BELAJAR CIA BARENG IIAC

Today’s internal auditor will often encounter a wide range of potential ethical dilemmas, not all of which are explicitly addressed by The IIA’s Code of Ethics. If the internal auditor encounters such a dilemma, the internal auditor should always

• A. Seek the counsel of the board before deciding on an action

• B. Act consistently with the code of ethics adopted by the organization even if such action is not consistent with The IIA's Code of Ethics.

• C. Seek counsel from an independent attorney to determine the personal consequences of potential actions.

• D. Apply and uphold the principles embodied in The IIA Code of Ethics.

Answer explanation

CORRECT ANSWER IS D . Its Explanation is

The internal auditor should always apply and uphold the principles of The IIA Code of

Ethics. The core principles of the Code are integrity, objectivity, confidentiality, and

competency.

INCORRECT CHOICES EXPLANATION

Explanation for Choice A:

The internal auditor should always apply and uphold the principles of The IIA Code of Ethics. It does not seem practical for the

internal auditor to seek counsel of the board concerning all ethical issues.

Explanation for Choice B:

The internal auditor should always apply and uphold the principles of The IIA Code of Ethics. If the standards of the organization

are not consistent with the profession’s standards, the internal auditor will first be held to the standards of the profession.

Explanation for Choice C:

The internal auditor should always apply and uphold the principles of The IIA Code of Ethics. It does not seem practical for the

internal auditor to seek counsel from an independent attorney concerning all ethical issues.

The proper organizational role of internal auditing is to

• A. Serve as the investigative arm of the board of directors.

• B. Perform studies to assist in the attainment of more efficient operations.

• C. Assist the external auditor in order to reduce external audit fees.

• D. Serve as an appraisal function to examine and evaluate activities as a service to the organization.

Answer explanation

CORRECT ANSWER IS D . Its Explanation is

The primary role of the internal audit activity is to assist the management of a company in

its responsibility of maintaining effective controls by evaluating the effectiveness of those

controls. In this role, it serves as an appraisal function that adds value to operations.

INCORRECT CHOICES EXPLANATION

Explanation for Choice A:

The role of internal auditing is not limited to serving as the investigative arm of the board. The internal audit activity assists the

management of a company in its responsibility of maintaining effective controls by evaluating the effectiveness of those controls.

Explanation for Choice B:

One of the roles of internal auditing is the performance of studies to assist in the attainment of more efficient operations.

However, primary role of internal auditing is much more than this.

Explanation for Choice C:

Although external audit fees may be reduced as a result of the internal auditing activities, this is not the primary role of internal

auditing

The benefits from internal auditing include all of the following except

• A. Employees benefit because the internal audit activity can help them

  effectively perform their jobs.

• B. Management benefits because the internal audit activity is able to help

  them identify and minimize risks.

• C. The external auditor benefits because the internal audit activity is able

  to provide an opinion about the accuracy and completeness of the annual

  financial statements.

• D. Society benefits from internal auditing because the internal auditor

  promotes the efficient and effective use of resources.

Answer explanation

CORRECT ANSWER IS C . Its Explanation is

Internal auditors are not able to provide an opinion about the accuracy and

completeness of the annual financial statement. This is solely the responsibility of the

external auditor.

INCORRECT CHOICES EXPLANATION

Explanation for Choice A:

This is a true statement about the benefit of internal auditing.

Explanation for Choice B:

This is a true statement about the benefit of internal auditing.

Explanation for Choice D:

This is a true statement about the benefit of internal auditing

The authority of the internal audit activity is limited to that granted by

• A. The audit committee and the chief financial officer.

• B. Management and the board.

• C. Senior management and the Standards.

• D. The board and the controller.

Answer explanation

CORRECT ANSWER IS B . Its Explanation is

Management and the board of directors grant authority to the internal

audit activity by means of the internal audit activity's charter.

INCORRECT CHOICES EXPLANATION

Explanation for Choice A:

No single officer and no single committee grant authority to the internal audit activity.

Explanation for Choice C:

The Standards do not grant authority to the internal audit activity.

Explanation for Choice D:

No single manager grants authority to the internal audit activity.

To avoid being the apparent cause of conflict between an organization's senior management and the audit committee, the chief audit executive (CAE) should

• A. Discuss all reports to senior management with the audit committee first.

• B. Strengthen the independence of the internal audit activity through organizational status.

• C. Request board approval of policies that include internal audit activity relationships.

• D. Communicate all engagement results to both senior management and the

  audit committee

Answer explanation

CORRECT ANSWER IS C . Its Explanation is

The purpose, authority and responsibility of the internal audit activity should be defined

in the charter. The charter should establish the internal audit activity's position within the

organization.

INCORRECT CHOICES EXPLANATION

Explanation for Choice A:

The audit committee provides an oversight role, not an operational.

Explanation for Choice B:

Strengthening the independence of the internal audit activity would not necessarily eliminate a conflict

between senior management and audit committee.

Explanation for Choice D:

Communicating all engagement results to both senior management and the audit committee is not necessary

and would be inefficient.

Internal auditors should be prudent in their relationships with persons

and organizations external to their employers. Which of the following

activities will most likely not adversely affect internal auditors’ ethical

behavior?

• A. Discussing engagement plans or results with external parties.

• B. Serving as consultants to competitor organizations.

• C. Accepting compensation from professional organizations for consulting

  work.

• D. Serving as consultants to suppliers.

Answer explanation

CORRECT ANSWER IS C . Its Explanation is

Accepting compensation from professional organizations for consulting work is not

likely to impair, or be presumed to impair the internal auditors’ professional judgment.

INCORRECT CHOICES EXPLANATION

Explanation for Choice A:

Rule of Conduct 3.1 states that internal auditors shall be prudent in the use and protection of

information in the course of their duties.

Explanation for Choice B:

Serving as consultants to competitor organizations might create a conflict of interest.

Explanation for Choice D:

Serving as consultants to suppliers might create a conflict of interest.