Case-based MCQ questions on Ethics and Professionalism (CIA Part 1) by Prof Mahaley

 

Case-based MCQ questions on Ethics and Professionalism (CIA Part 1) by Prof Mahaley

Case-based MCQ questions on Ethics and Professionalism (CIA Part 1) 

Case MCQ 1: Gifts and Objectivity

Scenario: An internal audit team completed an audit of a department and made recommendations that significantly improved operational efficiency. During the holiday season, the department manager sends a moderately valued gift to the internal auditor who led the engagement as a token of appreciation.

According to the IIA Code of Ethics, what is the BEST action for the auditor to take?

A. Accept the gift because its value is low and it is a holiday custom

B. Do not accept the gift until the final audit report has been issued

C. Decline the gift if accepting it would appear to impair, or actually impair, professional judgment

D. Never accept the gift under any circumstances because its value is significant

Answer: 

Case MCQ 2: Ethical Dilemma in Obtaining Information

Scenario: An employee takes a colleague's personnel file without authorization and gives it to an internal auditor, claiming that the colleague is committing payroll fraud.

According to the Global Internal Audit Standards, what should the auditor do FIRST?

A. Immediately file the personnel record as audit evidence and launch a fraud investigation

B. Reject the employee's allegation outright because the source of information was improper

C. Escalate the matter to the Chief Audit Executive (CAE) for handling at the appropriate level

D. Confront the suspected employee privately to verify whether the file's contents are true

Answer: 

Case MCQ 3: Personal Integrity and "Trading"

Scenario: An internal auditor conducts a surprise inventory count at a small subsidiary's warehouse and finds items missing in several categories. The warehouse manager admits he took the items for personal use and offers to provide information about other employees' misconduct if the auditor does not report the matter. The auditor agrees not to report the issue and, as a result, uncovers a larger financial loss.

Which of the following statements about this scenario is correct?

A. The scenario illustrates an impairment of audit independence

B. The auditor's behavior is consistent with the definition of internal auditing and adds value to the organization

C. The auditor demonstrated due professional care and cost-benefit considerations

D. The auditor appears to lack personal integrity

Answer: 

Case MCQ 4: Illegal Payments and Reporting Lines

Scenario: An internal auditor discovers during an audit of an overseas subsidiary that the sales department made payments to local government officials in exchange for orders.

According to the IIA Code of Ethics and Standards, what action should the auditor take?

A. Avoid taking any action that could be detrimental to the organization

B. Report the matter to the appropriate regulatory authority

C. Report the matter to the appropriate officials within the organization

D. Report the practice to the IIA Global Board

Answer: 

Case MCQ 5: Prior Responsibilities and the Presumption of Objectivity

Scenario: Internal auditor B transferred to the internal audit department six months ago from a management position in the procurement department. The CAE is now considering assigning B to an assurance engagement covering procurement operations.

According to the Standards, what is the MOST appropriate course of action?

A. Assign B actively because B understands procurement best

B. Allow B to participate after documenting the potential objectivity impairment in the working papers

C. Avoid assigning B to the engagement because B's objectivity is presumed to be impaired

D. Allow B to participate after obtaining written consent from the current procurement manager

Answer: 

Exam Preparation Notes

In CIA Part 1, "Ethics and Professionalism" accounts for roughly 20% of the exam, and questions are primarily situational judgment. When studying, distinguish these commonly confused points: Independence (an attribute at the internal audit activity level, involving organizational status and reporting relationships) versus Objectivity (an individual auditor's state of mind, involving conflicts of interest and bias); internal reporting (the Standards' preferred channel) versus external regulatory reporting (only when legally required). Also note that in the post-2025 Standards framework, "due professional care" has been elevated from a sub-element under "competency" in the old version to a standalone principle—keep this change in mind regarding how questions are worded.