Exam Code: IIA-CIA-Part3 (Practice Exam Latest Test Questions VCE PDF)
Exam Name: Certified Internal Auditor - Part 3, Business Analysis and Information Technology
Certification Provider: IIA
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Q61. An internal auditor is evaluating project management reviews of individual initiatives and development projects and system development life cycle reviews. When performing this service, the internal auditor is addressing which key e-commerce audit area?
A. Corruption of data.
B. E-commerce organization.
C. Management issued.
D. Business interruptions.
Answer: C
Explanation:
According to the outline of a possible e-commerce audit protocol for key areas given in PA 2100-6, the internal auditor should evaluate how well business units are managing the e- commerce when addressing the possible key audit area of management issues. The following is a list of some relevant topics that the internal auditor should review when doing their evaluation:
.
Project management reviews of individual initiatives and development projects.
.
System development life cycle reviews.
.
Vendor selection, vendor capabilities, employee confidentiality, and bonding.
.
Post-implementation economic reviews: Are anticipated benefits being achieved? What metrics are being used to measure success?
.
Post-implementation process reviews: Are new processes in place and working effectively?
Q62. 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 technical 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 an entity
Answer: C
Explanation:
The objective of ISO 9000 standards is to ensure consistent quality even if the quality poor. The market determines the quality of the result.
Q63. An audit manager has just returned from an executive training program and has suggested that the audit department develop a mathematical model to help identify factors that may be causing changes in the cost of production. According to the manager, the model should recognize that the company currently has three separate production cost) ': enters. Which of the following approaches would best provide the analysis suggested by the audit manager?
A. Develop a classical variables sampling estimate of cost of production per department, with the sample stratified by the dollar value of each product produced.
B. Develop a -gear ratio analysis of the cost of production compared to the cost of raw inventory across the three departments.
C. Develop a multiple regression analysis of production costs, including such variables as raw material inventory costs, number of employees in the department, and overtime pay.
D. Develop a linear regression analysis relating the cost of production to the cost of goods sold.
Answer: C
Explanation:
Regression analysis extends correlation to find an equation for the linear relationship among variables. The behavior of a dependent variable, such as cost of production, is explained in terms of one or more independent variables for example, raw material costs, employees, overtime). Thus, multiple regression analysis determines functional relationships among quantitative variables.
Q64. One of the main reasons total quality management (TQM) can be used as a strategic weapon is that:
A. The cumulative improvement from a company's TQM efforts cannot readily be copied by competitors.
B. Introducing new products can lure customers away from competitors.
C. Reduced costs associated with better quality can support higher shareholder dividends.
D. TQM provides a comprehensive planning process for a business.
Answer: A
Explanation:
TQM is a comprehensive approach to quality. It treats the pursuit of quality as a basic organizational function that is as important as production or marketing. Because TQM affects every aspect of the organization's activities, it is part of the organizational culture. Thus, the cumulative effect of TQM's continuous improvement process can attract and hold customers and cannot be duplicated by competitors.
Q65. Which of the following is an indication that a computer virus is present?
A. Frequent power surges that harm computer equipment.
B. Unexplainable losses of or changes to data.
C. Inadequate backup, recovery, and contingency plans.
D. Numerous copyright violations due to unauthorized use of purchased software.
Answer: B
Explanation:
The effects of computer viruses range from harmless messages to complete destruction of all data within the system. A symptom of a virus would be the unexplained loss of or change to data.
Q66. Which of the following inventory items would be the most frequently reviewed in an ABC inventory control system?
A. Expensive, frequently used, high stock-out cost items with short lead times.
B. Expensive, frequently used, low stock-out cost items with long lead times.
C. Inexpensive, frequently used, high stock-out cost items with long lead times.
D. Expensive, frequently used, high stock-out cost items with long lead times.
Answer: D
Explanation:
The ABC system is a method for controlling inventories that divides inventory items into three groups: Group A -- high-monetary value items, which account for a small portion perhaps 10%) of the total inventory usage Group B -- medium-monetary value items, which may account for about 20°10 of the total inventory items
Group C -- low-monetary value items, which account for the remaining 70% of sales or usage The ABC system permits the proper degree of managerial control to be identified and exercised over each group. Group A items are reviewed on a regular basis. Group B items may not have to be revered as often as group A items, but more often than group C items. For group C, extensive use of models and records is not cost effective. It is cheaper to order large quantities infrequently. The ABC method therefore reduces the safety-stock investment because high-value items are frequently monitored and medium-value items are monitored more often than inexpensive items. Frequent review can prevent stockouts and decrease inventory levels, and the cost of such review is minimized if it is limited to high- or mediumvalue items.
Q67. Dale has 20 days to complete production of an order for an important customer. The customer wants 96 units of product that may be painted either red or white. The red units can be produced at a rate of 4 per day. The white units, because of a different quality of paint, can be produced at a rate of 7 per day. The materials for the red units cost US $80 each, while the white units cost US $120 each. Dale wants to keep costs at a minimum. What is the constraint that expresses the number of units to be produced?
A. 4R + 7W = 20
B. R 4) + W = 7) <20
C. R + W = 20
D. 4R + 7W = 96
Answer: B
Explanation:
The constraint function that expresses the number of units to be produced is R + W = —I 96, but that is not one of the answer choices. Another constraint is that the total quantities of red R) and white W) units must be produced in 20 or fewer days at a rate of 4 red units per day and 7 white units per day. Thus, the time constraint is R - 4) + W - 7) 20.
Q68. What coefficient of correlation results from the following data?
A. 0
B. -1
C. +1
D. Cannot be determined from the data given.
Answer: B
Explanation:
The coefficient of correlation (in standard notation, r) measures the strength of the linear relationship. The magnitude of r is independent of the scales of measurement of x and y. Its range is -1 to +1. A value of -1 indicates a perfectly inverse linear relationship between x and y. A value of zero indicates no linear relationship between x and y. A value of 1 indicates a perfectly direct relationship between x and y As x increases by 1, y consistently decreases by 2. Hence, a perfectly inverse relationship exists, and r must be equal to -1.
Q69. An internal auditor was performing an operational audit of the purchasing and accounts payable system. The audit objective was to identify changes in processes that would improve efficiency and effectiveness. Which of the following statements support the auditor's recommendation that electronic data interchange EDI) be implemented within a company?
I. There is a small number of transactions.
II. There is a time-sensitive just-in-time purchase environment.
III. There is a large volume of custom purchases.
IV.
There are multiple transactions with the same vendor.
A.
I only.
B.
II and IV only.
C.
I and Ill.
D.
II, Ill, and IV.
Answer: B
Explanation:
EDI is advantageous in a JIT environment because it provides the capacity for instantaneous ordering. Moreover, a JIT environment already is characterized by the close vendor-purchaser cooperation required by an EDI system. Another reason for implementing an EDI system is that the purchaser has a large volume of transactions with the same vendor(s). Otherwise. EDI may not be cost efficient.
Q70. In the standard regression equation y- a + bx, how is the letter ￡> best described?
A. Independent variable.
B. Dependent variable.
C. Y intercept.
D. Slope of the regression line.
Answer: D
Explanation:
In the standard regression equation, b is the slope of the regression line.
Q71. Which of the following are elements of risk management and mitigation?
I. Threat events and cost/benefit analysis
II. Safeguards, controls, and POI analysis
III. Frequency and uncertainty
IV.
Safeguard and control costs
A.
I only
B.
II only.
C.
I and Ill only.
D.
II and IV only.
Answer: D
Explanation:
The elements relating to risk management and mitigation include safeguards and controls, safeguard and control costs, and cost/benefit or POI analysis. The other elements of risk - threat events, single loss exposure value, frequency, and uncertainty- comprise risk identification and quantification.
Q72. During the recessionary phase of a business cycle,
A. The purchasing power of money is likely to decline rapidly. B. The natural rate of unemployment will increase dramatically. C. Potential national income will e-.:coed actual national income
D. Actual national income will e- 'c l potential national income.
Answer: C
Explanation:
There are four phases of a business cycle: trough, recovery, peak, and recession. During the recessionary phase of a business cycle, economic activities and employment levels contract and society's resources are underused_ Because of the underuse of resources, potential national income will exceed actual national income.
Q73. Which of the following costs of quality is a failure cost?
A. Systems development costs.
B. Costs of inspecting in-process items.
C. Contract penalty for delivery of nonconforming goods.
D. Costs of quality circles.
Answer: C
Explanation:
Failure costs are incurred after defective output has been removed from production. A contract penalty for faulty goods is an example of an external failure cost.
Q74. Which of the following is not a component of physical distribution?
A. Transportation.
B. Pricing.
C. Location of retail outlets.
D. Warehousing.
Answer: B
Explanation:
Physical distribution market logistics) involves planning, implementing, and controlling the movement of materials and final goods to meet customer needs while earning a profit.
Physical distribution systems coordinate suppliers, purchasing agents, marketers, channels, and customers. They include warehousing, transportation, and retail outlets.
Q75. Value engineering is:
A. A policy of seeking continuous improvement in all phases of company{ activities.
B. A method of determining prices based on a cost determination.
C. An element of a marketing mix strategy.
D. A systematic approach to assessing all aspects of cost buildup for a product.
Answer: D
Explanation:
Value engineering is a means of reaching targeted cost levels. It is a systematic approach to assessing all aspects of the value chain cost buildup for a product: R&D, design of products, design of processes, production, marketing, distribution, and customer service_ The purpose is to minimize costs without sacrificing customer satisfaction.