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

Outsourcing a business activity is considered a risk reduction technique. By outsourcing, an organization transfers certain activities to external service providers who possess specialized skills or resources, thereby reducing the associated risks that the organization may face if it had to manage those activities internally.References: IIA guidance on risk management techniques

The IIA Code of Ethics states that integrity is fundamental and describes behaviors such as honesty and responsibility. In this scenario, being completely honest with operational management about unfavorable audit results exemplifies the principle of integrity.References: The Institute of Internal Auditors (IIA) "Code of Ethics", which details the principles and expectations for the professional practice of internal auditing, including integrity as a key principle.

The most effective type of fraud test for looking for possible fictitious vendors would be running checks to uncover post office box addresses that match employee addresses. This test directly targets a common tactic used in vendor fraud schemes, where employees might set up fictitious vendor accounts and direct payments to themselves via P.O. boxes.References: IIA resources on auditing for fraud, which often discuss various methods for detecting fictitious vendors, including address comparisons.

The first step for a newly hired chief audit executive (CAE) to build and maintain the proficiency of the internal audit activity should be to incorporate the basic criteria of internal audit competency into job descriptions. This foundational step ensures that all current and future hires are aligned with the required skills and competencies needed for effective internal audit functions. It sets a clear expectation of skills and knowledge right from the recruitment stage, thereby facilitating the development and maintenance of a competent audit team.References: The Institute of Internal Auditors (IIA) - Practice Guides on Talent Management

The chief audit executive is required to disclose any potential conflicts of interest of the assessment team in the communication of quality assessment results to senior management and the board. This disclosure is crucial to maintain the credibility and integrity of the quality assessment process, ensuring that the results are viewed as objective and reliable.References: IIA Standard on Quality Assurance and Improvement Program

In consulting engagements, according to the IIA's Standards, a work program is not required but may be developed. This allows internal auditors flexibility to design an approach that best fits the nature of the consulting engagement.References: The IIA's International Standards for the Professional Practice of Internal Auditing (Standards), particularly the standards related to consulting activities.

Due professional care was not exercised because the residual risk from the possibility of authorized users sharing their passwords was not considered. Identifying and assessing risks associated with shared access and improper handling of credentials is crucial in a risk assessment. The failure to consider such risks indicates a lack of thoroughness in the auditor's evaluation of control effectiveness.References: IIA Standard 1300: Quality Assurance and Improvement Program

An evaluation of the current performance and compensation program would be the most effective control to address the underlying cause of fraudulent behavior described. The pressures from unrealistic targets and aggressive monitoring likely encouraged employees to engage in fraudulent account openings. By evaluating and potentially revising these targets and the associated compensation schemes, the bank could mitigate the pressures that lead to such unethical behaviors.References: Standards on the role of internal control systems in preventing and detecting fraud, including guidance on managing performance and compensation to align with ethical standards.