CIA Exam Part Two – Practice Exam Prep
CIA EXAM PART TWO – PRACTICE EXAM PREP NEWEST
2026/2027 ACTUAL EXAM COMPLETE 400 QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+||BRAND NEW VERSION!!
An organization's managerial decision-making model for capital budgeting is
based on the net present value of discounted cash flows. The same organization's
managerial performance evaluation model is based on annual divisional return on
investment. Which of the following is true?
A) Divisional managers are likely to maximize the measures in the performance
evaluation model.
B) Divisional managers are likely to maximize the measures in the decision-making
model.
C) The manager has an incentive to accept a project with a positive net present
value that initially has a negative effect on net income.
D) The use of models with different criteria promotes goal congruence - Correct
Answer-A) Divisional managers are likely to maximize the measures in the
performance evaluation model.
- Effective management control requires performance measurement and feedback.
This process affects allocation of resources to organizational subunits. It also
affects decisions about managers' compensation, advancement, and future
assignments. Furthermore, evaluating their performance serves to motivate
managers to optimize the measures in the performance evaluation model.
1|Page
, CIA Exam Part Two – Practice Exam Prep
However, that model may be inconsistent with the organization's model for
managerial decision making.
Which type of facilitated approach format begins by listing all possible barriers,
obstacles, threats, and exposures that might prevent achieving an objective?
A) Process-Based format
B) Objective-Based format
C) Control-Based format
D) Risk-Based format - Correct Answer-D) Risk-Based format
- A risk-based format focuses on listing the risks to achieving an objective. The
workshop begins by listing all possible barriers, obstacles, threats, and exposures
that might prevent achieving an objective and, then, examining the control
procedures to determine if they are sufficient to manage the key risks. The aim of
the workshop is to determine significant residual risks. This format takes the work
team through the entire objective-risks-controls formula.
Any program for selecting and developing the human resources of the internal
audit activity will fail unless compensation is adequate at all levels of
responsibility. Policies concerning compensation should
A) Be clearly stated and based on evaluations of position requirements and
individual performance.
B) Provide for cost-of-living, longevity, and merit increases annually.
2|Page
, CIA Exam Part Two – Practice Exam Prep
C) Link internal auditors' compensation to the pay for comparable positions in the
controller's department.
D) Be informal and as flexible as possible to allow the chief audit executive to
respond to unusual situations - Correct Answer-A) be clearly stated and based on
evaluations of position requirements and individual performance.
Internal auditing job descriptions are important because, among other things, they
may be used to justify adequate salaries. As part of an overall personnel
management and development program, they should be used together with
periodic, formal performance appraisals as a basis for compensation adjustments
and promotions.
The reliability and integrity of all critical information of an organization, regardless
of the media in which the information is stored, is the responsibility of
A) All employees
B) Shareholders
C) Management
D) IT Department - Correct Answer-C) Management
Which of the following procedures is the most valuable in an engagement
involving the traffic department operations of a large manufacturer?
A) Trace selected items from the weekly demurrage (car detention charge) report
to supporting documentation.
B) Review procedures for selection of routes and carriers.
3|Page
, CIA Exam Part Two – Practice Exam Prep
C) Verify that all bills of lading are prenumbered
D) Obtain written confirmation from the regulatory agencies that all carriers used
are properly licensed and bonded. - Correct Answer-B) Review procedures for
selection of routes and carriers.
- An operational engagement examines the reasons and policies for day-to-day
activities and the transaction flow that is the objective of the evaluation of
controls. Selection of routes and carriers is the chief function of the department,
and poor practice may lead to materially excessive shipping costs or serious
delays. Thus, an internal auditor conducting an operational engagement should
review the procedures for selection of routes and carriers.
To monitor the performance of operating management, executive mgmt has
requested that the IAs examine interim financial statements that are prepared for
internal use only. Although interim financial statements have been prepared for
several years, this will be the first time that the IAs have been involved. The
primary reason for this request was that executive mgmt was surprised at the
lower-than-anticipated net profit eventually reflected in last year's audited
financial statements. Earnings had been artificially manipulated on quarterly
financial statements. In their work on this year's interim financial statements,
internal auditors are likely to focus on which of the following?
A) Whether payables have been accrued properly at the end of the interim period.
B) the timing of revenue recognition and the valuation of inventories. - Correct
Answer-B) the timing of revenue recognition and the valuation of inventories.
- Many manipulations are possible. For example, net profit will be overstated if
current-period revenues include sales that should be recognized in a subsequent
4|Page
CIA EXAM PART TWO – PRACTICE EXAM PREP NEWEST
2026/2027 ACTUAL EXAM COMPLETE 400 QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+||BRAND NEW VERSION!!
An organization's managerial decision-making model for capital budgeting is
based on the net present value of discounted cash flows. The same organization's
managerial performance evaluation model is based on annual divisional return on
investment. Which of the following is true?
A) Divisional managers are likely to maximize the measures in the performance
evaluation model.
B) Divisional managers are likely to maximize the measures in the decision-making
model.
C) The manager has an incentive to accept a project with a positive net present
value that initially has a negative effect on net income.
D) The use of models with different criteria promotes goal congruence - Correct
Answer-A) Divisional managers are likely to maximize the measures in the
performance evaluation model.
- Effective management control requires performance measurement and feedback.
This process affects allocation of resources to organizational subunits. It also
affects decisions about managers' compensation, advancement, and future
assignments. Furthermore, evaluating their performance serves to motivate
managers to optimize the measures in the performance evaluation model.
1|Page
, CIA Exam Part Two – Practice Exam Prep
However, that model may be inconsistent with the organization's model for
managerial decision making.
Which type of facilitated approach format begins by listing all possible barriers,
obstacles, threats, and exposures that might prevent achieving an objective?
A) Process-Based format
B) Objective-Based format
C) Control-Based format
D) Risk-Based format - Correct Answer-D) Risk-Based format
- A risk-based format focuses on listing the risks to achieving an objective. The
workshop begins by listing all possible barriers, obstacles, threats, and exposures
that might prevent achieving an objective and, then, examining the control
procedures to determine if they are sufficient to manage the key risks. The aim of
the workshop is to determine significant residual risks. This format takes the work
team through the entire objective-risks-controls formula.
Any program for selecting and developing the human resources of the internal
audit activity will fail unless compensation is adequate at all levels of
responsibility. Policies concerning compensation should
A) Be clearly stated and based on evaluations of position requirements and
individual performance.
B) Provide for cost-of-living, longevity, and merit increases annually.
2|Page
, CIA Exam Part Two – Practice Exam Prep
C) Link internal auditors' compensation to the pay for comparable positions in the
controller's department.
D) Be informal and as flexible as possible to allow the chief audit executive to
respond to unusual situations - Correct Answer-A) be clearly stated and based on
evaluations of position requirements and individual performance.
Internal auditing job descriptions are important because, among other things, they
may be used to justify adequate salaries. As part of an overall personnel
management and development program, they should be used together with
periodic, formal performance appraisals as a basis for compensation adjustments
and promotions.
The reliability and integrity of all critical information of an organization, regardless
of the media in which the information is stored, is the responsibility of
A) All employees
B) Shareholders
C) Management
D) IT Department - Correct Answer-C) Management
Which of the following procedures is the most valuable in an engagement
involving the traffic department operations of a large manufacturer?
A) Trace selected items from the weekly demurrage (car detention charge) report
to supporting documentation.
B) Review procedures for selection of routes and carriers.
3|Page
, CIA Exam Part Two – Practice Exam Prep
C) Verify that all bills of lading are prenumbered
D) Obtain written confirmation from the regulatory agencies that all carriers used
are properly licensed and bonded. - Correct Answer-B) Review procedures for
selection of routes and carriers.
- An operational engagement examines the reasons and policies for day-to-day
activities and the transaction flow that is the objective of the evaluation of
controls. Selection of routes and carriers is the chief function of the department,
and poor practice may lead to materially excessive shipping costs or serious
delays. Thus, an internal auditor conducting an operational engagement should
review the procedures for selection of routes and carriers.
To monitor the performance of operating management, executive mgmt has
requested that the IAs examine interim financial statements that are prepared for
internal use only. Although interim financial statements have been prepared for
several years, this will be the first time that the IAs have been involved. The
primary reason for this request was that executive mgmt was surprised at the
lower-than-anticipated net profit eventually reflected in last year's audited
financial statements. Earnings had been artificially manipulated on quarterly
financial statements. In their work on this year's interim financial statements,
internal auditors are likely to focus on which of the following?
A) Whether payables have been accrued properly at the end of the interim period.
B) the timing of revenue recognition and the valuation of inventories. - Correct
Answer-B) the timing of revenue recognition and the valuation of inventories.
- Many manipulations are possible. For example, net profit will be overstated if
current-period revenues include sales that should be recognized in a subsequent
4|Page
