IIA-CIA-Part3 Exam Dumps - Internal Audit Function

To detect missing rows in point-of-sale spreadsheet data, the auditor or analyst should compare product identification codes by store for consecutive periods. This approach tests whether expected product-store combinations appear consistently over time and can reveal gaps for specific days or locations. Sorting only by product identification code may show missing products but would not reliably detect missing rows by store or date. Reviewing store identification code and identifying missing product codes is incomplete because the issue concerns missing days of data, not merely missing product records. Comparing product codes for consecutive periods without considering store could hide gaps if the same product appears in other stores. From an internal audit data analytics perspective, the most precise test uses store-level comparison across consecutive periods. Therefore, Option D is correct.

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.

Organizations must comply with privacy principles that emphasize data retention limitations. Keeping personal data indefinitely violates privacy laws and regulations such as the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA).

Privacy Regulations Require Data Minimization:

GDPR Article 5(1)(e) states that personal data should only be kept for as long as necessary for the intended purpose.

IIA GTAG 4: Management of IT Auditing also advises against excessive data retention.

Security and Risk Concerns:

Storing data indefinitely increases the risk of data breaches.

IIA Standard 2110 – Governance emphasizes the need for proper information security governance to protect personal data.

Legal and Compliance Issues:

Organizations are required to define retention policies to prevent unauthorized or unnecessary storage of personal data.

A. Customers can access and update personal information when needed. (Incorrect)

Reason: Allowing customers to access and update their information aligns with privacy principles such as data accuracy and transparency.

C. Customers reserve the right to reject sharing personal information with third parties. (Incorrect)

Reason: This supports data control rights, which is consistent with privacy standards like opt-in and opt-out policies.

D. The organization performs regular maintenance on customers ' personal information. (Incorrect)

Reason: Regular maintenance (e.g., updates, corrections, deletions) enhances data accuracy and security, aligning with privacy best practices.

IIA Global Technology Audit Guide (GTAG) 4: Management of IT Auditing – Discusses data privacy principles.

IIA Standard 2110 – Governance – Ensures data security and regulatory compliance.

IIA GTAG 8: Auditing Application Controls – Covers data retention policies and privacy compliance.

Privacy Regulations: GDPR (Article 5), CCPA (Section 1798.105) – Require organizations to delete data once it is no longer needed.

Why is Indefinite Retention a Violation?Analysis of Incorrect Answers:IIA References:Thus, the correct answer is B. The organization retains customers ' personal information indefinitely.

Implementing enhanced failure detection and backup systems is a risk reduction response because management is taking action to lower the likelihood or impact of data loss, corruption, processing failure, or system unavailability. Risk reduction involves designing and implementing controls to bring risk within the organization’s tolerance. Failure detection helps identify errors or system problems quickly, while backup systems support recovery and preservation of data integrity. Option A is incorrect because risk acceptance means management knowingly takes no additional action beyond existing controls. Option B is incorrect because risk sharing involves transferring or distributing risk, such as through insurance, outsourcing, or contractual arrangements. Option C is incorrect because risk avoidance means discontinuing the activity that creates the risk. Here, the organization continues operations but strengthens controls, so Option D is correct.

When an organization integrates governance, risk, and compliance (GRC) activities into a centralized technology-based resource, enterprise governance must ensure that the system:

Supports strategic decision-making by the board and senior management.

Provides accurate, reliable, and quality information to demonstrate an effective governance framework.

Aligns with IIA Standard 2110 – Governance, which requires auditors to assess whether the organization’s governance structure supports accountability, transparency, and effective decision-making.

(A) The board should be fully satisfied that there is an effective system of governance in place through accurate, quality information provided. (Correct Answer)

Governance is about ensuring that stakeholders, particularly the board, have confidence in the organization ' s control environment and decision-making process.

IIA Standard 2110 (Governance) states that internal auditors must evaluate the adequacy and effectiveness of governance structures.

A GRC system should ensure transparency, accountability, and quality reporting to enable strategic governance oversight.

(B) Compliance, audit, and risk management can find and seek efficiencies between their functions through integrated information reporting.

While improving efficiency is a benefit of a GRC system, it is a secondary objective, not a primary enterprise governance concern.

(C) Key compliance and risk metrics can be tracked and compared throughout the enterprise, aiding in identifying problem departments.

Tracking risk metrics is useful but does not directly address governance at the board level, making this answer incomplete.

(D) Data analytics can be utilized for trending of the data to ensure that patterns and ongoing monitoring occurs throughout the organization.

Analytics support monitoring, but the core governance concern is ensuring the board’s confidence in the system.

IIA Standard 2110 – Governance: Internal auditors must assess whether governance processes are effective.

GTAG 1 – Information Technology Risks and Controls: IT governance must provide quality, reliable information for decision-making.

COSO ERM Framework: Emphasizes governance as a key driver of enterprise risk management.

Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (A) because effective enterprise governance relies on accurate and high-quality information for strategic decision-making.

The root cause is the system interface errors between the customer payments portal and the accounting system. The most appropriate recommendation is for the finance manager to collaborate with IT and the system vendor to correct the interfacing issue.

Option A (manual workaround) is temporary and inefficient. Option B (new portal) is costly and unnecessary when the existing one can be fixed. Option D addresses symptoms but not the root cause.

Data normalization should have been performed before loading the extract into the analytics tool. Normalization prepares data by standardizing formats, correcting inconsistent values, reducing duplicate entries, and making fields comparable across records. Duplicate entries and spelling issues can cause false positives, excessive exceptions, and meaningless results. Data segregation separates data by category or access need, but it does not correct quality problems. Data stratification groups data into ranges or layers, usually for analysis of values or risk. Data quantification converts information into measurable form, but it does not address duplicate or inconsistent records. Internal audit analytics require reliable, complete, and standardized data before testing. Therefore, Option C is correct.

Strong Security Governance Requires Well-Defined Policies:

Cybersecurity governance is built upon clear, documented, and enforceable security policies that outline expectations, roles, responsibilities, and processes.

Policies define acceptable behaviors, security controls, incident response, and compliance requirements.

IIA Standard 2110 - Governance: Requires organizations to establish effective IT security governance, including policies that address cybersecurity risks.

IIA GTAG (Global Technology Audit Guide) on Information Security Governance:

Recommends that clear policies should guide security controls, user access, and incident response to address cybersecurity threats.

A. Inventory of information assets (Incorrect)

While identifying critical information assets is essential for risk management, it does not constitute security governance on its own.

Asset inventories support governance but must be reinforced by policies that define how data should be protected.

B. Limited sharing of data files with external parties (Incorrect)

Restricting data sharing is a control measure, not a governance principle.

Policies define when, how, and under what conditions data can be shared securely.

C. Vulnerability assessment (Incorrect)

Assessments help identify security gaps but do not establish governance.

Effective governance ensures that vulnerabilities are identified, prioritized, and remediated in accordance with policies.

Explanation of Answer Choice D (Correct Answer):Explanation of Incorrect Answers:Conclusion:To ensure strong security governance, organizations must have clearly defined security policies (Option D) as a foundation for managing cybersecurity threats.

IIA References:

IIA Standard 2110 - Governance

IIA GTAG - Information Security Governance