Certified Internal IIA-CIA-Part3 Real Exam Questions and Answers FREE Updated on Sep 29, 2021
IIA-CIA-Part3 Ultimate Study Guide - Lead2Passed
NEW QUESTION 67
According to the COSO enterprise risk management (ERM) framework, which of the following is not a typical responsibility of the chief risk officer?
- A. Providing the board with an independent, objective risk perspective on financial reporting.
- B. Defining ERM roles and responsibilities.
- C. Guiding integration of ERM with other management activities.
- D. Establishing risk category definitions and a common risk language for likelihood and impact measures.
Answer: A
NEW QUESTION 68
Which of the following is a cybersecurity monitoring activity that involves assessing the strength of an organization's IT protection?
- A. Boundary defense
- B. Malware defense
- C. Penetration tests
- D. Wireless access controls
Answer: A
NEW QUESTION 69
Which of the following principles are common to both hierarchical and open organizational structures?
1.Employees at all levels should be empowered to make decisions.
2.A supervisor's span of control should not exceed seven subordinates. 3.Responsibility should be accompanied by adequate authority.
4.A
superior cannot delegate the ultimate responsibility for results.
- A. 3 and 4
- B. 1 and 4
- C. 1 and 2
- D. 2 and 3
Answer: A
NEW QUESTION 70
What are revenue tariffs designed to do?
- A. Provide the government with tax revenues.
- B. Develop new export opportunities.
- C. Restrict the amount of a commodity that can be imported in a given period.
- D. Encourage foreign companies to limit the amount of their exports to a particular country.
Answer: A
Explanation:
Revenue tariffs are usually applied to products that are not produced domestically. Their purpose is to provide the government with tax revenue.
NEW QUESTION 71
Managerial performance may be measured in many ways. For example, an internal nonfinancial measure is:
- A. Customer satisfaction.
- B. Manufacturing lead time.
- C. Market share.
- D. Delivery performance.
Answer: B
Explanation:
Feedback regarding managerial performance may take the form of financial and nonfinancial measures that may be internally or externally generated. Moreover, different measures have a long-term or short-term emphasis. Examples of internal nonfinancial measures are product quality, new product development time, and manufacturing lead time cycle time).
NEW QUESTION 72
Using an EOQ analysis (assuming a constant demand), it is determined that the optimal order quantity is 2.500. The company desires a safety stock of 500 units. A 5-day lead time is needed for delivery. Annual inventory holding costs equal 25% of the average inventory level. It costs the company US $4 per unit to buy the product, which it sells for US $8. It costs the company US $150 to place a detailed order, and the monthly demand for the product is 4,000 units.
Total inventory ordering costs per year equal:
- A. US$2,400
- B. US$2,880
- C. US$3,600
- D. US$1,250
Answer: B
Explanation:
Total annual demand is 48.000 units (4,000 per month x 12). Hence, total annual ordering costs equal US $2,880 [US $150 cost per order x (48,000 units + 2,500 EOQ)].
NEW QUESTION 73
What ensures that an entity is complying with the documented quality management system (QMS) procedures and ISO 9000 standards?
- A. Management commitment.
- B. An internal audit system.
- C. Onsite inspections by an external auditor.
- D. The registrar.
Answer: B
Explanation:
An important requirement of the ISO 9000 standards is an internal audit system. Internal audits ensure that the entity is complying with the documented QMS procedures and ISO 9000 standards.
NEW QUESTION 74
What should the company focus on to achieve quality more economically?
- A. External failure costs.
- B. Appraisal costs.
- C. Prevention costs.
- D. Internal failure costs.
Answer: C
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.
NEW QUESTION 75
A company has several departments that conduct technical studies and prepare reports for clients. Recently, there have been long delays in having these reports copied at the company's centralized copy center because of the dramatic increase in business. Management is considering decentralizing copy services to reduce the turnaround and provide clients with timely reports. An appropriate technique for minimizing turnaround time and the cost of providing copy services is:
- A. Regression analysis.
- B. Linear programming.
- C. Game theory.
- D. Queuing theory.
Answer: D
Explanation:
Two basic costs are involved in queuing (waiting-line) models: (1) the cost of providing service (including facility costs and operating costs) and (2) the cost of idle resources waiting in line. The latter may be a direct cost if paid employees are waiting, or an opportunity cost in the case of waiting customers. The objective of queuing theory is to minimize the total cost of the system, including both service and waiting costs, for a given rate of arrivals. This minimization occurs at the point at which cost of waiting is balanced by the cost of providing service. This company wishes to reduce the total of waiting costs (turnaround time) and the cost of copy services.
NEW QUESTION 76
An accounting change requiring retrospective treatment is a change in:
- A. A provision for warranty costs.
- B. Depreciation methods from straight-line to diminishing-balance.
- C. The residual value of equipment.
- D. An accounting policy inseparable from a change in an accounting estimate.
Answer: B
Explanation:
A change in depreciation methods is reported as a change in accounting policy. A voluntary change in accounting policy is applied retrospectively unless it is impracticable. Retrospective application means adjusting the opening balances of equity for the first period presented and restating other comparative amounts.
NEW QUESTION 77
Which of the following activities most significantly increases the risk that a bank will make poor-quality loans to its customers?
- A. The bank's loan documentation may not meet the government's disclosure requirements.
- B. Fees paid by the borrower at the time of the loan may not be deposited in a timely manner.
- C. Loan officers may override the lending criteria established by senior management.
- D. Borrowers may not sign all required mortgage loan documentation.
Answer: C
NEW QUESTION 78
The use of teams in total quality management (TQM) is important because:
- A. The use of teams eliminates the need for supervision, thereby allowing a company to become leaner and more profitable.
- B. Well-managed teams can be highly creative and are able to address complex problems better than individuals can.
- C. Employee motivation is higher for team members than for individual contributors.
- D. Teams are quicker to make decisions, thereby helping to reduce cycle time.
Answer: B
Explanation:
Teams can use the diverse knowledge and skills of all team members. Employee involvement means training and empowering employees to harness their creativity for problem solving. Quality control circles are used to obtain input from employees and to locate the best perspective on problem solving.
NEW QUESTION 79
The order costs associated with inventory management include:
- A. Quantity discounts lost, storage costs, handling costs, and interest on capital invested.
- B. Insurance costs, purchasing costs, shipping costs, and obsolescence.
- C. Purchasing costs, shipping costs, setup costs, and quantity discounts lost.
- D. Obsolescence, setup costs, quantity discounts lost, and storage costs.
Answer: C
Explanation:
Order costs include purchasing costs, shipping costs, setup costs for a production run, and quantity discounts lost.
NEW QUESTION 80
The economic order quantity can be calculated using the following formula:
Which of the following describes how the optimal order size will change if the annual demand increases by 36 percent?
- A. Increase by about 7 percent.
- B. Decrease by about 17 percent.
- C. Decrease by about 7 percent.
- D. Increase by about 17 percent.
Answer: D
NEW QUESTION 81
The market value of an entity's outstanding ordinary shares will be higher, everything else equal, if investors:
- A. Expect lower dividend growth.
- B. Have longer expected holding periods.
- C. Have shorter expected holding periods.
- D. Have a lower required return on equity.
Answer: D
Explanation:
The dividend growth model is used to calculate the cost of equity. The simplified formula is R is
The required rate of return, D is the next dividend, P is the share's price, and G is the growth rate in earnings per share. The equation is also used to determine the share price.
Thus, when investors have a lower required return on equity, the denominator is smaller, which translates into a higher market value.
NEW QUESTION 82
Regardless of whether a company develops, buys, leases, or pays for the use of the software for EDI transmissions, internal audit should be responsible for evaluating whether the software:
- A. Meets business objectives.
- B. Was developed in a controlled environment.
- C. Is backed up adequately to permit recovery.
- D. Was acquired with adequate review by legal counsel.
Answer: A
Explanation:
An EDI application should meet business objectives and satisfy user and control requirements. The internal auditors should consider the organization's important EDI applications because they represent significant risk exposures and control problems. This role is within the scope of work of the internal auditors, who are charged with examining and evaluating internal control and the quality of performance in carrying out assigned responsibilities.
NEW QUESTION 83
Which of me following application controls is the most dependent on the password owner?
- A. Password lockout
- B. Password selection
- C. Password aging
- D. Password rotation
Answer: B
NEW QUESTION 84
Which of the following statements is correct regarding corporate compensation systems and related bonuses?
1. A bonus system should be considered part of the control environment of an organization and should be considered in formulating a report on internal control.
2. Compensation systems are not part of an organization's control system and should not be reported as such.
3. An audit of an organization's compensation system should be performed independently of an audit of the control system over other functions that impact corporate bonuses.
- A. 3 only
- B. 2 and 3 only
- C. 2 only
- D. 1 only
Answer: D
NEW QUESTION 85
Which of me following statements is most accurate concerning me management and audit of a web server?
- A. The number of ports and protocols allowed to access the web server should be maximized
- B. The simple mail transfer protocol (SMTP) should be operating under me most privileged accounts
- C. Secure protocols for confidential pages should be used instead of clear-text protocol such as HTTP or FTP
- D. The file transfer protocol (FTP) should always be enabled
Answer: C
NEW QUESTION 86
On December 31, Year 1, Health entities reported a US $150,000 warranty expense in its income statement. The expense was based on actual warranty cost of US$30,000 in Year 1 and expected warrant costs of US $35,000 in Year 2, US $40,000 in Year 3, and US $45,000 in Year 4. For tax purposes, warrant costs are not deductible until paid. At December 31, Year 1, deferred taxes should be based on a:
- A. US $ 120,000 deductible temporary difference
- B. US $ 150,000 deductible temporary difference
- C. US $ 120,000 taxable temporary difference
- D. US $ 150,000 taxable temporary difference
Answer: A
Explanation:
At year-end year 1, Health entities should report a US $120,000 warranty liability in its balance sheet. The warranty liability is equal to the US $150,000 warranty expense minus the US $30,000 warrant cost actually incurred in Year 1. Because warranty costs are not deductible until paid, the tax base of the warranty liability is 0. The result is a US $120,000 temporary difference US$120,000 carrying amount tax base). When the liability is settled through the actually incurrence of warranty costs, the amounts will be deductible. Thus, the temporary difference should be classified as a deductible temporary difference.
NEW QUESTION 87
Early in its fiscal year, Starr purchased 1,000 shares of Pack ordinary shares for US $54,000. In the same transaction, Starr acquired 2,000 detachable share purchase warrants. Two of the warrants are required to purchase one additional Pack ordinary share. The market price without the warrants was US $49 per share. The market price of the warrants was US $3.50 per warrant. Starr sold 50% of the warrants several weeks later. If the proceeds received by Starr equaled US $4,000, it recognized a realized gain of:
- A. US $3,000
- B. US $500
- C. US $0
- D. US $625
Answer: D
Explanation:
The recipient of share purchase warrants should allocate the carrying amount of the shares owned between those shares and the rights based on their relative fair values.
Thus, the amounts to be allocated to the ordinary shares and warrants are US $47,250{($49 x 1,000) - [($49 x 1,000) +$3.50 x 2,000)]} x $54,000) and US $6,750$54,000
-$47,250), respectively. The realized gain is therefore US $625 [$4,000 -$6,750 x 50%)]. An entity has issued 1.000 ordinary shares with a par value of US $10, and its credit balance in retained earnings is US $5,000. Two proposals are under consideration. The first is a share split giving each shareholder Mro new shares for each share formerly held. The second is to declare and distribute a 10% share dividend.
NEW QUESTION 88
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