CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 1: How do auditors maintain objectivity with
respect to areas that they previously worked in?
Answer: Individuals who are assigned to or transferred to the IAA
should not audit areas where they worked until a reasonable
period of time has elapsed, usually at least one year. If an
individual is assigned to an engagement where he or she worked
in the past year, objectivity is presumed be impaired.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 2: How do internal auditors maintain individual
objectivity?
Answer: Individual objectivity means that internal auditors:
Must be impartial
Have an unbiased attitude
Avoid conflicts of interest

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 3: How does the CAE directly interact with the
Board?
Answer: The CAE directly interacts with the Board by:
Regularly attending and participating in board meetings that relate
the board’s oversight responsibilities for auditing, financial
reporting, organizational governance, and control
Meeting privately with the board, at least annually

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 4: How does the IIA define internal auditing?
Answer: The IIA defines internal auditing as "an independent,
objective assurance and consulting activity designed to add value
and improve an organization’s operations. It helps an organization
accomplish its objectives by bringing a systematic, disciplined
approach to evaluate and improve the effectiveness of risk
management, control and governance processes."

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 5: How often do external quality
assessments need to be performed?
Answer: External assessments must be conducted at least once
every five years by a qualified, independent reviewer or review
team from outside the organization. The chief audit executive must
discuss with the board:
The need for more frequent external assessments; and
The qualifications and independence of the external reviewer or
review team, including any potential conflict of interest.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 6: How often is a QAIP performed and who is it
reported to?
Answer: At least once a year the CAE should report to senior
management and the board the results of internal assessments on
the efforts and results of the QAIP.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 7: Under what circumstances may the CAE state
that the IAA conforms with the Standards?
Answer: The CAE may use this statement only if assessments
provide information that the IAA is in compliance. Providing
information about compliance requires an external assessment at
least once during a five-year period, along with periodic internal
assessments. Both of these assessments have to conclude that
the IAA conforms to the Definition of Internal Auditing, the Code of
Ethics, and the Standards. It is expected that, before any use of
the conformance statement, all instances of non-conformance will
have been rectified.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 8: What 5 main areas about the IAA should the
Charter include?
Answer: The scope of the services and work to be performed
The objectives of the internal audit activity
The authority that the internal audit activity has to access records,
personnel, and physical properties in the organization
The accountability of the internal audit activity
The responsibility of the internal audit activity

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 9: What are assurance services?
Answer: Assurance services involve the internal auditor’s
objective assessment of evidence to provide an independent
opinion or conclusions regarding a process, system, or other
subject matter.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 10: What are consulting services?
Answer: Consulting services are advisory in nature and are
generally performed at the specific request of an engagement
client.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 11: What are Practice Advisories?
Answer: Practice Advisories represent the best practices
endorsed by the IIA as a means of applying the Definition of
Internal Auditing, the Code of Ethics, and the Standards. They are
usually optional and do not represent all the considerations that
may be necessary when applying them. Rather, Practice
Advisories are the recommendations that should be addressed or
followed.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 12: What are quality circles?
Answer: A quality circle is a group of five to fifteen employees who
are intimately familiar with a specific operation and who are
brought together to improve quality and productivity. They achieve
this objective by studying the operation or problem and then
making specific recommendations. Depending on the operation,
they may also have the authority to implement recommendations.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 13: What are the components of the Attribute
Standards?
Answer: Purpose, Authority, and Responsibility (1000): The purpose,
authority, and responsibility of the internal audit activity (IAA) should be
formally defined in the internal audit charter, consistent with the
Standards, and approved by the board.
Independence and Objectivity (1100): The internal audit activity must be
independent and the internal auditors must be objective in performing
their work.
Proficiency and Due Professional Care (1200): Engagement must be
performed with proficiency and due professional care.
Quality Assurance and Improvement Program (1300): The CAE must
develop and maintain a quality assurance and improvement program that
covers all aspects of the internal audit activity and must also continuously
monitor its effectiveness. This program includes periodic internal and
external quality assessments and ongoing internal monitoring. Each part
of the program must be designed to help the internal auditing activity add
value and improve the organization’s operations. Furthermore, the
program must provide assurance that the internal audit activity conforms
to the Definition of Internal Auditing, the Standards, and the Code of
Ethics.
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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 14: What are the four principles in the Code of
Ethics?
Answer: Integrity
Objectivity
Confidentiality
Competency

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 15: What are the four purposes of the Standards?
Answer: Outline basic principles that represent the practice of
internal auditing.
Provide a framework for performing and promoting a broad range
of value-added internal audit activities.
Establish the basis for the evaluation of internal audit
performance.
Support improved organizational processes and operations.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 16: What are the two approaches for an external
quality assessment?
Answer: The first approach is to have a full external assessment
conducted by an external assessor or review team.

The second approach involves an independent assessor or

review team conducting an independent validation of the internal
self-assessment and the corresponding report that was completed
by the internal audit activity. Ideally, a full external review is
preferred, but there may be cases where this is simply not
practical.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 17: What do internal quality assessments include?
Answer: 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.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 18: What does a quality assurance and
improvement program include?
Answer: A quality assurance and improvement program (QAIP)
includes periodic internal and external quality
assessments and ongoing internal monitoring. Each part of the
program is designed to help the internal auditing activity add value,
improve the organization’s operations, and provide assurance that
the internal audit activity conforms with the Definition of Internal
Auditing and the Standards. Additionally, an evaluation of whether
or not internal auditors apply the Code of Ethics should also be
done.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 19: What does administrative reporting include?
Answer: Administrative Reporting is the reporting relationship
within the organization’s management structure that facilitates the
day-to-day operations of the IAA. Administrative reporting typically
includes:

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 20: What does continuing professional
development (CPE) include?
Answer: Maintaining proficiency through continuing education
Staying informed about improvements and current developments
in the internal audit standards, procedures, and techniques

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 21: What does functional reporting include?
Answer: Functional reporting is the ultimate source of
independence and authority for the IAA. The IIA recommends that
the CAE report functionally to the audit committee, board of
directors, or other appropriate governing authority.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 22: What does proficiency mean?
Answer: Proficiency means that individuals have the skills
necessary to perform their jobs. Regarding performance of
engagements, internal auditors need to be proficient in the
application of internal auditing standards, procedures, and
techniques.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 23: What is a conflict of interests?
Answer: A conflict of interest arises when an employee (such as
a senior manager, sales representative, and so forth) enters a
relationship that is not in the best interest of the company. This
involvement can impair an individual’s ability to perform his or her
duties and responsibilities objectively. A conflict of interest can
exist even if no unethical or improper act results. A conflict of
interest can give an appearance of impropriety that can undermine
confidence in the internal auditor.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 24: What is a disclosure of noncompliance?
Answer: A disclosure of noncompliance should be made to senior
management and the board when full compliance is not possible
due to the lack of skilled and qualified people (or for other reasons)
and the overall scope of the operation is impacted.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 25: What is a scope limitation?
Answer: A scope limitation is a restriction on the work that the
internal audit activity wants to perform that prevents it from
accomplishing its objectives and plans. A scope limitation might
restrict the IAA’s access to records, personnel, or properties
relevant to the performance of an engagement.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 26: What is due professional care?
Answer: Due professional care requires that internal auditors
apply the skill and care expected of a reasonably prudent and
competent internal auditor. This does not mean that the auditor
will never make a mistake and will always perform perfectly, but it
does mean that the auditor will do everything that could be
expected of a person in their position to achieve that goal.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 27: What is organizational independence?
Answer: Organizational independence means that the internal
audit function must not have any direct relationships with the
departments it will be auditing.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 28: What is the audit committee and what do they
do?
Answer: The audit committee is normally a subcommittee of the
board of directors. The audit committee receives reports and
communications from both the external auditors and internal
auditors, and it should promote their views to the board as a whole.
The Audit Committee usually oversees the work of the IAA and
manages the relationship with the external auditor.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 29: What is the definition of competency?
Answer: Internal auditors apply the knowledge, skills, and
experience needed in the performance of internal auditing
services.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 30: What is the definition of confidentiality?
Answer: Internal auditors respect the value and ownership of
information they receive and do not disclose information without
appropriate authority unless there is a legal or professional
obligation to do so.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 31: What is the definition of integrity?
Answer: The integrity of internal auditors establishes trust and
thus provides the basis for reliance on their judgment.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 32: What is the definition of objectivity?
Answer: Internal auditors exhibit the highest level of professional
objectivity in gathering, evaluating, and communicating
information about the activity or process being examined. Internal
auditors make a balanced assessment of all the relevant
circumstances and are not unduly influenced by their own interests
or by others in forming judgments.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 33: When can the IIA perform consulting services?
Answer: Consulting services can be engaged only if the nature of
the consulting services to be performed is specifically defined in
the internal audit charter.

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 34: Who are the parties involved in a consulting
engagement?
Answer: Consulting services generally involve two parties:
The internal auditor, or the person or group offering the advice
The engagement client, or the person or group seeking and
receiving the advice

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 35: Who are the parties involved in an assurance
engagement?
Answer: There are generally three parties involved in assurance
services:
The process owner, or the person or group directly involved with
the process, system, or other subject matter
The internal auditor, or the person or group making the
assessment
The user, or the person or group using the assessment

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 CIA Part 1: Internal Audit Basics

Section A: Mandatory Guidance -

Introduction
Study Note # 36: Who does the IAA report to?
Answer: The internal audit function must report to the board of
directors through the audit committee.

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