CIA P2 Part 2 · Internal Audit Engagement: mock exams and practice questions

Sample question 1 · Engagement Planning

Internal audit at Halvorsen Logistics is planning an assurance engagement over fleet maintenance. The auditors have read the maintenance policy but have not yet assessed risks. Which planning step is the most appropriate next action to understand how the process is intended to operate?

1. A Select a statistical sample of 60 work orders and test each one for supervisory approval before identifying risks.
2. B Walk one work order from request to closure with the maintenance supervisor and compare it with the policy.
3. C Send a control self-assessment survey to all mechanics and use their answers to conclude on control effectiveness.
4. D Compare total maintenance cost with an industry average and report any variance to management as a finding.

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Answer: B. During planning, internal auditors must develop an understanding of the activity under review (Global Internal Audit Standards, Standard 13.2). A walkthrough of one transaction, set against the documented procedures, shows how the process is meant to work and where the key risks and controls sit. Testing samples, drawing conclusions from surveys and reporting findings all come later, once the work program has been built on that understanding.

Sample question 2 · Information Gathering, Analysis and Evaluation

During a review of purchasing at Harlow Medical Supplies, the procurement manager explains in an interview that every supplier invoice is matched to an approved purchase order and a goods received note before payment. What should the internal auditor do next to obtain more reliable evidence that the process operates as described?

1. A Perform a walkthrough of actual invoices through the process, inspecting the matched documents at each step
2. B Ask the procurement manager to sign a written statement confirming that the description given in the interview is accurate
3. C Interview a second member of the procurement team and accept the description if both accounts agree
4. D Accept the description because the manager is the person accountable for the process and knows it best

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Answer: A. Inquiry (interviews) is a useful starting point but is the least persuasive form of evidence on its own. A walkthrough traces real transactions from start to finish, letting the auditor inspect the purchase order, goods received note and invoice and see the matching step performed. This corroborates the manager's description with documentary and observational evidence and confirms the auditor's understanding of the process and its controls.

Sample question 3 · Engagement Supervision and Communication

The chief audit executive of Hollin Bank is staffing two engagements: a routine branch cash audit led by a senior auditor with eight years' experience, and a first-time review of derivative valuation models performed by two newly hired staff. How should supervision differ between the engagements?

1. A Both engagements need the same level of supervision so that internal audit methodology is applied consistently
2. B The branch cash audit needs more supervision because cash is more susceptible to theft
3. C Neither engagement needs supervision if the workpapers are reviewed after the final report is issued
4. D The derivative review needs closer supervision, given the staff's inexperience and the subject's complexity

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Answer: D. Supervision runs from planning to the final communication and includes guiding staff, monitoring progress and reviewing workpapers. The extent of supervision required depends on the proficiency and experience of the internal auditors and the complexity of the engagement. A complex, first-time area staffed by new auditors calls for closer direction, more frequent check-ins and more detailed review than a routine engagement led by an experienced senior.