Pass the IIA CIA IIA-CIA-Part1 Questions and answers with CertsForce

The role of internal control frameworks, such as COSO, is to provide guidance related to internal control design and implementation. They assist organizations in evaluating and benchmarking their business practices (Option B). These frameworks do not prescribe specific controls but offer principles and guidelines to help organizations design effective internal control systems tailored to their unique circumstances. This approach enables organizations to achieve their business objectives while managing risks effectively.

COSO Internal Control - Integrated Framework

IIA Standards, Standard 2130: Control

The identification of multiple control weaknesses and high-priority recommendations often indicates a systemic issue with the organizational framework for risk management. A strong organizational framework provides guidance on risk management and controls, aligning with IIA guidelines on the importance of an integrated approach to risk management​​.

The IIA's guidelines suggest that internal audit may provide support by coaching management on risk responses, but it should not take on management’s responsibilities, such as implementing risk responses or setting the risk appetite, as this would impair objectivity​​.

In the scenario where the board requests the chief audit executive (CAE) to provide consulting services for a new systems implementation project, the CAE should avoid making decisions on risk responses within risk management processes. The CAE’s role is to provide independent and objective assurance and consulting services. Making decisions on risk responses would impair the CAE's independence and objectivity, which are crucial for the internal audit function. Instead, the CAE can provide advice and recommendations on risk management practices while ensuring that management retains responsibility for decision-making.

The IIA Standards: Standard 1112 – Chief Audit Executive Roles Beyond Internal Auditing: "If the CAE has or is expected to have roles and/or responsibilities that fall outside of internal auditing, safeguards must be in place to limit impairments to independence or objectivity."

The IIA Practice Guide: "Independence and Objectivity": Discusses the importance of maintaining independence and objectivity in consulting engagements.

The internal audit charter formally grants the internal audit activity its authority, as per IIA standards. It outlines the audit function’s scope, responsibilities, and independence within the organization​​.

The chief audit executive (CAE) would include the scope and frequency of both internal and external quality assessments on the quarterly board meeting agenda as part of the internal audit activity's quality assurance and improvement program. This topic is essential for ensuring the board is informed about the mechanisms in place to maintain and enhance the quality of the internal audit function. Regular updates on quality assessments help the board understand the effectiveness of the internal audit activity and its commitment to continuous improvement.

The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards) - Standard 1311: Internal Assessments and Standard 1312: External Assessments.

The IIA’s Quality Assessment Manual.

In a consulting engagement, it is generally acceptable and often expected that the engagement client will determine the scope of the engagement to ensure that the consulting services meet their specific needs. This collaborative approach helps in aligning the audit services with the desired outcomes of the client while maintaining the flexibility needed in consulting engagements. However, the internal auditor must ensure that such scope setting does not impair their objectivity.

The IIA’s Practice Advisories on Consulting Engagements

An impairment to independence occurs when the CAE's supervisor is responsible for functions that the CAE may need to audit. This dual responsibility can create a conflict of interest and impact the objectivity of the internal audit activity. References:

IIA Standard 1110: Organizational Independence.

IIA Practice Guide: Independence and Objectivity.

The first step in conducting a fraud risk assessment is to identify relevant fraud risk factors (Option A). This involves understanding the internal and external factors that could influence the likelihood and impact of fraud within the organization. Identifying these risk factors sets the foundation for subsequent steps, such as identifying potential fraud schemes, existing controls, and red flags. This approach aligns with the guidance provided in the IIA's Practice Guide on Managing the Business Risk of Fraud, which outlines the process of conducting comprehensive fraud risk assessments starting with identifying risk factors.

IIA Practice Guide: Managing the Business Risk of Fraud

COSO Framework for Fraud Risk Management

To maintain objectivity and independence, the new internal auditor, who was recently a senior supervisor in the accounts payable department, should not be assigned to an audit engagement in the same area. The IIA standards emphasize the need to avoid actual or perceived conflicts of interest, especially when auditors have recently transferred from or held responsibilities in the areas they audit​​.