IIA-CHAL-QISA Exam Dumps - IIA CIA Challenge Exam Questions and Answers

Introduction:

When a compensating control is not considered, it can affect various aspects of the audit findings and conclusions.

Impact on Workpapers:

Effect of the Control Weakness: The impact of the control weakness needs to be reassessed considering the compensating control.

Conclusion on the Control Weakness: The overall conclusion about the severity of the control weakness may change.

Recommendation for the Control Weakness: Recommendations may need to be adjusted based on the new assessment.

Options Analysis:

Option A: Includes the effect, cause, and conclusion, but the cause might not change if it remains relevant regardless of compensating controls.

Option B: Includes the effect, cause, and recommendation, but the cause might not change.

Option C: The effect, conclusion, and recommendation would likely need adjustments.

Option D: Includes cause, conclusion, and recommendation, but the cause might remain unchanged.

Conclusion:

The sections of the workpapers that most likely require changes are the effect of the control weakness, the conclusion on the control weakness, and the recommendation for the control weakness.

Inventory Valuation Principles: Inventory valuation must accurately reflect the ownership of goods. The accounting treatment of inventory in transit depends on the shipping terms, specifically whether it is FOB (Free on Board) shipping point or FOB destination.

FOB Shipping Point:

Ownership Transfer: When goods are shipped FOB shipping point, ownership transfers to the buyer as soon as the goods leave the seller's premises.

Impact on Inventory Valuation: If goods shipped FOB shipping point are in transit at the end of the reporting period, they should be included in the buyer's inventory, not the seller's.

FOB Destination:

Ownership Transfer: When goods are shipped FOB destination, ownership transfers to the buyer only when the goods arrive at the buyer's premises.

Impact on Inventory Valuation: Goods in transit under FOB destination terms should remain in the seller's inventory until they reach the buyer.

Consignment:

Goods Received on Consignment: Goods held on consignment should not be included in the inventory of the consignee (the holder) but remain in the inventory of the consignor (the owner).

Goods Sent on Consignment: Goods sent out on consignment should still be included in the inventory of the consignor until they are sold by the consignee.

Correct and Incorrect Valuations:

Incorrect Valuation (Option C): Including goods in transit shipped FOB shipping point in the seller's inventory would be incorrect, as ownership has transferred to the buyer.

Correct Valuation (Option D): Including goods sent on consignment in the consignor's inventory is correct because ownership has not transferred.

References:

Correct inventory valuation practices ensure that goods in transit are properly accounted for based on the shipping terms, thus providing an accurate financial picture of inventory​​​​.

Due professional care is a critical concept in internal auditing, ensuring that auditors conduct their work with the necessary diligence and competence.

Definition and Standards:According to the IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 1220 – Due Professional Care, internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor.

Introduction:

Engaging an external fraud specialist brings several advantages to an investigation, particularly in preserving the integrity of evidence.

Advantages of External Fraud Specialists:

External specialists bring expertise, objectivity, and resources that may not be available internally.

Options Analysis:

Option A: Access to employees is not necessarily increased with external specialists.

Option B: External fraud specialists have the skills and protocols to preserve evidence and maintain the chain of command, ensuring legal and procedural compliance.

Option C: Scrutinizing business processes is part of their role, but the primary advantage lies in evidence preservation.

Option D: Access to software and proprietary data is not the primary advantage; internal controls can provide this access as needed.

Conclusion:

The main advantage of utilizing an external fraud specialist is their increased ability to preserve evidence and maintain the chain of command, which is critical in legal and compliance contexts.