Accept the gift after the audit is completed
Correct answer: Decline the gift to avoid compromising objectivity and integrity
The Code of Ethics requires auditors to avoid accepting gifts that could impair or appear to impair their professional judgment, regardless of value.
Question 7: Standard 1220 (Due Professional Care) requires internal auditors to consider which factor when planning an engagement?
- Cost of audit procedures relative to budget
- Probability of significant errors, irregularities, or noncompliance (Correct answer)
- The auditee's satisfaction scores from prior audits
- Number of staff days available for fieldwork
Correct answer: Probability of significant errors, irregularities, or noncompliance
Standard 1220 requires auditors to consider the probability of significant errors, fraud, or noncompliance when applying due professional care.
Certified Internal Auditor Internal Audit Standards & Ethics 4
Under the IIA Standards, a consulting engagement differs from an assurance engagement primarily because: