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

Assessing whether an organization's responses to risk are aligned with its risk appetite effectively can be done by analyzing the results of tests on controls and monitoring procedures implemented by management. This approach ensures that the measures taken are sufficient and appropriate in relation to the defined risk appetite, thereby providing assurance that the organization manages risks effectively.References: Institute of Internal Auditors (IIA) Standards and Guidelines.

According to IIA guidance, an internal audit charter should detail the responsibilities of the audit committee. The charter is a formal document that defines the purpose, authority, and responsibility of the internal audit activity. Including the audit committee's responsibilities ensures clarity on the committee's role in overseeing the internal audit function, enhancing governance, and providing a framework for accountability and support.

References:

• The IIA Standards: Standard 1000 – Purpose, Authority, and Responsibility: "The purpose, authority, and responsibility of the internal audit activity must be formally defined in an internal audit charter, consistent with the Definition of Internal Auditing, the Code of Ethics, and the Standards."
• IIA Practice Guide: "Internal Audit Charter: Understanding the Components": Highlights the importance of specifying the audit committee's responsibilities in the charter.

When an organization purchases a derivative contract in the stock market to limit the potential loss in the value of a security, it is transferring the risk to another party. In this case, the derivative contract (such as options or futures) serves as a hedge against potential losses, meaning the risk of loss is transferred to the counterparty of the derivative contract. References:

• Institute of Internal Auditors (IIA) standards and guidelines on risk management and control.

The risk committee is best suited to help the board identify and assess the effects of increased regulations on current industry lending practices. The risk committee focuses on overseeing the organization's risk management policies and procedures, ensuring that all risks, including regulatory risks, are identified, assessed, and managed appropriately. This committee is responsible for understanding the implications of regulatory changes and advising the board on how these changes may impact the organization's operations and strategic objectives.References:

• The IIA’s Practice Guide on Risk Management.
• COSO’s Enterprise Risk Management Framework.