IIA-CIA-Part1 Exam Dumps - Essentials of Internal Auditing

Policies that provide examples of inappropriate business relationships best promote objectivity in the internal audit activity’s work by explicitly defining what constitutes a conflict of interest and guiding auditors on how to avoid situations that might impair their objectivity. This clear delineation helps maintain the independence and unbiased perspective necessary for effective auditing.

Institute of Internal Auditors (IIA) - Code of Ethics and Professional Standards; literature on maintaining objectivity in internal auditing.

To effectively determine whether ethical values are followed throughout an organization, internal auditors should review employee survey responses and follow up on those that suggest weaknesses in the ethical climate. This approach allows auditors to gather firsthand insights from employees about the actual ethical environment, which can be more telling than formal documentation or compliance with written policies alone. It provides a direct measure of the ethical culture as experienced and perceived by the employees themselves.

Institute of Internal Auditors (IIA) - International Standards for the Professional Practice of Internal Auditing; Guidance on assessing organizational culture.

Segregation of duties is a preventive control designed to mitigate fraud by ensuring that no single individual has control over all phases of a financial transaction. This control reduces the risk of errors and fraud by requiring the involvement of multiple people in tasks such as authorization, custody of assets, and record-keeping.

Institute of Internal Auditors (IIA) - Practice Advisories on Fraud Prevention and Control

An example of an application control specifically involves the software or system used to process information. A two-stage authentication process to access customer information is an application control because it involves the authentication mechanisms within the application software to secure access to sensitive data. This control helps in verifying the identity of users and ensuring that access to critical data is restricted to authorized personnel only.

IT Governance Institute’s COBIT Framework.

By accepting a role as an engagement supervisor on a highly specialized and technical engagement for which she did not have the expertise, the internal auditor violated the fundamental principle of competency as outlined in The IIA's Code of Ethics. The principle of competency requires internal auditors to perform audit services with the necessary knowledge, skills, and experience. Accepting an assignment without the required expertise undermines the quality and reliability of the audit work.

The IIA Code of Ethics: "Internal auditors shall engage only in those services for which they have the necessary knowledge, skills, and experience."

The IIA Standards: Standard 1210 – Proficiency: "Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities."

Evaluating the potential impact on related controls is the first step an internal auditor should take when identifying a weakness in the control environment regarding the delegation of authority and responsibility within the management structure. This approach allows the auditor to understand the extent of the weakness and how it might affect other controls within the organization. By assessing the impact, the auditor can gather the necessary information to inform management and recommend appropriate corrective actions. This method aligns with the principles of risk-based auditing, which emphasize understanding and evaluating risks before taking further steps.

The Institute of Internal Auditors (IIA) Standards: Standard 2210 – Engagement Objectives: "Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives."

COSO Framework: Control Environment principle emphasizes the need for a robust structure for delegation of authority and responsibility and its impact on related controls.

In the context of internal auditing and risk management, the situation described involves the identification of key risks at the beginning of the IT development project, with risk owners appointed. However, the project later faces significant issues such as being over budget, delays, and loss of key personnel. These issues indicate that the ongoing management and oversight of identified risks were insufficient.

Risk monitoring is the continuous process of tracking and evaluating the performance and changes in the risk environment. Effective risk monitoring ensures that risk responses are executed as planned, emerging risks are identified, and necessary adjustments are made. The failure to stay on budget, meet deadlines, and retain key personnel suggests that there were lapses in regularly reviewing and updating the risk management plan and responses as the project progressed. Therefore, the risk management practice that should be improved for future projects is risk monitoring.

Institute of Internal Auditors (IIA), "Risk Management and Internal Audit: Forging a Collaborative Alliance"

ISO 31000:2018 Risk Management – Guidelines