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CIA Part 1 Mission of Internal Audit correct answer To enhance and protect organizational value by providing risk-based and objective assurance, advice, and insight. Core Principles for the Professional Practice of Internal Auditing correct answer Demonstrates integrity. Demonstrates competence and due professional care. Is objective and free from undue influence (independent). Aligns with the strategies, objectives, and risks of the organization. Is appropriately positioned and adequately resourced. Demonstrates quality and continuous improvement. Communicates effectively. Provides risk-based assurance. Is insightful, proactive, and future-focused. Promotes organizational improvement. Risk Categories correct answer 1. Business Disruption and System Failures
- Clients, Products, & Business Practices
- Credit
- Damage to Physical Assets
- External Fraud
- Employment Practices and Workplace Safety
- Execution, Delivery & Process Management
- Internal Fraud
- Insurance
- Market Types of Controls correct answer 1. Analytical Procedures
- Approvals and Authorizations
- Confirmations
- Exception Reporting and Tracking
- Ongoing Monitoring
- Physical Security
- Reconciliations
- Segregation of Duties
- Transaction/Application Controls
- Information and Communication
- Risk Assessment
- Training Definition of Internal Auditing correct answer Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Code of Ethics — Principles correct answer 1. Integrity
- Objectivity
- Confidentiality
- Competency Integrity correct answer Internal auditors: Shall perform their work with honesty, diligence, and responsibility. Shall observe the law and make disclosures expected by the law and the profession.
Shall perform internal audit services in accordance with the International Standards for the Professional Practice of Internal Auditing (Standards). Shall continually improve their proficiency and the effectiveness and quality of their services. Add Value correct answer The internal audit activity adds value to the organization (and its stakeholders) when it provides objective and relevant assurance, and contributes to the effectiveness and efficiency of governance, risk management, and control processes. Adequate Control correct answer Present if management has planned and organized (designed) in a manner that provides reasonable assurance that the organization's risks have been managed effectively and that the organization's goals and objectives will be achieved efficiently and economically. Assurance Services correct answer An objective examination of evidence for the purpose of providing an independent assessment on governance, risk management, and control processes for the organization. Examples may include financial, performance, compliance, system security, and due diligence engagements. Board correct answer The highest level of governing body charged with the responsibility to direct and/or oversee the activities and management of the organization. Typically, this includes an independent group of directors (e.g., a board of directors, a supervisory board, or a board of governors or trustees). If such a group does not exist, the "board" may refer to the head of the organization. "Board" may refer to an audit committee to which the governing body has delegated certain functions. Charter correct answer A formal document that defines the internal audit activity's purpose, authority, and responsibility. The internal audit charter establishes the internal audit activity's position within the organization; authorizes access to records, personnel, and physical properties relevant to the performance of engagements; and defines the scope of internal audit activities.
Chief Audit Executive correct answer A person in a senior position responsible for effectively managing the internal audit activity in accordance with the internal audit charter and the Definition of Internal Auditing, the Code of Ethics, and the Standards. The chief audit executive or others reporting to the chief audit executive will have appropriate professional certifications and qualifications. The specific job title of the chief audit executive may vary across organizations. Code of Ethics correct answer Principles relevant to the profession and practice of internal auditing, and Rules of Conduct that describe behavior expected of internal auditors. The Code of Ethics applies to both parties and entities that provide internal audit services. The purpose of the Code of Ethics is to promote an ethical culture in the global profession of internal auditing. Compliance correct answer Adherence to policies, plans, procedures, laws, regulations, contracts, or other requirements. Conflict of Interest correct answer Any relationship that is, or appears to be, not in the best interest of the organization. A conflict of interest would prejudice an individual's ability to perform his or her duties and responsibilities objectively. Consulting Services correct answer Advisory and related client service activities, the nature and scope of which are agreed with the client, are intended to add value and improve an organization's governance, risk management, and control processes without the internal auditor assuming management responsibility. Examples include counsel, advice, facilitation, and training. Control correct answer Any action taken by management, the board, and other parties to manage risk and increase the likelihood that established objectives and goals will be achieved. Management plans, organizes, and directs the performance of sufficient actions to provide reasonable assurance that objectives and goals will be achieved. Control Environment correct answer The attitude and actions of the board and management regarding the importance of control within the organization. The control environment provides the discipline and structure for the achievement of the primary objectives of the system of internal control. The control environment includes the following elements:
Governance correct answer The combination of processes and structures implemented by the board to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives. Impairment correct answer Impairment to organizational independence and individual objectivity may include personal conflict of interest, scope limitations, restrictions on access to records, personnel, and properties, and resource limitations (funding). Independence correct answer The freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner. Information Technology Controls correct answer Controls that support business management and governance as well as provide general and technical controls over information technology infrastructures such as applications, information, infrastructure, and people. Information Technology Governance correct answer Consists of the leadership, organizational structures, and processes that ensure that the enterprise's information technology supports the organization's strategies and objectives. Internal Audit Activity correct answer A department, division, team of consultants, or other practitioner(s) that provides independent, objective assurance and consulting services designed to add value and improve an organization's operations. The internal audit activity helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes. International Professional Practices Framework correct answer The conceptual framework that organizes the authoritative guidance promulgated by The IIA. Authoritative Guidance is comprised of two categories - (1) mandatory and (2) strongly recommended. Must correct answer The Standards use the word "must" to specify an unconditional requirement.
Objectivity (Definition) correct answer An unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others. Overall Opinion correct answer The rating, conclusion, and/or other description of results provided by the chief audit executive addressing, at a broad level, governance, risk management, and/or control processes of the organization. An overall opinion is the professional judgment of the chief audit executive based on the results of a number of individual engagements and other activities for a specific time interval. Risk correct answer The possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood. Risk Appetite correct answer The level of risk that an organization is willing to accept. Risk Management correct answer A process to identify, assess, manage, and control potential events or situations to provide reasonable assurance regarding the achievement of the organization's objectives. Should correct answer The Standards use the word "should" where conformance is expected unless, when applying professional judgment, circumstances justify deviation. Significance correct answer The relative importance of a matter within the context in which it is being considered, including quantitative and qualitative factors, such as magnitude, nature, effect, relevance, and impact. Professional judgment assists internal auditors when evaluating the significance of matters within the context of the relevant objectives. Standard correct answer A professional pronouncement promulgated by the Internal Audit Standards Board that delineates the requirements for performing a broad range of internal audit activities, and for evaluating internal audit performance.
1110 - Organizational Independence correct answer The chief audit executive must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. The chief audit executive must confirm to the board, at least annually, the organizational independence of the internal audit activity. Organizational independence is effectively achieved when the chief audit executive reports functionally to the board. Examples of functional reporting to the board involve the board: Approving the internal audit charter;Approving the risk based internal audit plan;Approving the internal audit budget and resource plan;Receiving communications from the chief audit executive on the internal audit activity's performance relative to its plan and other matters;Approving decisions regarding the appointment and removal of the chief audit executive; Approving the remuneration of the chief audit executive; andMaking appropriate inquiries of management and the chief audit executive to determine whether there are inappropriate scope or resource limitations. 1110.A1 - The internal audit activity must be free from interference in determining the scope of internal auditing, performing work, and communicating results. 1111 - Direct Interaction With the Board correct answer The chief audit executive must communicate and interact directly with the board. 1120 - Individual Objectivity correct answer Internal auditors must have an impartial, unbiased attitude and avoid any conflict of interest. Interpretation - Conflict of interest is a situation in which an internal auditor, who is in a position of trust, has a competing professional or personal interest. Such competing interests can make it difficult to fulfill his or her duties impartially. A conflict of interest exists even if no unethical or improper act results. A conflict of interest can create an appearance of impropriety that can undermine confidence in the internal auditor, the internal audit activity, and the profession. A conflict of interest could impair an individual's ability to perform his or her duties and responsibilities objectively.
1130 - Impairment to Independence or Objectivity correct answer If independence or objectivity is impaired in fact or appearance, the details of the impairment must be disclosed to appropriate parties. The nature of the disclosure will depend upon the impairment. Interpretation - Impairment to organizational independence and individual objectivity may include, but is not limited to, personal conflict of interest, scope limitations, restrictions on access to records, personnel, and properties, and resource limitations, such as funding. The determination of appropriate parties to which the details of an impairment to independence or objectivity must be disclosed is dependent upon the expectations of the internal audit activity's and the chief audit executive's responsibilities to senior management and the board as described in the internal audit charter, as well as the nature of the impairment. 1130.A1 - Internal auditors must refrain from assessing specific operations for which they were previously responsible. Objectivity is presumed to be impaired if an internal auditor provides assurance services for an activity for which the internal auditor had responsibility within the previous year. 1130.A2 - Assurance engagements for functions over which the chief audit executive has responsibility must be overseen by a party outside the internal audit activity. 1130.C1- Internal auditors may provide consulting services relating to operations for which they had previous responsibilities. 1130.C2- If internal auditors have potential impairments to independence or objectivity relating to proposed consulting services, disclosure must be made to the engagement client prior to accepting the engagement.
1220 - Due Professional Care correct answer Internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor. Due professional care does not imply infallibility. 1220.A1- Internal auditors must exercise due professional care by considering the: Extent of work needed to achieve the engagement's objectives; Relative complexity, materiality, or significance of matters to which assurance procedures are applied; Adequacy and effectiveness of governance, risk management, and control processes;Probability of significant errors, fraud, or noncompliance; and Cost of assurance in relation to potential benefits. 1220.A2 - In exercising due professional care internal auditors must consider the use of technology-based audit and other data analysis techniques. 1220.A3- Internal auditors must be alert to the significant risks that might affect objectives, operations, or resources. However, assurance procedures alone, even when performed with due professional care, do not guarantee that all significant risks will be identified. 1220.C1- Internal auditors must exercise due professional care during a consulting engagement by considering the: Needs and expectations of clients, including the nature, timing, and communication of engagement results; Relative complexity and extent of work needed to achieve the engagement's objectives; and Cost of the consulting engagement in relation to potential benefits. 1230 - Continuing Professional Development correct answer Internal auditors must enhance their knowledge, skills, and other competencies through continuing professional development. 1300 - Quality Assurance and Improvement Program correct answer The chief audit executive must develop and maintain a quality assurance and improvement program that covers all aspects of the internal audit activity.
Interpretation - A quality assurance and improvement program is designed to enable an evaluation of the internal audit activity's conformance with the Definition of Internal Auditing and the Standards and an evaluation of whether internal auditors apply the Code of Ethics. The program also assesses the efficiency and effectiveness of the internal audit activity and identifies opportunities for improvement. 1310 - Requirements of the Quality Assurance and Improvement Program correct answer The quality assurance and improvement program must include both internal and external assessments. 1311 - Internal Assessments correct answer Internal assessments must include: Ongoing monitoring of the performance of the internal audit activity; and Periodic self-assessments or assessments by other persons within the organization with sufficient knowledge of internal audit practices. Interpretation - Ongoing monitoring is an integral part of the day-to-day supervision, review, and measurement of the internal audit activity. Ongoing monitoring is incorporated into the routine policies and practices used to manage the internal audit activity and uses processes, tools, and information considered necessary to evaluate conformance with the Definition of Internal Auditing, the Code of Ethics, and the Standards. Periodic assessments are conducted to evaluate conformance with the Definition of Internal Auditing, the Code of Ethics, and the Standards.
Interpretation - The form, content, and frequency of communicating the results of the quality assurance and improvement program is established through discussions with senior management and the board and considers the responsibilities of the internal audit activity and chief audit executive as contained in the internal audit charter. To demonstrate conformance with the Definition of Internal Auditing, the Code of Ethics, and the Standards, the results of external and periodic internal assessments are communicated upon completion of such assessments and the results of ongoing monitoring are communicated at least annually. The results include the assessor's or assessment team's evaluation with respect to the degree of conformance. 1321 - Use of "Conforms with the International Standards for the Professional Practice of Internal Auditing" correct answer The chief audit executive may state that the internal audit activity conforms with the International Standards for the Professional Practice of Internal Auditing only if the results of the quality assurance and improvement program support this statement. Interpretation - The internal audit activity conforms with the Standards when it achieves the outcomes described in the Definition of Internal Auditing, Code of Ethics, and Standards. The results of the quality assurance and improvement program include the results of both internal and external assessments. All internal audit activities will have the results of internal assessments. Internal audit activities in existence for at least five years will also have the results of external assessments. 1322 - Disclosure of Nonconformance correct answer When nonconformance with the Definition of Internal Auditing, the Code of Ethics, or the Standards impacts the overall scope or operation of the internal audit activity, the chief audit executive must disclose the nonconformance and the impact to senior management and the board. 2000 - Managing the Internal Audit Activity correct answer The chief audit executive must effectively manage the internal audit activity to ensure it adds value to the organization. Interpretation -
The internal audit activity is effectively managed when: The results of the internal audit activity's work achieve the purpose and responsibility included in the internal audit charter;The internal audit activity conforms with the Definition of Internal Auditing and the Standards; andThe individuals who are part of the internal audit activity demonstrate conformance with the Code of Ethics and the Standards.The internal audit activity adds value to the organization (and its stakeholders) when it provides objective and relevant assurance, and contributes to the effectiveness and efficiency of governance, risk management, and control processes. 2010 - Planning correct answer The chief audit executive must establish a risk-based plan to determine the priorities of the internal audit activity, consistent with the organization's goals. Interpretation - The chief audit executive is responsible for developing a risk-based plan. The chief audit executive takes into account the organization's risk management framework, including using risk appetite levels set by management for the different activities or parts of the organization. If a framework does not exist, the chief audit executive uses his/her own judgment of risks after consideration of input from senior management and the board. The chief audit executive must review and adjust the plan, as necessary, in response to changes in the organization's business, risks, operations, programs, systems, and controls. 2010.A1 - The internal audit activity's plan of engagements must be based on a documented risk assessment, undertaken at least annually. The input of senior management and the board must be considered in this process. 2010.A2 - The chief audit executive must identify and consider the expectations of senior management, the board, and other stakeholders for internal audit opinions and other conclusions. 2010.C1 - The chief audit executive should consider accepting proposed consulting engagements based on the engagement's potential to improve management of risks, add value,
2060 - Reporting to Senior Management and the Board correct answer The chief audit executive must report periodically to senior management and the board on the internal audit activity's purpose, authority, responsibility, and performance relative to its plan. Reporting must also include significant risk exposures and control issues, including fraud risks, governance issues, and other matters needed or requested by senior management and the board. Interpretation - The frequency and content of reporting are determined in discussion with senior management and the board and depend on the importance of the information to be communicated and the urgency of the related actions to be taken by senior management or the board. 2070 - External Service Provider and Organizational Responsibility for Internal Auditing correct answer When an external service provider serves as the internal audit activity, the provider must make the organization aware that the organization has the responsibility for maintaining an effective internal audit activity. Interpretation - This responsibility is demonstrated through the quality assurance and improvement program which assesses conformance with the Definition of Internal Auditing, the Code of Ethics, and the Standards. 2100 - Nature of Work correct answer The internal audit activity must evaluate and contribute to the improvement of governance, risk management, and control processes using a systematic and disciplined approach. 2110 - Governance correct answer The internal audit activity must assess and make appropriate recommendations for improving the governance process in its accomplishment of the following objectives: Promoting appropriate ethics and values within the organization;
Ensuring effective organizational performance management and accountability; Communicating risk and control information to appropriate areas of the organization; andCoordinating the activities of and communicating information among the board, external and internal auditors, and management. 2110.A1- The internal audit activity must evaluate the design, implementation, and effectiveness of the organization's ethics-related objectives, programs, and activities. 2110.A2 - The internal audit activity must assess whether the information technology governance of the organization supports the organization's strategies and objectives. 2120 - Risk Management correct answer The internal audit activity must evaluate the effectiveness and contribute to the improvement of risk management processes. Interpretation - Determining whether risk management processes are effective is a judgment resulting from the internal auditor's assessment that: Organizational objectives support and align with the organization's mission;Significant risks are identified and assessed;Appropriate risk responses are selected that align risks with the organization's risk appetite; andRelevant risk information is captured and communicated in a timely manner across the organization, enabling staff, management, and the board to carry out their responsibilities. The internal audit activity may gather the information to support this assessment during multiple engagements. The results of these engagements, when viewed together, provide an understanding of the organization's risk management processes and their effectiveness. Risk management processes are monitored through ongoing management activities, separate evaluations, or both. 2120.A1- The internal audit activity must evaluate risk exposures relating to the organization's governance, operations, and information systems regarding the:
