Latest IIA-CHAL-QISA Actual Free Exam Updated 177 Questions
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NEW QUESTION # 42
Which of the following would be considered a violation of The IIA's mandatory guidance on independence?
- A. The CAE updates the internal audit charter and presents it to the board for approval periodically, not on a specific timeline
- B. The CAE confirms to the board, at least once every five years, the organizational independence of the internal audit act/vity.
- C. The board seeks senior managements recommendation before approving the annual salary adjustment of the CAE.
- D. The chief audit executive (CAE) reports functionally to the board and administratively to the chief financial officer
Answer: C
Explanation:
Independence Requirement: The IIA's mandatory guidance emphasizes the importance of the CAE's independence to ensure unbiased internal audit activities.
Conflict of Interest: Seeking senior management's recommendation for the CAE's salary adjustment can create a conflict of interest and potentially compromise the CAE's independence.
Best Practices: To maintain independence, the CAE's compensation should be determined by the board without influence from senior management.
Standard Compliance: According to the IIA's Attribute Standard 1110 ?Organizational Independence, the CAE must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities.
NEW QUESTION # 43
With regard to project management, which of the following statements about project crashing is true?
- A. It leads to an increase in risk and often results in rework.
- B. It involves a revaluation of project requirements and/or scope.
- C. It is an optimization technique where activities are performed in parallel rather than sequentially
- D. It is a compression technique in which resources are added to the project
Answer: D
Explanation:
Project crashing is a schedule compression technique used in project management to shorten the project duration without changing the project scope. It involves adding additional resources to critical path activities to complete them faster. This method can lead to increased costs but aims to reduce the project timeline effectively. Crashing is often used when project deadlines are tight and time is more critical than budget.
NEW QUESTION # 44
According to IIA guidance, which of the following statements is true regarding reporting the results of the quality assurance and improvement program?
- A. Results of ongoing monitoring of the internal audit activity's performance must be reported to senior management and the board at least annually
- B. The external assessor must present the findings from the external assessment to senior management and the board upon completion.
- C. Deficiencies within the internal audit activity must be reported to the board as soon as they are noted
- D. Results of internal assessments need to be reported to the board at least once every five years.
Answer: A
Explanation:
The IIA's International Standards for the Professional Practice of Internal Auditing (Standards) provide guidance on the reporting requirements of the quality assurance and improvement program.
According to Standard 1320, "The chief audit executive must communicate the results of the quality assurance and improvement program to senior management and the board." This communication must include the results of both internal and external assessments and ongoing monitoring.
Specifically, the results of ongoing monitoring of the internal audit activity's performance should be reported to senior management and the board at least annually. This ensures that the internal audit activity maintains its proficiency, enhances its effectiveness, and complies with the Standards.
NEW QUESTION # 45
An organization uses the management-by-objectives method, whereby employee performance is based on defined goals. Which of the following statements is true regarding this approach?
- A. it is more successful when goal-setting Is performed not only by management, but by all team members, including lower-level staff
- B. It is particularly helpful to management when the organization is facing rapid change.
- C. it is particularly successful in environments that are prone to having poor employer-employee relations
- D. It is a more successful approach when adopted by mechanistic organizations.
Answer: A
Explanation:
* Management-by-Objectives (MBO):This method involves setting clear, measurable objectives that employees and management agree on. It aligns individual performance with organizational goals.
* Inclusive Goal-Setting:When goal-setting is inclusive, involving all team members, it fosters a sense of ownership and commitment to the goals. This collaboration enhances motivation and accountability.
* Empirical Evidence:Research and practical experience indicate that MBO is more effective when employees at all levels are involved in the goal-setting process, as it leads to better performance and job satisfaction.
* IIA Standards and Best Practices:Encouraging participation from all levels aligns with the principles of good governance and effective management, which are central to the IIA's standards and best practices.
References:
* Principles of Management-by-Objectives (MBO) .
NEW QUESTION # 46
A chief audit executive is developing the annual audit plan.
Which factor should receive the HIGHEST priority?
- A. Areas with the greatest residual risk.
- B. Departments with the largest budgets.
- C. Areas not audited during the prior year.
- D. Requests from operational managers.
Answer: A
Explanation:
Risk-based planning focuses on areas presenting the highest residual risk to organizational objectives.
NEW QUESTION # 47
Which of the following situations best applies to an organization that uses a project, rather than a process, to accomplish its business activities?
- A. A commercial construction company is hired to build a warehouse.
- B. A city department sets up a new firefighter training program.
- C. A clothing company designs, makes, and sells a new item.
- D. A manufacturing organization acquires component parts from a contracted vendor
Answer: A
Explanation:
To determine which situation best applies to an organization that uses a project, rather than a process, to accomplish its business activities, it's important to understand the fundamental difference between a project and a process. A project is a temporary endeavor undertaken to create a unique product, service, or result. It has a defined beginning and end and is often constrained by time, budget, and resources. In contrast, a process is ongoing and repetitive, focusing on sustaining and improving existing operations.
NEW QUESTION # 48
During which phase of the contracting process are contracts drafted for a proposed business activity'
- A. Development phase.
- B. Initiation phase.
- C. Management phase
- D. Bidding phase.
Answer: A
Explanation:
Contracts are typically drafted during the development phase of the contracting process. This phase follows the initiation and bidding phases and involves detailed negotiations and the preparation of formal agreements that outline the terms and conditions of the proposed business activity. This ensures that both parties have a clear understanding of their obligations and expectations before the contract is finalized and executed
NEW QUESTION # 49
A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annual snowfall for the coming winter. Which of the following best describes this type of risk?
- A. inherent.
- B. Net
- C. Accepted.
- D. Residual
Answer: A
Explanation:
Inherent Risk: Inherent risk refers to the exposure to risk in its natural state, without considering any controls or mitigation measures. It is the risk that exists before any action is taken to manage it.
* Example: In the scenario of a snow removal company, the significant reduction in annual snowfall represents an inherent risk as it is a natural condition that affects the company's operations.
Other Risk Types:
* Residual Risk: This is the risk that remains after controls and mitigation strategies have been applied.
* Net Risk: Similar to residual risk, it is the risk that remains after considering existing controls.
* Accepted Risk: This is the risk that the organization knowingly accepts after evaluating its impact and likelihood.
Scenario Planning: The exercise of considering the impacts of reduced snowfall helps the company understand its inherent risks and prepare for potential adverse outcomes.
NEW QUESTION # 50
The internal audit activity is responsible for which of the following actions related to an organization's internal controls9
- A. Analyzing and advising regarding costs versus benefits of control activities.
- B. Mitigating risks affecting achievement of organizational objectives.
- C. Enabling opportunities affecting achievement of organizational objectives.
- D. Attesting to fairness of financial statements
Answer: A
Explanation:
Internal audit activities include evaluating the effectiveness and efficiency of internal controls, and part of this process involves analyzing and advising on the cost-benefit relationship of control activities.
This function helps ensure that the internal controls in place are not only effective in mitigating risks but are also economically justified
NEW QUESTION # 51
Which of the following activities would an internal auditor perform as a consulting engagement for an organization?
- A. Advising new internal auditors working for the organization on how to develop strategies on planning audits for the upcoming fiscal year
- B. Communicating with senior management to better understand how new purchasing controls will minimize payment processing time
- C. Briefing the organization's department managers on how to implement risk management processes into their daily operations.
- D. Assessing whether the organization's corporate social responsibility program is meeting its yearly goals to reduce carbon emissions.
Answer: C
Explanation:
* Consulting Engagements:Consulting engagements are advisory in nature and are intended to add value and improve an organization's governance, risk management, and control processes.
* Role of Internal Auditor:In a consulting role, an internal auditor provides advice, facilitates risk management, and helps enhance the efficiency and effectiveness of operations.
* Briefing Managers:By briefing department managers on how to implement risk management processes into their daily operations, the internal auditor is providing valuable advice that can help improve the organization's risk management framework.
* IIA Standards:The IIA's standards emphasize that consulting activities should aim at improving governance, risk management, and control processes without taking on management responsibilities.
References:
* IIA Standard 2010 - Planning .
NEW QUESTION # 52
A newly appointed chief audit executive (CAE) started analyzing the organization's policies in an attempt to customize them to address internal audit specifics. Which of the following organizationwide practices is most likely to be acceptable to the CAE?
- A. To enhance efficiency, Internal auditors should not be rotated regularly among engagements
- B. Hiring practices include requiring potential auditors to disclose any significant stock ownership in the organization.
- C. Standard training for each employee, including internal auditors, is 10 hours per year.
- D. Internal auditors' performance evaluation is primarily based on both client satisfaction surveys and cost savings identified from the audits
Answer: D
Explanation:
The statistical model indicates that daily sales have a direct relationship with the cost of ingredients used and an inverse relationship with rainy days.
NEW QUESTION # 53
An organization invests excess short-term cash in trading securities Which of the following actions should an internal auditor take to test the valuation of those securities'*
- A. Use the equity method to recalculate the investment carrying value
- B. Compare the carrying value with current market quotations
- C. Confirm the securities held by the broker.
- D. Perform a calculation of premium or discount amortization.
Answer: B
Explanation:
Testing Valuation: The valuation of trading securities requires comparing their carrying value with current market prices to ensure accuracy.
Market Quotations: Current market quotations provide the most reliable and up-to-date information on the fair value of securities.
Accounting Standards: This approach is consistent with accounting standards that require securities to be reported at fair value, reflecting any unrealized gains or losses.
Verification Process: Comparing the carrying value with market quotations helps verify that the securities are appropriately valued on the financial statements.
NEW QUESTION # 54
An organization uses the management-by-objectives method, whereby employee performance is based on defined goals. Which of the following statements is true regarding this approach?
- A. it is more successful when goal-setting Is performed not only by management, but by all team members, including lower-level staff
- B. It is particularly helpful to management when the organization is facing rapid change.
- C. it is particularly successful in environments that are prone to having poor employer-employee relations
- D. It is a more successful approach when adopted by mechanistic organizations.
Answer: A
Explanation:
Management-by-Objectives (MBO): This method involves setting clear, measurable objectives that employees and management agree on. It aligns individual performance with organizational goals.
Inclusive Goal-Setting: When goal-setting is inclusive, involving all team members, it fosters a sense of ownership and commitment to the goals. This collaboration enhances motivation and accountability.
Empirical Evidence: Research and practical experience indicate that MBO is more effective when employees at all levels are involved in the goal-setting process, as it leads to better performance and job satisfaction.
IIA Standards and Best Practices: Encouraging participation from all levels aligns with the principles of good governance and effective management, which are central to the IIA's standards and best practices.
NEW QUESTION # 55
Which risk management activity should remain exclusively with management?
- A. Reviewing risk registers.
- B. Evaluating risk responses.
- C. Determining risk acceptance decisions.
- D. Facilitating risk workshops.
Answer: C
Explanation:
Risk acceptance is a management responsibility because management owns organizational risks.
NEW QUESTION # 56
Which of the following situations best applies to an organization that uses a project, rather than a process, to accomplish its business activities?
- A. A commercial construction company is hired to build a warehouse.
- B. A city department sets up a new firefighter training program.
- C. A clothing company designs, makes, and sells a new item.
- D. A manufacturing organization acquires component parts from a contracted vendor
Answer: A
Explanation:
To determine which situation best applies to an organization that uses a project, rather than a process, to accomplish its business activities, it's important to understand the fundamental difference between a project and a process. A project is a temporary endeavor undertaken to create a unique product, service, or result. It has a defined beginning and end and is often constrained by time, budget, and resources. In contrast, a process is ongoing and repetitive, focusing on sustaining and improving existing operations.
* Option A: A clothing company designs, makes, and sells a new item.
* This scenario represents a combination of both project and process elements. The design and creation of a new item can be considered a project, but the ongoing making and selling of the item are part of a process. Hence, this does not exclusively apply to a project-based approach.
* Option B: A commercial construction company is hired to build a warehouse.
* This is a classic example of a project. The construction of a warehouse is a temporary endeavor with a specific goal, defined start and end dates, and constraints on time, cost, and resources. Once the warehouse is built, the project is complete.
* Option C: A city department sets up a new firefighter training program.
* Setting up a new training program could be seen as a project due to its temporary nature and specific goal. However, once the program is established, the training activities themselves will be ongoing, making this more aligned with a process.
* Option D: A manufacturing organization acquires component parts from a contracted vendor.
* This is part of the organization's regular procurement process and does not constitute a temporary, unique project.
NEW QUESTION # 57
Which of the following steps should an internal auditor complete when conducting a review of an electronic data interchange application provided by a third-party service?
1.Ensure encryption keys meet ISO standards.
2.Determine whether an independent review of the service provider's operation has been conducted.
3.Verify that the service provider's contracts include necessary clauses.
4.Verify that only public-switched data networks are used by the service provider
- A. 1 and 3.
- B. 1 and 4
- C. 2 and 4.
- D. 2 and 3.
Answer: D
Explanation:
When conducting a review of an electronic data interchange (EDI) application provided by a third-party service, the internal auditor should ensure several key aspects to maintain security and compliance:
* Independent Review of Service Provider: Determine whether an independent review of the service provider's operations has been conducted. This review helps ensure that the service provider meets
* necessary standards and maintains adequate controls.
* Contractual Clauses: Verify that the service provider's contracts include necessary clauses. These clauses should cover aspects like data security, confidentiality, compliance with standards, and performance metrics.
Ensuring encryption keys meet ISO standards and verifying the use of public-switched data networks are important but are more specific technical controls that might be part of broader reviews. The focus here should be on independent verification and robust contractual agreements
NEW QUESTION # 58
Which of the following internal audit activities is performed in the design evaluation phase?
- A. The internal auditor identifies the controls over segregation of duties.
- B. The internal auditor checks a process for completeness.
- C. The internal auditor reviews prior audits and workpapers
- D. The internal auditor communicates the audit results to management
Answer: A
Explanation:
To determine which internal audit activity is performed in the design evaluation phase, it's essential to understand what each phase in the audit process entails. The design evaluation phase involves assessing whether the design of controls is adequate to mitigate risks to acceptable levels.
* Option A: The internal auditor reviews prior audits and workpapers.
* This activity typically occurs during the planning phase of an audit. Reviewing prior audits and workpapers helps the auditor understand the scope, findings, and context of previous audits, providing valuable information for planning the current audit.
* Option B: The internal auditor identifies the controls over segregation of duties.
* Identifying controls, particularly those related to segregation of duties, is a key part of the design evaluation phase. In this phase, the auditor assesses whether the control design, including segregation of duties, is sufficient to prevent or detect errors and fraud.
* Option C: The internal auditor checks a process for completeness.
* Checking a process for completeness is more aligned with the testing phase, where the auditor evaluates the operational effectiveness of controls. During this phase, the auditor ensures that all parts of a process are functioning as intended.
* Option D: The internal auditor communicates the audit results to management.
* Communicating audit results occurs in the reporting phase, after the audit fieldwork is complete.
In this phase, the auditor summarizes findings, conclusions, and recommendations and presents them to management.
NEW QUESTION # 59
Which of the following is applicable to both a job order cost system and a process cost system'?
- A. Three manufacturing cost elements are tracked: direct materials, direct labor, and manufacturing overhead.
- B. Total manufacturing costs are determined at the end of each period.
- C. The unit cost can be calculated by dividing the total manufacturing costs for the period by the units produced during the period.
- D. Costs are summarized in a production cost report for each department
Answer: A
Explanation:
Both job order cost systems and process cost systems track three manufacturing cost elements:
direct materials, direct labor, and manufacturing overhead. These cost elements are essential in calculating the total production cost and determining the cost per unit.
Direct Materials: The raw materials directly used in the production of goods.
Direct Labor: The wages of workers who are directly involved in manufacturing the products.
Manufacturing Overhead: Indirect costs associated with production, such as utilities, maintenance, and depreciation of equipment.
NEW QUESTION # 60
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