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Q1. Control objectives regarding effectiveness and efficiency, reliability, and compliance are the basis of which control framework?
A. GTAG
B. eSAC
C. COBIT
D. COSO
Answer: D
Explanation:
Probably the most well-known control framework in the U.S. is Infernal Control Integrated Framework, published in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The document is commonly referred to as the COSO Framework." The COSO Framework defines internal control as A process, effected by an organization's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
.
Effectiveness and efficiency of operations
.
Reliability of financial reporting
.
Compliance with applicable laws and regulations
Q2. A traditional quality control process in manufacturing consists of mass inspection of goods only at the end of a production process. A major deficiency of the traditional control process is that:
A. It is expensive to do the inspections at the end of the process.
B. It is not possible to rework defective items.
C. It is not 100% effective.
D. It does not focus on improving the entire production process.
Answer: A
Explanation:
The process used to produce the goods is not thoroughly reviewed and evaluated for efficiency and effectiveness. Preventing defects and increasing efficiency by improving the production process raises quality standards and decreases costs.
Q3. When making a cost-time trade-off in CPM analysis, the first activity that should be crashed is the
activity:
A. With the largest amount of slack.
B. With the lowest unit crash cost.
C. On the critical path with the maximum possible time reduction.
D. On the critical path with the lowest unit crash cost.
Answer: D
Explanation:
When making a cost-time trade-off, the first activity to be crashed (have its completion time accelerated) is one on the critical path. To select an activity on another path would not reduce the total time of completion. The initial activity chosen should be the one with the completion time that can be accelerated at the lowest possible cost per unit of time saved.
Q4. Which of the following is usually a benefit of using electronic funds transfer EFT) for international cash transactions?
A. Improvement of the audit trail for cash receipts and disbursements.
B. Creation of self-monitoring access controls.
C. Reduction of the frequency of data entry errors.
D. Off-site storage of source documents for cash transactions.
Answer: C
Explanation:
The processing and transmission of electronic transactions, such as EFTs, virtually eliminates human interaction. This process not only helps eliminate errors but also allows for the rapid detection and recovery from errors when they do occur.
Q5. Various tools are employed to control large scale projects. They include all of the following except:
A. PERT.
B. CPM.
C. Statistical process control.
D. Gantt charts.
Answer: C
Explanation:
Statistical process (quality) control is not used to control large scale projects. Statistical quality control is a method of determining whether the shipment or production run of units lies within acceptable limits. It is also used to determine whether production processes are out of control.
Q6. In a critical path analysis, if slack time in an activity exists, the activity:
A. Is not essential to the overall project.
B. Is a backup activity to replace a main activity should it fail.
C. Could be delayed without delaying the overall project.
D. Involves essentially no time to complete.
Answer: C
Explanation:
Slack is the free time associated with activities not on the critical path. Slack represents unused resources that can be diverted to the critical path.
Q7. An organization has adopted the robust quality approach. According to this view of quality,
A. The minimum point on the total quality cost curve occurs when conformance cost per unit equals nonconformance cost per unit.
B. Improving quality requires tradeoffs among categories of quality costs.
C. Beyond some point, incurrence of prevention and appraisal costs is not cost beneficial
D. Costs in all categories of quality costs may be reduced while improving quality.
Answer: D
Explanation:
The optimal level of quality costs traditionally has been deemed to occur where the conformance cost curve intercepts the nonconformance cast curve, which corresponds to the minimum point on the total cost curve. Thus, beyond some point, incurrence of prevention and appraisal costs is not cost beneficial. However, the modern robust quality view is that this relationship does not always hold. Improving quality and reducing costs in each category may be possible if the most efficient prevention methods are applied. For example, selection of a supplier meeting high quality standards regarding defect rates and delivery times may drive dawn not only failure casts but also the prevention and appraisal casts incurred when supplier performance was less reliable. Thus, conformance casts do not have to continue to increase to obtain additional reductions in nonconformance casts.
Q8. The costs of quality that are incurred in detecting units of product that do not conform to product specifications are referred to as
A. Prevention costs.
B. Appraisal costs.
C. Rework costs.
D. Failure costs.
Answer: B
Explanation:
Appraisal embraces such activities as statistical quality control programs, inspection, and testing. Appraisal costs are those costs such as test equipment maintenance and destructive testing) incurred to detect which products do not conform to specifications.
Q9. 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) centers.
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 3-year 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.
Q10. The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for $1.00 each, and the cost per pretzel is $.30. Any unsold pretzels are discarded because they will be stale before the next home game.
The frequency distribution of the demand for pretzels per game is presented as follows:
Unit Sales VolumeProbability
2.000 pretzels.10
3,000 pretzels.15
4.000
pretzels.20
5.000
pretzels.35
6.000
pretzels.20
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. 5,000 pretzels.
D. None of the answers are correct.
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.
Q11. Company P, which produces computers, uses a target pricing and costing approach. The following is Company P's costs and revenues for the year just ended:
Company P plans to increase sales of computers to 15,000 in the next year by reducing the unit price to US $1,250. If Company P wishes to achieve a unit target operating income of 10%, by what amount must it reduce the full cost per unit?
A. US $100
B. US $125
C. US $225
D. US $250
Answer: C
Explanation:
Unit target operating income is US $125 10% $1,250 target price). Thus, the unit target full cost is US $1,125 $I,250 $125). The current full cost per unit is US $1,350 [($8,000,000 cost of goods sold + $5,500,000 operating costs excluding production) — 10,000 units sold], so the necessary reduction in full cost per unit is US $225 $1,350 – $1 .125).
Q12. A chief executive officer CEO) believes that a major competitor may be planning a new campaign. The CEO sends a questionnaire to key personnel asking for original thinking concerning what the new campaign may be. The CEO selects the best possibilities then sends another questionnaire asking for the most likely option. The process employed by the CEO is called the
A. Least squares technique.
B. Delphi technique.
C. Maximum likelihood technique.
D. Optimizing of expected payoffs.
Answer: B
Explanation:
The Delphi technique is a forecasting or decision-making approach that attempts to avoid groupthink the tendency of individuals to conform to what they perceive to be the consensus). The technique allows only written, anonymous communication among group members. Each member takes a position on the problem at hand. A summary of these positions is communicated to each member. The process is repeated for several iterations as the members more toward a consensus. Thus, the Delphi technique is a qualitative, not quantitative, technique. 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.
Q13. An accounts payable program posted a payable to a vendor not included in the online vendor master file. A control that would prevent this error is a:
A. Validity check.
B. Range check.
C. Reasonableness test.
D. Parity check.
Answer: A
Explanation:
Validity checks are tests of identification numbers or transaction cedes for validity by comparison with items already known to be correct or authorized. For example, social security numbers on payroll input records can be compared with Social Security numbers authorized by the personnel department.
Q14. The primary difference between PERT and CPM is that:
A. CPM uses probabilities on the activity times and PERT does not.
B. PERT considers activity costs and CPM does not.
C. PERT can assign probabilities to activity times and CPM does not.
D. CPM considers activity costs and PERT does not.
Answer: D
Explanation:
Both PERT and CPM are network analysis techniques. But CPM was developed independently of PERT and is widely used in the construction industry. CPM may be thought of as a subset of PERT. Like PERT, it is a network technique, but, unlike PERT, it uses deterministic time and cost estimates. Its advantages include cost estimates plus the concept of "crash" efforts and costs. Activity times are estimated for normal effort and crash effort. Crash time is the time to complete an activity assuming that all available resources were devoted to the task overtime, extra crew, etc.). Activity costs are also estimated for normal and crash efforts. These estimates allow the project manager to estimate the costs of completing the project if some of the activities are completed on a crash basis. The network diagram is constructed in the same manner as PERT diagrams. Once the diagram is constructed, the critical paths are found for normal and crash times. More than one critical path may exist for each diagram.
Q15. The use of message encryption software:
A. Guarantees the secrecy of data.
B. Requires manual distribution of keys.
C. Increases system overhead.
D. Reduces the need for periodic password changes.
Answer: C
Explanation:
Encryption software uses a fixed algorithm to manipulate plain text and an encryption key a set of random data bits used as a starting point for application of the algorithm) to introduce variation. The machine instructions necessary to encrypt and decrypt data constitute system overhead. As a result, processing speed may be slowed.