[Dec-2024] The Best Certified Internal IIA-CIA-Part3 Professional Exam Questions
Try 100% Updated IIA-CIA-Part3 Exam Questions [2024]
IIA-CIA-Part3 exam is designed to test candidates' knowledge and understanding of business concepts and their application in internal auditing. It covers topics such as business ethics, financial management, organizational structure, risk management, and governance. IIA-CIA-Part3 exam is divided into four sections, each with its own set of learning objectives and exam questions.
NEW QUESTION # 69
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. TQM provides a comprehensive planning process for a business.
- D. Reduced costs associated with better quality can support higher shareholder dividends.
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.
NEW QUESTION # 70
What coefficient of correlation results from the following data?
- A. +1
- B. 0
- C. Cannot be determined from the data given.
- D. 1
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.
NEW QUESTION # 71
The sale of final goods is <List A> the gross domestic product, and the sale of intermediate goods is <List B> the gross domestic product.
- A. Option C
- B. Option A
- C. Option B
- D. Option D
Answer: C
Explanation:
The sale of final goods is included in. and the sale of intermediate goods is excluded from, GDP. The purpose of this treatment is to avoid double counting. The value of final goods already includes any intermediate transactions involved in their production.
NEW QUESTION # 72
The most direct way to prepare a cash budget for a manufacturing entity is to include:
- A. Projected sales and purchases, percentages of collections, and terms of payments.
- B. Projected purchases, percentages of purchases paid, and net income.
- C. Projected sales, credit terms, and net income.
- D. Projected net income, depreciation, and goodwill amortization.
Answer: A
Explanation:
The most direct way of preparing a cash budget requires incorporation of sales projections and credit terms. collection percentages, estimated purchases and payment terms, and other cash receipts and disbursements. In other words, preparation of the cash budget requires consideration of both inflows and outflows.
NEW QUESTION # 73
Which of the following is a key to successful total quality management (TQM)?
- A. Establishing a well-defined quality standard, then focusing on meeting it.
- B. Training quality inspectors.
- C. Focusing intensely on the customer.
- D. Creating appropriate hierarchies to increase efficiency.
Answer: C
Explanation:
TQM emphasizes satisfaction of customers, both internal and external. TQM considers the supplier's relationship with the customer, identifies customer needs, and recognizes that everyone in a process is at some time a customer or supplier of someone else, either inside or outside of the organization. Thus, TQM begins with external customer requirements, identifies internal customer-supplier relationships and requirements, and establishes requirements for external suppliers.
NEW QUESTION # 74
Division Z of a company produces a component that it currently sells to outside customers for US $20 per unit At its current level of production, which is 60% of capacity, Division Z's fixed cost of producing this component is US $5 per unit and its variable cost is US $12 per unit Division Y of the same company would like to purchase this component from Division Z for US $10. Division Z has enough excess capacity to fill Division Y's requirements. The managers of both divisions are compensated based upon reported profits. Which of the following transfer prices will maximize total company profits and be most equitable to the managers of Division Y and Division Z?
- A. US $22 per unit
- B. US $12 per unit
- C. US $18 per unit
- D. US $20 per unit
Answer: C
Explanation:
A unit price of US $18 is less than Division Y's cost of purchase from an outside supplier but Division Z's production cost. Accordingly, both Y and Z benefit.
NEW QUESTION # 75
After using the report writer for several months, the marketing analysts gained confidence in using it but the marketing department manager became concerned. Whenever analysts revised reports they had written earlier, the coding errors kept reappearing in their command sequences. The manager was sure that all the analysts knew what the errors were and how to avoid them. The most likely cause of the reappearance of the same coding errors is inadequate:
- A. Testing.
- B. Change control
- C. Backups.
- D. Access control.
Answer: B
Explanation:
Change control manages changes in information system resources and procedures. It includes a formal change request procedure; assessments of change requests on technical and business grounds; scheduling changes; testing, installing, and monitoring changes; and reporting the status of recorded changes. The analysts were reusing erroneous code that should have been but was not corrected.
NEW QUESTION # 76
Data encryption is an example of which of the following controls?
- A. IT general control
- B. Data input control
- C. Data output control
- D. Application control.
Answer: C
NEW QUESTION # 77
If the bank uses the rnaxirna criterion for selecting the location of the branch, it will select:
- A. L2
- B. L3
- C. L1
- D. L4
Answer: D
Explanation:
Under the maximax criterion, the decision maker selects the choice that maximizes the maximum profit. The maximum profits for the five locations are
A bank plans to open a branch in one of five locations labeled L1, L2, L3, L4, L5). Demand for bank services may be high, medium, or low at each of these locations. Profits for each location-demand combination are presented in the payoff matrix.
NEW QUESTION # 78
Internal auditors want to increase the likelihood of identifying very small control and transaction anomalies in their testing that could potentially be exploited to cause material breaches. Which of the following techniques would best meet this objective?
- A. Verification of the completeness and integrity of existing data.
- B. Analysis of the full population of existing data.
- C. Analysis of the databases of partners, such as suppliers.
- D. Continuous monitoring on a repetitive basis.
Answer: B
NEW QUESTION # 79
Which of the following is the elementary unit of data storage used to represent individual attributes of an entity?
- A. Database.
- B. File.
- C. Data field.
- D. Record.
Answer: C
Explanation:
A data item or field) is a group of characters. It is used to represent individual attributes of an entity, such as an employee's address. A field is an item in a record.
NEW QUESTION # 80
Antitrust laws are intended to:
- A. Require entities in regulated industries to share any patent rights with other entities in that industry.
- B. Establish set profit percentages for entities in regulated industries.
- C. Ensure a free and competitive market in which consumer demand dictates prices.
- D. Prohibit entities in the same industry from engaging in joint ventures.
Answer: C
Explanation:
Antitrust laws are designed to promote more efficient allocation of resources, greater choice for consumers, greater business opportunities, fairness in economic behavior, and avoidance of concentrated political power resulting from economic power.
Competition results in greater output and lower prices than other market structures.
NEW QUESTION # 81
In PERT, slack is the:
- A. Difference between the latest starting time and earliest finishing time.
- B. Number of days an activity can be delayed without forcing a delay for the entire project.
- C. Path that has the largest amount of time associated with it.
- D. Uncertainty associated with time estimates.
Answer: B
Explanation:
Slack is the amount of time that commencement of an activity can be delayed without forcing a delay of the entire project.
NEW QUESTION # 82
ABC entities, a manufacturer lesser, leased a chine to XYZ on January 1. The lease meets the criteria for a finance lease. Title to the asset will automatically pass to the lessee at the end of the lease term. Other details are as follow:
Assuming the fair value of the asset is at least equal to the present value of the minimum lease payments, the journal entry to record the inception of this lease on the laser's books at January 1 is:
- A. Option B
- B. Option D
- C. Option C
- D. Option A
Answer: B
Explanation:
For this finance lease, the manufacturer-lesser should record
1.As gross investment, the minimum lease payments because there
2.As net investment, the difference between the gross investment in the lease and unearned finance income a credit to a liability
3.As unearned finance income the difference between the gross investment gross investment discounted at the interest rate implicit in the lease)
4.As sales revenue the fair value of the asset o if lower, the present value payments computed at the interest rate implicit in the lease
5.As cost of goods sold, the cost of the leased asset Because the first payment is made at the inception of the lease. the payment structure is that of annuity due. Sales revenue is therefore equal to the US $10.000 periodic payment times the present value of an annuity due of I discounted for 10 years at 10%US $10,000 6.7590 = US $67,590). Given that cash is paid at the beginning of the year, the initial 10.000 cash debit immediately decreases the gross investment in the lease payments receivable) from US $100,000 to US $90,000. The cost of the leased asset US $55,000) must also be charged to cost of sales and credited to inventory. Finally, at the inception of the lease, unearned finance income equals the difference between the gross investment and the sales price US $100,000 ax$67,590 = US 632,410).
NEW QUESTION # 83
An organization uses the management-by-objectives method, whereby employee performance is based on defined goals. Which of the following statements is true regarding this approach?
- A. It is particularly helpful to management when the organization is facing rapid change.
- B. It is more successful when goal-setting is performed not only by management, but by all team members, including lower-level staff.
- C. It is a more successful approach when adopted by mechanistic organizations.
- D. It is particularly successful in environments that are prone to having poor employer-employee relations.
Answer: D
Explanation:
Explanation
NEW QUESTION # 84
If bonds are initially sold at a discount and the effective-interest method of amortization is used:
- A. Interest expense in the earlier periods will be greater than interest expense in the later periods.
- B. Interest expense will equal the cash interest payment each period.
- C. Interest expense in the earlier periods will be less than interest expense in the later periods.
- D. Interest expense will be less than the cash interest payment each period.
Answer: C
Explanation:
Interest expense equals the carrying amount of the liability at the beginning of the period times the effective interest rate. The carrying amount of the liability equals the face amount of the bond minus the discount. As the discount is amortized over the life of the bond, the carrying amount increases, Consequently, the interest expense increases over the term of the bond.
NEW QUESTION # 85
If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll computer application?
- A. Department numbers.
- B. Net pay
- C. Total debits and total credits.
- D. Hours worked.
Answer: A
Explanation:
The three types of control totals are record counts, financial totals, and hash totals Record counts establish the number of source documents and reconcile it to the number of output records. Financial totals compute dollar totals from source documents e.g.. the total dollar amount of invoices processes) and reconcile them with the output records. Hash totals add numbers on input documents that are not normally added e.g., department numbers), resulting in a total that is "meaningless" for any purpose other than this control.
Batchelder Company has the following invoices in a batch:
NEW QUESTION # 86
During an audit of the payroll system, the internal auditor identifies and documents the following condition:
"Once a user is logged into the system, the user has access to all functionality within the system." What is the most likely root cause for tins issue?
- A. The application owner apparently did not approve the access request during the provisioning process.
- B. The system authorization of the user does not correctly reflect the access rights intended.
- C. The authentication process relies on a simple password only, which is a weak method of authorization.
- D. There was no periodic review to validate access rights.
Answer: B
NEW QUESTION # 87
Which of the following physical security controls is able to serve as both a detective and preventive control?
- A. Video surveillance.
- B. Card key readers.
- C. Authentication logs.
- D. Biometric devices
Answer: A
NEW QUESTION # 88
An entity changes its method of accounting for depreciation during the current year because it believes that the result will be reliable and more relevant information. In its financial statements for the year, how should the entity report the adjustment resulting from the change in accounting policy if the practicability criterion is met?
- A. Included in the determination of profit or loss for the current period as a cumulative effect adjustment.
- B. Not disclosed in the financial statements.
- C. Reported as an adjustment to beginning retained earnings of the earliest period presented.
- D. Disclosed as a separate type of depreciation expense, directly following depreciation expense for the current year.
Answer: C
Explanation:
Under IAS 8, Accounting Policies, Changes in Estimates and Accounting Errors, a voluntary change in accounting policy should be applied retrospectively unless any resulting adjustment that relates to prior periods is not reasonably determinable. Thus, if it is not impracticable to apply the new policy retroactively, the policy should be applied to comparative information as far back as practicable. The entity should determine the cumulative effect on the opening and closing balance sheets for the earliest period for which it is practicable to do so.
NEW QUESTION # 89
When an entity increases its degree of financial leverage DFL), the:
- A. Systematic risk of the entity falls.
- B. Systematic risk of the entity rises.
- C. Equity beta of the entity falls.
- D. Standard deviation of returns on the equity of the entity rises.
Answer: D
Explanation:
The DFL equals the percentage change in FPS earnings available to ordinary shareholders) divided by the percentage change in net operating profit or loss. When the DFL rises, fixed interest charges and the riskiness of the entity rise. As a result, the variability of returns will increase. In other words, the standard deviation of returns of the entity rises.
NEW QUESTION # 90
Which of the following statements about matrix organizations is false?
- A. In a matrix organization, staff under dual command is more likely to suffer stress at work.
- B. In a matrix organization, conflict between functional and product managers may arise.
- C. Matrix organizations offer the advantage of greater flexibility.
- D. Matrix organizations minimize costs and simplify communication.
Answer: D
NEW QUESTION # 91
A cost-volume-profit model developed in a dynamic environment determined that the estimated parameters used may vary between limits. Subsequent testing of the model with respect to all possible values of the estimated parameters is termed:
- A. A time-series study.
- B. A sensitivity analysis.
- C. Statistical hypothesis testing.
- D. Statistical estimation.
Answer: B
Explanation:
After a problem has been formulated into any mathematical model, it may be subjected to sensitivity analysis. Sensitivity analysis is a method for studying the effects of changes in one or more variables on the results of a decision model.
NEW QUESTION # 92
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