IIA IIA-CIA-Part2 - Practice of Internal Auditing

Internal control questionnaires are an efficient information-gathering method for an internal auditor to determine whether specified control procedures are in place. These questionnaires are designed to capture detailed information about controls through structured questions, enabling auditors to quickly identify the existence and nature of controls. This method is systematic and allows for comprehensive coverage of various control aspects, making it efficient for initial assessments.References:

IIA Standard 2240: Engagement Work Program

IIA Practice Guide: Using Control Self-Assessment for Continuous Improvement

A. A plan that focuses on furthering the independence of the internal audit activity:While independence is essential, it is not directly related to professional development planning, which addresses skill enhancement.

B. A plan that ensures internal auditors collectively possess expertise in various fields to avoid outsourcing:This may be a benefit of professional development but is not its primary objective.

C. A plan based on individual preferences and proposals, which helps internal auditors achieve greater success:This option emphasizes individual goals rather than aligning professional development with organizational needs.

D. A plan that focuses on filling gaps in the current skills needed to complete audit objectives:Correct. Professional development should address skill gaps to enhance the internal audit activity’s ability to meet its objectives effectively.

CIA Exam Syllabus Reference:

Domain IV: Managing the Internal Audit Function – Professional Development and Resource Management.

To improve collaboration with audit clients during an engagement, it is effective for internal auditors to discuss the engagement plan with the client so they understand the reasoning behind the approach (2), and to review test criteria and procedures where the client expresses concerns about the type of tests to be conducted (3). This approach fosters transparency, helps manage client expectations, and builds trust. Obtaining control concerns before the audit (1) is also useful but less directly related to collaboration during the engagement. Providing all observations at the end of the audit (4) might not facilitate ongoing collaboration during the audit process. References: IIA Standard 2200 – Engagement Planning, IIA Standard 2400 – Communicating Results

According to the IIA’s Fraud and Internal Audit position paper1, internal auditors should not investigate fraud unless they have the specific experience and expertise required to do so. Therefore, the most appropriate option for the chief audit executive is to appoint an independent fraud investigation specialist to work with the selected internal auditors. This will ensure that the investigation is conducted in a professional and ethical manner, and that the evidence is not compromised or tainted. The other options are not suitable because they do not address the immediate need for fraud investigation expertise, and they may expose the organization to legal or reputational risks.

Generalized audit software (GAS) is a type of automated audit tool commonly used by internal auditors to perform a wide range of audit tests, including the validation of calculations and the simulation of transactions. GAS allows auditors to analyze large volumes of data, perform complex calculations, and create simulations to test the accuracy and completeness of the transactions. This makes it the most appropriate tool for validating calculations in the organization's building application. References:

The IIA’s Global Technology Audit Guide (GTAG) on Data Analytics and Generalized Audit Software.

In the context of internal auditing, activities that pose immediate and significant risks to health, safety, the environment, or that conceal inappropriate activities within an organization are of high importance and typically require formal communication to the chief audit executive (CAE). These activities could have severe legal, financial, and reputational consequences for the organization. While acts that favor one party to the detriment of another are concerning and may indicate ethical or procedural issues, they are generally considered less critical compared to the other options, as they do not necessarily imply immediate and severe risks to individuals or the organization as a whole.References:

The Institute of Internal Auditors (IIA) International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 2060: Reporting to Senior Management and the Board.

IIA Practice Guide on Communicating Unacceptable Risk.

One of the primary drawbacks of using internal control questionnaires is the risk that management may not provide honest or accurate answers. This can occur due to a variety of reasons, including a lack of knowledge, intentional deception, or a misunderstanding of the questions. As a result, the responses may not accurately reflect the true state of the controls, leading to incomplete or misleading audit conclusions.

In a consulting engagement agreement, it is crucial to clearly define the duties and responsibilities needed from management. This ensures that both the internal audit team and the management are aligned on their roles and what is expected from each party. Clear delineation of responsibilities helps prevent misunderstandings and sets a solid foundation for the engagement’s success. References:

IIA Standards - 2201: Planning Considerations

IIA Practice Guide - Consulting Services

When proposing interim changes to the annual audit plan due to emerging risks, the most appropriate action for the CAE is to communicate with the CEO and present the revised audit plan to the board for approval. This ensures that senior management is informed and supportive of the changes, and that the board, which holds the ultimate oversight responsibility, formally approves the revised plan. References:

The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2020 - Communication and Approval.

The IIA’s Practice Guide on Engagement Planning.

The chief audit executive (CAE) typically performs several activities following an audit engagement, including reporting follow-up activities to senior management, implementing follow-up procedures to evaluate residual risk, and evaluating the extent of improvements. These activities are crucial to ensure that audit recommendations are properly addressed and that any residual risks are managed effectively. However, determining the costs of implementing the recommendations is not typically a responsibility of the CAE. This task is usually handled by the management of the area being audited, as they have the detailed operational knowledge necessary to accurately estimate these costs. References:

The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 2500 - Monitoring Progress.

The IIA’s Practice Guide on Follow-up Processes.