IIA Updated IIA-CIA-Part1 Exam Questions and Answers by ryder

Information misrepresentation involves the intentional misstatement or omission of important information in the financial reports to deceive users of those reports. In this scenario, the sales director's failure to correct the reserves for unearned income in the department’s performance report, despite knowing it should be adjusted for cancellations, is a clear example of information misrepresentation. This act could lead to misleading stakeholders about the company's financial status, which fits the definition of information misrepresentation fraud.

IIA guidance on types of fraud and their characteristics

The statement that the internal audit activity shall develop a flexible audit plan based on risk assessment and submit this plan to the board for approval is typically found in the responsibilities section of the internal audit charter. This element emphasizes the planning aspect of audit activities, showcasing the audit's alignment with organizational risks and the governance structure's oversight.

IIA's International Standards for the Professional Practice of Internal Auditing

According to the IIA Standards, the chief audit executive (CAE) must ensure that internal audit activities are performed with competence and due professional care. If the internal audit team lacks the necessary knowledge or skills to perform all or part of the work, the CAE must obtain competent advice and assistance. Thus, the CAE's best response to defend the expenditure for an external fraud expert is to refer to the Standards, explaining that the internal audit activity must obtain competent assistance if needed to ensure the investigation is conducted effectively and professionally.

IIA Standard 1210: Proficiency

Approval of master file change requests by the accounts payable supervisor could have prevented the fraud described. This control ensures that changes to critical financial information, such as vendor payment details, are verified and authorized by a responsible authority, thereby reducing the risk of unauthorized alterations and fraud.

IIA guidance on internal controls related to fraud prevention, which emphasizes the importance of control activities such as supervisory approvals for changes in critical financial data to prevent unauthorized transactions.