CIA TEST BANK II.FINAL EXAM 2026\2027.
A specific objective of an audit of a company's
expenditure cycle is to determine if all goods
paid for have been received and charged to
the correct account. This objective would
address which of the following primary
objectives identified in the Standards?
I. Reliability and integrity of financial and
operational information.
II. Compliance with laws, regulations, and
contracts.
III. Effectiveness and efficiency of operations.
IV. Safeguarding of assets.
a. I and II only.
b. I and IV only.
c. I, II, and IV only.
d. II, III, and IV only.
B. I and IV only
I. Correct. According to Implementation Standard 2110.A2: "The internal audit activity should
evaluate risk exposures relating to the organization's governance, operations, and information
systems regarding the:
• Reliability and integrity of financial and operational information.
• Effectiveness and efficiency of operations.
• Safeguarding of assets.
• Compliance with laws, regulations, and contracts."
The specific engagement objective of determining if goods are charged to the appropriate
account would address the objective regarding the reliability and integrity of information.
IV. Correct. The specific engagement objective of determining if all goods paid for have been
received would address the objective regarding safeguarding of assets.
II. Incorrect. The specific engagement objective described does not address compliance.
III. Incorrect. The specific engagement objective described may address effectiveness of
operations but does not address efficiency.
,CIA TEST BANK II.FINAL EXAM 2026\2027.
Which of the following would be permissible
under the IIA Code of Ethics?
a. In response to a subpoena, an auditor
appeared in a court of law and disclosed
confidential, audit-related information that
could potentially damage the auditor's
organization.
b. An auditor used audit-related information
in a decision to buy stock issued by the
employer corporation.
c. After praising an employee in a recent
audit engagement communication, an
auditor accepted a gift from the employee.
d. An auditor did not report significant
observations about illegal activity to the
board because management indicated
that it would resolve the issue.
a. Correct. Auditors must exhibit loyalty to the organization, but must not be a party to any illegal
activity. Thus, auditors must comply with legal subpoenas.
b. Incorrect. Rule of Conduct 3.2 prohibits auditors from using audit information for personal gain.
c. Incorrect. Rule of Conduct 2.2 prohibits auditors form accepting anything which might be
presumed to impair the auditor's professional judgment.
d. Incorrect. Rule of Conduct 1.3 prohibits auditors from knowingly being a party to any illegal or
improper activity. Practice Advisory 1210.A2-1.10 states that significant observations of illegal
activity should be reported to the audit committee.
An internal auditor who encounters an ethical
dilemma not explicitly addressed by the IIA
Code of Ethics should always:
a. Seek counsel from an independent
attorney to determine the personal
consequences of potential actions.
b. Take action consistent with the principles
embodied in the IIA Code of Ethics.
,CIA TEST BANK II.FINAL EXAM 2026\2027.
c. Seek the counsel of the audit committee
before deciding on an action.
d. Act consistently with the employing
organization's code of ethics even if such
action would not be consistent with the IIA
Code of Ethics.
b. Correct. This is consistent with the concepts embodied in the IIA Code of Ethics.
a. Incorrect. The auditor must act consistently with the spirit embodied in the IIA Code of Ethics. It
would not be practical to seek the advice of legal counsel for all ethical decisions. Ethics is a
moral and professional concept, not just a legal.
c. Incorrect. It would not be practical to seek the audit committee's advice for all potential
dilemmas. Further, the advice might not be consistent with the profession's standards.
d. Incorrect. If the company's standards are not consistent with, or as high as, the profession's
standards, the professional internal auditor should abide by the standards of the profession.
An auditor uncovers a plan to overstate
inventory and thereby increase reported profits
for a division. The auditor has substantial
evidence that the divisional manager was
aware of and approved the plan to overstate
inventory. There is also some evidence that
the manager may have been responsible for
the implementation of the plan. The auditor
should:
a. Continue to conduct interviews with
subordinates until a definite case is made,
and then report the case to the audit
committee.
b. Inform senior management and the audit
committee of the findings and discuss
possible further investigation.
c. Inform the divisional manager of the
auditor's suspicions and obtain the
manager's explanation of the findings
before pursuing the matter further.
, CIA TEST BANK II.FINAL EXAM 2026\2027.
d. Document the case thoroughly and report
the suspicions to the external auditor for
further review.
b. Correct. This is the correct answer according to Practice Advisory 1210.A2-1.6.
a. Incorrect. The auditor has sufficient evidence to bring the matter to the attention of management
and let them decide the method of further investigation.
c. Incorrect. There is no need to inform divisional management of the audit suspicions. It would be
appropriate to interview divisional management, but primarily for data gathering purposes.
d. Incorrect. The auditor's responsibility is for reporting inside the organization.
Data-gathering activities such as interviewing
operating personnel, identifying standards to
be used to evaluate performance, and
assessing risks inherent in a department's
operations are typically performed in which
phase of an audit engagement?
a. Fieldwork.
b. Preliminary survey.
c. Engagement program development.
d. Examination and evaluation of evidence.
b. Correct. These activities are normally accomplished during the preliminary survey phase.
a. Incorrect. The activities described must be performed before the fieldwork can be undertaken.
c. Incorrect. The activities described must be performed before the engagement program can be
developed.
d. Incorrect. The activities described must be performed before the evidence can be examined or
evaluated.
Which of the following best describes an
auditor's responsibility after noting some
indicators of fraud?
a. Expand activities to determine whether an
investigation is warranted.
b. Report the possibility of fraud to senior
management and ask how to proceed.
c. Consult with external legal counsel to
A specific objective of an audit of a company's
expenditure cycle is to determine if all goods
paid for have been received and charged to
the correct account. This objective would
address which of the following primary
objectives identified in the Standards?
I. Reliability and integrity of financial and
operational information.
II. Compliance with laws, regulations, and
contracts.
III. Effectiveness and efficiency of operations.
IV. Safeguarding of assets.
a. I and II only.
b. I and IV only.
c. I, II, and IV only.
d. II, III, and IV only.
B. I and IV only
I. Correct. According to Implementation Standard 2110.A2: "The internal audit activity should
evaluate risk exposures relating to the organization's governance, operations, and information
systems regarding the:
• Reliability and integrity of financial and operational information.
• Effectiveness and efficiency of operations.
• Safeguarding of assets.
• Compliance with laws, regulations, and contracts."
The specific engagement objective of determining if goods are charged to the appropriate
account would address the objective regarding the reliability and integrity of information.
IV. Correct. The specific engagement objective of determining if all goods paid for have been
received would address the objective regarding safeguarding of assets.
II. Incorrect. The specific engagement objective described does not address compliance.
III. Incorrect. The specific engagement objective described may address effectiveness of
operations but does not address efficiency.
,CIA TEST BANK II.FINAL EXAM 2026\2027.
Which of the following would be permissible
under the IIA Code of Ethics?
a. In response to a subpoena, an auditor
appeared in a court of law and disclosed
confidential, audit-related information that
could potentially damage the auditor's
organization.
b. An auditor used audit-related information
in a decision to buy stock issued by the
employer corporation.
c. After praising an employee in a recent
audit engagement communication, an
auditor accepted a gift from the employee.
d. An auditor did not report significant
observations about illegal activity to the
board because management indicated
that it would resolve the issue.
a. Correct. Auditors must exhibit loyalty to the organization, but must not be a party to any illegal
activity. Thus, auditors must comply with legal subpoenas.
b. Incorrect. Rule of Conduct 3.2 prohibits auditors from using audit information for personal gain.
c. Incorrect. Rule of Conduct 2.2 prohibits auditors form accepting anything which might be
presumed to impair the auditor's professional judgment.
d. Incorrect. Rule of Conduct 1.3 prohibits auditors from knowingly being a party to any illegal or
improper activity. Practice Advisory 1210.A2-1.10 states that significant observations of illegal
activity should be reported to the audit committee.
An internal auditor who encounters an ethical
dilemma not explicitly addressed by the IIA
Code of Ethics should always:
a. Seek counsel from an independent
attorney to determine the personal
consequences of potential actions.
b. Take action consistent with the principles
embodied in the IIA Code of Ethics.
,CIA TEST BANK II.FINAL EXAM 2026\2027.
c. Seek the counsel of the audit committee
before deciding on an action.
d. Act consistently with the employing
organization's code of ethics even if such
action would not be consistent with the IIA
Code of Ethics.
b. Correct. This is consistent with the concepts embodied in the IIA Code of Ethics.
a. Incorrect. The auditor must act consistently with the spirit embodied in the IIA Code of Ethics. It
would not be practical to seek the advice of legal counsel for all ethical decisions. Ethics is a
moral and professional concept, not just a legal.
c. Incorrect. It would not be practical to seek the audit committee's advice for all potential
dilemmas. Further, the advice might not be consistent with the profession's standards.
d. Incorrect. If the company's standards are not consistent with, or as high as, the profession's
standards, the professional internal auditor should abide by the standards of the profession.
An auditor uncovers a plan to overstate
inventory and thereby increase reported profits
for a division. The auditor has substantial
evidence that the divisional manager was
aware of and approved the plan to overstate
inventory. There is also some evidence that
the manager may have been responsible for
the implementation of the plan. The auditor
should:
a. Continue to conduct interviews with
subordinates until a definite case is made,
and then report the case to the audit
committee.
b. Inform senior management and the audit
committee of the findings and discuss
possible further investigation.
c. Inform the divisional manager of the
auditor's suspicions and obtain the
manager's explanation of the findings
before pursuing the matter further.
, CIA TEST BANK II.FINAL EXAM 2026\2027.
d. Document the case thoroughly and report
the suspicions to the external auditor for
further review.
b. Correct. This is the correct answer according to Practice Advisory 1210.A2-1.6.
a. Incorrect. The auditor has sufficient evidence to bring the matter to the attention of management
and let them decide the method of further investigation.
c. Incorrect. There is no need to inform divisional management of the audit suspicions. It would be
appropriate to interview divisional management, but primarily for data gathering purposes.
d. Incorrect. The auditor's responsibility is for reporting inside the organization.
Data-gathering activities such as interviewing
operating personnel, identifying standards to
be used to evaluate performance, and
assessing risks inherent in a department's
operations are typically performed in which
phase of an audit engagement?
a. Fieldwork.
b. Preliminary survey.
c. Engagement program development.
d. Examination and evaluation of evidence.
b. Correct. These activities are normally accomplished during the preliminary survey phase.
a. Incorrect. The activities described must be performed before the fieldwork can be undertaken.
c. Incorrect. The activities described must be performed before the engagement program can be
developed.
d. Incorrect. The activities described must be performed before the evidence can be examined or
evaluated.
Which of the following best describes an
auditor's responsibility after noting some
indicators of fraud?
a. Expand activities to determine whether an
investigation is warranted.
b. Report the possibility of fraud to senior
management and ask how to proceed.
c. Consult with external legal counsel to
