Study Unit 1

Question 1

What are the two types of guidance provided in the IIA’s International Professional Practices Framework (IPPF)?

Answer 1

1. Mandatory

2. Strongly Recommended

Question 2

What 3 parts make up the Mandatory Guidance of the IPPF?

Answer 2

1. Definition of IA
2. Code of Ethics
3. The Standards

Question 3

What is the Definition of IA?

Answer 3

It is an independent, objective assurance and consulting activity designed to add value and improve an orgs ops. It helps an org accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk mgmt., control, and governance processes.

Question 4

What 4 purposes does the Standards serve as described by the IIA?

Answer 4

1. Delineate basic principles
2. Provide a framework for performing and promoting a broad range of value added IA.
3. Establish the basics for the evaluation of IA performance.
4. Foster improved org. processes and operations.

Question 5

What do Attribute standards govern?

Answer 5

They govern the responsibilities, attitudes, and actions of the orgs IA activity and the people who serve as IA’s.

Question 6

What do Performance standards govern?

Answer 6

They govern the nature of IA and provide quality criteria for evaluating the IA function’s performance.

Question 7

What are Interpretations provided by the IIA?

Answer 7

To clarify terms and concepts referred to in Attribute and Performance Standards.

Question 8

What are Implementation standards?

Answer 8

Expand upon Attribute/Performance standards that apply to all IA engagements. Each Implementation standard describes the requirements of either an assurance or consulting engagement.

Question 9

What are the 3 Strongly Recommended Guidance and what do they describer practices for?

Answer 9

1. Position Papers
2. Practice Advisories
3. Practice Guidance

-They describe practices for effective implementation of the def. of IA, the Code of Ethics, and the Standards.

Question 10

Why is a formal charter for the IA activity important and who approves the charter?

Answer 10

It defines the IA activity’s purpose, authority, and responsibility. Final approval rests with the board.

Question 11

What activities did the Racketeer Influenced and Corrupt Organizations Act (RICO) specifically make unlawful?

Answer 11

1. Conspiring to commit any of the offenses listed below.
2. Using income derived from a pattern of racketeering activity to acquire an interest in an enterprise.
3. Acquiring or maintaining an interest in an enterprise through a pattern of racketeering activity.
4. Conducting the affairs of the enterprise through a pattern of racketeering activity.

Most notably used to indict on insider trading.

Question 12

What two sets of provisions are contained in the Foreign Corrupt Practices Act (FCPA)?

Answer 12

1. All public companies must devise and maintain a system of of internal accounting control, regardless of whether they have foreign operations.
2. Public companies may not make corrupt payments to any foreign official, foreign political party, or official thereof, or candidate for political office in a foreign country.

Question 13

What specific governance practices did SOX impose on issuers of publicly traded securities?

Answer 13

1. Each member of the audit committee must be an independent member of the BOD.
2. At least one member of the audit committee must be a financial expert.
3. The audit committee must be directly responsible for appointing, compensating, and overseeing the work of the independent auditor.
4. The independent auditor must report directly to the audit committee, not to management.

Also, the CEO and CFO are required to certify to the effectiveness of the system of IC.

Question 14

What are the reasons for the Code of Ethical Conduct?

Answer 14

-Primary purpose: to promote an ethical culture among professionals who serve others.

Additional functions include:

• Communicating acceptable value to all members
• Establish objective standards against which individuals can measure their own performance, and
• Communicating the orgs values to outsiders

Question 15

What level of standards does the Code of Ethics help establish?

Answer 15

A minimum level of competence, but it is impossible to require equality of competence by all members of the profession.

To be effective, the code must provide for disciplinary actions for violators.

Question 16

What are the 4 core principles of the IIA’s Code of Ethics?

Answer 16

1. Integrity: a refusal to compromise professional values for personal gain and performance of professional duties in accordance w/ relevant laws.
2. Objectivity: providing stakeholders w/ unbiased info and a commitment to independence from conflicts of economic or professional interest.
3. Confidentiality: Refusal to use org info for private gain.
4. Competency: Commitment to acquiring and maintaining an appropriate level of knowledge and skill.

Question 17

What are 2 essential components of the IIA’s Code of Ethics?

Answer 17

1. Principles that are relevant to the profession and the practice of IA.
2. Rules of Conduct

Question 18

What are Rules of Conduct?

Answer 18

They describe the behavior norm expected of IA’s. These rules are to aid in interpreting the Principles into practical applications and are intended to guide the ethical conduct of IA’s.

Question 19

To whom should violations of the Code of Ethics be reported?

Answer 19

The IIA’s Board of Directors.

Question 20

What does the IA Charter establish?

Answer 20

It establishes the IA activity’s position within the org, including the nature of the CAE’s functional reporting relationship with the board, authorizes access to records, personnel, and physical properties relevant to the performance of engagements; and defines the scope of IA activities.

Final approval rests with the board.

Question 21

What must be recognized in the IA Charter?

Answer 21

-The mandatory nature of the Definition of IA, the Code of Ethics, and the Standards must be recognized in the IA charter. The CAE should discuss each of these items with Senior Management and the Board.