IIA Updated IIA-CIA-Part2 Exam Questions and Answers by julius

A conservative working capital policy means maintaining higher current assets relative to current liabilities (e.g., higher cash balances, larger inventories). This increases liquidity but reduces profitability because funds are tied up in low-yield assets. Therefore, the expected result is high liquidity (Option C).

When a significant risk is identified during a consulting engagement, the most appropriate response is to report the risk to senior management. Even if the engagement is consulting in nature, it is still crucial for the internal audit activity to ensure that significant risks are communicated to those responsible for managing them.

IIA References:

IIA Standard 2120: Risk Management requires that internal auditors evaluate the effectiveness of risk management processes and communicate significant risks to senior management. This applies regardless of whether the engagement is assurance or consulting.

The Practice Guide on Consulting Services advises that internal auditors must ensure that significant risks identified during consulting engagements are brought to the attention of senior management so that they can take appropriate action.

According to IIA guidance, the primary purpose of the exit conference is to ensure timely communication of observations and findings, especially those that require immediate management action. This meeting allows auditors to discuss their findings with management, address any disagreements, and clarify the facts before the final report is issued. It does not require the attendance of both the chief audit executive and the chief executive over the activity (B), nor is it solely for reviewing anticipated results (C) or the performance of the internal auditors (D). References: IIA Standard 2440 – Disseminating Results, IIA Practice Advisory 2440-1

According to the IIA ' s Standards, specifically Standard 1210 - Proficiency, internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities. If the internal audit activity lacks the necessary skill set to conduct a requested consulting engagement, the most appropriate action for the CAE is to decline the engagement request. This ensures that the internal audit activity does not compromise the quality and effectiveness of its services.