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

An effective control to mitigate the risk of payments to ghost employees involves cross-verification and authorization by relevant departments. Reviewing the staff salary payment list by the head of payroll and its subsequent endorsement by the head of human resources ensures a double-check mechanism that can detect anomalies such as ghost employees. This control measure helps in verifying the legitimacy of the payroll and the accuracy of the payments made.

Best practices in internal controls for payroll and human resources departments

When deciding whether to rely on the work of internal auditors, external auditors often assess the objectivity of the internal audit activity. Objectivity assures that audits are performed impartially and without bias, which enhances the credibility of the audit work. This assessment is crucial for determining the reliability of the internal audit function's work for external audit purposes.

IIA Standard 1220: Objectivity, and external auditing standards regarding the use of internal auditors' work.

The best step for the chief audit executive (CAE) to take when determining that the internal audit activity lacks adequate independence is to request that the board restructure the reporting line to ensure the CAE has unrestricted access to the board. This action will help to enhance the independence and objectivity of the internal audit activity by ensuring that the CAE reports functionally to the board, which is a key aspect of maintaining organizational independence.

The IIA Standards: Standard 1110 – Organizational Independence: "The chief audit executive must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. The chief audit executive must confirm to the board, at least annually, the organizational independence of the internal audit activity."

IIA Practice Guide: "Independence and Objectivity": Discusses the importance of reporting lines and organizational structure in maintaining the independence of the internal audit activity.

Internal auditors focus on assessing the adequacy of controls to manage various risks within the organization, including operational and strategic risks. External auditors primarily focus on the accuracy and reliability of the organization's financial statements and compliance with relevant accounting standards. References:

IIA Standard 2100: Nature of Work.

IIA Practice Guide: Coordination and Reliance: Developing an Assurance Map.

External Audit Standards (e.g., Generally Accepted Auditing Standards - GAAS).