CIA Changed IIA-CIA-Part2 Questions

Introduction:

Corporate Social Responsibility (CSR) involves companies taking responsibility for their impact on society and the environment beyond statutory obligations.

Nature of CSR Reporting:

CSR reporting is generally voluntary, although some regions and industries may have mandatory requirements.

Options Analysis:

Option A: Many CSR areas may overlap with the audit universe or annual audit plan, but not all.

Option B: Investors may increasingly rely on CSR information, particularly in ESG (Environmental, Social, Governance) investing.

Option C: CSR reporting is largely voluntary, unlike financial or regulatory reporting which is often mandatory.

Option D: Operating management typically plays a significant role in CSR efforts and reporting.

Conclusion:

The correct statement regarding CSR is that it is largely voluntary, unlike many other areas of reporting responsibilities that impact stakeholders.

Internal Audit Standards and Practice Guides

When an internal auditor identifies a primary control failure due to a design weakness, the next step is to assess the risk and determine if there are any compensating controls that mitigate this risk. Compensating controls can help to reduce the overall risk to an acceptable level. Engaging with management to discuss the issue and determine the necessary corrective actions ensures that the control environment is adequately addressed. This approach aligns with the internal auditor's role in providing assurance and consulting services designed to add value and improve an organization's operations.

The IIA's International Standards for the Professional Practice of Internal Auditing, Standard 2120 - Risk Management.

When the internal audit activity lacks the expertise to perform an audit engagement in a specialized area like IT, the most appropriate action for the CAE is to outsource the engagement to a reputable IT audit consulting firm. This ensures that the audit is conducted by professionals with the necessary skills and experience, thereby maintaining the quality and reliability of the audit.

IIA References:

IIA Standard 1210: Proficiency requires that internal auditors possess the knowledge, skills, and other competencies needed to perform their responsibilities. When the internal audit activity does not have the required expertise for a specific engagement, the CAE must obtain competent advice and assistance, either by hiring external experts or outsourcing the work.

IIA Standard 2070: External Service Provider and Organizational Responsibility for Internal Auditing advises that when the internal audit activity uses external service providers, the CAE must ensure that the provider possesses the necessary skills and knowledge.

A reasonableness test involves comparing data against logical expectations or constraints to identify anomalies. In this case, the comparison of warehouse size to inventory levels represents a reasonableness test. Conducting a fraud investigation (Option B) would require stronger evidence of wrongdoing. Trend analysis (Option C) examines patterns over time, which is not the auditor’s approach here. Option D is irrelevant, as the auditor's actions do not impair objectivity.