Certified Internal Auditor® (CIA®) Sample Exam Questions |
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According to IIA guidance, independence of the internal audit activity is achieved through which of the following?
A. Staffing and supervision.
B. Continuing professional development and due professional care.
C. Human relations and communications.
D. Organizational status and objectivity.
- Incorrect. Staffing and supervision relate to the professional proficiency of the internal audit activity.
- Incorrect. Continuing professional development and due professional care relate to the professional proficiency of the internal auditor.
- Incorrect. Human relations and communications relate to the professional proficiency of the internal auditor.
- Correct. According to Practice Advisory 1110-1, organizational status and objectivity permit members of the internal audit activity to render the impartial and unbiased judgments essential to the proper conduct of engagements.”
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An organization’s accounts receivable turnover rate decreased from 7.3 to 4.3 over the last three years. Which of the following is most likely the cause of the decrease?
A. An increase in the discount offered for early payment.
B. A more liberal credit policy.
C. A change in net payment due, from 30 to 25 days.
D. Increased cash sales.
- Incorrect. This should have the opposite effect.
- Correct. With a liberal credit policy, customers would be taking longer to pay (365/4.3 compared to 365/7.3).
- Incorrect. This should have the opposite effect.
- Incorrect. This is irrelevant, since cash sales will have no impact.
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Considering the differences between statistical and judgmental sampling, which of the following statements about statistical sampling is true?
A. No judgment is required, because everything is computed according to a formula.
B. A smaller sample can be used.
C. More accurate results are obtained.
D. Population estimates can be made with measurable reliability.
- Incorrect. Judgment is needed for confidence levels and sample unit definition.
- Incorrect. A statistical sample may result in either a smaller or larger sample.
- Incorrect. There is no way to determine which method would produce greater accuracy.
- Correct. The only way to have measured reliability (stated in terms of confidence intervals) is to use a statistical sample..
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Two internal auditors left the organization and cannot be replaced due to budget constraints. Which of the following is the least desirable option for completing future audit engagements?
- Use self-assessment questionnaires to address audit objectives.
- Employ IT solutions for audit planning, sampling, and documentation.
- Eliminate consulting engagements from the audit plan.
- Fill vacancies with personnel from operating departments that are not being audited..
- Incorrect. Self-assessment questionnaires are a means of efficiently addressing the objectives of certain internal audits.
- Incorrect. Use of technology is an appropriate means of achieving efficiencies in audit execution.
- Correct. The audit schedule should only be reduced as a last resort once all other viable alternatives have been explored, including the request for additional resources.
- Incorrect. Using operating personnel with internal audit interest and corporate experience is an appropriate way to enhance internal audit resources..
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Which of the following fraudulent entries is most likely to be made to conceal the theft of an asset?
- Debit expenses, and credit the asset.
- Debit the asset, and credit another asset account.
- Debit revenue, and credit the asset.
- Debit another asset account, and credit the asset..
- Correct. Most fraud perpetrators would attempt to conceal their theft by charging it against an expense account.
- Incorrect. Debiting the stolen asset account would be going in the wrong direction to conceal an asset theft.
- Incorrect. An entry decreasing revenue would be unusual and would stand out.
- Incorrect. This entry would not permanently conceal the frauIt would simply shift the irreconcilable balance to another asset account.
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Which of the following statements are true regarding audit workpaper documentation for a fraud investigation?
1. All incriminating evidence should be included in the workpapers.
2. All important testimonial evidence should be reviewed to ensure that it provides sufficient basis for the conclusions reached.
3. If interviews are held with a suspected perpetrator, written transcripts or statements should be included in the workpapers.
- 1 and 2 only
- 1 and 3 only.
- 2 and 3 only.
- 1, 2, and 3.
- Correct.
- Correct.
- Correct. All workpapers should contain pertinent information to support observations and recommendations.
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Which of the following is the best strategy for limiting production delays caused by equipment breakdown and repair?
- Schedule production based on capacity planning.
- Plan maintenance activity based on an analysis of equipment repair work orders.
- Preauthorize equipment maintenance and overtime pay.
- Establish a preventive maintenance program for all production equipment.
- Incorrect. Scheduling production based on capacity utilization ignores other important factors such as demands.
- Incorrect. Budgeting maintenance department activities based on previous work orders will not prevent equipment breakdowns and repairs.
- Incorrect. Standing authorizations of work orders and overtime will not address the problem posed.
- Correct. A preventive maintenance program will reduce equipment breakdowns and repairs..
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Franchising and horizontal mergers are commonly used strategies in which of the following industry environments?
- Emerging industries.
- Declining industries.
- Fragmented industries.
- Mature industries.
- Incorrect. See answer “C”.
- Incorrect. See answer “C”.
- Correct. Strategies such as chaining, franchising, and horizontal mergers are commonly used in fragmented industries, because there are low barriers to entry. Companies in fragmented industries face many opportunities for differentiation but each opportunity for competitive advantage is small.
- Incorrect. See answer “C”.
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Which of the following costs does management need to consider when introducing a new product or substituting a new product for an existing one?
1. Costs of retraining employees.
2. Costs of acquiring new ancillary equipment.
3. Write-offs due to undepreciated investment in old technology.
4. Capital requirements for changeover.
- 1 and 3 only.
- 1, 2, and 4 only.
- 2, 3, and 4 only.
- 1, 2, 3, and 4.
- Correct.
- Correct.
- Correct.
- Correct. Costs that management should consider would include costs of retraining employees; costs of acquiring new ancillary equipment; write-offs of undepreciated investments in the old technology; capital requirements and research and development costs of the changeover; and costs of modifying interrelated stages of production or related aspects of the business.
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In the Boston Consulting Group (BCG) growth-share matrix, which strategy in the matrix describes large generation of cash and heavy investment needed to grow and maintain competitive positioning but net cash flow is usually modest?
- Cash cows.
- Question marks.
- Dogs.
- Stars.
- Incorrect. A cash cow generates more cash than it requires, providing funds to the corporation to invest in other ventures.
- Incorrect. Question marks deserve attention to determine if the venture is viable or not. The business is located in a growing industry but has not achieved a strong competitive position.
- Incorrect. Dogs describe a business situated in a low growth or declining industry and if not positioned strongly will be divested.
- Correct. Stars describe a business with a strong competitive position in the industry. The industry is robust and SBUs are highly attractive. Net cash flow is modest since investment is heavy although stars generate large amounts of cash.
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In which of the following industry environments are franchising and horizontal mergers commonly used strategies?
- Emerging industries.
- Declining industries.
- Fragmented industries.
- Mature industries.
- Incorrect. See answer “C”.
- Incorrect. See answer “C”.
- Correct. Strategies such as chaining, franchising, and horizontal mergers are commonly used in fragmented industries, because there are low barriers to entry. Companies in fragmented industries face many opportunities for differentiation but each opportunity for competitive advantage is small.
- Incorrect. See answer “C”.
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Which of the following costs does management need to consider when introducing a new product or substituting a new product for an existing one?
- Costs of retraining employees.
- Costs of acquiring new ancillary equipment.
- Write-offs due to undepreciated investment in old technology.
- Capital requirements for changeover.
- I and III only.
- I, II, and IV only.
- II, III, and IV only.
- I, II, III, and IV.
- Correct.
- Correct.
- Correct.
- Correct. Costs that management should consider would include costs of retraining employees; costs of acquiring new ancillary equipment; write-offs of undepreciated investments in the old technology; capital requirements and research and development costs of the changeover; and costs of modifying interrelated stages of production or related aspects of the business.
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Which of the following theories includes the assertion that employees may be motivated by achievement of acceptance or esteem in the workplace?
- Equity theory.
- Expectancy theory.
- Needs hierarchy theory.
- Goal-setting theory.
- Incorrect. The equity theory focuses on the balance between inputs and outcomes.
- Incorrect. The basis of the expectancy theory is that employees are only motivated to provide inputs if they believe a given level of outcome will result.
- Correct. The need theory suggests that employees have needs that they are motivated to satisfy in the workplace.
- Incorrect. The goal-setting theory is based upon the belief that employees have desires and aspirations, which result in goals that direct their behavior.
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The information contained on this website pertains to all other countries. |
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