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

According to IIA guidance, any additional roles beyond traditional audit functions, such as being responsible for risk management and investigation, must be explicitly defined in the internal audit charter. This document, approved by senior management and the board, delineates the scope and responsibilities of the internal audit function, ensuring clarity and proper governance. Thus, if the internal audit charter stipulates such roles, it justifies the CEO’s decision.

IIA Standard 1000 - Purpose, Authority, and Responsibility

COSO Enterprise Risk Management organizes its Performance component in a logical sequence: identify risks, assess their severity, prioritize them, implement risk responses, and then develop a portfolio view. A portfolio view allows management to consider individual risks collectively across the organization and understand the combined amount and types of risk being assumed relative to strategy and risk appetite. Prioritizing risks and assessing severity occur before risk responses are selected and implemented. Measuring risk velocity may be useful in risk analysis, but it is not the next COSO ERM principle in this sequence. Therefore, once management has identified risks and implemented appropriate responses, the next step is to develop a portfolio view so management can evaluate aggregate risk exposure across the enterprise.

The scenario describes a substantial increase in cancelled proposals, which could indicate fraudulent activity. One potential fraud risk scenario is that some electricians might be offering clients reduced fees if they pay with cash, leading to off-the-record transactions. This can result in the cancellation of official proposals and lost revenue for the company, as these transactions might not be recorded in the company’s financial systems. This type of fraud involves bypassing the formal processes and price lists, which impacts the integrity of the procurement and sales processes.

IIA Practice Guide: Fraud and Internal Audit

COSO Fraud Risk Management Guide