IIA-CIA-Part3 IIA Internal Audit Function Free Practice Exam Questions (2026 Updated)

The cost principle (historical cost principle) states that assets should be recorded at their original purchase price, regardless of changes in market value.

Correct Answer (B - A Building Purchased Last Year for $1 Million Is Still Reported at $1 Million, Despite an Increase in Value)

Under the cost principle, assets remain recorded at their historical cost, not adjusted for market fluctuations.

The only exception is for certain financial instruments, such as trading securities, which are reported at fair market value.

The IIA Practice Guide: Auditing Financial Reporting and Accounting Estimates states that fixed assets (such as buildings) should be recorded at cost unless an impairment occurs.

Why Other Options Are Incorrect:

Option A (Trading and Investment Securities Reported at Market Cost):

Securities can be reported at market value, but this does not follow the cost principle, which applies to tangible assets.

Option C (Adjusting the Building's Value to $1.2 Million):

Violates the cost principle—historical cost does not change due to market appreciation.

Option D (Reporting Assets at Either Historical or Fair Value):

This is not the cost principle; it describes fair value accounting, which is different.

IIA Practice Guide: Auditing Financial Reporting and Accounting Estimates – Defines the cost principle and asset valuation rules.

Generally Accepted Accounting Principles (GAAP) – Requires fixed assets to be recorded at historical cost.

Step-by-Step Explanation:IIA References for Validation:Thus, B is the correct answer because the cost principle requires assets to be recorded at their original purchase price, regardless of market value changes.

Understanding Predictive Analytics:

Predictive analytics involves using historical data, statistical algorithms, and machine learning techniques to forecast future trends and behaviors.

It applies assumptions and models patterns to predict outcomes, helping businesses make proactive decisions.

Why Option B is Correct:

Predictive analytics is forward-looking and uses assumptions (e.g., weather conditions) to predict where stock levels would decrease more quickly.

This aligns with the goal of predictive analytics: forecasting potential events before they occur.

Why Other Options Are Incorrect:

A. Analyzed instances where parts were out of stock before scheduled deliveries: This is descriptive analytics, as it looks at past data without making future predictions.

C. Analyzed past stockouts and found a correlation with stormy weather: This is diagnostic analytics, as it identifies past correlations but does not predict future trends.

D. Modeled different scenarios for stock reordering and delivery decisions: This is prescriptive analytics, which focuses on decision-making rather than predictions.

IIA Standards and References:

IIA GTAG on Data Analytics (2017): Highlights predictive analytics as a tool for forecasting risks and operational inefficiencies.

IIA Standard 1220 – Due Professional Care: Encourages auditors to use analytical techniques to anticipate potential issues.

COSO ERM Framework: Supports the use of predictive models to improve risk management and strategic planning.

Thus, the correct answer is B: A supplier of electrical parts analyzed sales, applied assumptions related to weather conditions, and identified locations where stock levels would decrease more quickly.

A periodic inventory system calculates cost of goods sold (COGS) using the formula:

COGS=Beginning Inventory+Purchases−Ending InventoryCOGS = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory}COGS=Beginning Inventory+Purchases−Ending Inventory

If beginning inventory is understated, it causes COGS to be understated, which in turn overstates net income because expenses are lower than they should be.

Understated Beginning Inventory → Understated COGS

Since COGS is too low, fewer expenses are deducted from revenue.

Understated COGS → Overstated Net Income

If COGS is too low, the company's profit (net income) is artificially inflated.

(A) COGS will be understated and net income will be overstated (Correct Answer):

Since the beginning inventory was understated, COGS is lower than it should be, making net income higher than it should be.

(B) COGS will be overstated and net income will be understated:

This would be true if beginning inventory was overstated, but in this case, it was understated, making this incorrect.

(C) COGS will be understated and there will be no impact on net income:

Since COGS affects net income, this statement is incorrect. Understated COGS overstates net income.

(D) There will be no impact on COGS and net income will be overstated:

This is incorrect because COGS is directly affected by an inventory misstatement.

IIA GTAG 3: Continuous Auditing – Discusses the importance of accurate financial reporting in preventing misstatements.

COSO Internal Control Framework – Financial Reporting Component – Highlights the impact of inventory errors on financial accuracy.

IIA Standard 2330 – Documenting Information – Requires auditors to evaluate financial calculations for accuracy and completeness.

Step-by-Step Impact on Financial Statements:Analysis of Each Option:IIA References:Conclusion:Since COGS is understated and net income is overstated, option (A) is the correct answer.

Understanding Data Recovery and Security Risks:

Data must be protected, recoverable, and accessible when needed while maintaining security.

The best practice is to store encrypted backups offsite while keeping encryption keys separate but accessible.

Why Option D is Correct?

Storing encrypted data offsite (a few hours away) ensures protection against disasters (e.g., fire, cyberattacks, physical damage).

Keeping encryption keys at the organization ensures that recovery is quick and controlled without risking unauthorized access.

This aligns with the IIA's IT Audit Practices and ISO 27001 (Information Security Management), which emphasize separate storage of encrypted data and encryption keys for security and recoverability.

IIA Standard 2110 – Governance requires internal auditors to assess whether IT governance ensures the availability and security of critical data.

Why Other Options Are Incorrect?

Option A (Encrypted physical copies and keys stored together at the organization):

If both data and keys are in the same location, a disaster or breach would make recovery impossible.

Option B (Encrypted copies and keys stored in separate locations far away):

While secure, if encryption keys are stored too far, recovery could be delayed, impacting business continuity.

Option C (Encrypted usage reports in a cloud database):

This does not ensure full data recovery; it only provides logs and structure changes, not the actual data.

Storing encrypted data offsite while keeping encryption keys accessible onsite follows best IT security and disaster recovery practices.

IIA Standard 2110 supports evaluating IT governance, including data security and recovery controls.

Final Justification:IIA References:

IPPF Standard 2110 – Governance

ISO 27001 – Information Security Management

NIST SP 800-34 – Contingency Planning Guide for IT Systems

COBIT Framework – Data Security & Recovery Controls

The discussion between the internal auditor and the database administrator is most likely centered around the security risk present in the period between account creation and password change. When a system generates a default password such as "123456," it introduces a temporary vulnerability until the user changes it.

Understanding Default Password Security Risks:

Default passwords, especially predictable ones (e.g., "123456"), pose a security threat because they are easy to guess.

If an unauthorized user gains access before the legitimate user changes the password, data confidentiality and integrity may be compromised (IIA GTAG - Global Technology Audit Guide).

Evaluating the Window of Exposure:

The primary concern is the time between account creation and password reset.

During this time, an attacker could exploit the default password to gain unauthorized access to sensitive systems.

Why Other Options Are Less Relevant:

Option A (Replacing numbers with characters) – While this improves security, it does not directly address the risk of an attacker exploiting the default password before the user resets it.

Option B (Users continuing to use the initial password) – This is a security issue, but it is mitigated by requiring a password reset upon first login. The primary concern is the time before the reset happens.

Option D (User training on password management) – While training is crucial for long-term security, it does not directly address the immediate vulnerability of default passwords before they are changed.

IIA Global Technology Audit Guide (GTAG) 16: Data Management and Security

IIA Standard 2110 – Governance: Recommends addressing IT security risks, including credential management.

IIA Practice Advisory 2130.A1-1: Internal auditors should assess whether management has identified, assessed, and mitigated IT security risks, such as weak authentication practices.

Step-by-Step Analysis:Relevant IIA References:

 Understanding the Attributes of Data Analytics (The Four Vs of Big Data):

Volume: Refers to the massive amount of data generated.

Velocity: Refers to the speed at which data is created and processed.

Variety: Refers to the different types and sources of data.

Veracity: Refers to data accuracy and reliability.

 Why Variety is the Correct Answer:

Variety represents the increasing number of data sources (e.g., social media, IoT devices, cloud storage, structured/unstructured data, etc.).

As data sources grow, internal auditors must evaluate data integrity, consistency, and reliability across multiple formats and systems.

 Why Other Options Are Incorrect:

A. Volume: Refers to the size of data, not the number of sources.

B. Velocity: Refers to how fast data is generated and processed, not its diversity.

D. Veracity: Refers to data accuracy, not the number of sources.

 IIA Standards and References:

IIA GTAG on Data Analytics (2017): Highlights the role of variety in managing data from multiple sources.

IIA Standard 1220 – Due Professional Care: Auditors must assess data variety when using analytics for decision-making.

COSO ERM Framework: Addresses the importance of integrating diverse data sources for risk management.

When an organization buys equity securities for trading purposes, it means that these securities are classified as trading securities. According to International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP):

Trading securities are measured at fair value.

Unrealized gains and losses from changes in fair value are recognized in net income, not in shareholders' equity.

A. At fair value with changes reported in the shareholders' equity section. (Incorrect)

This treatment applies to available-for-sale (AFS) securities under previous GAAP rules, but not to trading securities.

Under IFRS 9, AFS classification has been removed, and most equity investments are recorded at fair value through profit or loss (FVTPL).

B. At fair value with changes reported in net income. (Correct)

This is the correct treatment for trading securities, as per IFRS 9 and ASC 320 (FASB).

C. At amortized cost in the income statement. (Incorrect)

Amortized cost is used for held-to-maturity (HTM) debt securities, not for equity securities held for trading.

D. As current assets in the balance sheet. (Partially Correct but Incomplete)

While trading securities are usually classified as current assets, this answer does not address valuation and reporting of changes in fair value.

IIA Practice Guide: Auditing Investments highlights the importance of correctly valuing securities based on accounting standards.

IFRS 9 – Financial Instruments mandates fair value measurement for trading securities with gains/losses reported in profit or loss.

GAAP ASC 320 – Investments – Debt and Equity Securities aligns with IFRS, requiring fair value reporting through net income.

Explanation of Answer Choices:IIA References:Thus, the correct answer is B. At fair value with changes reported in net income.

Policies and procedures should be tailored to the size and maturity of the internal audit function. A small or less mature function may require simpler procedures, while a large and well-established function may require more detailed and formalized guidance.

Option A (nature of audit) and D (organizational structure) are relevant but secondary. Option B (organization size) does not necessarily dictate internal audit’s needs as directly as its own size and maturity.

When conducting a cybersecurity risk assessment, an internal auditor must evaluate the most significant threats based on their potential impact on the organization. In the pharmaceutical industry, intellectual property (IP), such as research and development (R&D) data, is one of the most valuable and sensitive assets.

(A) Cybercriminals hacking into the organization's time and expense system to collect employee personal data:While the loss of employee personal data is a serious concern due to privacy and regulatory implications (e.g., GDPR, CCPA), it does not pose as critical a threat as the loss of proprietary pharmaceutical research.

(B) Hackers breaching the organization's network to access research and development reports (Correct Answer):R&D reports contain proprietary drug formulas, clinical trial results, and patent-pending innovations, making them highly valuable to competitors and cybercriminals. A breach could lead to intellectual property theft, financial losses, loss of competitive advantage, and regulatory non-compliance (e.g., FDA, EMA requirements). This is considered the most significant threat because:

It could result in billions of dollars in lost revenue.

Competitors or state-sponsored hackers could exploit stolen research.

It could disrupt drug development and approval processes.

(C) A denial-of-service (DoS) attack that prevents access to the organization's website:While DoS attacks can damage an organization's reputation and disrupt operations, they generally do not cause the same level of financial or strategic harm as the loss of critical R&D data. Most organizations have cybersecurity measures (e.g., load balancers, CDNs) to mitigate DoS risks.

(D) A hacker accessing the financial information of the company:Unauthorized access to financial data can be serious, leading to fraud or reputational damage. However, publicly traded companies already disclose much of their financial data, and financial breaches typically have a lower long-term impact compared to intellectual property theft.

IIA Global Technology Audit Guide (GTAG) 15: Information Security Governance: Recommends that internal auditors prioritize risks that impact strategic assets, such as intellectual property.

IIA Standard 2120 - Risk Management: Requires internal auditors to evaluate the organization’s risk management processes, emphasizing risks with significant financial and operational consequences.

IIA Practice Advisory 2110-2: Assessing the Adequacy of Risk Management Processes: Highlights that internal auditors must identify risks that could threaten the organization’s long-term objectives, such as IP theft.

COSO ERM Framework: Encourages prioritization of risks that have high impact on an organization’s value and strategic objectives, such as cyber threats to proprietary research.

Analysis of Each Option:IIA References:Conclusion:Given the pharmaceutical industry's reliance on proprietary R&D, a breach compromising research reports represents the most significant cyber threat. Therefore, option (B) is the correct answer.

Indirect labor costs incurred in the production process are treated as part of manufacturing overhead. Since the cost was incurred on the last day of the year, it is likely that the related products are still in inventory rather than being sold.

Under Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), indirect labor costs associated with manufacturing should be included in the cost of inventory until the related goods are sold.

Once the goods are sold, the cost will be transferred to the cost of goods sold (COGS) in the income statement.

A. It should be reported as an administrative expense on the income statement. (Incorrect)

Indirect labor related to manufacturing is classified as part of manufacturing overhead, not an administrative expense.

B. It should be reported as a period cost other than a product cost on the management accounts. (Incorrect)

Indirect labor in production is a product cost (i.e., a cost that is included in inventory and matched with revenues when the product is sold).

Period costs refer to expenses like selling and administrative costs, which are expensed immediately.

C. It should be reported as cost of goods sold on the income statement. (Incorrect)

Since the cost was incurred on the last day of the year, the related products have likely not yet been sold, meaning the cost remains in inventory.

D. It should be reported on the balance sheet as part of inventory. (Correct)

Manufacturing overhead, including indirect labor, is included in inventory (work-in-process or finished goods) on the balance sheet until the goods are sold.

IIA Practice Guide: Auditing Inventory Management emphasizes that manufacturing costs, including indirect labor, should be allocated properly to inventory.

IIA Standard 2330 – Documenting Information requires auditors to ensure proper financial reporting of costs in accordance with GAAP/IFRS inventory valuation principles.

IFRS (IAS 2 – Inventories) and GAAP (ASC 330 – Inventory) state that indirect production costs must be capitalized as inventory until sold.

Explanation of Answer Choices:IIA References:Thus, the correct answer is D. It should be reported on the balance sheet as part of inventory.

A cold site is a disaster recovery option that provides only basic infrastructure (such as power, space, and network connectivity) but does not have pre-installed IT equipment such as servers and storage. Organizations must procure and install servers and restore data before resuming operations, leading to longer recovery times.

Let’s analyze each option:

Option A: Data is synchronized in real-time

Incorrect.

Real-time data synchronization is a feature of hot sites, which have fully operational infrastructure and data replication.

Cold sites do not support real-time synchronization because they lack servers and storage.

Option B: Recovery time is expected to be less than one week

Incorrect.

Cold sites require significant setup time since servers and infrastructure must be procured, configured, and installed.

Recovery time can often exceed one week, depending on the complexity of IT systems.

Option C: Servers are not available and need to be procured

Correct.

A cold site lacks computing hardware (e.g., servers, storage, network devices), meaning the organization must purchase or transport servers to the site before recovery can begin.

IIA Reference: Internal auditors assess disaster recovery strategies, including the limitations of cold sites and their impact on business continuity. (IIA GTAG: Auditing Business Continuity and Disaster Recovery)

Option D: Recovery resources and data restore processes have not been defined.

Incorrect.

Even though a cold site lacks IT infrastructure, the organization still has a disaster recovery plan, which includes predefined recovery steps, resource planning, and data restoration procedures.

Thus, the verified answer is C. Servers are not available and need to be procured.

Effective change management ensures that IT changes (such as software updates, system modifications, or infrastructure upgrades) are well-controlled, minimizing disruptions. Poor change management leads to instability, inefficiencies, and operational risks.

Unplanned Downtime (2) – Indicates that changes are being implemented without proper testing or failover planning, disrupting business operations.

Excessive Troubleshooting (3) – Suggests that changes are causing recurring issues, leading to increased workload for IT support teams.

Unavailability of Critical Services (4) – Highlights that change-related failures are affecting essential business functions, indicating improper risk assessment.

While inadequate control design is a general IT risk, it is not a direct indicator of poor change management. Instead, it relates more to weaknesses in IT governance and security frameworks.

IIA’s GTAG (Global Technology Audit Guide) on Change Management – Identifies unplanned downtime, excessive troubleshooting, and service unavailability as key red flags of poor change management.

COBIT 2019 (Governance and Management of IT) – Emphasizes structured change management to minimize disruptions.

ITIL Change Management Framework – Highlights these issues as symptoms of ineffective change control.

Why 2, 3, and 4 Are Indicators of Poor Change Management?Why Not Option 1 (Inadequate Control Design)?IIA References:✅ Final Answer: D. 2, 3, and 4 only.

The root cause of the missing significant risks lies in the methodology used for risk identification. If the process relies too rigidly on a standard set of questions, it may overlook critical risks. By revising the risk identification methodology, the organization ensures that future projects capture relevant risks comprehensively and consistently, adding long-term value.

Option A addresses only the current project, not the underlying issue. Option B may improve knowledge but does not fix the flawed process. Option D merely shifts responsibility but does not address the methodology weakness.

The CAE must communicate the results of the QAIP to the board and senior management. This includes results from ongoing monitoring, periodic self-assessments, and external assessments.

Option A (board oversight) is part of governance but not a QAIP requirement. Option B is incorrect because conformance is assessed for the activity overall, not per engagement. Option C is incorrect because self-assessments are ongoing, while external assessments are required at least once every five years.

Thus, the essential QAIP requirement for conformance is reporting results to the board (Option D).

When auditing logical access controls for a workstation, the focus should be on user authentication methods, including:

Password policies (length, complexity, change frequency)

User access rights and permissions

Login activity logs to detect unauthorized access attempts

Correct Answer (B - Reviewing Password Policies and User List for Login Process)

Logical access controls ensure only authorized users can access a workstation.

Reviewing password length, complexity, and change frequency helps assess if security best practices are followed.

Reviewing the list of authorized users ensures that only appropriate personnel have access.

The IIA’s GTAG 9: Identity and Access Management recommends evaluating password policies and user access lists as key control measures.

Why Other Options Are Incorrect:

Option A (Reviewing access badges and room logs):

Physical access controls are important but do not assess logical access (login security, user authentication).

Option C (Reviewing failed access attempts and error messages):

Reviewing failed login attempts identifies security breaches but does not directly assess password policies or user access lists.

Option D (Reviewing unsuccessful passwords and activity logs):

Passwords should not be reviewed due to privacy and security policies. Logs should be checked, but reviewing actual passwords is a security violation.

IIA GTAG 9: Identity and Access Management – Covers password controls and user authentication.

IIA Practice Guide: Auditing IT Security Controls – Recommends reviewing password policies as a key security measure.

Step-by-Step Explanation:IIA References for Validation:Thus, B is the correct answer because reviewing password policies and user lists is essential for auditing logical access controls.

When calculating available audit hours, the CAE must exclude non-engagement activities such as administration, meetings, professional development, and staff coaching. These are essential but not directly part of engagement execution.

Preliminary risk assessment (Option B), documentation (Option C), and reporting (Option D) are all integral steps of an engagement and should be included in engagement hours. Thus, only coaching time (Option A) should be deducted.

The external quality assessment must be performed at least once every five years. Therefore, the assessor must consider the frequency requirement when planning the review.

Option A is too narrow; the assessment evaluates conformance with the Standards, not just laws/regulations. Option B is incorrect because assessors must be independent of the organization. Option C is incorrect; assessors may come from various professional backgrounds, not just accounting firms.

Understanding Matrix Organizations:

A matrix organization is a hybrid structure that combines functional and project-based structures, where employees report to multiple managers (e.g., a functional manager and a project manager).

These organizations adapt to projects by adjusting authority, responsibility, and accountability based on the project's stage or the organization's culture.

Why Option C Is Correct?

In a matrix organization, roles and decision-making authority evolve based on the project's phase, size, or complexity.

Employees might report to different managers at different times, and accountability structures may change.

This aligns with IIA Standard 2110 – Governance, which emphasizes clear roles and responsibilities in dynamic organizational structures.

Why Other Options Are Incorrect?

Option A (Unity-of-command concept):

The unity-of-command principle states that employees should report to only one superior, which contradicts the nature of a matrix organization, where dual reporting exists.

Option B (Combination of product and functional departments allows management to utilize personnel from various functions):

While matrix organizations integrate product and functional departments, the key defining feature is the variable authority, responsibility, and accountability, making option C a better fit.

Option D (Best suited for firms with scattered locations or large-scale firms):

While matrix structures can be used in large firms, they are not limited to them and are often found in project-based industries (e.g., engineering, IT, consulting).

Matrix organizations adapt their authority structures based on project needs, making option C the best choice.

IIA Standard 2110 supports governance structures that evolve with organizational needs.

Final Justification:IIA References:

IPPF Standard 2110 – Governance (Organizational Structure & Accountability)

COSO ERM – Governance & Decision-Making in Matrix Organizations

The QAIP (Quality Assurance and Improvement Program) expresses an opinion at the internal audit function level about the overall efficiency, effectiveness, and conformance with the Standards. Engagement-level reviews assess quality for individual audits, but the overall opinion covers the full internal audit activity.

Options A and D describe perspectives within reviews but do not represent the overall opinion. Option C refers only to engagement-specific assurance, not the full function.

This attack was caused by a phishing email containing malware embedded in an Excel spreadsheet. The most effective way to prevent such attacks is employee awareness training, as human error is the leading cause of successful phishing attempts.

Understanding Phishing Attacks:

Phishing emails trick employees into opening malicious links or attachments, leading to malware infections and data breaches.

Cybercriminals often disguise emails as coming from trusted vendors or colleagues.

Why Employee Training is the Most Effective Control:

Employees must be trained to identify suspicious emails, attachments, and links.

Training reduces the likelihood of employees accidentally opening malicious files.

Many cybersecurity frameworks (e.g., NIST, ISO 27001, and CIS) emphasize employee awareness as the first line of defense.

Why the Other Options Are Less Effective Alone:

A. Monitoring network traffic. ❌

Can detect unusual activity after an attack but does not prevent phishing attempts.

B. Using whitelists and blacklists to manage network traffic. ❌

Helps filter harmful websites, but phishing emails often appear legitimate and may bypass filters.

C. Restricting access and blocking unauthorized access to the network. ❌

Helps limit damage after malware enters the network but does not stop employees from opening phishing emails.

IIA GTAG (Global Technology Audit Guide) on Cybersecurity: Recommends employee awareness programs as a key control.

IIA Standard 2110 (Governance): Internal auditors should assess cybersecurity training programs.

NIST Cybersecurity Framework – PR.AT (Protect – Awareness and Training): Emphasizes the role of employee education in preventing cyber threats.

ISO/IEC 27001 – Security Awareness and Training (A.7.2.2): Requires organizations to implement cybersecurity awareness programs.

Step-by-Step Justification:IIA References:Thus, the correct answer is D. Educating employees throughout the company to recognize phishing attacks. ✅

Internal audit may rely on the work of other internal assurance providers (such as finance or compliance), provided it has assessed the adequacy, competence, and objectivity of the work. This avoids duplication and increases efficiency.

Option B incorrectly assumes internal work cannot be relied upon. Option C shifts responsibility inappropriately. Option D ignores coordination opportunities.

When selling products to a foreign subsidiary, pricing must comply with international tax laws and transfer pricing regulations.

Correct Answer (C - Charge at the Arm’s Length Price)

Arm’s length pricing ensures that transactions between related parties (e.g., parent company and subsidiary) are priced as if they were between unrelated entities.

This helps comply with tax regulations and avoid penalties for manipulating transfer prices to reduce import tariffs.

The OECD Transfer Pricing Guidelines and the IIA Practice Guide: Auditing Global Business Risks recommend using arm’s length pricing to ensure compliance with tax authorities.

Why Other Options Are Incorrect:

Option A (Decrease the transfer price):

Lowering the transfer price may reduce import tariffs but could violate tax laws, leading to legal and financial penalties.

Option B (Increase the transfer price):

Increasing prices may help shift profits but could trigger regulatory scrutiny and additional taxes.

Option D (Charge at the optimal transfer price):

"Optimal" pricing is vague and may not comply with legal transfer pricing standards.

IIA Practice Guide: Auditing Global Business Risks – Covers compliance with international tax and transfer pricing regulations.

OECD Transfer Pricing Guidelines – Establishes arm’s length pricing as the best practice.

Step-by-Step Explanation:IIA References for Validation:Thus, C is the correct answer because arm’s length pricing ensures compliance with tax regulations while minimizing tariff risks.

Understanding BYOD Risks and Legal Implications

Bring-your-own-device (BYOD) policies allow employees to use personal devices for work, but they introduce compliance risks.

Jailbreaking is the process of bypassing manufacturer-imposed security restrictions on a device (e.g., iPhones or Android devices).

This significantly increases the risk of privacy law violations, copyright infringements, and security breaches.

Why Option D is Correct?

Jailbreaking allows users to:

Install unauthorized software, which may violate software licensing agreements and copyright laws.

Remove security restrictions, increasing exposure to data breaches, malware, and non-compliance with privacy regulations (e.g., GDPR, HIPAA, or CCPA).

Bypass digital rights management (DRM), leading to potential copyright infringement issues.

IIA Standard 2110 – Governance mandates that internal auditors evaluate IT risks, including legal compliance related to mobile device usage.

ISO 27001 – Information Security Management also highlights the risks of unapproved software on enterprise devices.

Why Other Options Are Incorrect?

Option A (Not installing anti-malware software):

While a security risk, this primarily exposes devices to cyber threats rather than directly causing regulatory infringements.

Option B (Updating operating software in a haphazard manner):

Irregular updates pose security risks, but they do not directly violate copyright or privacy laws.

Option C (Applying a weak password):

Weak passwords increase security risks, but they do not inherently cause regulatory infringements like jailbreaking does.

Jailbreaking increases risks of copyright infringement (through unauthorized apps) and privacy violations (by removing security controls).

IIA Standard 2110 and ISO 27001 emphasize legal and regulatory compliance in IT security audits.

Final Justification:IIA References:

IPPF Standard 2110 – Governance (IT & Legal Compliance Risks)

ISO 27001 – Information Security Compliance

GDPR, HIPAA, and CCPA – Privacy Law Considerations for BYOD