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NEW QUESTION # 24
According to IIA guidance, which of the following statements describes one of the similarities between assurance and consulting services?
- A. Internal auditors must not provide assurance or consulting services for an activity for which they had responsibility within the previous year.
- B. Both assurance and consulting services generally involve the internal auditor, the area under review, senior management, and the board.
- C. Internal auditors determine the engagement objectives, scope, and work program for both assurance and consulting services.
- D. When planning assurance and consulting engagements, internal auditors must consider the strategies and objectives of the activity being reviewed.
Answer: D
NEW QUESTION # 25
Which of the following audit techniques is used to evaluate control design while also embodying auditing's analytical process?
- A. A process narrative.
- B. A risk and control matrix.
- C. A walk-through.
- D. A flowchart.
Answer: B
NEW QUESTION # 26
An internal auditor would like to identify the involvement of various organizational units in handling employee travel reimbursement claims. Which of the following methods would be most effective and efficient in completing this task?
- A. Distributing questionnaires.
- B. Monitoring.
- C. Interviewing.
- D. Process mapping.
Answer: D
NEW QUESTION # 27
The director of purchasing, a certified internal auditor (CIA), signs a contract to procure a large order from a supplier whose products provide the best price, quality, and performance. A few days after signing the contract, the supplier presents the CIA with $1, 000 as a gift. Which statement regarding acceptance of the money is correct?
- A. Accepting the money would be prohibited only if it were non-customary.
- B. Because the CIA is not acting as an internal auditor, accepting the money would be governed only by the organization's code of conduct.
- C. Accepting the money would violate the IIA Code of Ethics.
- D. Because the contract was signed before the money was offered, accepting the money would not violate the IIA Code of Ethics.
Answer: C
NEW QUESTION # 28
Which of the following would be the most appropriate first step for the board to take when developing an effective system of governance?
- A. Establish a governance committee.
- B. Determine the organization's overall risk appetite.
- C. Identify key stakeholders and their expectations.
- D. Delegate authority to members of senior management.
Answer: C
NEW QUESTION # 29
An internal audit activity includes in its audit reports the assertion that its work is performed in conformance with the International Standards for the Professional Practice of Internal Auditing {Standards). A recent external quality assessment concluded that the internal audit activity had substantial deficiencies that impact its overall operations. According to IIA guidance, which of the following is the most appropriate action for issuing future audit reports?
- A. Indicate that the internal audit activity operates in partial conformance with the Standards, as the internal audit activity has a quality assurance and improvement program in place to address deficiencies and has met the requirement for conducting an external assessment.
- B. Update and reissue previous audit reports, removing the assertion that the internal audit activity operates in conformance with the Standards, and distribute them to all parties who received the original reports.
- C. Refrain from indicating that the internal audit activity operates in conformance with the Standards until the chief audit executive confirms that the internal audit activity has addressed all areas of nonconformance and the audit committee has been notified.
- D. Refrain from indicating that the internal audit activity operates in conformance with the Standards until another external assessment confirms that the significant areas of nonconformance have been addressed.
Answer: D
NEW QUESTION # 30
A chief audit executive (CAE) reports functionally to the CEO and administratively to the chief financial officer, both of whom serve on the company's board of directors. According to IIA guidance, which of the following would offer the greatest protection for the independence of the internal audit activity?
- A. Obtain full board approval of the internal audit activity's annual audit plan.
- B. Move the CAE's functional reporting to the audit committee.
- C. Appoint the CAE as a member of the board.
- D. Move the CAE's functional reporting to an executive who is not on the board.
Answer: B
NEW QUESTION # 31
Which of the following is a second line of defense in effective risk management and control?
- A. Purchasing department.
- B. Credit department.
- C. Internal audit department.
- D. Compliance department.
Answer: D
NEW QUESTION # 32
A chief audit executive (CAE) of an international charity reports functionally to the audit committee of the board of directors and administratively to the charity's chief financial officer (CFO).
Which of the following would impair the internal audit function's independence?
- A. The CFO administers the annual evaluation process for the internal auditors.
- B. The CFO provides feedback on the CAE's audit reports.
- C. The CFO manages the accounting of the budget for the internal audit function.
- D. The CFO determines the scope of internal audit work in the accounting department.
Answer: D
NEW QUESTION # 33
Which of the following documents is most appropriate in promoting the objectivity of the internal audit activity?
- A. Usage of IT system policy.
- B. Acceptance of gifts policy.
- C. Risk management framework.
- D. Personal responsibility policy.
Answer: B
NEW QUESTION # 34
Which of the following statements is true with regard to conducting an effective quality assurance and improvement program?
- A. The conclusions of periodic internal assessments are intended to assist in achieving conformity to the Standards.
- B. Members of the internal audit activity are not permitted to perform quality assessments, as they would not be independent.
- C. Periodic internal assessments provide the most current and independent recommendations for improvement.
- D. The IIA's Quality Assessment Manual for the Internal Audit Activity must be used as the basis for periodic assessments.
Answer: A
NEW QUESTION # 35
Which of the following is an example of collusion?
- A. An employee works with the IT manager to develop a program for identifying duplicate invoice payments.
- B. An employee includes a faked receipt in his expense claim, and the claim is signed by the employee's manager.
- C. A vendor sends a duplicate invoice with a new invoice number, and the accounts payable system fails to detect the duplication.
- D. A vendor inflates the price of an item and remits a portion of the excess to the purchasing manager.
Answer: D
NEW QUESTION # 36
An organization has implemented a software system that requires a supervisor to approve transactions that would cause treasury dealers to exceed their authorized limit. This is an example of which of the following types of controls?
- A. Preventive controls.
- B. Directive controls.
- C. Soft controls.
- D. Detective controls.
Answer: A
NEW QUESTION # 37
Which of the following is an example of a detective control?
- A. Auto-correct software functionality.
- B. Safety instructions.
- C. Confirmation with suppliers and vendors.
- D. Automatic shut-off valve.
Answer: C
NEW QUESTION # 38
An organization has implemented a new automated payroll system that contains a table of pay rates that are matched to employee job classifications. Which control should an internal auditor suggest in order to ensure that the table is updated correctly, and is used only for valid pay changes?
- A. Restrict data-table access from management and line supervisors who have the authority to determine pay rates.
- B. Require a manager, who is independent of the system and who cannot change the table, to authorize and sign-off on any employee pay changes.
- C. Ensure that adequate edit and reasonableness checks are built into the automated system.
- D. Require a supervisor in the department, who has the ability to change the table, to compare the changes to a signed management authorization.
Answer: B
NEW QUESTION # 39
An auditor identifies three errors in the sample of 25 entries selected for review (a 12 percent error rate).
Based on this result, the auditor assumes that approximately 59 of the total population of 492 entries are incorrect. To reach this assumption, the auditor has used a technique known as which of the following?
- A. Acceptance sampling.
- B. Stratification.
- C. Ratio estimation.
- D. Variability tolerance.
Answer: C
NEW QUESTION # 40
According to IIA guidance, which of the following should be included in the internal audit charter?
- A. Organizational relationships and reporting lines.
- B. Identification of the organizational units where engagements are to be performed.
- C. The minimum resources and competencies needed for the internal audit activity.
- D. Assigned responsibilities for designing and implementing controls.
Answer: A
NEW QUESTION # 41
In which of the following scenarios would the chief audit executive (CAE) be required to decline the assignment?
- A. There is no expertise within the internal audit team for detecting and investigating fraud.
- B. There is no expertise within the internal audit team for auditing an IT engagement.
- C. There is no available expertise on the internal audit team to perform a consulting engagement.
- D. The CAE would need to procure external services to deliver the internal audit assurance program.
Answer: A
NEW QUESTION # 42
An internal audit charter should do which of the following?
- A. Establish the size of the internal audit activity.
- B. Communicate the internal audit activity's goals.
- C. Outline the schedule of future audits.
- D. Define the scope of internal audit activities.
Answer: D
NEW QUESTION # 43
Which of the following is a preventive control?
- A. Reviewing expense accounts for irregularities.
- B. Reconciling purchase orders with approvals.
- C. Placing controls on physical access to inventory.
- D. Creating an audit trail.
Answer: C
NEW QUESTION # 44
According to the HA Code of Ethics, which of the following statements best describes the principle of competency?
- A. Internal auditors shall perform their work in accordance with the Standards.
- B. Internal auditors shall perform their work with honesty, diligence, and responsibility.
- C. Internal auditors shall perform their work in accordance with the law and make disclosures expected by the law.
- D. Internal auditors shall be prudent in the use of information acquired while performing their work.
Answer: A
NEW QUESTION # 45
According to IIA guidance, which of the following statements is true?
- A. The overall focus of the framework is on significant controls in all critical IT applications.
- B. Risks in IT processes are best mitigated by individual controls.
- C. Control process risks are found at multiple layers of the IT environment.
- D. IT risks and related controls are operational and best identified using a bottom-up approach.
Answer: C
NEW QUESTION # 46
According to IIA guidance, which of the following statements is true regarding periodic internal assessments of the internal audit activity?
- A. An internal auditor may perform a peer review of a colleague's workpapers, as long as the auditor wasn't involved in the audit under review.
- B. Internal assessments are conducted to benchmark the internal audit activity's performance against industry best practices.
- C. Follow-up to ensure appropriate improvements are implemented is a recommended, but not mandatory, element of internal assessments.
- D. Internal assessments must be performed at least once every five years by a qualified assessor.
Answer: A
NEW QUESTION # 47
Which the following activities should be performed by the internal audit activity to facilitate an effective relationship with the audit committee?
1. Periodically report about the accounting standards followed by the organization.
2. Provide assurance to the audit committee that its charter, activities, and processes are appropriate.
3. Ensure that the role and activities of the internal audit activity are clearly understood and responsive to the needs of the audit committee.
4. Maintain open and effective communications with the audit committee.
- A. 2, 3, and 4 only
- B. 1 and 2 only
- C. 3 and 4 only
- D. 1, 3, and 4 only
Answer: A
NEW QUESTION # 48
According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the internal audit activity?
- A. CAE meets privately with The board at least annually.
- B. CAE reports to the board regarding audit staff performance evaluation and compensation.
- C. CAE reviews and approves the annual audit plan.
- D. CAE meets privately with The CEO at least annually.
Answer: B
NEW QUESTION # 49
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