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

Given the chief audit executive's (CAE) new responsibility for the risk management and compliance operations, the independence of the internal audit activity could be compromised in future audits of these functions. Therefore, to maintain objectivity and impartiality, audits of risk management and compliance functions should ideally be overseen by a competent external assurance provider. This approach ensures that the audit is free from internal influence and bias, aligning with the IIA's standards on independence and objectivity.References: IIA Standard 1110 - Organizational Independence

In a scenario where substantial bonuses are tied to meeting financial targets, the most likely motivator to potentially commit fraud is "Pressure." The incentive structure creates a high-pressure environment for employees to meet financial targets, potentially encouraging unethical behavior to achieve these goals to receive bonuses.References: Fraud risk factors as outlined by auditing standards such as those from the AICPA or IIA

A red flag for potential issues in the control environment is compensation structures that are based on commissions. Such compensation schemes can incentivize behavior that prioritizes personal gain over corporate integrity and compliance, potentially leading to unethical actions or manipulation of results to meet targets.References: Internal control frameworks and literature on risk factors in control environments.

According to the IIA's guidance on external assessments (Standard 1312), a chief audit executive should consider conducting an external quality assessment more frequently than the mandated five years in situations such as significant changes in management or internal audit leadership. These changes can impact the expectations and requirements for the internal audit function, thus justifying the need for more frequent reviews to ensure alignment and adherence to standards.References: IIA Standard 1312 - External Assessments

A chief audit executive might obtain the services of a fraud specialist to assist in a major fraud investigation because fraud specialists are better equipped to act as an expert witness in court. Their expertise and credentials in fraud investigations provide authoritative insight and detailed knowledge that can support legal proceedings, making them valuable resources in cases where legal actions are pursued.References: The IIA's guidance on managing and investigating fraud.

When an organization has a high level of risk maturity, the internal audit activity is less likely to provide consulting services related to risk management. In highly mature risk environments, organizations typically have well-established risk management processes and capabilities, thereby reducing the need for consulting services from internal audit in this area. Instead, internal audit may focus more on assurance services over the existing risk management processes to ensure they are functioning as intended.References: Risk management and internal audit literature discussing the relationship between organizational risk maturity and the role of internal audit.

Senior management’s decision to adopt new inventory management software despite its newness and associated risks illustrates 'Risk Appetite'. Risk appetite is the amount of risk, on a broad level, an organization is willing to accept in pursuit of its objectives before action is deemed necessary to reduce the risk. It reflects the enterprise's willingness to take risks to achieve its goals, which is clearly demonstrated in this scenario.References: COSO Enterprise Risk Management Framework

If there are unresolved scope restrictions, the chief audit executive (CAE) should consider whether to pursue the audit and note the scope restrictions in the audit report. This is important because scope restrictions can limit the audit’s ability to fully assess the control environment, and documenting these limitations helps ensure that the audit report reflects the extent to which the auditor was able to evaluate the control environment.References: The IIA's International Standards for the Professional Practice of Internal Auditing regarding scope limitations and reporting.