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NEW QUESTION # 61
When auditing the award of a major contract, which of the following should an internal auditor suspect as a red flag for a bidding fraud scheme?
1. Subsequent change orders increase requirements for low-bid items.
2. Material contract requirements are different on the actual contract than on the request for bids.
3. A high percentage of employees are charged to indirect accounts.
4. Losing bidders are hired as subcontractors.
- A. 1 only
- B. 2 only
- C. 1 and 3.
- D. 2 and 4.
Answer: D
NEW QUESTION # 62
According to IIA guidance, which of the following statements is true regarding the reporting of results from an external quality assessment of the internal audit activity?
- A. The results of self-assessments with independent external validation are shared with the board upon completion, and monitoring of recommended improvements must be reported monthly.
- B. The requirements for reporting quality assessment results are the same for external assessments and self-assessments with independent external validation.
- C. The external assessment results are reported upon completion in confidence directly to the board, and senior management is advised only of the recommendations and improvement action plans.
- D. The external assessment results are communicated upon completion to senior management and the board, but action plans for recommended improvements do not have to be reported.
Answer: A
NEW QUESTION # 63
A fraud investigation was completed by management, and a proven fraud was communicated to relevant authorities. According to MA guidance, which of the following roles would be most appropriate for the internal audit activity to undertake after the investigation?
- A. Conduct lessons learned sessions to ascertain how the fraud occurred and which controls failed.
- B. Determine why The fraud was not detected earlier and design controls to strengthen early detection.
- C. Review the investigation and implement any improvements to the process.
- D. Plan employee sessions and team building strategies for the organization to improve awareness of fraud among employees.
Answer: A
NEW QUESTION # 64
While reviewing first quarter sales transactions, an internal auditor discovered that 10 invoices for a new customer had not been posted into the accounts receivable subsidiary ledger. Those 10 invoices were listed in an error report automatically generated by the sales processing system. The system had rejected the invoices because the customer's account number was not found in the customer master file. In this scenario, which of the following controls was lacking?
- A. Corrective control.
- B. Detective control.
- C. Preventive control.
- D. Directive control.
Answer: A
NEW QUESTION # 65
Which of the following is not an objective of internal control?
- A. Accuracy.
- B. Efficiency.
- C. Validation.
- D. Compliance.
Answer: C
NEW QUESTION # 66
An internal audit charter, approved by the board, restricts the internal audit activity to providing assurance only on the reliability of financial information and the effectiveness of internal accounting controls. Which of the following statements is true regarding the extent to which the external auditor may rely on the internal audit activity's work?
- A. The external auditor may make full use of the work, as the audit charter is very specific as to the work the internal audit activity may undertake.
- B. The external auditor must disregard the work, as the scope of the charter may introduce bias and result in a lack of due professional care.
- C. The external auditor may use the work, as the board has approved the charter, thus taking responsibility for any deficiencies.
- D. The external auditor may use the work with caution, due to the internal audit activity's scope and responsibility restrictions.
Answer: D
NEW QUESTION # 67
A large sales organization maintains a system of internal control according to the COSO model and has updated its code of conduct. This change relates to which component of the COSO framework?
- A. Commitment.
- B. Control environment.
- C. Information and communication.
- D. Control activities.
Answer: B
NEW QUESTION # 68
Internal auditors must exercise due professional care by considering which of the following?
1. Cost of assurance in relation to potential benefits.
2. Adequacy and effectiveness of governance, risk management, and control processes.
3. Management's competency level in the area being evaluated.
4. Probability of significant errors, fraud, or noncompliance.
- A. 2, 3, and 4 only
- B. 1, 2, and 4 only
- C. 1 and 2 only
- D. 1, 2, and 3 only
Answer: B
NEW QUESTION # 69
According to IIA guidance, which of the following best describes internal auditors' responsibility regarding fraud?
- A. Internal auditors should report all fraud cases to law enforcement agents, in accordance with the Code of Ethics.
- B. Internal auditors must have sufficient knowledge to evaluate the risk of fraud.
- C. Internal auditors are responsible for ensuring that fraud does not occur.
- D. Internal auditors should take a leading role in investigating all fraud-related cases.
Answer: B
NEW QUESTION # 70
The chief audit executive (CAE) has assigned an internal auditor to an upcoming engagement. Which of the following requirements would most likely indicate that the internal auditor was assigned to an assurance engagement?
- A. The assigned internal auditor must not assume management responsibilities while performing the engagement.
- B. The CAE must personally obtain the needed skills, knowledge, or other competencies if the internal auditor does not have them.
- C. The assigned internal auditor must maintain objectivity while performing the engagement.
- D. The assigned internal auditor must determine the objectives, scope, and techniques of the engagement.
Answer: D
NEW QUESTION # 71
An internal audit manager of a furniture manufacturing organization is planning an audit of the procurement process for kiln-dried wood. The procurement department maintains six procurement officers to manage 24 different suppliers used by the organization.
Which of the following controls would best mitigate the risk of employees receiving kickbacks from suppliers?
- A. The periodic rotation of procurement officers' assignments to supplier accounts.
- B. Periodic inventories of kiln-dried wood at the organization's warehouse.
- C. An automated computer report, organized by supplier, of any invoices for the same amount.
- D. A pre-award financial capacity analysis of suppliers.
Answer: A
NEW QUESTION # 72
According to IIA guidance, which of the following objectives of an assurance engagement for the organization's risk management process is valid?
- A. Risks have been accurately analyzed and evaluated.
- B. All risks have been identified and mitigated.
- C. The board is appropriately addressing intolerable risks.
- D. All controls are both adequate and efficient.
Answer: A
NEW QUESTION # 73
Which of the following scenarios best illustrates the principle of due professional care?
- A. An internal auditor declares that he would have a conflict of interest in providing planned audit support.
- B. An internal auditor has been given sufficient authority to access documents needed to make an appraisal of an issue.
- C. An internal auditor uses technology-based audit techniques to ensure that all significant risks are identified.
- D. An internal auditor evaluates the significant risks arising from a consulting engagement.
Answer: D
NEW QUESTION # 74
In which of the following scenarios would a customer service hotline receive a high volume of complaints regarding payments not being applied to customers' accounts?
- A. Employees are submitting fraudulent expense reports.
- B. An employee is tampering with customer checks.
- C. The customer service department is not forwarding complaints to the accounts receivable department.
- D. Invoices are not being mailed to customers.
Answer: B
NEW QUESTION # 75
Which of the following best explains why integrity is a necessary personal quality for internal auditors at all levels?
- A. Internal auditor integrity enables stakeholders to constantly question the work of the internal audit activity.
- B. Internal auditor integrity enables the internal auditor to avoid being challenged by any party in the organization.
- C. Internal auditor integrity enables users of internal auditors' work to make important business decisions.
- D. Internal auditor integrity enables the internal audit activity to be able to demonstrate independence.
Answer: C
NEW QUESTION # 76
When an internal auditor applies due professional care to perform an assurance engagement, which of the following must she consider?
1. Findings of the last audit engagement performed.
2. Probability of significant errors, irregularities, or noncompliance.
3. Extent of work needed to achieve engagement objectives.
4. Cost of the engagement versus the potential benefits.
- A. 1 and 4 only
- B. 2, 3, and 4 only
- C. 2 and 3 only
- D. 1, 2, 3, and 4
Answer: B
NEW QUESTION # 77
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