IIA-CIA-Part3 Training & Certification Get Latest Certified Internal Updated on Dec 01, 2021
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IIA IIA-CIA-Part3 Exam Syllabus Topics:
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NEW QUESTION 17
If a just-in-time purchasing policy is successful in reducing the total inventory costs of a manufacturing company, which of the following combinations of cost changes would be most likely to occur?
- A. An increase in stockout costs and a decrease in carrying costs.
- B. An increase in purchasing costs and a decrease in stockout costs.
- C. An increase in quality costs and a decrease in ordering costs.
- D. An increase in purchasing costs and a decrease in quality costs.
Answer: A
Explanation:
In this situation, the company will be receiving fewer materials at any point in time, increasing the likelihood of stockout and thereby resulting in an increase in a reduction in the carrying cost. At the same time, the average inventory will be less, resulting in a reduction in the carrying cost.
NEW QUESTION 18
Philip Enterprises, distributor of compact disks (CDs), is developing its budgeted cost of goods sold. Philip has developed the following range of sales estimates and associated probabilities for the year:
Philip's cost of goods sold averages 80% of sales. What is the expected value of Philip's budgeted cost of goods sold?
- A. US$85,000
- B. US$84,000
- C. US$67,200
- D. US$68,000
Answer: C
Explanation:
The expected value is calculated by weighting each sales estimate by the probability of its occurrence. Consequently, the expected value of sales is US $84,000 [$60,000 x .25) + ($85,000 x .40) + ($100,000 x.35)]. Cost of goods sold is therefore US $67,200 ($84,000x80%).
NEW QUESTION 19
Which of the following statements is correct regarding risk analysis?
- A. The extent to which management judgments are required in an area could serve as a risk factor in assisting the auditor in making a comparative risk analysis.
- B. The highest risk assessment should always be assigned to the area with the largest potential loss.
- C. The highest risk assessment should always be assigned to the area with the highest probability of occurrence.
- D. Risk analysis must be reduced to quantitative terms in order to provide meaningful comparisons across an organization.
Answer: A
NEW QUESTION 20
Tools that should be in place to ensure data integrity include III:
I. Monitoring software
II. Change controls
III. Trend analysis
IV.
IV Automatic timeout
- A. I, III, and IV only.
- B. I and III only.
- C. I, II, III, and IV.
- D. II, III, and IV only.
Answer: C
Explanation:
The internal auditor should evaluate controls over data integrity. Tools that should be in place in order to ensure data integrity include intrusion management monitoring software, automatic timeout, and trend analysis), physical security for e-commerce servers, change controls, and reconciliation.
NEW QUESTION 21
Fulford Company applies the target pricing and costing approach. The following information about costs and revenues of Fulford's product are available for the year just ended:
Fulford plans to increase unit sales to 80,000 by reducing the product's unit price to US $320.
If Fulford desires a unit target operating income of 12CYo, by what amount must it reduce the full cost per unit?
- A. US $32.00
- B. US $80.00
- C. US $70.40
- D. US $38.40
Answer: C
Explanation:
Unit target operating income is US $38.40 $320 unit target price 12°X0). Hence, the unit target full cost is US $281.60 $320 - $38.40). The current full cost per unit is US $352.00 [($13,200,000 CGS + $7,920,000 other value chain operating costs) - 60,000 units sold], so the necessary reduction in the full cost per unit is US $70.40 $352.00 - $281.60).
NEW QUESTION 22
An Internet firewall is designed to provide adequate protection against which of the following?
- A. Unauthenticated logins from outside users.
- B. A computer virus.
- C. Insider leaking of confidential information.
- D. A Trojan horse application.
Answer: A
Explanation:
A firewall is a combination of hardware and soft are that separates o networks and prevents passage of specific types of network traffic while maintaining a connection between the networks. Generally, an Internet firewall is designed to protect a system from unauthenticated logins from outside users, although it may provide several other features as well.
NEW QUESTION 23
In an economic order quantity EOQ) model, both the costs per order and the holding costs are estimates. If those estimates are varied to determine how much the changes affect the
optimal EOQ, such an analysis would be called a:
- A. Forecasting model.
- B. Decision analysis.
- C. Critical path method analysis.
- D. Sensitivity analysis.
Answer: D
Explanation:
An economic order quantity EOQ) sensitivity analysis involves varying the holding carrying) costs per unit and/or the order costs to determine how much the changes affect the optimal EOQ.
NEW QUESTION 24
Which one of the following is least likely to be recommended by the auditor when an EDIEFT system is being designed?
- A. Remote access to electronic data should be denied.
- B. The identity of the individual approving an electronic document should be stored as a data field.
- C. Data security procedures should be written to prevent changes to data by unauthorized individuals
- D. Disaster recovery plans should be established.
Answer: A
Explanation:
One of the benefits of an EDI-EFT system is that it can provide remote access at any time from any place if telecommunications links are available. However, appropriate controls should prevent unauthorized access. A multinational company has an agreement with a value-added network VAN) that provides the encoding and communications transfer for the company's electrons.. data interchange EDI) and electronic funds transfer EFT) transactions. Before transfer of data to the VAN, the company performs online preprocessing of the transactions. The internal auditor is responsible for assessing preprocessing controls. In addition, the agreement between the company and the VAN states that the internal auditor is allowed toe :amine and report on the controls in place at the VAN on an annual basis. The contract specifies that access to the VAN can occur on a surprise basis during the second or third quarter of the company's fiscal year. This p n I was -hosen so it would not interfere with processing during the VAN's peak transaction periods. This provision was riot reviewed with internal auditing. The annual audit plan approved by the board of directors specifies that a full audit would be done during the current year.
NEW QUESTION 25
The immediate goal of a theory of constraints (TOC) analysis is to:
- A. Maximize the efficiency of the entire production process.
- B. Minimize direct materials cost.
- C. Smooth production flow to eliminate backup in the system.
- D. Maximize contribution margin through the constraint.
Answer: D
Explanation:
A basic principle of TOC analysis is that short-term profit maximization requires maximizing the contribution margin through the constraint, called the throughput margin or throughput contribution.
NEW QUESTION 26
Which of the following is an example of a physical control?
- A. Establishing a physical security policy and promoting it throughout the organization.
- B. Performing business continuity and disaster recovery planning.
- C. Providing fire detection and suppression equipment.
- D. Keeping an offsite backup of the organization's critical data.
Answer: A
NEW QUESTION 27
Which of the following are included in ISO 31000 risk principles and guidelines?
- A. Principles, practices, and process.
- B. Standards, framework, and process.
- C. Standards, assessments, and process.
- D. Principles, framework, and process.
Answer: D
NEW QUESTION 28
A new advertising agency serves a wide range of clients including manufacturers, restaurants, service businesses, department stores, and other retail establishments. The accounting system the advertising agency has most likely adopted for its record keeping in accumulating costs is:
- A. Operation costing.
- B. Job-order costing.
- C. Relevant costing.
- D. Process costing.
Answer: B
Explanation:
Job-order costing is used by organizations whose products or services are readily identified by individual units or batches. The advertising agency accumulates its costs by client Job-order costing is the most appropriate system for this type of nonmanufacturing firm.
NEW QUESTION 29
Which of the following statements regarding database management systems is not correct?
- A. The data within the database management system can only be manipulated directly by the database management system administrator.
- B. The database management system acts as a layer between the application software and the operating system.
- C. Applications pass on the instructions for data manipulation which are then executed by the database management system.
- D. Database management systems handle data manipulation inside the tables, rather than it being done by the operating system itself in files.
Answer: A
NEW QUESTION 30
If the central bank of a country raises interest rates sharply, the country's currency will likely:
- A. Increase in relative value.
- B. Decrease sharply in value at first and then return to its initial value.
- C. Remain unchanged in value.
- D. Decrease in relative value.
Answer: A
Explanation:
Exchange rates fluctuate depending upon the demand for each country's currency. If a country raises its interest rates, its currency will appreciate. The demand for investment at the higher interest rates will shift the demand curare for the currency to the right. The reverse holds true for a decrease in interest rates.
NEW QUESTION 31
A corporation provides management consulting services to hospitals. Consulting engagements vary widely from hospital to hospital, both in terms of the nature of the consulting services provided and the scope of the consulting engagements. The most appropriate product costing system for the corporation is a:
- A. Job-order costing system.
- B. Process costing system.
- C. Just-in-time costing system.
- D. Operation costing system.
Answer: A
Explanation:
The job-order cost system of accounting is appropriate when producing products with individual characteristics and/or when identifiable groupings are possible, e.g., batches of certain styles or types of furniture. The unique aspect of job-order costing is the identification of costs to specific units or a particular job. A job-order system is appropriate in consulting because of the substantial variation between engagements.
NEW QUESTION 32
Which of the following actions is most likely to gain support for process change?
- A. Establish key competencies.
- B. Engage the various communities of practice within the organization.
- C. Demonstrate support from senior management.
- D. Set clear objectives.
Answer: B
NEW QUESTION 33
The estimated demand for pretzels at the next home football game using an expected value approach is:
- A. 4,000 pretzels.
- B. 4,400 pretzels.
- C. 6,000 pretzels.
- D. 5,000 pretzels.
Answer: B
Explanation:
The calculation using an expected value approach weights each possible sales volume by its probability. Thus, the estimated demand is 4,400 pretzels.
The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for US $1.00 each, and the cost per pretzel is U $.30. Any unsold pretzels are discarded because they will be stale before the next home game. 95. The estimated demand for pretzel at the next home football game. The frequency distribution of the demand for pretzels pe game is presented as follows.
NEW QUESTION 34
Assume that nominal interest rates just increased substantially but that the expected future dividends for an entity over the long run were not affected. As a result of the increase in nominal interest rates, the entity's share price should
- A. Stay constant
- B. Decrease.
- C. Increase.
- D. Change, but in no obvious direction_
Answer: B
Explanation:
The dividend growth model is used to calculate the price of a share.
Assuming that DI and G remain constant, an increase in Rs resulting from an increase in the nominal interest rate will cause Po to decrease. A higher interest rate raises the required return of investors, which results in a lower share price. An entity has the following three investment projects available:
The entity has a 4O f debt and 60 l equity capital structure. Each monetary unit of investment funds will be raised in these proportions .40 of debt and .60 of equity). The marginal cost of financing increases with the amount of new funds raised, as follows:
These investment opportunities and financing costs are shown in the graph below.
MCC=Marginal cost of capital IOS=Investment opportunity schedule
NEW QUESTION 35
Which of the following would provide the least security for sensitive data stored on a notebook computer?
- A. Locking the notebook computer in a case when not in use.
- B. Encrypting data files on the notebook computer.
- C. Using a notebook computer with a removable hard disk drive.
- D. Using password protection for the screen-saver program on the notebook computer.
Answer: D
Explanation:
Password protection for a screen-saver program can be easily bypassed.
NEW QUESTION 36
Batch processing:
- A. Is not used by most businesses because it reduces the audit trail.
- B. Allows users to inquire about groups of information contained in the system.
- C. Accumulates transaction records into groups for processing against the master file on a
delayed basis.
D Can only be performed on a centralized basis.
Answer: C
Explanation:
Batch processing is the accumulation and grouping of transactions for processing on a delayed basis. The batch approach is suitable for applications that can be processed against the master file at intervals and involve large volumes of similar items, such as payroll, sales, inventory, and billing.
NEW QUESTION 37
Which of the following statements is true regarding the resolution of interpersonal conflict?
- A. Deferring action should be used until there is sufficient time to fully deal with the issue.
- B. Timely and unambiguous clarification of roles and responsibilities will eliminate most interpersonal conflict.
- C. Reorganization would probably not help ambiguous or overlapping jurisdictions.
- D. Unrealized expectations can be avoided with open and honest discussion.
Answer: D
NEW QUESTION 38
The expected payoff if the vendor has perfect information is:
- A. US $3,900
- B. US $1,360
- C. US $1,960
- D. US $2,200
Answer: D
Explanation:
The vendor would like to sell coffee on cold days US $2,000) and soft drinks on hot days US $2,500). Hot days are expected 40% of the time. Hence, the probability is 40% of making US $2,500 by selling soft drinks. The chance of making US $2,000 by selling coffee is 600k. The payoff equation is:
4 US $2,600) + .6 $2,000 = US $2,200
A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make US $2,500; if the weather is cold, the profit will be U $1,000. If the stand sells coffee and the weather is hot, it will make US $1,900; if the weather is cold, the profit will be U $2,000. The probability of cold weather on a given day at this time is 60%.
NEW QUESTION 39
If electronic funds transfer EFT) is used to pay vendor invoices, which of the following computer-assisted audit procedures would an auditor use to determine if any payments were made twice?
I. Testing of EFT transactions for reasonableness.
II. Identification of EFT transactions to the same vendor for the same dollar amount.
III. Extraction of EFT transactions with unauthorized vendor codes.
IV.
Searching for EFT transactions with duplicate purchase order numbers.
- A. III and IV only.
- B. II and Ill only.
- C. I and IV only.
- D. I and II only.
Answer: C
Explanation:
EFT is a service provided by financial institutions worldwide that is based on EDI technology. EFT transaction costs are lower than for manual systems because documents and human intervention are eliminated from the transactions process.
Inaccurate transaction processing including duplication) is a risk specific to EFT. Thus, an auditor should 1) review transactions with the same vendor for the same amount and 2) search for transactions with duplicate purchase order numbers. However, selection of transactions with unauthorized vendor codes and testing of transactions for reasonableness do not identify duplicate payments.
NEW QUESTION 40
A local area network LAN) is best described as a(n):
- A. Computer system that connects computers of all sizes, workstations, terminals, and
other devices within a limited proximity - B. System to allow computer users to meet and share ideas and information.
C Electronic library containing millions of items of data that can be reviewed, retrieved, and
analyzed.
D Method to offer specialized software, hardware, and data-handling techniques that
improve effectiveness and reduce costs.
Answer: A
Explanation:
A LAN is a local distributed computer system, often housed within a single building. Computers, communication devices, and other equipment are linked by cable. Special software facilitates efficient data communication among the hardware devices.
NEW QUESTION 41
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