IIA Updated IIA-CIA-Part1 Exam Questions and Answers by gloria

This indicator suggests that the organization’s ethics program might not be well-developed if the responsibility for communicating ethics compliance is decentralized to the level of employees' direct managers without broader oversight or structured programs. Effective ethics programs typically involve centralized communication strategies that ensure consistency and comprehensiveness across the organization.References: Institute of Internal Auditors (IIA) - Guidance on Developing an Ethics ProgramQUESTION NO: 400

Which of the following is most likely to impair the internal audit activity's independence?

A. Undertaking audit work in an area where internal auditors lack the necessary skills.

B. Establishing an internal audit activity without documented policies and procedures.

C. Assigning compliance responsibilities to the chief audit executive.

D. Concluding that an internal control is effective without first obtaining evidence

Answer: C

Assigning compliance responsibilities to the chief audit executive (CAE) can impair the internal audit activity's independence. When the CAE has operational responsibilities, such as compliance, it may lead to a conflict of interest or self-review, both of which can compromise the independence required to objectively assess and report on the organization’s risks and controls.References: Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing, particularly those concerning independence and objectivity.

Under the circumstances described, the type of fraud most likely to occur is skimming. Skimming involves stealing cash before it is recorded on the organization’s books. Since receipts were issued only upon request and the inventory manager had control over collecting and depositing payments, there is an opportunity for undetected theft of cash payments.References: Common types of fraud in cash handling environments, as outlined in fraud detection and prevention resources by the IIA.

In the scenario where an internal auditor assisted with management's design of controls over the procurement function, the chief audit executive should plan an assurance engagement on the adequacy of the internal control system by assigning the engagement to another internal auditor on staff. This approach ensures that the evaluation of the controls is conducted with objectivity and independence, as the auditor who helped design the controls may have an inherent bias.References: IIA Standards regarding objectivity and independence in assurance engagements.

A newly hired internal auditor from a different industry would most likely need further education in the area of business acumen. This need arises because business acumen includes understanding the specific business context, industry practices, competitive environment, and operational processes that are unique to the industry in which the organization operates. Transitioning between industries often requires adjustments and additional learning to understand these new dynamics effectively.References: Institute of Internal Auditors (IIA) - Learning and Development Standards