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NEW QUESTION # 99
Which of the following offers the best evidence that the internal audit activity has achieved organizational independence?
- A. The internal audit charter is drafted properly and approved by the appropriate parties.
- B. The mission statement and strategy of the internal audit activity demonstrates alignment to organizational objectives.
- C. The chief audit executive reports both functionally and administratively to the CEO.
- D. An independent third party has assessed the organization's system of internal controls to be adequate and effective.
Answer: C
NEW QUESTION # 100
Evidence discovered during the course of an engagement suggests that multiple incidents of fraud have occurred. There do not appear to be sufficient controls in place to prevent reoccurrence. Which of the following is the internal auditor's most appropriate next step?
- A. Provide the evidence that was discovered to local law enforcement for possible prosecution of the suspected fraud.
- B. Fully document in the workpapers the evidence that has been discovered and recommend appropriate controls to address the fraud.
- C. Discuss the situation with the engagement supervisor to determine whether fraud investigation experts are required to investigate the matter properly.
- D. Immediately notify management of the area under review and the other internal auditors involved in the engagement.
Answer: D
NEW QUESTION # 101
Which of the following is the best way to detect fraud?
- A. Activate a whistleblower hotline.
- B. Conduct anti-fraud training.
- C. Implement process controls.
- D. Perform background investigations.
Answer: A
NEW QUESTION # 102
An internal auditor is performing analytical reviews as part of an audit of a supermarket's merchandising department. Because the economy has declined since midyear, the auditor can expect to encounter which of the following?
- A. Higher operating margin.
- B. Lower obsolete stock disposal.
- C. Lower sales volume.
- D. Higher inventory turnover.
Answer: C
NEW QUESTION # 103
According to the COSO enterprise risk management framework, which of the following best describes the activity that helps ensure risk responses are carried out effectively?
- A. Control activities.
- B. Information and communication.
- C. Event identification.
- D. Objective setting.
Answer: A
NEW QUESTION # 104
A new internal audit activity is creating its first charter. According to IIA guidance, which of the following objectives would be appropriate for inclusion in the charter?
- A. Oversee the establishment and administration of an effective risk management program.
- B. Assist management in implementing recommended control improvements.
- C. Evaluate the adequacy and effectiveness of the organization's governance activities.
- D. Continuously monitor the organization's overall risk activities in relation to its risk appetite.
Answer: A
NEW QUESTION # 105
Which of the following is not a standard technique that the chief audit executive (CAE) would use to provide evidence of supervisory review of working papers?
- A. The CAE utilizes an external third party to make an objective recommendation after each working paper review.
- B. The CAE prepares a memorandum discussing the results of the working paper review.
- C. The CAE completes an engagement working paper checklist.
- D. The CAE initials and dates every working paper after it has been reviewed.
Answer: A
NEW QUESTION # 106
Which of the following are generally recognized as essential elements of a corporate social responsibility program?
- A. Consumer issues and return on investment.
- B. Human rights and the environment.
- C. Organizational governance and financial reporting.
- D. Fair operating practices and government regulation.
Answer: B
NEW QUESTION # 107
What is the primary purpose of a fishbone diagram?
- A. To plan and control complex projects, such as internal audits.
- B. To identify the possible causes of adverse conditions.
- C. To depict the areas of responsibility for departments in an organization.
- D. To represent the frequencies of adverse conditions in a given process.
Answer: B
NEW QUESTION # 108
Why are preventative controls generally preferred to detective controls?
- A. Because preventive controls identify exceptions after-the-fact, allowing them to be used after the entire review is complete and therefore finding exceptions that detective controls may have missed.
- B. Because preventive controls include output procedures, which cover the full range of possible reviews, reconciliations and analysis.
- C. Because preventive controls promote doing the right thing in the first place, and lessen the need for corrective action.
- D. Because preventive controls are more sensitive and identify more exceptions than detective controls.
Answer: C
NEW QUESTION # 109
Which of the following items should the chief audit executive disclose to senior management regarding the results of the internal audit activity's quality assessments?
- A. The qualifications and independence of the assessment Team.
- B. The amount of the organization's potential loss prevented by the risk-based auditing of the internal audit activity.
- C. The internal audit activity's plan for resource allocation.
- D. The number of audits from the annual internal audit plan that were completed last year.
Answer: B
NEW QUESTION # 110
The chief audit executive (CAE) of a mid-sized pharmaceutical organization has operational responsibility for the regulatory compliance function. The audit committee requests an assessment of regulatory compliance.
According to IIA guidance, which of the following is the CAE's best course of action?
- A. Have a proficient internal audit staff member perform the assessment and disclose the impairment in the audit report and to the board.
- B. Have a proficient internal audit staff member perform the audit and report the results of the assessment directly to senior management and the board.
- C. Contract with a third-party entity or external auditor to complete the assessment and report the results to senior management and the board.
- D. Have a regulatory compliance staff member perform a self-assessment, to be reviewed by a proficient internal auditor.
Answer: C
NEW QUESTION # 111
According to IIA guidance, which of the following statements regarding the internal audit charter is true?
- A. Senior management should approve the charter before it is submitted to the board.
- B. The CEO periodically should assess whether the terms of the charter continue to be adequate.
- C. The charter should define the consulting services that the internal audit activity is permitted to perform.
- D. The charter should describe the purpose and authority of the internal audit activity, consistent with the Standards.
Answer: A
NEW QUESTION # 112
An accounts receivable clerk receives cash payments, posts the payments to customer accounts, and prepares the daily cash deposit.
The clerk has been stealing some cash and manipulating the customer payments to hide the theft.
This fraud could be detected with which of the following controls?
- A. Total cash deposits for the month are reconciled to the cash receipts journal.
- B. Total cash deposits are compared with the bank reconciliation.
- C. Monthly bank reconciliations are performed by the clerk on a timely basis.
- D. Names, amounts, and dates on remittance advices are reconciled with the names, amounts, and dates recorded in the cash receipts journal.
Answer: D
NEW QUESTION # 113
Which of the following statements best explains why internal auditors map processes?
1. To obtain audit evidence to support auditor's observations.
2. To determine scope and objectives of the audit.
3. To facilitate the identification of ownership and responsibility for key risks.
4. To identify potential efficiency improvements.
- A. 1 and 3.
- B. 1 and 2.
- C. 2 and 4.
- D. 3 and 4.
Answer: D
NEW QUESTION # 114
According to IIA guidance, which of the following must internal auditors consider to conform with the requirements for due professional care during a consulting engagement?
1. The cost of the engagement, as it pertains to audit time and expenses in relation to the potential benefits.
2. The needs and expectation of clients, including the nature, timing, and communication of engagement results.
3. The application of technology-based audit and other data analysis techniques, where appropriate.
4. The relative complexity and extent of work needed to achieve the engagement's objectives.
- A. 1, 3, and 4
- B. 2, 3, and 4
- C. 1, 2, and 3
- D. 1, 2, and 4
Answer: D
NEW QUESTION # 115
Forty-five percent of an organization's customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.
Which of the following represents the organization's residual risk for online customer payments due?
- A. $11, 250
- B. $33, 750
- C. $25, 000
- D. $45, 000
Answer: A
NEW QUESTION # 116
What is the purpose of a secondary control?
- A. It replaces primary controls that are either ineffective or cannot fully mitigate a risk.
- B. It helps to ensure the completeness and accuracy of automated controls in a system environment.
- C. lt combines with other controls to help reduce significant risk exposures to an acceptable level.
- D. It partially reduces the residual risk level when a key control does not operate effectively.
Answer: C
NEW QUESTION # 117
Which of the following statements is true about The IIA Global Internal Audit Competency Framework?
- A. The framework is designed to be used primarily by chief audit executives that are developing indicators to measure the performance of the internal audit activity for which they are responsible.
- B. The framework describes competencies needed for individual internal auditors, but not those necessary at the chief audit executive level.
- C. The core competencies outlined in the framework are not expected of a person undertaking an entry-level position as an internal auditor.
- D. The framework lists the core competencies internal auditors should possess before attempting to attain The IIA's Certified Internal Auditor certification.
Answer: A
NEW QUESTION # 118
An internal auditor is conducting an engagement in the accounts payable department, which includes expressing an opinion at the micro level. According to IIA guidance, which of the following statements is true regarding micro-level opinions?
1. They are most effective when using a combination of current and prior engagement findings to draw conclusions.
2. They typically are based on defined procedures such as those found in an accounts payable reconciliation process.
3. They are discrete and not normally shared with senior management or the board.
4. They can rely on evidence taken from the work of other assurance activities across the organization.
- A. 1 and 3.
- B. 2 and 3.
- C. 1 and 2.
- D. 3 and 4.
Answer: B
NEW QUESTION # 119
Which of the following statements is true regarding the use of non-statistical sampling in auditing control tests?
- A. Non-statistical sample results must be projected to the population.
- B. Sampling risk will be accurately quantified through non-statistical sampling.
- C. It considers tolerable deviation rate more effectively than does statistical sampling.
- D. Lesser evidence is required to support a conclusion than for statistical sampling.
Answer: A
NEW QUESTION # 120
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