IIA-CHAL-QISA Free Exam Study Guide! (Updated 177 Questions) [Q46-Q67]

Published date October 4, 2026

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IIA-CHAL-QISA Free Exam Study Guide! (Updated 177 Questions)

IIA-CHAL-QISA Dumps for CIA Challenge Exam Certified Exam Questions and Answer

IIA IIA-CHAL-QISA Exam Syllabus Topics:

Topic	Details
Topic 1	Essentials of Internal Auditing: This domain has topics such as foundations of internal auditing, independence aconcept of governance and CSR.nd objectivity, Proficiency and Due Professional Care, QA, and Managing Risks. The domain covers describing the
Topic 2	Business Knowledge for Internal Auditing: This domain covers the vital planning phases and efforts and common performance measures. It also includes ways for management to effectively lead and counsel people to increase their commitment. Also, the domain covers financial accounting and managerial accounting fundamentals and the treatment of various costs.
Topic 3	Practice of Internal Auditing: This domain covers strategies and policies related to planning, organizing, controlling of internal audit processes, and understanding administrative activities such as resourcing, recruiting, and staffing. Moreover, this domain covers goals of engagement and assessment criteria in addition to planning the engagement to ensure the identification of key risks and controls.

Q46. Which of the following is most likely the subject of a periodic report from the chief audit executive to the board?

A complete, accurate, and comprehensive account of engagement observations and recommendations.

Oversight of the coordination between the internal audit activity and independent outside auditors

The internal audit activity’s purpose, authority, responsibility, and performance relative to plan.

Management’s assertions regarding the system of internal controls.

Introduction:
The chief audit executive (CAE) has a crucial role in reporting to the board on various aspects of the internal audit activity (IAA).
Importance of Reporting:
Periodic reports from the CAE to the board are essential for ensuring transparency and providing oversight on the IAA’s performance and alignment with organizational objectives.

Q47. Which of the following statements is true regarding the reporting of tangible and intangible assets?

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

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.

Q48. Which of the following methods is most closely associated to year over year trends?

Horizontal analysts

Vertical analysis.

Common-size analysis.

Ratio analysis.

Introduction:
Horizontal analysis involves comparing financial data across multiple periods to identify trends and patterns over time.
Year-over-Year Trends:
This method helps in understanding changes in financial performance and position year-over- year.

Q49. Who is responsible for ensuring internal auditors continuing professional development*

Individual internal auditors

Chief audit executive.

The board

Engagement supervisors

Introduction:
Continuing Professional Development (CPD) is essential for internal auditors to maintain and enhance their skills and knowledge.
Responsibility for CPD:
While the organization and CAE provide support and resources, the primary responsibility for ensuring CPD rests with the individual internal auditors.

Q50. Which of the following statements best demonstrates application of due professional care during an assurance engagement?

The engagement detected irregularities and noncompliance instances.

The engagement supervisor had no significant comments in the supervisory review.

The audit procedures were systematically planned: executed, and documented.

The engagement objectives were designed to assist the engagement client

Introduction:
Due professional care requires auditors to plan, execute, and document their work meticulously, ensuring that their findings and conclusions are based on a thorough and objective assessment.
Application of Due Professional Care:
It involves following a structured approach to audit engagements to ensure that all necessary steps are taken to gather sufficient and appropriate evidence.

Q51. A bank uses customer departmentalization to categorize its departments. Which of the following groups best exemplifies this method of categorization?

Community, institutional, and agricultural banking

Mortgages, credit cards, and savings.

South, southwest and east.

Teller, manager, and IT specialist

Customer Departmentalization: This method categorizes departments based on the type of customers they serve. It aligns services and strategies with the specific needs and characteristics of different customer groups.
Examples of Customer Departmentalization:
* Community Banking: Focuses on services tailored for local communities, often involving personal banking services.
* Institutional Banking: Caters to large organizations, offering specialized financial products and services.
* Agricultural Banking: Provides financial services to farmers and agricultural businesses, addressing their unique needs.
Comparison with Other Options:
* Product Departmentalization: Option B categorizes by products offered, such as mortgages and credit cards.
* Geographical Departmentalization: Option C categorizes by regions, such as south and southwest.
* Functional Departmentalization: Option D categorizes by job functions, such as teller and manager.
References:
* Customer departmentalization is exemplified by categorizing banking services into community, institutional, and agricultural sectors, focusing on the distinct needs of different customer groups.

Q52. Which of the following is the next step in understanding a business process once an internal auditor has identified the process?

Determine process outputs

Determine process inputs.

Determine process activities.

Determine process goals

Once an internal auditor has identified a business process, the next step is to understand the specific activities involved in that process. This includes mapping out each step or action taken within the process to gain a detailed understanding of how it operates. Identifying process activities helps in evaluating the efficiency, effectiveness, and potential risks associated with the process

Q53. Which of the following internal audit activity staffing models has the disadvantage that auditors are always new and in training?

Career model

Center of competence model.

Rotational model.

Hybrid model

Q54. An auditor finds no evidence supporting management’s assertion that a key control operates daily.
The auditor should:

Accept management’s explanation.

Conclude the control is operating effectively.

Consider the control ineffective until evidence is obtained.

Remove the control from the audit scope.

Audit conclusions must be supported by sufficient and appropriate evidence. Unsupported assertions are not evidence.

Q55. According to the IIA Code of Ethics, which of the following is required with regard to communicating results?

The internal auditor should present material information to appropriate personnel within the organization without revealing confidential matters that could be detrimental to the organization

The internal auditor should disclose all material information obtained by the date of the final engagement communication.

The internal auditor should obtain all material information within the established time and budget parameters.

The internal auditor should reveal material facts that could potentially distort the reporting of activities under review

The IIA Code of Ethics sets forth principles and expectations for ethical behavior in internal auditing, particularly regarding the communication of results.
Integrity and Transparency: According to the IIA Code of Ethics, internal auditors are expected to exhibit integrity and transparency in their reporting, ensuring that material facts are disclosed accurately to avoid misrepresentation.
Reference: IIA Code of Ethics, Principle 4 Integrity, which emphasizes the need for internal auditors to disclose all material facts known to them that, if not disclosed, could distort the reporting of activities under review.
Revealing Material Facts: The principle of integrity mandates that internal auditors must reveal material facts necessary to avoid any misrepresentation of the activities being reviewed. This ensures that stakeholders receive a truthful and complete picture of the audit findings.
Practical Example: If an auditor discovers significant control weaknesses that could impact financial reporting, these must be disclosed in the audit report to provide a true representation of the entity’s control environment.
Confidentiality and Appropriateness: While confidentiality is important, it does not supersede the need to report material facts that are essential for accurate reporting. Confidential matters that are not material or do not distort the reporting can be withheld to protect sensitive information.

Q56. According to IIA guidance, which of the following best describes the purpose of a planning memorandum for an audit engagement?

It documents the audit steps and procedures to be performed.

it documents preliminary information useful to the audit team.

It documents events that could hinder the achievement of process objectives.

It documents existing measures that manage risks in the area under review

The planning memorandum serves as a comprehensive blueprint for an audit engagement, outlining the specific steps, procedures, and strategies that will be employed to carry out the audit. According to IIA guidance, the purpose of this document is to ensure that the audit team is well-prepared and that the audit process is systematic and thorough.
Documentation of Audit Steps and Procedures: The primary purpose of a planning memorandum is to detail the steps and procedures that the audit team will follow. This ensures consistency and clarity throughout the audit process and provides a clear framework for team members to follow.
Preparation and Coordination: It serves as a preparatory document that helps in coordinating the activities of the audit team, ensuring that everyone is aware of their roles and responsibilities.
Practical Example: If an audit is being conducted on the financial reporting processes, the planning memorandum would include specific procedures for testing internal controls over financial reporting, timelines for each phase of the audit, and responsibilities assigned to each team member.
Risk Management: While it includes information on preliminary risks, its main focus is on documenting the audit steps rather than managing risks or existing measures, which would be covered in other documents or sections of the audit plan.

Q57. Which requirement should the chief audit executive consider when communicating results of the quality assurance and improvement program to the board of a large organization?

The internal assessment results should be discussed once every five years

The rating conclusions and the impact from results of the external assessment should be explained

The results of the external assessment should be discussed every seven years.

The qualifications and independence of the internal assessment team should be discussed

When communicating the results of the quality assurance and improvement program (QAIP) to the board of a large organization, the chief audit executive (CAE) should explain the rating conclusions and the impact of the results from the external assessment. This ensures transparency and helps the board understand the effectiveness and areas for improvement in the internal audit function.
* Rating Conclusions: These provide a summary of the overall quality and performance of the internal audit function.
* Impact Explanation: Discussing the impact helps the board understand how the results affect the internal audit’s ability to fulfill its responsibilities and improve its processes.
* Transparency: Clear communication of these aspects helps build trust and provides a basis for informed decision-making by the board.
References:
* “Internal Audit Quality Assurance and Improvement Program,” which emphasizes the importance of explaining rating conclusions and impacts to the board .

Q58. Applying ISO 31000; which of the following is part of the external context for risk management?

Risk treatment method based on risk evaluation.

Organizational culture, objectives, and processes.

The regulatory and competitive environment.

The method of determining the risk level

ISO 31000 Context: ISO 31000 provides guidelines on risk management, emphasizing the importance of understanding the external context.
External Context: This includes external factors such as regulatory and competitive environments that can impact the organization’s risk profile.
Regulatory Environment: Understanding regulations helps the organization ensure compliance and avoid legal risks.
Competitive Environment: Analyzing the competitive environment allows the organization to anticipate market changes and manage competitive risks.

Q59. Which of the following internal audit activity staffing models has the disadvantage that auditors arealways new and in training?

Career model

Center of competence model.

Rotational model.

Hybrid model

Understanding Staffing Models: Internal audit activity staffing models vary in structure and approach, each with its advantages and disadvantages. The rotational model involves assigning employees from various departments to the internal audit activity for a fixed period before they rotate back to their original or new roles within the organization.
Rotational Model Disadvantages:
* Continuous Training: A key disadvantage of the rotational model is that auditors are often new and in training. This model means that there is a constant influx of new staff who may lack extensive audit experience, requiring continuous training and development efforts.
* Consistency and Expertise: This can impact the consistency and depth of audit expertise within the
* internal audit activity, as the auditors are frequently changing.
Comparison with Other Models:
* Career Model: Auditors build long-term careers within the internal audit activity, leading to high levels of expertise and consistency.
* Center of Competence Model: This model involves a centralized team of audit professionals who provide specialized audit services across the organization, ensuring high levels of competence.
* Hybrid Model: Combines elements of multiple models to balance the benefits and mitigate the drawbacks of each approach.
References:
* The rotational model’s major drawback of auditors always being new and in training highlights the challenges in maintaining a stable and highly skilled audit team. Continuous training efforts are required to ensure the effectiveness of this staffing model.

Q60. Which of the following statements best describes the difference between risk appetite and risk tolerance?

Risk appetite applies to specific objectives, while risk tolerance refers to an organization’s general attitude toward risk.

Risk appetite refers to the degree of risk acceptance for a particular objective, while risk tolerance is one approach to risk management

Risk appetite refers to an organization’s general level of acceptance, while risk tolerance is a more specific and subordinate concept

There is no significant difference between the two terms

Definition of Risk Appetite: Risk appetite is the amount and type of risk an organization is willing to pursue or retain to achieve its objectives. It reflects the organization’s overall approach to risk- taking and is typically articulated at the highest level of the organization.
Definition of Risk Tolerance: Risk tolerance refers to the acceptable variation relative to the achievement of specific objectives. It is more granular and specific than risk appetite, detailing the levels of risk that are acceptable within the parameters set by the organization’s risk appetite.

Q61. Which of the following statements is most accurate with respect to the required elements of the quality assurance and improvement program?

Internal assessments provide sufficient objectivity to provide evidence to the board that the internal audit activity understands the organization’s control processes.

Quality assessments focus on the internal audit activity’s structure, relationships with stakeholders, compliance with the Standards, and internal audit staff proficiency.

in order to comply with the Standards, the internal audit activity must obtain an objective assessment of its processes and function at least once a year

Internal auditors completing internal assessments must demonstrate certification to perform quality assessments

Understanding Quality Assessments: Quality assessments in internal audit activities are designed to evaluate various aspects such as the structure of the internal audit activity, relationships with stakeholders, compliance with the IIA Standards, and the proficiency of internal audit staff.
Internal Assessments: These include ongoing monitoring of the performance of the internal audit activity and periodic self-assessments or assessments by other persons within the organization with sufficient knowledge of internal audit practices.
External Assessments: External assessments should be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organization to ensure objectivity and comprehensiveness.
Focus Areas: Quality assessments should focus on compliance with the IIA Standards, the effectiveness of the internal audit activity’s structure, the quality of relationships with stakeholders, and the proficiency and continuous professional development of internal audit staff.
Continuous Improvement: The quality assurance and improvement program (QAIP) should be designed to enable the internal audit activity to add value and improve an organization’s operations. It helps ensure that the internal audit activity is in compliance with the IIA Standards and Code of Ethics and continuously improves.

Q62. According to IIA guidance, which of the following statements about analytical procedures is true?

Analytical procedures compare information against expectations

Analytical procedures begin after the engagements planning phase.

Analytical procedures provide internal auditors with explainable results.

Analytical procedures are computer-assisted audit techniques

Analytical Procedures: These procedures involve evaluating financial information by studying plausible relationships among both financial and non-financial data. They help auditors form expectations about account balances or other financial data and then compare actual results to these expectations.
* Purpose: To identify any unusual or unexpected results that might indicate potential misstatements.
IIA Guidance on Analytical Procedures:
* Comparison Against Expectations: This is the core aspect of analytical procedures. Auditors develop expectations based on their knowledge of the business, industry trends, historical data, and other relevant factors.
* Engagement Phases: Analytical procedures can be applied in various phases of an audit, not just after the planning phase.
Other Statements:
* Begin After Planning: Analytical procedures are often used during planning to understand the business and during substantive testing and review phases.
* Explainable Results: While they can provide insights, the primary purpose is not just to explain results but to identify discrepancies.
* Computer-Assisted Techniques: Analytical procedures can be performed manually or with the help of software, but they are not solely defined as computer-assisted techniques.

Q63. A rapidly expanding retail organization continues to be tightly controlled by its original small management team. Which of the following is a potential risk in this vertically centralized organization?

Lack of coordination among different business units

Operational decisions are inconsistent with organizational goals.

Suboptimal decision-making.

Duplication of business activities.

Introduction:
In a vertically centralized organization, decision-making is concentrated among a small management team, potentially leading to various risks.

Q64. Which of the following is the most appropriate way to ensure that a newly formed internal audit activity remains free from undue influence by management?

Appoint the chief audit executive as a member of the board.

Adopt written policies and procedures for the internal audit activity, approved by the board.

Ensure the chief audit executive reports administratively to the audit committee.

Establish the internal audit activity’s position within the organization in an audit charter

The internal audit charter is a formal document that defines the internal audit activity’s purpose, authority, and responsibility.
Establishing the internal audit activity’s position within the organization in an audit charter ensures independence and objectivity by clearly stating the internal audit’s role and its reporting lines. The charter should be approved by the board and senior management to reinforce its authority and protect the internal audit activity from undue influence by management

Q65. According to IIA guidance, which of the following most appropriately justifies the CEO’s decision that the internal audit activity shall be responsible for risk management and Investigation at multinational organization?

The recommendation of the parent office external auditors.

The provisions of the internal audit charter.

The authority of the CEO.

The level of proficiency of the chief audit executive

Role of Internal Audit Charter: The internal audit charter is a formal document that defines the purpose, authority, and responsibility of the internal audit activity. It establishes the internal audit activity’s position within the organization, including the nature of the chief audit executive’s functional reporting relationship with the board.
CEO’s Decision Justification: According to IIA guidance, the internal audit activity can take on responsibilities related to risk management and investigation if it is defined within the internal audit charter. The charter must outline the scope of the internal audit activity, which can include risk management functions if approved by the board and senior management.
Authority and Proficiency: While the CEO has the authority to assign responsibilities, the decision must align with the provisions of the internal audit charter. The level of proficiency of the CAE and the recommendation of external auditors can support the decision but are not primary justifications.

Q66. Which of the following best describes why an internal audit activity would consider sending written preliminary observations to the audit client?

Written observations allow for more interpretation.

Written observations help the internal auditors express the significance.

Written and verbal observations are equally effective.

Written observations limit premature agreement

Audit workpapers are essential documents that provide evidence of the audit work performed and the conclusions reached.

Q67. Which of the following best describes the risk contained in an initial public offering for a new stock?

Residual risk.

Net risk.

Inherent risk.

Underlying risk

Introduction:
Inherent risk refers to the susceptibility of an assertion to a material misstatement, assuming no related controls.
IPO Risks:
Initial Public Offerings (IPOs) inherently carry a high level of risk due to the uncertainty and complexity involved in the process, the lack of historical data, and market volatility.

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IIA-CHAL-QISA Free Exam Study Guide! (Updated 177 Questions) [Q46-Q67]

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