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

The organization and content of workpapers should be based on the professional judgment of the internal auditor. Workpapers should provide sufficient detail to support the audit findings and conclusions but do not need to answer every conceivable question. Standard 2330 – Documenting Information states that internal auditors must document relevant information to support the conclusions and engagement results. This allows for flexibility and professional judgment in determining what is necessary and appropriate to include.References:

Institute of Internal Auditors (IIA), International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2330 – Documenting Information.

The primary weakness of internal control questionnaires (ICQs) is that the respondents, who are often managers or personnel responsible for specific areas, may have incentives to indicate that internal controls are in place, even when they might not be effective or fully operational. This can occur due to a desire to present their department in a positive light, avoid scrutiny, or because of misunderstandings about what constitutes a control. This bias in responses can lead to inaccurate assessments of the internal control environment.

IIA References:

IIA Standard 2310: Identifying Information and its accompanying guidance highlight the importance of obtaining accurate, reliable, and unbiased information when assessing controls. The potential for biased responses in ICQs is a known risk that can undermine the quality of the audit evidence gathered.

The Practice Guide on Evaluating Internal Controls notes that while ICQs are useful for gathering information, auditors should be aware of the limitations and potential biases inherent in this method.

An operational audit is the most appropriate type of audit engagement to determine how an organization could be more profitable in the long term. Operational audits focus on the efficiency and effectiveness of an organization's operations, processes, and procedures. They assess whether resources are being used optimally to achieve business objectives and identify opportunities for cost savings, process improvements, and enhanced productivity. This type of audit is designed to provide insights and recommendations that can help an organization improve its profitability over the long term by streamlining operations and eliminating inefficiencies.

References:

The Institute of Internal Auditors (IIA) Practice Guide: Operational Auditing: A Guide for Internal Auditors

IIA Standard 2110 - Governance

In the scenario provided, the bakery chain's statistical model predicts that daily sales should have an inverse relationship with rainy days, meaning that on rainy days, sales are generally expected to be lower. However, if an auditor notices that on a rainy day, total sales are greater than expected when compared to the cost of ingredients used, this could indicate potential employee theft of food. The reasoning is that if sales are unusually high despite weather conditions that typically depress sales, it may be that the reported sales are inflated or that ingredients are being used without corresponding sales being recorded, which could suggest theft.

IIA References:

IIA Standard 1220: Due Professional Care implies that auditors should consider the likelihood of significant errors, fraud, or noncompliance when assessing risks and performing audit procedures. Unusual patterns or deviations from expected results, as seen in this scenario, should raise red flags for potential fraudulent activity, such as theft.