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IIA-CIA-Part3 exam is designed to test the candidate's knowledge of business concepts and their application to the internal audit process. IIA-CIA-Part3 exam covers various topics such as business acumen, financial management, risk management, and strategic planning. IIA-CIA-Part3 exam is computer-based and consists of 100 multiple-choice questions, which must be completed within 2.5 hours.
IIA-CIA-Part3 (Business Knowledge for Internal Auditing) Certification Exam is a professional certification program offered by the Institute of Internal Auditors. It is designed to evaluate the knowledge and skills of internal auditors in the areas of business, finance, and management. Business Knowledge for Internal Auditing certification is highly valued by employers and is recognized as a mark of excellence in the field of internal auditing. Passing the exam is an important step in the career progression of internal auditors and demonstrates a commitment to ongoing professional development.
NEW QUESTION # 41
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. Sensitive data, such as account numbers, are submitted using encrypted communications.
- B. Access to read application logs is restricted to authorized users.
- C. Account balance information is encrypted in the database.
- D. The web server used to host the application is located in a physically secure area.
Answer: A
NEW QUESTION # 42
The best evidence that contingency planning is effective is to have:
- A. Comprehensive documentation of the plan.
- B. Signoff on the plan by the internal audit activity.
- C. Successful testing of the plan.
Answer: C
NEW QUESTION # 43
In an effort to increase business efficiencies and improve customer service offered to its major trading partners, management of a manufacturing and distribution company established a secure network, which provides a secure channel for electronic data interchange between the company and its partners. Which of the following network types is illustrated by this scenario?
- A. A value-added network.
- B. A local area network.
- C. A wide area network.
- D. A metropolitan area network.
Answer: A
NEW QUESTION # 44
Program documentation is a control designed primarily to ensure that:
- A. Programs are kept up to date and perform as intended.
- B. Programmers have access to production programs.
- C. Programs do not make mathematical errors.
- D. No one has made use of the computer hardware for personal reasons.
Answer: A
Explanation:
Complete, up-to-date documentation of all programs and associated operating procedures is necessary for efficient operation of a computer installation. Maintenance of programs is important to provide for continuity and consistency of data processing services to users. Program documentation the program run manual) consists of problem statements, systems flowcharts, operating instructions, record layouts, program flowcharts, program listings, test data, and approval and change sheets.
NEW QUESTION # 45
When an organization is choosing a new external auditor, which of the following is the most appropriate role for the chief audit executive to undertake?
- A. Determine the selection criteria.
- B. Review and acquire the external audit service.
- C. Identify regulatory requirements to be considered.
- D. Assess the appraisal and actuarial services.
Answer: C
NEW QUESTION # 46
Refer to the exhibit.
Presented below are partial year-end financial statement data (000 omitted from dollar amounts) for companies A and B:
If company A has a quick ratio of 2:1, then it has an accounts receivable balance of:
- A. $500
- B. $100
- C. $300
- D. $200
Answer: B
NEW QUESTION # 47
If the government were to increase corporate tax rates, after-tax cost-volume-profit relationships for individual firms would change as follows:
- A. Br eakeven points would increase.
- B. Br eakeven points would decrease.
- C. There would be no change in the breakeven points.
- D. There would be no change whatsoever in cost-volume-profit relationships.
Answer: C
Explanation:
The firm owes no tax if it does not earn a profit. At the breakeven point, there is no profit.
Thus, a tax increase would have no effect on a firm's breakeven point, which is calculated by dividing fixed costs by the contribution margin ratio. The contribution margin equals sales revenues minus total variable costs. A business needs a computer application that can be either other related data follows Computer time is charged using developed internally or purchased. Suitable software from a predetermined rates. The organization has sufficient excess vendor costs US $29,000. Minor modifications and testing can be conducted by the systems staff as part of their regular workload. If the software is developed internally, a systems analyst would be assigned full time, and a contractor would assume the analyst's responsibilities. 1 he hourly rate for the regular analyst is US $25. The hourly rate for the contractor is US $22. The contractor would occupy an empty office.
The office has 100 square feet, and occupancy cost is US $45 per square foot computer capacity for either software development or modification/testing of the purchase software.
NEW QUESTION # 48
If the bank uses the minimax regret criterion for selecting the location of the branch, it will select:
- A. L2.
- B. L5.
- C. L3.
- D. L1.
Answer: A
Explanation:
Under the minimax regret criterion, the decision maker selects the choice that minimizes the maximum regret (opportunity cost). The maximum regret for each location is determined from the opportunity loss matrix.
NEW QUESTION # 49
Which of the following security controls focuses most on prevention of unauthorized access to the power plant?
- A. Requests for additional access rights are sent for approval and validation by direct supervisors
- B. An offboarding procedure is initiated monthly to determine redundant physical access rights
- C. Logs generated by smart locks are automatically scanned to identify anomalies in access patterns
- D. Automatic notifications are sent to a central security unit when employees enter the premises during nonwork hours
Answer: A
NEW QUESTION # 50
If a manufacturer has established a limit on the number of defects that are tolerable in the final assembly of its product, which of the following quality control procedures should be employed?
I. Inspect completed goods for compliance with established tolerances.
II. Review sales returns for defects not detected during the final inspection process.
III. Compare materials and machinery specifications with original product designs.
IV.
Establish a quality circle that includes management and subordinates to discuss labor efficiency.
- A. I, III, and IV
- B. I, II, and III
- C. II and III only
- D. III and IV only
Answer: B
Explanation:
Inspecting goods after completion of the production process and counting defective goods returned by customers are product quality procedures. They measure the level of product conformance with customer expectations. Verifying materials and machinery specifications are process quality procedures because they emphasize the inputs to the process and the process itself.
NEW QUESTION # 51
The following data on variables x and y was collected from June to October.
The correlation coefficient between variables x and y is nearest to:
- A. 0.0
- B. 0.5
- C. -1.0
- D. 1.0
Answer: C
Explanation:
The simplest way to solve this problem is to use a scatter diagram:
The data points appear to form a straight line with a negative slope. Thus,-1 is the best estimate of the coefficient of correlation.
NEW QUESTION # 52
Which of the following is based on the concept that there is not one best leadership style and that successful leadership depends on a match between the leader, the situation, and the subordinate?
- A. Life cycle model
- B. Contingency theory
- C. Attribute theory.
- D. Path goal model
Answer: B
NEW QUESTION # 53
Which of the following professional organizations sets standards for quality and environmental audits?
- A. The Board of Environmental, Health, and Safety Auditor Certifications.
- B. The International Standards Organization.
- C. The International Organization of Supreme Audit Institutions.
- D. The Committee of Sponsoring Organizations of the Treadway Commission.
Answer: B
Explanation:
Explanation/Reference:
NEW QUESTION # 54
Only two companies manufacture Product A. The finished product is identical regardless of which company manufactures it. The cost to manufacture Product A is US$1, and the selling price is US $2. One company considers reducing the price to achieve 100% market share but fears the other company will respond by further reducing the price. Such a scenario would involve a:
- A. Dual-win strategy.
- B. No-win strategy.
- C. One win-one lose strategy.
- D. Neutral strategy.
Answer: B
Explanation:
If both firms reduce the selling price of Product A, neither will gain sales and the resultant price war will cause both firms to earn lower profits. This outcome is inevitable when reduced profit margins do not result in a significant increase in sales. This is classified as a no-win strategy.
NEW QUESTION # 55
The following transactions and events occurred during the year:
- $300,000 of raw materials were purchased, of which $20,000 were returned because of defects
- $600,000 of direct labor costs were incurred.
- S750.000 of manufacturing overhead costs were incurred.
What is the organization's cost of goods sold for the year?
- A. $1,610.000
- B. $1 500 000
- C. $1650 000
- D. $1.480.000
Answer: B
NEW QUESTION # 56
Which one of the following items is not directly reflected in the basic economic order quantity (EOQ) model?
- A. Inventory obsolescence.
- B. Interest on invested capital.
- C. Public warehouse rental charges.
- D. Quantity discounts lost on inventory purchases
Answer: D
Explanation:
The basic EOQ model minimizes the sum of ordering (or setup) and carrying costs. Included in the formula are annual demand, ordering (or setup) costs, and carrying costs. Carrying costs include warehousing costs, insurance, spoilage, obsolescence, and interest on invested capital. The cost of the inventory itself and any quantity discounts lost on inventory purchases are not components of the EOQ model.
NEW QUESTION # 57
Which of the following is a disadvantage of selecting a commercial software package rather than developing an application internally?
- A. Employee resistance to change.
- B. Lack of flexibility.
- C. Inadequate technical support.
- D. Incompatibility with client/server technology.
Answer: B
NEW QUESTION # 58
When a perpetual inventory system is used and a difference exists between the perpetual inventory amount balance and the physical inventory count. a separate entry is needed to adjust the perpetual inventory amount. Which of the following demonstrates that adjusting entry?
- A. Cost of goods sold Retained earnings appropriated for shortages
- B. Extraordinary loss due to write-down of inventory Allowance for inventory shortages
- C. Extraordinary loss due to write-down of inventory
- D. Inventory over and short Inventory
Answer: D
Explanation:
The entry to record a write-down is a debit to inventory over and short and a credit to inventory. This amount is reported as an adjustment of cost of goods sold or as an other expense on the income statement.
NEW QUESTION # 59
Which of the following storage options would give the organization the best chance of recovering data?
- A. 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
- B. 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 the organization.
- 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: A
Explanation:
available.
NEW QUESTION # 60
Which of the following does not provide operational assurance that a computer system is operating properly?
- A. Testing policy compliance.
- B. Conducting system monitoring.
- C. Performing a system audit.
- D. Making system changes.
Answer: D
NEW QUESTION # 61
Presented below are partial year-end financial statement data (000 omitted from dollar amounts) for companies A and B:
If company A has a quick ratio of 2:1, then it has an accounts receivable balance of:
- A. $500
- B. $100
- C. $300
- D. $200
Answer: B
NEW QUESTION # 62
When comparing the residual income of several investment centers the validity of comparisons may be destroyed by:
- A. Differences in the relative amount of income.
- B. Peculiarities of each investment center.
- C. Common amounts of invested capital for each investment center.
- D. Consistent use of an imputed interest rate.
Answer: B
Explanation:
Residual income is income of an investment center, minus an imputed interest charge for invested capital. The theory is that earning an income greater than residual income indicates that expansion is desirable. However, comparisons of investment centers based on residual income may be misleading because of differences in products, markets, costs, and local conditions.
NEW QUESTION # 63
An organization recently documented its procedures for recovering systems and data after a disaster How are these documented procedures most likely to be used during a disaster simulation exercise''
- A. To help property configure mass communication notification tools
- B. To help validate the contact information of key personnel required to recover systems and data
- C. To help identify training needs across the functional areas required to recover systems and data.
- D. To help ensure that the team members who are required to recover systems and data understand their roles.
Answer: D
NEW QUESTION # 64
Which of the following is a definition of predatory pricing?
- A. Pricing products at different prices for different customers.
- B. Pricing products below cost to destroy competitors.
- C. Selling below cost in other countries.
- D. Conspiring to restrict output and set artificially high prices.
Answer: B
Explanation:
Predatory pricing is the practice of pricing products below cost to destroy competitors. A price is predatory if it is below an appropriate measure of costs, and the seller has a reasonable prospect of recovering its losses in the future through higher prices or greater market share.
NEW QUESTION # 65
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