IIA-CIA-Part1 IIA Internal Audit Fundamentals Free Practice Exam Questions (2026 Updated)

Critical thinking skills are essential for internal auditors when designing audit procedures and selecting samples. The situation described indicates that the auditor relied on a sampling method without thoroughly considering the potential risks and the specific context of the transaction population. Improved critical thinking skills would help the auditor better assess the representativeness of the sample, identify potential fraud risks, and ensure a more thorough and effective audit approach, potentially preventing the oversight that led to undetected fraud.

The IIA Standards: Standard 1220 – Due Professional Care: "Internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor. Due professional care includes consideration of the use of technology-based audit and other data analysis techniques."

IIA Practice Guide: "Assessing the Adequacy of Risk Management and Controls": Emphasizes the importance of critical thinking in evaluating risks and controls.

The best course of action when the internal audit activity lacks the necessary knowledge for a planned audit is to Provide data backup training to the engagement supervisor. This option ensures that the audit team builds the required competencies internally, enhancing their ability to perform the audit effectively.

Option A: Postponing the audit might delay identifying critical issues.

Option B: Recruiting a full-time staff auditor is not a practical immediate solution and could be resource-intensive.

Option C: Changing to a consulting engagement does not solve the knowledge gap for future audits.

Providing training aligns with the IIA Standard 1210.A1, which requires internal auditors to possess the knowledge, skills, and other competencies needed to perform their responsibilities.

IIA Standard 1210: Proficiency and Due Professional Care.

IIA Standard 1230: Continuing Professional Development.

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​​.

The organization’s decision to cease operations in a market due to increasing volatility and uncertainties represents a risk avoidance technique. Risk avoidance involves actions taken to eliminate the exposure to risk entirely, often by discontinuing the activities that generate the risk. In this scenario, by exiting the market, the organization avoids the potential negative impacts associated with the volatile and uncertain environment.

The IIA Standards: Standard 2120 – Risk Management: "The internal audit activity must evaluate the effectiveness and contribute to the improvement of risk management processes."

COSO ERM Framework: Describes risk avoidance as a strategy where organizations opt to avoid risk by discontinuing the activities that produce the risk.

According to IIA guidance, any additional roles beyond traditional audit functions, such as being responsible for risk management and investigation, must be explicitly defined in the internal audit charter. This document, approved by senior management and the board, delineates the scope and responsibilities of the internal audit function, ensuring clarity and proper governance. Thus, if the internal audit charter stipulates such roles, it justifies the CEO’s decision.

IIA Standard 1000 - Purpose, Authority, and Responsibility

According to IIA guidance, ISO 31000 recommends that utilizing a combination of the three primary approaches to the framework (ISO 31000) often provides the most comprehensive insights despite the complexity involved. This approach allows for a more robust and holistic understanding of the organization's risk management practices by integrating multiple perspectives and methodologies.

The Institute of Internal Auditors (IIA) provides guidance on utilizing standards such as ISO 31000 in internal audit practices, emphasizing the value of a comprehensive approach.

When an internal auditor has audited the same department repeatedly, familiarity threat is a significant concern. The IIA Standards emphasize maintaining objectivity and avoiding circumstances that could impair the auditor's unbiased attitude. Auditing the same department annually for several years can lead to familiarity, which can compromise the internal audit activity's independence and objectivity (Option B). According to Standard 1130: Impairment to Independence or Objectivity, auditors must avoid auditing areas where repeated engagements might lead to a lack of objectivity due to familiarity.

IIA Standards, Standard 1130: Impairment to Independence or Objectivity

IIA Practice Guide: Independence and Objectivity

To promote continuous improvement in control effectiveness, it is crucial that the internal audit activity evaluates whether management is effectively measuring and monitoring the costs and benefits of controls. This ensures that controls are not only designed appropriately but are also operating efficiently and providing the intended value to the organization. This proactive evaluation encourages continual refinement and adjustment of controls based on their effectiveness and efficiency.

IIA guidance on assessing and improving control effectiveness.

The best evidence of conformance with the Standards concerning the proficiency required of the internal audit activity would be a listing of employee profiles and certifications. This documentation provides concrete evidence of the knowledge, skills, and competencies of the internal audit staff, ensuring that they meet the requirements set forth by the professional standards and are capable of performing their duties effectively. This also aligns with the Standards' requirement for the internal audit activity to possess the knowledge, skills, and other competencies needed to perform its responsibilities.

The Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing