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CIA Challenge Exam
IIA-CHAL-QISA
Qualified Info Systems Auditor CIA Challenge Exam Questions and Answers

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Questions # 41:

According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the Internal audit activity^

Options:

CAE reviews and approves the annual audit plan.

CAE meets privately with the CEO at least annually

CAE meets privately with the board at least annually.

CAE reports to the board regarding audit staff performance evaluation and compensation.

Answer

Explanation

According to IIA guidance, one of the best practices for enhancing the organizational independence of the internal audit activity is for the chief audit executive (CAE) to meet privately with the board at least annually. This practice reinforces the independence of the internal audit function by ensuring direct and unfiltered communication with the board.

Direct Communication: Private meetings with the board allow the CAE to discuss audit findings, concerns, and other important matters without management's influence, thereby preserving the objectivity and independence of the internal audit function.

Board Support: This direct line of communication helps to secure the board’s support for the internal audit activity, which is critical for its effective functioning.

Independence: Such meetings underscore the independence of the internal audit activity from management, reinforcing its role in providing unbiased assurance.

References:

"IIA Standards for the Professional Practice of Internal Auditing," which recommends private meetings between the CAE and the board to support independence .

Questions # 42:

Which of the following is the primary engagement responsibility of an entry-level internal auditor?

Options:

Leadership

Documentation.

Analysis.

Reporting

Answer

Explanation

Primary Responsibilities: For entry-level internal auditors, the primary responsibilities focus on learning and supporting tasks. Documentation is a key responsibility as it involves recording the findings and work performed during an audit engagement. This helps in building a foundation for understanding audit processes and methodologies.

[: IIA's Global Internal Audit Competency Framework emphasizes documentation as a core skill for entry-level auditors., Other Responsibilities:, Leadership: Typically a responsibility for more experienced auditors., Analysis and Reporting: While entry-level auditors may assist with analysis and reporting, these tasks are generally more advanced and require a deeper understanding of audit processes., , ]

Questions # 43:

When using cost-volume-profit analysis, which of the following will increase operating income once the break-even point has been reached?

Options:

Fixed costs per unit for each additional unit sold.

Variable costs per unit for each additional unit sold.

Contribution margin per unit for each additional unit sold.

Gross margin per unit for each additional unit sold

Answer

Explanation

Contribution Margin: Contribution margin is the amount by which the sales price of a product exceeds its variable costs. After reaching the break-even point, each additional unit sold contributes directly to operating income.

[: Cost-volume-profit (CVP) analysis, which highlights the role of contribution margin in determining profitability., Operating Income: At the break-even point, fixed costs are covered, so additional units sold increase operating income by the contribution margin per unit., Fixed Costs: Fixed costs per unit (option A) do not change with additional units sold., Variable Costs: Variable costs per unit (option B) remain constant and are deducted from sales price to calculate contribution margin., Gross Margin: Gross margin per unit (option D) includes fixed costs and is less directly relevant than the contribution margin., , ]

Questions # 44:

Which of the following statements is true regarding the reporting of tangible and intangible assets?

Options:

For plant assets, cost includes the purchase price and the cost of design and construction

For intangible assets, cost includes the purchase price and development costs.

Due to their indefinite nature, intangible assets are not subject to amortization.

The organization must expense any cost incurred in developing a plant asset

Answer

Explanation

Plant Assets Cost: For plant assets, which are tangible fixed assets such as buildings and machinery, the cost includes all expenditures necessary to acquire the asset and prepare it for its intended use. This includes the purchase price and additional costs such as design and construction.

[: This aligns with standard accounting practices where costs related to bringing an asset to its operational state are capitalized as part of the asset's cost., Intangible Assets Cost: The cost of intangible assets, such as patents and trademarks, typically includes the purchase price and development costs. However, option B refers to this, but the correct focus for plant assets is emphasized in option A., Amortization of Intangible Assets: Intangible assets with finite useful lives are subject to amortization, contradicting option C. Those with indefinite lives are not amortized but tested annually for impairment., Expense of Developing Plant Assets: Development costs for plant assets are capitalized, not expensed immediately, making option D incorrect., , ]

Questions # 45:

Which of the following statements is true regarding partnership liquidation?

Options:

Operations can continue after the liquidation, if all partners agree.

Partnership liquidation ends both the legal and economic life of an entity

Partnership liquidation occurs when there is capital deficiency.

When a partnership Is liquidated, each partner pays creditors from cash received

Answer

Explanation

Partnership liquidation refers to the process of dissolving a partnership, where all assets are sold, liabilities are paid off, and any remaining assets are distributed among the partners. This process marks the end of the partnership's legal existence and its economic activities.

Legal and Economic Termination: Upon liquidation, the partnership ceases to exist legally and economically. This means that it can no longer operate or enter into new business transactions.

Asset Distribution: The liquidation process ensures that all assets are sold, and the proceeds are used to pay off any outstanding debts. Any remaining funds are distributed to the partners according to the partnership agreement.

Capital Deficiency: While capital deficiency might prompt liquidation, it is not a defining characteristic of the process.

Creditors Payment: Creditors are paid from the partnership's assets, not directly by the partners unless agreed otherwise or if the assets are insufficient to cover the liabilities.

References:

"Fundamentals of Partnership Accounting," which details the steps and consequences of partnership liquidation.

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