[Free] Download New Updated (October 2016) IIA IIA-CIA-Part1 Real Exam 121-130

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QUESTION 121

Which of the following statements is correct regarding corporate compensation systems and related bonuses?

 

I. A bonus system should be considered part of the control environment of an organization and should be considered in formulating a report on internal control.

 

II. Compensation systems are not part of an organization’s control system and should not be reported as such.

 

III. An audit of an organization’s compensation system should be performed independently of an audit of the control system over other functions that impact corporate bonuses.

 

A.

I only

B.

II only

C.

III only

D.

II and III only

 

Correct Answer: A

 

 

 

 

 

QUESTION 122

During an audit of financial contracts, an auditor learns that a relative has a substantial loan with the organization. The auditor should:

 

A.

Exclude the relative’s information from the audited work and proceed with the audit engagement.

B.

Proceed with the audit engagement but disclose in the engagement final communication that the relative is a customer.

C.

Immediately withdraw from the audit engagement.

D.

Notify management and the chief audit executive (CAE) and have the CAE determine whether the auditor should continue with the audit engagement.

 

Correct Answer: D

 

 

QUESTION 123

Which of the following lists these audit steps in the correct chronological order?

 

I. Create the engagement work program.

 

II. Conduct the exit conference.

 

III. Perform fieldwork.

 

IV. Schedule the audit engagement.

 

Issue a summary report of audit findings.

 

A.

I, IV, III, II, V.

B.

I, IV, II, III, V.

C.

IV, I, III, II, V.

D.

IV, III, I, V, II.

 

Correct Answer: C

 

 

QUESTION 124

Which of the following elements should an auditor recommend for inclusion in an organization’s code of ethics?

 

I. Ethics should vary with local customs in the organization’s foreign operations.

 

II. Whistle-blowing should be discouraged because it can cause distrust among employees and false accusations which waste organizational resources on investigations.

 

III. Ethical behavior should not be incorporated into performance evaluations because it is too subjective and controversial.

 

A.

I only

B.

II only

C.

I, II, and III.

D.

None of the above.

 

Correct Answer: D

 

QUESTION 125

Which of the following would have the least impact (either positive or negative) on an assessment of a department’s control environment?

 

A.

The department managed long-term investments,including investment in derivatives and other financial instruments,to maximize return.

B.

The department manager sets a tone of honesty and integrity in all business dealings and this tone is emulated by department personnel.

C.

Many department functions were duplicated or verified by other department employees as part of the department’s normal procedures.

D.

Audit tests designed to verify compliance with control procedures detected a general failure to follow standard procedures for transaction authorization.

 

Correct Answer: A

 

 

QUESTION 126

An internal quality assessment of the internal audit activity should provide the chief audit executivewith.

 

A.

Recommendations for improvement.

B.

Objectives for internal audit engagements.

C.

Confirmation of action on past audit recommendations.

D.

Appraisals of internal audit staff performance.

 

Correct Answer: A

 

 

QUESTION 127

Which of the following processes should be included in a benchmarking activity?

 

I. Identify key measures.

 

II. Collect data on performances and practices.

 

III. Identify opportunities for improvement.

 

A.

II only

B.

I and III only

C.

II and III only

D.

I, II, and III.

 

Correct Answer: D

 

 

QUESTION 128

In addition to data protection, which of the following is a control that is typically used by companies to safeguard the privacy rights of their customers?

 

I. End-user computing.

 

II. Encryption of data.

 

III. Spyware.

IV. Intrusion detection.

 

A.

II only

B.

I and III only

C.

II and IV only

D.

I, II, and IV only

 

Correct Answer: C

 

 

QUESTION 129

Risk within an internal audit engagement is defined asthe:

 

A.

Probability that a balance or class of transactions and related assertions contain misstatements that could be material to the financial statements.

B.

Uncertainty of an event occurring that could have an impact on the achievement of objectives.

C.

Failure to adhere to organizational policies,plans,and procedures, or the failure to comply with relevant laws and regulations.

D.

Failure to accomplish established objectives and goals for operations or programs.

 

Correct Answer: B

 

 

QUESTION 130

Which of the following is the most important limitation on the effectiveness of audit committees?

 

A.

Audit committees may be composed of independent directors; however,those directors may have close personal and professional friendships with management.

B.

Audit committee members are compensated by the organization and thus favor a stockholder view.

C.

Audit committees devote most of their efforts to external audit concerns and do not pay much attention to internal auditing and the overall control environment.

D.

Audit committee members do not normally have degrees in the accounting or auditing fields.

 

Correct Answer: A

 

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