Pass the IIA CIA Challenge Exam IIA-CHAL-QISA Questions and answers with CertsForce

Introduction:

The independence and objectivity of the internal audit function are paramount, especially when the CAE has had prior involvement in the area under review.

Scenario Analysis:

Option A: Previous consulting assignments may raise concerns but do not inherently impair independence if managed correctly.

Option B: A historical role in accounting functions is less problematic if sufficient time has passed and there is no ongoing influence.

Option C: Having been the payroll manager presents a direct conflict of interest, compromising the CAE's objectivity.

Option D: Reviews following consulting assignments are common practice and do not necessarily indicate a conflict.

Conclusion:

It is problematic for the CAE to provide assurance over payroll functions if they were previously the payroll manager, as this creates a clear conflict of interest and threatens audit objectivity.

Audit workpapers are essential documents that provide evidence of the audit work performed and the conclusions reached.

Option A: While review notes can be useful, they do not need to be retained if they do not add value to the audit evidence.

Option B: Audit workpaper documentation policies are typically established by the internal audit department, not reviewed or approved by the audit committee.

Option C: Management should not review the workpapers for accuracy as this could compromise the independence of the audit.

Option D: Preparing workpapers helps auditors document their work thoroughly, facilitating learning and professional development​​.

Introduction:

When the internal audit team lacks necessary skills for an ad-hoc assurance engagement, leveraging internal resources can be a practical solution.

Resolving Skill Gaps:

Using employees from other departments can provide the needed expertise while maintaining the engagement's integrity.

Options Analysis:

Option A: Declining the engagement may not be feasible and does not address the need.

Option B: Completing the engagement without the required skills can compromise quality.

Option C: Using employees from other departments brings in the necessary competencies and supports cross-functional collaboration.

Option D: Changing the scope may limit the effectiveness of the engagement.

Conclusion:

The acceptable resolution is to consider using employees from other departments in the organization to bring in the required skills for the engagement.

If an organization pays one of its liabilities twice, its assets (cash) would be reduced more than necessary. This results in an understatement of net income and owners’ equity because the additionalpayment is an expense that should not have been recorded. Liabilities would be overstated because the duplicate payment does not reduce the liability correctly.

References:

"Financial Accounting Principles," which discusses the impact of errors on financial statements.

Non-Assurance Engagements: Non-assurance engagements focus on advisory and consulting services rather than providing an independent assessment. These engagements aim to add value by offering insights and recommendations to management.

Objective Characteristics:

Informing Management: Providing information on potential risks and advising on risk management strategies is typical for non-assurance engagements. This helps management make informed decisions and manage risks effectively.

Assessment and Compliance: Options A, C, and D are more aligned with assurance engagements, where the internal audit activity provides an independent assessment or ensures compliance with policies and procedures.

IIA Guidance:

Standard 2120 – Risk Management: Internal auditors must evaluate and contribute to the improvement of risk management processes, often through advisory services in non-assurance roles.

References:

Non-assurance engagements focus on informing and advising management about risks, improvements, and strategic decisions, as exemplified by informing management about risks related to moving the data warehouse to a third-party cloud server​​​​.

Performing a cost-benefit analysis when management decides not to implement a recommendation is a prime example of residual risk assessment. This involves evaluating the potential impacts and remaining risks associated with the decision, thereby determining the residual risk that the organization will continue to face.

Cost-Benefit Analysis: This helps in understanding the financial implications and benefits that would have been realized had the recommendation been implemented versus the risks of not implementing it.

Risk Assessment: By assessing the residual risk, the CAE can provide a clearer picture of the ongoing risks that the organization needs to manage.

Management Decision Impact: This analysis assists in making informed decisions and understanding the trade-offs involved in addressing audit observations.

References:

"Audit and Assurance Services: An Integrated Approach," which explains residual risk assessment and the importance of cost-benefit analysis in audit recommendations .

Introduction:

Corporate Social Responsibility (CSR) involves companies taking responsibility for their impact on society and the environment beyond statutory obligations.

Nature of CSR Reporting:

CSR reporting is generally voluntary, although some regions and industries may have mandatory requirements.

Options Analysis:

Option A: Many CSR areas may overlap with the audit universe or annual audit plan, but not all.

Option B: Investors may increasingly rely on CSR information, particularly in ESG (Environmental, Social, Governance) investing.

Option C: CSR reporting is largely voluntary, unlike financial or regulatory reporting which is often mandatory.

Option D: Operating management typically plays a significant role in CSR efforts and reporting.

Conclusion:

The correct statement regarding CSR is that it is largely voluntary, unlike many other areas of reporting responsibilities that impact stakeholders.

Demonstrating due professional care involves using appropriate technology and data analysis techniques to enhance the audit's effectiveness and efficiency. These tools help auditors identify anomalies, trends, and potential areas of risk more accurately and timely, reflecting a higher standard of care in their audit activities.

References:

"Auditing Standards and Guidelines," which emphasize the importance of using advanced techniques in audit processes.

Understanding the GRI:The Global Reporting Initiative (GRI) provides a comprehensive framework for reporting on sustainability performance, including social responsibility aspects.

Framework and Standards:GRI standards are widely used and recognized globally, which helps organizations benchmark their performance against other entities using the same framework.

Stakeholder Communication:The GRI framework emphasizes transparency and accountability in reporting, making it an effective tool for informing stakeholders about an organization's social responsibility performance.

Comprehensive Coverage:GRI covers various aspects of social responsibility, including economic, environmental, and social impacts, providing a holistic view of an organization's performance.

References:

The Global Reporting Initiative (GRI) .

Both job order cost systems and process cost systems track three manufacturing cost elements: direct materials, direct labor, and manufacturing overhead. These cost elements are essential in calculating the total production cost and determining the cost per unit.

Direct Materials: The raw materials directly used in the production of goods.

Direct Labor: The wages of workers who are directly involved in manufacturing the products.

Manufacturing Overhead: Indirect costs associated with production, such as utilities, maintenance, and depreciation of equipment.

References:

"Cost Accounting: A Managerial Emphasis," which details the tracking of manufacturing costs in different costing systems .