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​Certified Financial Services Auditor® (CFSA®) Sample Exam Questions

Sample Questions
  •   Which of the following situations would not impair audit objectivity?
    1. An auditor is assigned to audit a business function that the auditor was responsible for nine months ago.
    2. An individual temporarily assigned to the internal audit activity because of the individual's expert knowledge in a particular business function is assigned to audit an activity that the individual was responsible for just prior to transferring to the internal audit activity.
    3. An auditor is assigned to perform a post-implementation review on a system for which the auditor participated in the design of controls during the system's design process.
    4. An auditor is assigned to perform a post-implementation review on a system for which the auditor performed a procedure review and made control recommendations prior to the system's implementation.

    View answer
    1. Incorrect. Practice Advisory 1130.A1 states that "Objectivity is presumed to be impaired if an auditor provides assurance services for an activity for which the auditor had responsibility within the previous year."
    2. Incorrect. Practice Advisory 1130.A1-1 states that "Persons transferred to, or temporarily engaged by, the internal audit activity should not be assigned to audit those activities they previously performed or for which they had management responsibility until at least one year has elapsed. Such assignments are presumed to impair objectivity, and additional consideration should be exercised when supervising the engagement work and communicating engagement results."
    3. Incorrect. Practice Advisory 1120-1-4 states that "The internal auditor’s objectivity is not adversely affected when the auditor recommends standards of control for systems or reviews procedures before they are implemented. The auditor’s objectivity is considered to be impaired if the auditor designs, installs, drafts procedures for, or operates such systems."
    4. Correct. Practice Advisory 1120-1-4 states that "The internal auditor’s objectivity is not adversely affected when the auditor recommends standards of control for systems or reviews procedures before they are implemented. The auditor’s objectivity is considered to be impaired if the auditor designs, installs, drafts procedures for, or operates such systems."
  •   Which of the following are typical information systems controls that are used to ensure properly authorized transactions?
    1. Online validation routines that check dollar authority limits.
    2. Online user access controls.
    3. Automated balancing and reconciliation routines.
    4. Edits that validate full completion of data input fields.

     
    1. I and II only.
    2. II and III only.
    3. III and IV only.
    4. I, II, and IV only.

    View answer
    1. Correct. On-line validation routines that check dollar authority limits is a control that ensures that individuals do not input amounts exceeding a predefined limit, and is therefore a control to ensure that only authorized transactions occur. On-line user access controls are controls to ensure only authorized users will be granted access.
    2. Incorrect. On-line user access controls are controls to ensure only authorized users will be granted access. However, automated balancing and reconciliation routines are controls which ensure that transactions are complete and accurate.
    3. Incorrect. Automated balancing and reconciliation routines are controls which ensure that transactions are complete and accurate. Edits which validate full completion of data input fields is control to ensure the completeness of processing.
    4. Incorrect. On-line validation routines that check dollar authority limits is a control that ensures that individuals do not input amounts exceeding a predefined limit, and is therefore. a control to ensure that only authorized transactions occur. On-line user access controls are controls to ensure only authorized users will be granted access. However, edits which validate full completion of data input fields is control to ensure the completeness of processing.
  •   Commercial banks create money by:
    1. Making loans.
    2. Selling government bonds to the public.
    3. Placing reserves at the Federal Reserve Bank.
    4. Repurchasing their stock on the open market.

    View answer
    1. Correct. Commercial banks create money through loans.
    2. Incorrect. Money decreases as banks sell government bonds to the public. Instead money is created when banks buy government bonds from the public.
    3. Incorrect. Placing reserves at the Federal Reserve Bank only transfers money from one account to another account on the bank's balance sheet. Money is not created.
    4. Incorrect. Repurchasing their stock on the open market only moves money from the bank to the seller. No money is created.
  •   The time that a new group member must wait before becoming eligible to enroll in a group insurance plan is known as the:
    1. Actively-at-work provision.
    2. Probationary period.
    3. Eligibility period.
    4. Enrollment period.

    View answer
    1. Incorrect. The actively-at-work provision requires that the employee is only eligible for coverage if the employee is actively at work.
    2. Correct. The probationary period is the time that a new group member must wait before becoming eligible to enroll in a group insurance plan.
    3. Incorrect. Eligibility period, also known as the enrollment period, is the time during which a new group member may first enroll for coverage.
    4. Incorrect. The enrollment period, also known as the eligibility period, is the time during which a new group member may first enroll for coverage.
  •   An entity that purchases and sells securities on its own behalf is acting as:
    1. A broker.
    2. A dealer.
    3. An agent.
    4. A principal.

    View answer
    1. Incorrect. A broker would buy and sell securities of others.
    2. Correct. A dealer purchases and sells securities on its own behalf.
    3. Incorrect. An agent acts on behalf of a principal but has no role in the buying and selling of securities.
    4. Incorrect. A principal would be the party on whose behalf the agent is acting. This does not apply to the purchase and sale of securities.
  •   Which of the following statements about the over-the-counter market is false?
    1. Mutual funds and other new issues are initially issued over-the-counter.
    2. Security prices are determined through auction bidding.
    3. Broker dealers must be registered.
    4. Securities are traded at many locations throughout the country.

    View answer
    1. Incorrect. This statement is true.
    2. Correct. This statement is false. Knowledge in the over-the-counter market security prices is determined through negotiation; not auction bidding.
    3. Incorrect. This statement is true.
    4. Incorrect. This statement is true.
  •   Which statement is correct concerning commercial letters of credit?
    1. A letter of credit is not a negotiable instrument, and the contract of sale between the buyer and seller is independent of the letter of credit.
    2. A letter of credit is not a negotiable instrument, and the contract of sale between the buyer and seller is dependent on the letter of credit.
    3. A letter of credit is a negotiable instrument, and the contract of sale between the buyer and seller is independent of the letter of credit.
    4. A letter of credit is a negotiable instrument, and the contract of sale between the buyer and seller is dependent on the letter of credit.

    View answer
    1. Correct. A letter of credit is not a negotiable instrument and the contract of sale between the buyer and seller is independent of the letter of credit.
    2. Incorrect. Although a letter of credit is not a negotiable instrument, the contract of sale between the buyer and seller is independent of the letter of credit; not dependent on the letter of credit.
    3. Incorrect. Although the contract of sale between the buyer and seller is independent of the letter of credit, a letter of credit is not a negotiable instrument.
    4. Incorrect. Although a letter of credit is not a negotiable instrument, the contract of sale between the buyer and seller is independent of the letter of credit; not dependent on the letter of credit.
  •   Which of the following would not generally be a responsibility of an underwriting department?
    1. Helping policy owners with requests for information, interpreting policy language, and answering questions regarding policy coverage.
    2. Verifying that the mortality/morbidity rates of the company's insureds does not exceed the rates assumed when the premiums were calculated.
    3. Considering the applicant's age, weight, physical condition, personal/family history and other factors to determine the degree of risk.
    4. Negotiating and managing reinsurance agreements.

    View answer
    1. Correct. Helping policy owners with requests for information, interpreting policy language, and answering questions regarding policy coverage, are responsibilities of the customer service department.
    2. Incorrect. Verifying that the mortality/morbidity rates of the company's insureds do not exceed the rates assumed when the premiums were calculated is a responsibility of the underwriting department.
    3. Incorrect. Considering the applicant's age, weight, physical condition, personal/family history, and other factors to determine the degree of risk is a responsibility of the underwriting department.
    4. Incorrect. Negotiating and managing reinsurance agreements are responsibilities of the underwriting department.
  •   In which of the following ways are call and put options used by the options investor in purchase and sales transactions?
    1. A long call allows the investor to purchase the underlying security at the specified strike price after the option expiration date.
    2. A long put allows the investor to sell the underlying security at the specified strike price until the option expiration date.
    3. An investor who is short a call is obligated to sell the underlying security at the specified strike price if a call option is exercised after the option expiration date.
    4. An investor who is short a put is obligated to buy the underlying security at the specified strike price if a put option is exercised by the option expiration date.

     
    1. I and II only.
    2. I and III only.
    3. II and III only.
    4. II and IV only.

    View answer
    1. Incorrect. I is incorrect. All option transactions must be completed by the expiration date on the option contract./li>
    2. Incorrect. III is incorrect. All option transactions must be completed by the expiration date on the option contract.
    3. Incorrect. III is incorrect. All option transactions must be completed by the expiration date on the option contract.
    4. Correct. II is correct. A long put allows the investor to sell the underlying security at the specified strike price until the option expiration date. IV is also correct. An investor who is short a put is obligated to buy the underlying security at the specified strike price if a put option is exercised by the option expiration date.
  •   In which of the following ways would the writer of an uncovered call usually make a profit?
    1. The call expires.
    2. The underlying stock splits.
    3. The underlying stock goes up in price.
    4. The underlying stock goes down in price.

     
    1. III only.
    2. I and IV only.
    3. II and IV only.
    4. I, II, and III only.

    View answer
    1. Incorrect. The underlying stock goes down in price.
    2. Correct. The call expires, and the underlying stock goes down in price.
    3. Incorrect. Although the underlying stock goes down in price, the stock does not split.
    4. Incorrect. Although the call does expire, the underlying stock does not split and it goes down in price.

Candidates from the following countries must refer to their local IIA Institute web-site or contact their local representative for more information about local certification processes:


The information contained on this website pertains to all other countries.

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