IIA Updated IIA-CIA-Part2 Exam Questions and Answers by oona

When internal controls are weak, it is important for the auditor to rely less on the internal controls and instead perform more substantive testing. Detail testing involves examining a larger number of individual transactions or balances to gather sufficient evidence about the accuracy and completeness of financial records. This method is appropriate because it does not rely on the effectiveness of internal controls, which are known to be weak in this scenario. References:

The IIA’s Standards and Practice Advisories, specifically focusing on audit procedures and responses to weak internal controls.

According to the IIA Standards, the primary factors in determining the adequacy of an annual audit plan include sufficiency, appropriateness, and effective deployment of resources. These elements ensure that the internal audit activity can effectively cover key risk areas, provide relevant assurance, and utilize resources efficiently. While cost-effectiveness is important, it is considered less critical compared to ensuring the audit plan is comprehensive and appropriately targeted. References: = IIA Standard 2010 - Planning.

After management has implemented an action plan to improve controls, the most appropriate follow-up action for the auditor is to perform retesting. Retesting involves verifying that the new procedures are effective in addressing the control deficiencies identified during the initial audit.

IIA Standard 2500 – Monitoring Progress:

This standard requires the internal audit activity to monitor and ensure that management actions have been implemented and are working as intended. Retesting is a critical component of this process because it confirms that the new controls effectively mitigate the risks.

Importance of Retesting:

Retesting allows the auditor to verify that the specific control activities, which were previously found to be deficient, have been corrected. This hands-on approach provides direct evidence of the effectiveness of the new procedures.

IIA Practice Advisory 2500-1:

The advisory emphasizes the need for follow-up activities to include retesting when necessary to confirm that management’s actions have resolved the issues identified.

Option A (Conduct another audit): Conducting a completely new audit might be excessive; follow-up and retesting are sufficient to confirm the effectiveness of the corrective actions.

Option B (Ensure procedures are documented): Documentation is important, but it does not confirm that the procedures are actually effective.

Option D (Analyze procedures and report to management): Analysis is useful, but retesting provides direct verification of effectiveness.

Detailed Explanation:Why Not Other Options?Conclusion: Option C is correct because retesting confirms that the new procedures effectively address the previously identified deficiencies, ensuring that the risks have been mitigated as intended, in line with IIA guidance.

The chief audit executive (CAE) can best illustrate the value of the internal audit activity by reporting the overall performance resulting from the internal audit balanced scorecard. The balanced scorecard includes metrics that measure the effectiveness, efficiency, and impact of the internal audit function, providing a comprehensive view of its contributions to the organization. This approach demonstrates how internal audit activities align with and support the organization's strategic objectives. References:

The IIA’s Practice Guide on Measuring Internal Audit Performance.

The IIA’s Practice Guide on Internal Audit Effectiveness.