Certified Internal Auditor Internal Audit Standards & Ethics — Questions and Answers
Question 1: What is the primary purpose of the International Standards for the Professional Practice of Internal Auditing?
- To provide a framework for performing and promoting internal audit activities (Correct answer)
- To establish tax filing requirements for corporations
- To regulate external financial reporting
- To set accounting standards for publicly traded companies
Correct answer: To provide a framework for performing and promoting internal audit activities
The IIA Standards provide a framework for conducting internal audits consistently, ensuring quality, and promoting the value of internal auditing to organizations worldwide.
Question 2: What are the four principles of the IIA Code of Ethics?
- Integrity, Objectivity, Confidentiality, and Competency (Correct answer)
- Accuracy, Timeliness, Completeness, and Transparency
- Honesty, Loyalty, Diligence, and Courage
- Independence, Authority, Responsibility, and Accountability
Correct answer: Integrity, Objectivity, Confidentiality, and Competency
The IIA Code of Ethics establishes four mandatory principles: Integrity (trust), Objectivity (unbiased assessment), Confidentiality (protecting information), and Competency (applying knowledge and skills).
Question 3: What is the difference between assurance and consulting engagements in internal auditing?
- Assurance provides independent assessment of risks/controls; consulting provides advisory services at management's request (Correct answer)
- They are identical types of engagements
- Consulting is mandatory; assurance is optional
- Assurance involves only financial audits; consulting involves only IT audits
Correct answer: Assurance provides independent assessment of risks/controls; consulting provides advisory services at management's request
Assurance engagements involve objective examination of evidence to provide independent assessments, while consulting engagements are advisory in nature, designed to add value at management's request.
Question 4: What does 'due professional care' mean in internal auditing?
- Applying the care and skill expected of a reasonably prudent and competent auditor (Correct answer)
- Performing every possible audit procedure regardless of cost
- Guaranteeing that no errors exist in audited processes
- Working only during regular business hours
Correct answer: Applying the care and skill expected of a reasonably prudent and competent auditor
Due professional care means internal auditors apply reasonable care and competence, considering the complexity and materiality of matters, but it does not imply infallibility or guarantee of catching every issue.
Question 5: What is organizational independence in the context of internal auditing?
- The internal audit function reports to a level that allows it to fulfill responsibilities without interference (Correct answer)
- The internal audit department operates as a separate legal entity
- Internal auditors work from home independently
- The audit team has no interaction with management
Correct answer: The internal audit function reports to a level that allows it to fulfill responsibilities without interference
Organizational independence means the internal audit function reports functionally to the board or audit committee, ensuring it can perform its work without management interference or undue influence.
Question 6: What is a quality assurance and improvement program (QAIP)?
- A program to evaluate and continuously improve the internal audit activity's performance and conformance (Correct answer)
- A quality control program for manufacturing products
- A customer satisfaction survey program
- A software testing methodology
Correct answer: A program to evaluate and continuously improve the internal audit activity's performance and conformance
The QAIP includes ongoing internal monitoring and periodic external assessments to evaluate the internal audit activity's conformance with standards and the effectiveness of its processes.
