Domain 3 – Proficiency and Due Professional Care

Question 1
The relationship between proficiency and competency is:
a) Direct.
b) Indirect.
c) Not tested.
d) Not
observed.
Proficiency is defined as the ability to apply knowledge to situations likely to be
faced and to deal with them without extensive recourse to technical research and
assistance. There is a built-in and direct relationship between a person's proficiency
and competency. One needs to be fully proficient first to become a fully competent
person.

Question 2
A person's competency can be derived from which of the following?
a) Informal knowledge
and skills
b) More theory and less
practice
c) Education and
experience
d) Less theory and more
practice

. Competency of a person is derived from a combination of that person's education and

experience.

Question 3
Regarding competency levels, staff auditors belong to which of the following levels?
a) Entry level
b) Journeyman
level
c) Functional
level
d) Expert level
In the audit management hierarchy, staff auditors are at a low competency level, in
their first jobs or in new jobs with little or no work experience.
Question 4
Regarding competency levels, audit consultants belong to which of the following
levels?
a) Entry level
b) Journeyman
level
c) Functional
level
d) Expert level
Audit consultants are at a very high competency level and are supposed to be subject
matter experts.

Question 5
Regarding competency levels, audit supervisors belong to which of the following
levels?
a) Entry level
b) Journeyman
level
c) Functional
level
d) Expert level

Audit supervisors are knowledgeable in audit function and other business functions
such as operations, marketing, and finance.

Question 6
Regarding competency levels, senior auditors belong to which of the following levels?
a) Entry level
b) Journeyman
level
c) Functional
level
d) Expert level
Senior auditors have more work experience than the staff auditors and are at a medium
competency level, which is the Journeyman level.

Question 7
Due professional care for internal auditors is derived from which of the following?
a) Internal audit manual
b) Internal auditor education
c) Internal auditor experience
d) Internal auditor professional
certification

Due professional care refers to understanding the systematic and disciplined approach
to internal auditing, which is derived from an internal audit's policies and procedures
manual (i.e., audit manual).

Question 8
Internal audit management should annually perform which of the following?
a) Education gap
assessment
b) Competency gap
assessment
c) Talent gap assessment
d) Skill gap assessment

Core competencies are defined as the unique and collective capabilities (training and
know-how) and specific competencies (skills, experience, and education) that a
company has and its competitors do not have. Therefore, the internal audit
management should perform the competency gap assessment every year.

Question 9
Auditors’ professional judgment does not mean:
a) Eliminating all possible
limitations.
b) Identifying all possible
limitations.
c) Mitigating all possible
 limitations.
d) Assessing all possible
limitations.

. Professional judgment does not mean eliminating all possible limitations or

weaknesses associated with a specific audit engagement but rather identifying,
assessing, mitigating, and concluding on them.

Question 10
Due professional care for internal auditors does not mean:
a) Developing a systematic approach to
audits.
b) Attending audit-related professional
seminars.
c) Adhering to a disciplined approach to
audits.
d) Developing a structured approach to
audits.
. Attending audit-related professional seminars provides proficiency. It does not
improve due professional care.

Question 11
Due professional care is not exercised:
a) When the internal audit work is planned.
b) When the internal audit work is supervised.
c) When the internal audit reports are objective and clear.
d) When internal auditors fail to follow-up on repeated audit
findings.
. Due professional care is not exercised at all when internal auditors fail to follow up
on repeated audit findings.

Question 12
Professional judgment for internal auditors includes which of the following?
a) Professional skills and professional
work
b) Strong evidence and documented
 procedures
c) Reasonable care and professional
skepticism
d) Sufficient evidence and appropriate
evidence

Professional judgment includes exercising reasonable care and showing professional

skepticism.

Question 13
Regarding professional judgment, internal auditors cannot attain:
a) Absolute
assurance.
b) Reasonable
assurance.
c) Possible
assurance.
d) Expected
assurance.

. Auditors must use professional judgment in planning and conducting the audit
engagement and in reporting the audit results. In doing so, auditors cannot provide
absolute assurance because so many things could go wrong.

Question 14
Which of the following is the highest-ranked skill required at all levels of internal
auditors?
a) Assertion skills
b) Career skills
c) Persuasion skills
d) Communication
skills

. Communication, whether it is written or oral, is ranked as the number 1 requirement

at all levels of internal auditors.
Question 15
Which of the following can help clear up major sources of conflict between internal
auditors and their audit clients?
a) Assertion skills and listening skills
b) Leadership skills and managing skills
c) Problem-solving skills and decision-
making skills
d) Social skills and teamwork skills

. Both assertion skills and listening skills help to clear up two major sources of
conflict: errors and lack of information.

Question 16
Audit teams need more of which of the following?
a) Collaboration
skills
b) Communication
skills
c) Critical thinking
skills
d) Creativity skills
. Audit teams and other types of teams need more collaboration skills because they
work in cooperation and coordination with each team member. In collaboration, face-
to-face interaction is better than person-to-machine interaction.

Question 17
Internal auditors ranging from staff auditor to audit director need most of which of the
following skills?
a) Technical skills
b) Business
acumen skills
c) Social skills
d) Motivation
skills
. People who have business acumen skills possess knowledge of core business
functions, such as operations, marketing, and finance (functional skills); are
committed to the company's mission and vision; and are able to develop a grand
strategy for the entire business and sub strategies for each business line; and more.
Since internal auditors audit business functions and operations, they need more
business acumen skills.

Question 18
Internal auditors are often called on either to perform or to assist the external auditor
in performing a due diligence review. A due diligence review is:
a) A review of interim financial statements as directed by an
underwriting firm.
b) An operational audit of a division of a company to determine if
divisional management is complying with laws and regulations.
c) A review of operations as requested by the audit committee to
determine whether the operations comply with audit committee and
organizational policies.
d) A review of financial statements and related disclosures in
conjunction with a potential acquisition.

. This is a broad definition of due diligence reviews per IIA Standard 1210 –
Proficiency.

Question 19
According to the IIA Standards, the staff of a newly developed internal auditing
department should include:
a) Members with bachelor's degrees in accounting and related fields.
b) Members possessing appropriate professional designations.
c) Members proficient in applying internal auditing standards,
procedures, and techniques.
d) Members with prior internal audit experience.
based on IIA Standard 1210 – Proficiency.

Question 20
The chief audit executive is concerned that a recently disclosed fraud was not
uncovered during the last audit of cash operations. A review of the working papers
indicated that the fraudulent transaction was not included in a properly designed
statistical sample of transactions tested. Which of the following applies to this
situation?
 a) Because cash operation is a high-risk area, 100% testing of
transactions should have been performed.
b) The internal auditor acted with due professional care since an
appropriate statistical sample of material transactions was tested.
c) Fraud should not have gone undetected in a recently audited area.
d) Extraordinary care is necessary in the performance of a cash
operations audit, and the auditor should be held responsible for the
oversight.
. based on IIA Standard 1220 – Due Professional Care and IIA Standard 2320 –
Analysis and Evaluation, which state that the possibility of material irregularities or
noncompliance should be considered whenever the internal auditor undertakes an
internal auditing assignment.

Question 21
In the course of their work, internal auditors must be alert for fraud and other forms of
white-collar crime. The important characteristic that distinguishes fraud from other
varieties of white-collar crime is that:
a) Fraud encompasses an array of irregularities and illegal acts that
involve intentional deception.
b) Unlike other white-collar crimes, fraud is always perpetrated against
an outside party.
c) White-collar crime is usually perpetrated for the benefit of an
organization, whereas fraud benefits an individual.
d) White-collar crime is usually perpetrated by outsiders to the detriment
of an organization, whereas fraud is perpetrated by insiders to benefit
the organization.
based on IIA Standard 1220 – Due Professional Care.

Question 22
According to the IIA Standards, an internal auditor should possess proficiency in:
a) Management principles.
b) The fundamentals of such subjects as accounting, economics, and
finance.
c) Computerized information systems.
d) Applying internal auditing standards, procedures, and techniques.
. IIA Standard 1210 – Proficiency specifies, in the area of applying internal auditing
standards, procedures, and techniques that an internal auditor should possess, the
ability to "apply knowledge to situations likely to be encountered and to deal with
them without extensive recourse to technical research and assistance.”

Question 23
The IIA Standards require an internal auditor to exercise due professional care in
performing internal audits. This includes:
a) Establishing direct communication between the director of internal
auditing and the board of directors.
b) Evaluating established operating standards and determining whether
those standards are acceptable and are being met.
c) Accumulating sufficient evidence so that the auditor can give
absolute assurance that irregularities do not exist.
d) Establishing suitable criteria of education and experience for filling
internal audit positions.
. Standards include within the definition of due professional care the evaluation of
operating standards for acceptability and determining whether they are being met (IIA
Standard 1220 – Due Professional Care).

Question 24
According to the IIA Standards, internal auditors should possess the knowledge,
skills, and disciplines essential to the performance of internal auditing. This means
that all internal auditors should be proficient in applying:
a) Internal auditing
standards.
b) Quantitative methods.
c) Management
principles.
d) Structured systems
analysis.
. Auditors should have a proficiency in applying internal auditing standards
(IIA Standard 1210 – Proficiency).

Question 25
Which of the following differs between assurance services and consulting services
when exercising due professional care?
a) Costs and
benefits.
 b) Complexity of
work.
c) Extent of
work.
d) Materiality.
. Materiality is considered in assurance services and procedures but is not relevant to
consulting services (IIA Standard 1220 – Due Professional Care). The other three
choices are the same in assurance services and consulting services.

Question 26
An auditor finds a situation where there is some suspicion, but no evidence, of
potential misstatement. The Due Professional Care Standard of would be violated if
the auditor:
a) Identified potential ways in which an error could occur and ranked
the items for audit investigation.
b) Informed the audit manager of the suspicions and asked for advice on
how to proceed.
c) Did not test for possible misstatement because the audit program had
already been approved by audit management.
d) Expanded the audit program, without the auditee's approval, to
address the highest ranked ways in which a misstatement may have
occurred.
. This would violate IIA Standards because the auditor has not acted on audit evidence
that indicated that the audit should be expanded (IIA Standard 1220 – Due
Professional Care; IIA Standard 2320 – Analysis and Evaluation).

Question 27
The IIA Standards require an auditor to have the knowledge, skills, and disciplines
essential to perform an internal audit. Which of the following correctly describes the
level of knowledge or skill required by the Standards? Auditors must have:
a) Proficiency in applying knowledge of auditing standards and
procedures to specific situations without extensive recourse to
technical research and assistance.
b) Proficiency in applying knowledge of accounting and computerized
information systems to specific or potential problems.
c) An understanding of broad techniques used in supporting and
developing audit findings and the ability to research the proper audit
 procedures to be used in any audit situation.
d) A broad appreciation for accounting principles and techniques when
auditing the financial records and reports of the organization.
. Proficiency in the application of the Standards is required (IIA Standard 1210 –
Proficiency).

Question 28
A professional engineer applied for a position in the internal auditing department of a
high-technology firm. The engineer became interested in the position after observing
several internal auditors while they were auditing the engineering department. The
chief audit executive:
a) Should not hire the engineer because of the lack of knowledge of
internal auditing standards.
b) May hire the engineer in spite of the lack of knowledge of internal
auditing standards.
c) Should not hire the engineer because of the lack of knowledge of
accounting and taxes.
d) May hire the engineer because of the knowledge of internal auditing
gained in the previous position.
. Internal auditing standards are required to be known by the department collectively.
Individual internal auditing staff members may, however, bring special skills to the
department instead of specific knowledge of internal auditing standards (IIA Standard
1210 – Proficiency).

Question 29
According to the IIA Standards, internal auditors should possess all of the
following except:
a) Proficiency in applying internal audit standards.
b) An understanding of management principles.
c) The ability to exercise good interpersonal relations.
d) The ability to conduct training sessions in quantitative
methods.
. Internal auditors need only an appreciation of the broad nature and fundamentals of
quantitative methods. That does not suggest sufficient knowledge to teach the methods
to others (IIA Standard 1210 – Proficiency).
Question 30
While performing a construction audit, the auditor suspects that the structural steel
used does not conform to contract specifications. The internal auditing department
does not have an engineer on the staff. According to the IIA Standards, the
appropriate course of action is to:
a) Assign a dollar value to the difference and prepare a deficiency
finding.
b) Ask a company or consulting engineer to determine whether the steel
conforms to the contract specifications.
c) Ask the construction superintendent to explain why there is a
difference.
d) Require suspension of contract payments until the difference is
resolved.
. IIA Standard 1210 – Proficiency requires the internal auditing department to
collectively possess the knowledge, skills, and disciplines necessary to carry out its
audit responsibilities.

Question 31
An internal auditing director is establishing the evaluation criteria for the selection of
new internal audit staff members. According to the IIA Standards, which of the
following would be an inappropriate item to list?
a) An appreciation of the fundamentals of accounting.
b) An understanding of management principles.
c) The ability to recognize deviations from good business practice.
d) Proficiency in computerized operations and the use of computers in
auditing.
. IIA Standard 1210 – Proficiency states that "an appreciation is required." Also, many
audit staffs have a specialized information technology audit operation that handles
complex computer-related audits.

Question 32

“Due professional care implies reasonable care and competence, not infallibility or
extraordinary performance.” This statement makes which of the
following unnecessary:
a) The conduct of examinations and verifications to a
 reasonable extent.
b) The conduct of extensive examinations.
c) The reasonable assurance that compliance does exist.
d) The consideration of the possibility of material irregularities.
. The IIA Standard 1220 – Due Professional Care does not require extensive and
detailed audits of all transactions.

Question 33
The IIA Standards state that internal auditors are responsible for continuing their
education in order to maintain their proficiency. Which of the following is correct
regarding the continuing education requirements of the practicing internal auditor?
a) Internal auditors are required to obtain 40 hours of continuing
professional development (CPD) each year and a minimum of 120
hours over a three-year period.
b) Certified Internal Auditors have formal requirements that must be met
in order to continue as a CIA.
c) Attendance, as an officer or committee member, at formal Institute of
Internal Auditors meetings does not meet the criterion of continuing
professional development.
d) In-house programs meet continuing professional development
requirements only if they have been preapproved by the Institute of
Internal Auditors.
. In order to maintain the CIA designation, the CIA must commit to a formal program
of continuing professional development and report to the Certification Department of
the IIA (IIA Standard 1230–Continuing Professional Development).

Question 34
An auditor has uncovered facts that could be interpreted as indicating unlawful
activity on the part of an auditee. The auditor decides not to inform senior
management of these facts since he cannot prove that an irregularity occurred. The
auditor, however, decides that if questions are raised regarding the omitted facts, he
will answer fully and truthfully. In taking this action, the auditor:
a) Has not violated the Code of Ethics or the Standards because
confidentiality takes precedence over all other standards.
b) Has not violated the Code of Ethics or the Standards because the
auditor is committed to answering all questions fully and truthfully.
c) Has violated the Code of Ethics because unlawful acts should have
 been reported to the appropriate regulatory agency to avoid potential
"aiding and abetting" by the auditor.
d) Has violated the Standards because the auditor should inform the
appropriate authorities in the organization if fraud may be indicated.
. IIA Standard 1220 – Due Professional Care indicates that the auditor should inform
the appropriate authorities in the organization if there are sufficient indicators of the
commission of a fraud.

Question 35
Internal auditing is unique in that its scope often encompasses all areas of an
organization. Thus, it is not possible for each internal auditor to possess detailed
competence in all areas that might be audited. Which of the following competencies is
required by the IIA Standards for every internal auditor?
a) Taxation and law as it applies to operation of the
organization.
b) Proficiency in accounting principles.
c) Understanding of management principles.
d) Proficiency in computer systems and databases.
. An understanding of management principles is required of all internal auditors (IIA
Standard 1210 – Proficiency).

Question 36
As a particular audit is being planned in a high-risk area, the chief audit executive
(CAE) determines that the available staff does not have the requisite skills to perform
the assignment. The best course of action consistent with audit planning standards
would be to:
a) Not perform the audit, since the requisite skills are not available.
b) Use the audit as a training opportunity and let the auditors learn as the
audit is performed.
c) Consider using external resources to supplement the needed
knowledge, skills, and disciplines and complete the assignment.
d) Perform the audit but limit the scope in light of the skill deficiency.
. Proper planning includes documented determination of resources including
consideration of supplementation (IIA Standard 1210 – Proficiency).

Question 37
As part of the process to improve auditor–auditee relations, it is very important to deal
with how internal auditing is perceived. Certain types of attitudes in the work
performed will help create these perceptions. From a management perspective, which
attitude is likely to be the most conducive to a positive perception?
a) Objective.
b) Investigative.
c) Interrogatory.
d) Consultative.
. A consultative attitude leads to two-way communication (IIA Standard 1210—
Proficiency).

Question 38
A service company is currently experiencing a significant downsizing and process
reengineering. Its board of directors has redefined the business goals and established
initiatives using technology developed in house to meet these goals. As a result, a
more decentralized approach has been adopted to run the business functions by
empowering the business branch managers to make decisions and perform functions
traditionally done at a higher level.
The internal auditing staff is made up of the director, two managers, and five staff
auditors, all with financial background. In the past, the primary focus of successful
audit activities has been the service branches and the six regional division
headquarters, which support the branches. These division headquarters are the primary
targets for possible elimination. The support functions, such as human resources,
accounting, and purchasing, will be brought into the national headquarters, and
technology will be enhanced to enable and augment these operations.
Branch managers view the internal auditing function as a watchdog for top
management. What is the best way for internal auditing to change this view to one that
is more cooperative?
a) Increase focus on control responsibilities.
b) Increase technical skills.
c) Increase confidentiality of investigative audits to
minimize fear.
d) Increase solicitation of auditee concerns.
. Two-way communication is important in fostering a cooperative relationship
(IIA Standard 1210—Proficiency).