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Q211. Which of the following statements is true concerning internal control in an electronic data interchange (EDI) system?
A. Preventive controls generally are more important than detective controls in EDI systems.
B. Control objectives for EDI systems generally are different from the objectives for other information systems.
C. Internal controls in EDI systems rarely permit control risk to be assessed at below the maximum.
D. Internal controls related to the segregation of duties generally are the most important controls in EDI systems.
Answer: A
Explanation:
In general, preventive controls are more important than detective controls because the benefits typically outweigh the costs. In electronic processing, once a transaction is accepted, there is often little opportunity to apply detective controls. Thus, it is important to prevent errors or frauds before they happen.
Q212. Which of the following statements is not true regarding ISO 9000 standards?
A. Compliance with the standards is voluntary.
B. The ISO 9000 standards are revised every 5 years to account for technological and market developments.
C. The objective of ISO 9000 standards is to ensure high quality products and services.
D. ISO 9000 is a set of generic standards for establishing and maintaining a quality system within a company.
Answer: C
Explanation: The objective of ISO 9000 standards is to ensure consistent quality even if the quality is poor. The market will determine the quality of the end result.
Q213. Buyer-based pricing involves:
A. Adding a standard markup to the cost of the product.
B. Determining the price at which the product will earn a target profit.
C. Basing prices on the product's perceived value.
D. Basing prices on competitors' prices.
Answer: C
Explanation:
Buyer-based pricing involves basing prices on the product's perceived value rather than on the seller's cost. Nonprice variables in the marketing mix augment the perceived value. For example, a cup of coffee may have a higher price at an expensive restaurant than at a fast food outlet.
Q214. A balanced scorecard is primarily concerned with:
A. Staff.
B. Structure.
C. Strategy.
D. Systems.
Answer: C
Explanation:
The scorecard is primarily a tool to assist the organization in describing and clarifying its strategy and then alignment of its performance measures to that strategy.
Topic 2, Volume B
Q215. In which product-mix pricing strategy is it appropriate for the seller to accept any price that
exceeds the storage and deliver} casts for the product?
A. By-product pricing.
B. Optional-product pricing.
C. Captive-product pricing.
D. Product-bundle pricing.
Answer: A
Explanation:
A by-product is a product of relatively minor importance generated during the production of one or more other products. Its production entails no additional costs. Any amount received above the storage and delivery. casts for a by-product allows the seller to reduce the main product's price to make it more competitive.
Q216. In forecasting purchases of inventory for a firm, all of the following are useful except:
A. Knowledge of the behavior of business cycles.
B. Internal allocations of costs to different segments of the firm.
C. Information on the seasonal variations in demand.
D. Econometric modeling.
Answer: B
Explanation:
Internal allocations of costs relate to costs already incurred, that is, to sunk costs. Sunk costs are not relevant to decision making, for example, to forecasting future purchases.
Q217. Much of the internal auditor's work involves accumulation of engagement information. A duplicate of a contract rather than the original is an example of what kind of evidence?
A. Secondary.
B. Circumstantial.
C. Hearsay.
D. Opinion.
Answer: A
Explanation:
Secondary evidence according to the legal view is acceptable if primary evidence the strongest evidence, e.g., original documents) has been destroyed or is not reasonably procurable. Secondary evidence must be a proper representation of primary evidence, e.g., copies of a contract.
Q218. Which of the following terms is not used in project management?
A. Dummy activity.
B. Latest finish.
C. Optimistic time.
D. Lumpy demand.
Answer: D
Explanation:
Project management concerns managing teams assigned to special projects. Lumpy demand refers to periodic demand for a product or service that increases in large, lumpy increments.
Q219. A large fishing operation has information on the interval, time, and probabilities of shrimp schools staying beneath their fishing boats. In order to use this information to predict when and where to send their boats, which of the following techniques should be used?
A. Simulation.
B. Least squares.
C. Queuing theory.
D. Exponential smoothing.
Answer: A
Explanation:
Simulation Monte Carlo simulation) is a technique for experimenting with logical/mathematical models using a computer. Despite the power of mathematics, many problems cannot be solved by known analytical methods because of the behavior of the variables and the complexity of their interactions. However, the performance of a quantitative model under uncertainty may be investigated by randomly selecting values for each variable in the model based on its probability distribution) and then calculating the value of the solution. If this process is performed many times, the distribution of results from the model will be obtained.
Q220. All of the following are stages of the business cycle except:
A. Boom, or peak.
B. Trough.
C. Recovery.
D. Acceleration.
Answer: D
Explanation:
A business cycle has four stages: the trough, recovery, peak, and recession. Acceleration is not one of the stages.
Q221. If a system does not have a mainframe computer or a file server but does processing within a series of personal computers, the network is a(n):
A. Offline processing system.
B. Expert system.
C. Direct access system.
D. Peer-to-peer system.
Answer: D
Explanation:
A local area network is a user-controlled network that operates without the assistance of a common carrier. It can have several personal computers attached to a host computer, can be linked as part of several LANs that may or may not communicate with a host computer, or can be connected together but not connected to a host computer stand alone). A peer-to-peer network operates without a mainframe or file server.
Q222. What should the company focus on to achieve quality more economically?
A. Appraisal costs.
B. Prevention costs.
C. Internal failure costs.
D. External failure costs.
Answer: B
Explanation:
Prevention attempts to avoid defective output. Prevention costs include preventive maintenance,
employee training, review of equipment design, and evaluation of suppliers.
Prevention is less costly than detection and correction of defective output.
Q223. A tight monetary policy is frequently cited as an important policy instrument for fighting inflation. Keynesian n:mists believe that one of the possible undesirable side effects of such a policy is:
A. Reduced business investment due to higher interest rates.
B. Reduced business investment due to lower interest rates.
C. Increased business investment due to decreased government spending.
D. Increased business investment because of reduced confidence in business.
Answer: A
Explanation:
A tight monetary policy means that little money is available for borrowing. When supply is reduced, the price increases. Thus, interest rates are increased when the money supply contracts. Because of high interest rates, the cost of investment is increased and investment is discouraged.
Q224. A firm must decide the mix of production of Product X and Product Y. There are only two resources used in the two products, resources A and B. Data related to the two products is given in the following table: What is the appropriate objective function to maximize profit?
A. 3X + 7Y
B. 2X+Y
C. 8X + 6Y
D. 5X + 8Y
Answer: C
Explanation:
The objective function is the function to be optimized. This firm wishes to maximize profits on the sales of two products X and Y). Based on profits per unit US $8 and US $6, respectively), the objective function is 8X + 6Y.
Q225. The auditor determined that the risks associated with the EDI purchases were less than the risks associated with the purchases made through the traditional system. Which one of the following factors best supports this prioritization of risks?
A. There are three vendors connected through EDI.
B. About half of the materials are purchased through EDI.
C. The internal auditors were involved with systems development and testing of the EDI software.
D. The external auditor did not examine EDI purchase controls during the annual financial audit.
Answer: C
Explanation:
Sound controls mitigate the risks associated with EDI. The question states that the internal auditing department's prior involvement consisted of assessing and testing the EDI system. This review found no significant problems. Accordingly, the risk of the EDI system is decreased.