Which of the following is an example of a properly supervised engagement?
Correct Answer:
D
Supervision in Internal Audit: Effective supervision ensures that the engagement is carried out according to plan, objectives are met, and quality standards are maintained. It involves guiding, mentoring, and reviewing the work of auditors throughout the engagement.
IIA Standards:
✑ Standard 2340 – Engagement Supervision: Internal audit engagements must be properly supervised to ensure objectives are achieved, quality is maintained, and staff are developed.
✑ Proper supervision includes overseeing the engagement, providing direction, and ensuring that work complies with standards and achieves engagement objectives.
Examples of Proper Supervision:
✑ Reasonable Assurance: The auditor in charge providing reasonable assurance that engagement objectives were met is a fundamental aspect of effective supervision. It ensures that the engagement delivers the intended outcomes and adheres to quality standards.
✑ Daily Records and Workpaper Review: Options A and B involve administrative tasks and peer review, which are supportive but do not alone constitute comprehensive supervision.
✑ Accompanied Training: Option C involves on-the-job training, which is beneficial but not the primary aspect of engagement supervision.
According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the Internal audit activity^
Correct Answer:
C
According to IIA guidance, one of the best practices for enhancing the organizational independence of the internal audit activity is for the chief audit executive (CAE) to meet privately with the board at least annually. This practice reinforces the independence of the internal audit function by ensuring direct and unfiltered communication with the board.
✑ Direct Communication: Private meetings with the board allow the CAE to discuss
audit findings, concerns, and other important matters without management's influence, thereby preserving the objectivity and independence of the internal audit function.
✑ Board Support: This direct line of communication helps to secure the board??s
support for the internal audit activity, which is critical for its effective functioning.
✑ Independence: Such meetings underscore the independence of the internal audit activity from management, reinforcing its role in providing unbiased assurance.
References:
✑ "IIA Standards for the Professional Practice of Internal Auditing," which recommends private meetings between the CAE and the board to support independence .
Which of the following actions would an internal auditor perform primarily during a consulting engagement of a debt collections process?
Correct Answer:
C
A consulting engagement involves providing advice and recommendations to improve processes, controls, and efficiency.
✑ Option A: Reviewing journal entries for accuracy and completeness.
✑ Option B: Comparing the policies and procedures to regulatory collections guidance.
✑ Option C: Advising management on streamlining the recording of accounts receivable.
✑ Option D: Performing a walk-through of the debt collections process to determine whether proper segregation of duties exists.
Reference:
Consulting engagements, as defined by the IIA, involve activities where internal auditors provide advisory services to help an organization improve its governance, risk management, and control processes. This often includes providing insights and recommendations for process improvements, such as streamlining accounts receivable recording, which aligns with the role described in Option C.
By referencing these principles and guidelines, the answers and explanations provided are validated and grounded in established internal audit standards and accounting practices.
During a payroll audit, the internal auditor discovered that several individuals who have the same position classification as the are earning a significantly higher salary. The auditor noted the names and amounts of each; and he planned to prepare a request to the chief audit executive for a salary Increase based on this Information. Which of the following IIA Code of Ethics principles was violated in this scenario?
Correct Answer:
B
When internal audit resources are limited, it is crucial to focus on the most critical aspects of the control environment. Preventive key controls are designed to prevent errors or irregularities from occurring, which are essential for maintaining a strong control environment. Given the mature control environment of the organization, prioritizing preventive key controls ensures that potential issues are addressed before they materialize, providing a proactive approach to risk management.
Reference: IIA Practice Guide "Assessing the Adequacy of Internal Controls"
The internal audit activity is planning an assurance engagement for a foreign subsidiary. According to IIA guidance, which of the following would be included in the preliminary communication to management of the area under review?
Correct Answer:
A
✑ Preliminary Communication:Preliminary communication to management of the area under review is essential in setting clear expectations and ensuring transparency regarding the upcoming audit.
✑ Key Elements to Include:
✑ IIA Guidance:According to the IIA standards, communicating these elements helps in building a cooperative relationship and ensures that there are no misunderstandings regarding the audit process.
References:
✑ IIA Standard 2201 – Planning Considerations .