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Passing the IIA-CIA-Part3 exam is a significant achievement for internal auditors. It demonstrates that they have a solid understanding of business concepts and how they relate to internal auditing. This knowledge is essential for internal auditors, as it enables them to identify risks and opportunities within an organization and make informed recommendations to management. Business Knowledge for Internal Auditing certification also demonstrates a commitment to professional development and a willingness to invest in one's career.
NEW QUESTION # 28
Which one of the following is not a characteristic of an innovative manufacturing company?
- A. Emphasis on continuous improvement.
- B. Responsiveness to the changing manufacturing environment.
- C. Improved customer satisfaction through product quality.
- D. Emphasis on existing products.
Answer: D
Explanation:
Innovative companies are customer driven. Because customers demand ever better quality and competitors are attempting to provide that quality, continuous improvement called kaizen by the Japanese) is essential for such companies. Thus, the flaw of innovative products and services must be continuous. Simply emphasizing existing products is not an effective strategy for most organizations.
NEW QUESTION # 29
Which of the following is a likely result of outsourcing?
- A. Increased dependence on suppliers.
- B. Increased importance of market strategy.
- C. Decreased focus on costs
- D. Decreased sensitivity to government regulation
Answer: D
NEW QUESTION # 30
On a balanced scorecard, which is more of an internal process measure than an external based measure?
- A. Market share.
- B. Profitability.
- C. Customer satisfaction.
- D. Cycle time.
Answer: D
Explanation:
Cycle time is the manufacturing time to complete an order. Thus, cycle time is strictly related to internal processes. Profitability is a combination of internal and external considerations.
Customer satisfaction and market share are related to how customers perceive a product and how competitors react.
NEW QUESTION # 31
According to IIA guidance, which of the following is a typical risk associated with the tender process and contracting stage of an organization's IT outsourcing life cycle?
- A. The process is not sustained and is not optimized as planned.
- B. There is a lack of alignment to organizational strategies.
- C. There is increased potential for loss of assets.
- D. The operational quality is less than projected.
Answer: C
NEW QUESTION # 32
An organization prepares a statement of privacy to protect customers' personal information. Which of the following might violate the privacy principles?
- A. The organization performs regular maintenance on customers' personal information.
- B. Customers can access and update personal information when needed.
- C. The organization retains customers' personal information indefinitely.
- D. Customers reserve the right to reject sharing personal information with third parties.
Answer: C
NEW QUESTION # 33
Preventing someone with sufficient technical skill from circumventing security procedures and making changes to production programs is best accomplished by:
- A. Providing suitable segregation of duties.
- B. Comparing production programs with independently controlled copies.
- C. Running test data periodically.
- D. Reviewing reports of jobs completed.
Answer: A
Explanation:
When duties are separated, users cannot obtain a detailed knowledge of programs and computer operators cannot gain unsupervised access to production programs.
NEW QUESTION # 34
A principal advantage of an ERP system is:
- A. Centralization of data.
- B. Separate data updating for different functions.
- C. Program-data dependence.
- D. Data redundancy.
Answer: A
Explanation:
An advantage of an ERP system is the elimination of data redundancy through the use of a central database. In principle, information about an item of data is stored once, and all functions have access to it. Thus, when the item such as a price) is updated, the change is effectively made for all functions. The result is reliability data integrity).
NEW QUESTION # 35
Market-skimming pricing strategies could be appropriate when:
- A. The costs of producing a small volume are low
- B. Competitors can easily enter the market.
- C. The product is of poor quality.
- D. No buyers want the product at a high price.
Answer: D
Explanation:
Market-skimming pricing is used when a new product is introduced at the highest price possible given the benefits of the product. For market skimming to work, the product must appear to be worth its price, the costs of producing a small volume cannot be so high that they eliminate the advantage of charging more, and competitors cannot enter the market and undercut the price.
NEW QUESTION # 36
Which of the following factors is considered a disadvantage of vertical integration?
- A. It may limit the organization's ability to differentiate the product.
- B. It may not reduce the bargaining power of suppliers.
- C. It may lead to limited control of proprietary knowledge.
- D. It may reduce the flexibility to change partners.
Answer: D
NEW QUESTION # 37
All of the following are possible explanations for a significant unfavorable material efficiency
variance except:
- A. An inadequately trained and supervised labor force.
- B. Production of more units than planned for in the master budget.
- C. A large number of rush orders.
- D. Cutbacks in preventive maintenance.
Answer: B
NEW QUESTION # 38
Which of the following attributes of data is the most significantly impacted by the internet of things?
- A. Structuration
- B. Veracity
- C. Velocity
- D. Normalization
Answer: C
NEW QUESTION # 39
ABC Manufacturing Company ships merchandise U s $40.000 on consignment to XYZ Stores. ABC pays US $3,000 of freight costs to a transport company, and XYZ pays US $2,000 for local advertising costs that are reimbursable from ABC. By the end of the period the three, fourths of the consigned merchandise has been sold for US $50,000 cash. XYZ notifies ABC of the sales, retains a 10% commission and the paid advertising costs and remits the cash due ABC. Select the journal entry that appropriately records the notification of sale and the receipt of cash by ABC.
- A. Cash US $40,000 Revenue from consignment sales US $50,000
- B. Cash US $40,000 Advertising expense 2,000 Commission expense 5,000 Freight expense 3,000 Revenue from consignment sales US $50,000
- C. Cash US $43,000 Advertising expense 2,000 Commission expense 5,000 Revenue from consignment sales US $50,000
- D. Cash US $40,000 Commission expense 5,000 Revenue from consignment sales US $50,000
Answer: C
Explanation:
ABC debits the cash received US $43,000 [$50,000 sales - $2,000 advertising -$50,000 $10) sales commission]. The advertising and commission expenses are debited for $2,000 and $5,000, respectively. Finally, US $50,000 of gross revenue is credited.
NEW QUESTION # 40
Which of me following storage options would give the organization the best chance of recovering data?
- A. Encrypted physical copies of the data are stored separately from their encryption keys and both are held in secure locations a few hours away from me organization
- B. Encrypted copies of the data are stored in a separate secure location a few hours away while the encryption keys are stored at the organization and are readily available
- C. Encrypted physical copies of the data and their encryption keys are stored together at the organization and are readily available upon request
- D. Encrypted reports on usage and database structure changes are stored on a cloud-based. secured database that is readily accessible
Answer: B
NEW QUESTION # 41
Overtime conditions and pay were recently set by the human resources department. The production department has just received a request for a rush order from the sales department. The production department protests that additional overtime costs will be incurred as a result of the order. The sales department argues that the order is from an important customer. The production department processes the order. To control costs, which department should never be charged with the overtime costs generated as a result of the rush order?
- A. Sales department
- B. Shared by production department and sales department.
- C. Human resources department.
- D. Production department.
Answer: C
Explanation:
The sales department should be responsible for the overtime costs because it can best judge whether the additional cost of the rush order is justified. The production department also may be held responsible for the overtime costs because charging the full overtime cost to the sales department would give the production department no incentive to control these costs. However, the human resources department would never be charged with the overtime costs because it has no effect on the incurrence of production overtime.
NEW QUESTION # 42
In an organization that produces chocolate, the leadership team decides that the organization will open a milk production facility for its milk chocolate. Which of the following strategies have the organization chosen?
- A. Focus
- B. Unrelated diversification.
- C. Vertical integration.
- D. Differentiation
Answer: D
NEW QUESTION # 43
Refer to the exhibit.
If the profit margin of an organization decreases, and all else remains equal, which of the following describes how the "Funds Needed" line in the graph below will shift?
- A. The "Funds Needed" line will remain pointed upward, but will become more steep.
- B. The "Funds Needed" line will point downward with an extreme slope.
- C. The "Funds Needed" line will remain pointed upward, but will become less steep.
- D. The "Funds Needed" line will point downward with a minimal slope.
Answer: A
NEW QUESTION # 44
Which of the following statements is true regarding the term "flexible budgets" as it is used in accounting?
- A. The term describes budgets that exclude fixed costs.
- B. Flexible budgets project data for different levels of activity.
- C. The term is a red flag for weak budgetary control activities.
- D. Flexible budgets exclude outcome projections, which are hard to determine, and instead rely on the most recent actual outcomes.
Answer: B
NEW QUESTION # 45
The internal auditor of a bank has developed a multiple regression model that has been used for a number of years to estimate the amount of interest income from commercial loans. During the current year, the auditor applies the model and discovers that the r2 value has decreased dramatically, but the model otherwise seems to be working.
Which of the following conclusions is justified by the change?
- A. Regression analysis is no longer an appropriate technique to estimate interest income.
- B. Some new factors not included in the model are causing interest income to change.
- C. Changing to a cross-sectional regression analysis should cause r2to increase.
- D. A linear regression analysis would increase the model's reliability.
Answer: B
Explanation:
The coefficient of determination (r2) is the amount of variation in the dependent variable (interest income) that is explained by the independent variables. In this case, less of the change in interest income is explained by the model. Thus, some other factor must be causing interest income to change. This change merits audit investigation.
NEW QUESTION # 46
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. Maximum likelihood technique.
- B. Delphi technique.
- C. Optimizing of expected payoffs.
- D. Least squares technique.
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.
NEW QUESTION # 47
Under a defined contribution pension plan<list A> is reported on the balance sheet only if the amount organization has contributed to the pension trust is<list B> the amount required.
- A. Option B
- B. Option D
- C. Option A
- D. Option C
Answer: A
Explanation:
Under a defined contribution plan, the entity reports on the balance sheet only contribution to the pension trust is greater than the defined, required contribution.
NEW QUESTION # 48
The ending inventory balance under the first-in, first-out-FIFO) method of inventory valuation is:
- A. US $3,050
- B. US $3,150
- C. US $3,230 D US $3.430
Answer: B
Explanation:
Under the FIFO method, the 1.700 units of ending inventory are valued at the most recent prices. Ending inventory is assumed to include 1.000 units purchased November 24. 500 units purchased May 5. and 700 units purchased January 12. Hence, the ending inventory is US $3.150 [(1 .000 x $1 65) +500 $2.21') +700 x $2.00)].
Additional Information
The entity had no opening inventory.
The Items sold on March 15 were purchased on January 12.
The items sold on July 3 war purchased on May 5
NEW QUESTION # 49
An electronic meeting conducted between several parties at remote sites is referred to as:
- A. Teleprocessing.
- B. Interactive processing.
- C. Telecommuting.
- D. Teleconferencing.
Answer: D
Explanation:
Conducting an electronic meeting among several parties at remote sites is teleconferencing. It can be accomplished by telephone or electronic mail group communication software. Videoconferencing permits the conferees to see each other on video screens. The practice has grown in recent years as companies have attempted to cut their travel costs.
NEW QUESTION # 50
Which of the following questions is best associated with the safeguards and controls risk element?
- A. What is the potential financial impact of the occurrence of an uncertain event?
- B. How often might an uncertain event occur?
- C. What can be done to prevent and avoid, mitigate, and detect risks and provide notification?
- D. What could happen that would adversely affect the organization's ability to achieve its objectives and execute its strategies?
Answer: C
Explanation:
For the purposes of management, there are seven key questions that can serve to identify organizational risk and target potential ways to control or mitigate the exposures. These questions, along with the risk elements associated with them in brackets), include the following:
What could happen that would adversely affect the organization's ability to achieve its objectives and execute its strategies? [Threat Events]
If it happens, what is the potential financial impact? [Single Loss Exposure Value]
How often might it happen? [Frequency]
How probable are the answers to the first three questions? [Uncertainty]
What can be done to prevent and avoid, mitigate, and detect risks and provide notification? [Safeguards and Controls]
How much will it cost? [Safeguards and Control Costs]
How efficient would that be? [Cost/Benefit or R01 Analysis]
NEW QUESTION # 51
According to IIA guidance on IT, which of the following controls the routing of data packets to link computers?
- A. Network.
- B. Operating system
- C. Application program code
- D. Control environment
Answer: A
NEW QUESTION # 52
Which of the following will allow a manufacturer with limited resources to maximize profits?
- A. Regression analysis.
- B. Exponential smoothing.
- C. The Delphi technique.
- D. Linear programming.
Answer: D
Explanation:
Linear programming is a technique used to optimize an objective function, that is, to maximize a revenue or profit function or to minimize a cost function, subject to constraints, e.g., limited scarce) resources or minimum/maximum levels of production, performance, etc.
In business, linear programming is used for planning resource allocations. Managers are often faced with problems of selecting the most profitable or least costly way to use available resources.
NEW QUESTION # 53
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