IIA-CIA-Part3 Dumps PDF New [2021] Ultimate Study Guide
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IIA IIA-CIA-Part3 Exam Syllabus Topics:
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NEW QUESTION 150
If a corporation's disaster recovery plan requires fast recovery with little or no downtime, which of the following backup sites should it choose?
- A. Hot site.
- B. Warm site.
- C. Cold site.
- D. Quick site.
Answer: A
Explanation:
A company uses a hot site backup when fast recovery is critical. The hot site includes all software, hardware, and other equipment necessary for a company to carry out operations. Hot sites are expensive to maintain and may be shared with other organizations with similar needs.
NEW QUESTION 151
During a review of a web-based application used by customers to check the status of their bank accounts, it would be most important for the internal auditor to ensure that:
- A. Account balance information is encrypted in the database.
- B. Access to read application logs is restricted to authorized users.
- C. Sensitive data, such as account numbers, are submitted using encrypted communications.
- D. The web server used to host the application is located in a physically secure area.
Answer: C
NEW QUESTION 152
Organizations use matrix management to accomplish which of the following?
- A. To focus better on a single market.
- B. To improve the chain of command.
- C. To strengthen corporate headquarters.
- D. To increase lateral communication.
Answer: D
NEW QUESTION 153
An audit of an entity records for its first year of operations determined that the following errors v. re made at the balance sheet date: Failed to accrue US $50,000 interest expense.
Failed to record depreciation expense on office equipment of US $80.000, Failed to amortize prepaid rent expense of US $100,000 Failed to defer recognition of prepaid advertising expense of US $60,000. The net effect of these errors was to overstate profit by:
- A. US$290,000
- B. US$230,000
- C. US$130,000
- D. US$170,000
Answer: D
Explanation:
The computation is as follows:
NEW QUESTION 154
A domestic entity and a foreign entity purchased the same stock on the foreign stock exchange and held the stock for 1 year. The value of the foreign currency weakened against the domestic currency over this period. Comparing the returns of the two companies, what will be the domestic entity's return?
- A. Higher.
- B. Higher in the short-run but lower in the long-run.
- C. The same.
- D. Lower.
Answer: D
Explanation:
The returns on the stock are presumably paid in foreign currency. Hence, the change in the value of the foreign currency relative to the domestic currency does not affect the foreign entity's return. However, the weakening of the foreign currency reduces the amount of domestic currency it will buy, and the domestic entity's return in domestic currency is correspondingly reduced.
NEW QUESTION 155
While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the life cycle?
- A. Maturity stage.
- B. Introduction stage.
- C. Decline stage.
- D. Growth stage.
Answer: D
Explanation:
During the growth stage, the opportunity for cost reductions is at its maximum because production volume is increasing at a high rate. Thus, fixed costs are being spread over more units of production, and the benefits of the learning curve are being realized.
NEW QUESTION 156
Your company (Company Y) has decided to enter the European market with one of its products and is now considering three advertising strategies. This market currently belongs to Company X. Company X is aware that your company is entering the market and is itself considering steps to protect its market. An analyst for your company has identified three strategies Company X might develop and has shown the payoffs for each in the tables below.
The analyst has formulated this problem as a:
- A. Game against nature.
- B. Zero-sum game.
- C. Cooperative game.
- D. Prisoner's dilemma.
Answer: B
Explanation:
Game theory is a mathematical approach to decision making when confronted with an enemy or competitor. Games are classified according to the number of players and the algebraic sum of the payoffs. In a two-player game, if the payoff is given by the loser to the winner, the algebraic sum is zero, and the game is a zero-sum game; if it is possible for both players to profit, the game is a positive-sum game. In this situation, the sum of the payoffs for each combination of strategies is zero. For example, if X takes no action and Y chooses limited advertising, X's payoff is -1 and Ys is 1.
NEW QUESTION 157
Which of the following is the most likely reason an organization may decide to undertake a stock split?
- A. To keep shareholders' equity constant.
- B. To increase shareholders' equity.
- C. To enhance the stock liquidity.
- D. To keep stock price constant.
Answer: C
NEW QUESTION 158
An organization engages in questionable financial reporting practices due to pressure to meet unrealistic performance targets. Which internal control component is most negatively affected?
- A. Control activities.
- B. Risk assessment.
- C. Monitoring.
- D. Control environment.
Answer: D
NEW QUESTION 159
An organization has a complex systems infrastructure consisting of multiple internally developed, off the shelf, and purchased but significantly customized applications. Some of these applications share databases or process data that is used by another stand-alone application, and interfaces have been written to move data between these applications as needed through batch processing Which of the following situations presents the greatest risk exposure given this environment?
- A. Documentation of each system and its interactions, interfaces, and dependencies with other systems and databases is not gathered and maintained.
- B. The implementation of a major update for a key application is delayed until any potential interdependencies are identified and analyzed.
- C. The job scheduling tool frequently malfunctions, causing scheduled jobs not to run. An error message is sent to IT personnel when a job fails.
- D. Batch processing jobs include key financial data that is not posted to the accounting system until the next day. preventing real-time queries.
Answer: A
NEW QUESTION 160
In recording transactions, which of the following best describes the relation between expenses and losses?
- A. Losses are extraordinary charges to income, whereas expenses are ordinary charges to income.
- B. Losses are material items, whereas expenses are immaterial items.
- C. Losses are expenses that may or may not arise in the course of ordinary activities.
- D. Expenses can always be prevented, whereas losses can never be prevented.
Answer: C
Explanation:
Expenses are defined as "decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrence's of liabilities that result in decreases in equity, other than those relating to distributions to equity participants."
Expenses include losses. Thus, losses are not treated as separate elements. Expenses include items arising in the course of ordinary activities. Losses meet the definition of expenses but may or may not occur in the course of ordinary activities. For example, losses may result from the sale of noncurrent assets or from natural disasters.
NEW QUESTION 161
A large hospital has an existing contract with a vendor in another country to provide software support and maintenance of the hospital's patient records information system. From the hospital management's perspective, which of the following controls would be most effective to address privacy risks related to this outsourcing arrangement^
- A. Conduct periodic reviews of the privacy policy to ensure that the existing policy meets current legislation requirements in both regions.
- B. Develop an incident monitoring and response plan to track breaches from internal and external sources
- C. Include a "right to audit" clause in the contract and impose detailed security obligations on the outsourced vendor
- D. Implement mandatory privacy training for management to help with identifying privacy risks when outsourcing services
Answer: A
NEW QUESTION 162
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 linear regression analysis relating the cost of production to the cost of goods sold.
- 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 classical variables sampling estimate of cost of production per department, with the sample stratified by the dollar value of each product produced.
- D. 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.
Answer: D
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.
NEW QUESTION 163
The effective-interest method and the straight-line method of amortizing a bond discount differ in that the effective-interest method results in:
- A. Escalating annual interest expense over the term of the bonds.
- B. Shrinking annual interest expense over the term of the bonds.
- C. Constant annual interest expense over the term of the bonds.
- D. Higher total interest expense over the term of the bonds.
Answer: A
Explanation:
Under the effective-interest method, interest expense for each period equals the effective interest rate times the carrying value of the bond issue. As the discount is amortized, the carrying value rises and interest expense increases.
NEW QUESTION 164
Before authorizing payment of an EDI invoice, the computer automatically compares the invoice with the purchase order and receiving report data. When the system was being developed, the auditor reviewed the payment authorization program and made recommendations. Which one of the following was most likely recommended by the auditor for the situation in which the quantity invoiced is greater than the quantity received?
- A. Pay the amount billed and adjust the inventory for the difference.
- B. Prepare an exception report.
- C. Authorize payment of the full invoice, but maintain an open purchase order record for the missing goods.
- D. Return the invoice to the vendor.
Answer: B
Explanation:
An exception report error listing) should be issued so that company personnel can investigate the discrepancy, determine its cause, and take appropriate corrective action.
NEW QUESTION 165
Which of the following does not provide operational assurance that a computer system is operating properly?
- A. Making system changes.
- B. Performing a system audit.
- C. Testing policy compliance.
- D. Conducting system monitoring.
Answer: A
NEW QUESTION 166
Which of the following is not a criterion for hedge accounting?
- A. A forecast transaction subject to a cash flow hedge must be highly probable.
- B. The hedge is expected to be highly effective and can be reliably measured.
- C. The hedge is assessed only at its inception.
- D. The hedge is formally designated and documented at its inception.
Answer: C
Explanation:
An entity can mitigate a possible loss by using hedges to offset risk. Thus, an entity is said to hedge its financial positions. One of the criteria for hedge accounting is that the hedge be continually assessed and determined to have been effective. Thus it is not assessed only at its inception.
NEW QUESTION 167
If a system does not have a mainframe computer or a file server but does processing within a series of personal computers, the network is a(n):
- A. Offline processing system.
- B. Peer-to-peer system.
- C. Expert system.
- D. Direct access system.
Answer: B
Explanation:
A local area network is a user-controlled network that operates without the assistance of a common carrier. It can have several personal computers attached to a host computer, can be linked as part of several LANs that may or may not communicate with a host computer, or can be connected together but not connected to a host computer stand alone). A peer-to-peer network operates without a mainframe or file server.
NEW QUESTION 168
A financial statement includes all of the following items: profit. depreciation, operating activities, and financing activities. What financial statement is this?
- A. Statement of changes in equity.
- B. Income statement.
- C. Balance sheet.
- D. Statement of cash flows.
Answer: D
Explanation:
A statement of cash flows is a required financial statement. It provides information about cash receipts and payments by reporting the cash effects of an enterprise's operating, investing, and financing activities. Related disclosures report the effects of noncash investing and financing activities. If the statement is presented using the indirect method, it will reconcile profit or loss to net cash from used in operating activities. Depreciation, a noncash expense, is included in this presentation.
NEW QUESTION 169
The sales manager for a builder of custom yachts developed the following conditional table for annual production and sales:
According to the table, how many yachts should be built?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: C
Explanation:
To achieve the maximum expected profit. 30 yachts should be built. For each level of production, multiply the probability of demand by the expected profit. The computation for the maximum is: 0.1 (-US $10) + 0.2($10) + 0.5($30) + 0.2($30) = US $22.
NEW QUESTION 170
A situation in which companies conspire to restrict output and set artificially high prices is known as:
- A. Collusive pricing.
- B. Predatory pricing.
- C. Market-based pricing.
- D. Price discrimination.
Answer: A
Explanation:
Collusive pricing is illegal. It involves two or more competitors conspiring to restrict output and charge artificially high prices.
NEW QUESTION 171
Under throughput costing, the only cost considered to be truly variable in the short run is:
- A. Direct materials.
- B. All manufacturing costs are considered variable.
- C. Manufacturing overhead.
- D. Direct labor.
Answer: B
Explanation:
Throughput costing, also called super variable costing, recognizes only direct materials costs as being truly variable and thus relevant to the calculation of throughput margin.
NEW QUESTION 172
The cost to enter a foreign market would be highest in which of the following methods of global expansion?
- A. Joint ventures.
- B. Exporting.
- C. Licensing.
- D. Overseas production.
Answer: D
NEW QUESTION 173
When assessing application controls, which one of the following input controls or edit checks is most likely to be used to detect a data input error in the customer account number field?
- A. Limit check.
- B. Validity check.
- C. Control total.
- D. Hash total.
Answer: B
Explanation:
Validity checks are tests of identification numbers or transaction codes 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.
NEW QUESTION 174
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