Have IIA-CIA-Part3-3P Dumps V10.02 To Prepare For CIA Exam Part Three: Business Knowledge for Internal Auditing Exam Well

1. If a bank's activities are categorized under such departments as community banking, institutional banking, and agricultural banking, what kind of departmentalization is being utilized?

2. What must be monitored in order to manage risk of consumer product inventory obsolescence?

1) Inventory balances.

2) Market share forecasts.

3) Sales returns.

4) Sales trends.

3. Maintenance cost at a hospital was observed to increase as activity level increased.

The following data was gathered:

Activity Level -

Maintenance Cost

Month

Patient Days

January

5,600

$7,900

February

7,100

$8,500

March

5,000

$7,400

April

6,500

$8,200

May

7,300

$9,100

June

8,000

$9,800

If the cost of maintenance is expressed in an equation, what is the independent variable for this data?

4. An internal auditor is reviewing physical and environmental controls for an IT organization .

Which control activity should not be part of this review?

5. Preferred stock is less risky for investors than is common stock because:

6. Which of the following are appropriate reasons for internal auditors to document processes as part of an audit engagement?

1) To determine areas of primary concern.

2) To establish a standard format for process mapping.

3) To define areas of responsibility within the organization.

4) To assess the performance of employees.

7. An internal auditor is trying to assess control risk and the effectiveness of an organization's internal controls .

Which of the following audit procedures would not provide assurance to the auditor on this matter?

8. Which of the following statements is true regarding the relationship between an individual’s average tax rate and marginal tax rate?

9. Which of the following is always true regarding the use of encryption algorithms based on public key infrastructure (PKI)?

10. 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:

11. The market price is the most appropriate transfer price to be charged by one department to another in the same organization for a service provided when:

12. Which of the following is not a potential area of concern when an internal auditor places reliance on spreadsheets developed by users?

13. Which stage of group development is characterized by a decrease in conflict and hostility among group members and an increase in cohesiveness?

14. Which of the following is a role of the board of directors in the governance process?

15. An internal auditor has been asked to conduct an investigation involving allegations of independent contractor fraud .

Which of the following controls would be least effective in detecting any potential fraudulent activity?

16. An organization decided to install a motion detection system in its warehouse to protect against after-hours theft. According to the COSO enterprise risk management framework, which of the following best describes this risk management strategy?

17. Which of the following are the most appropriate measures for evaluating the change in an organization's liquidity position?

18. An organization is considering mirroring the customer data for one regional center at another center. A disadvantage of such an arrangement would be:

19. According to the COSO enterprise risk management (ERM) framework, which of the following is not a typical responsibility of the chief risk officer?

20. A holding company set up a centralized group technology department, using a local area network with a mainframe computer to process accounting information for all companies within the group. An internal auditor would expect to find all of the following controls within the technology department except:

21. 5

Based on this data, which of the following describes the value of Cost X in relation to the value of Output Produced?

22. Which of the following engagement observations would provide the least motivation for management to amend or replace an existing cost accounting system?

23. Which of the following is the most likely reason an organization may decide to undertake a stock split?

24. An organization facing rapid growth decides to employ a third party service provider to manage its customer relationship management function .

Which of the following is true regarding the supporting application software used by that provider compared to an in-house developed system?

1) Updating documentation is always a priority.

2) System availability is usually more reliable.

3) Data security risks are lower.

4) Overall system costs are lower.

25. A capital investment project will have a higher net present value, everything else being equal, if it has:

26. Within an enterprise, IT governance relates to the:

1) Alignment between the enterprise's IT long term plan and the organization's objectives.

2) Organizational structures of the company that are designed to ensure that IT supports the organization's strategies and objectives.

3) Operational plans established to support the IT strategies and objectives.

4) Role of the company's leadership in ensuring IT supports the organization's strategies and objectives.

27. Multinational organizations generally spend more time and effort to identify and evaluate:

28. The economic order quantity for inventory is higher for an organization that has:

29. Which of the following is an element of effective negotiating?

30. Which audit approach should be employed to test the accuracy of information housed in a database on an un-networked computer?

31. According to the International Professional Practices Framework, which of the following statements is true regarding a corporate social responsibility (CSR) program?

1) Every employee generally has a responsibility for ensuring the success of CSR objectives.

2) The board has overall responsibility for the effectiveness of internal control processes associated with CSR.

3) Public reporting on the CSR governance process is expected.

4) Organizations generally have flexibility regarding what is included in a CSR program.

32. A software that translates hypertext markup language (HTML) documents and allows a user to view a remote web page is called:

33. Which of the following is the most appropriate test to assess the privacy risks associated with an organization's workstations?

34. Which of the following is a disadvantage of selecting a commercial software package rather than developing an application internally?

35. Which of the following statements accurately describes the responsibility of the internal audit activity (IAA) regarding IT governance?

1) The IAA does not have any responsibility because IT governance is the responsibility of the board and senior management of the organization.

2) The IAA must assess whether the IT governance of the organization supports the organization’s strategies and objectives.

3) The IAA may assess whether the IT governance of the organization supports the organization’s strategies and objectives.

4) The IAA may accept requests from management to perform advisory services regarding how the IT governance of the organization supports the organizationâ™s strategies and objectives.

36. Which of the following best describes a market signal?

37. Which of the following statements about COBIT is not true?

38. During which phase of disaster recovery planning should an organization identify the business units, assets, and systems that are critical to continuing an acceptable level of operations?

39. Which of the following conflict resolution methods should be applied when the intention of the parties is to solve the problem by clarifying differences and attaining everyone's objectives?

40. 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?

41. Which of the following is true regarding an organization's relationship with external stakeholders?

42. According to the Standards, which of the following is based on the assertion that the quality of an organization's risk management process should improve with time?

43. Which of the following local area network physical layouts is subject to the greatest risk of failure if one device fails?

44. Which of the following statements is in accordance with COBIT?

1) Pervasive controls are general while detailed controls are specific.

2) Application controls are a subset of pervasive controls.

3) Implementation of software is a type of pervasive control.

4) Disaster recovery planning is a type of detailed control.

45. The percentage of sales method, rather than the percentage of receivables method, would be used to estimate uncollectible accounts if an organization seeks to:

46. In terms of international business strategy, which of the following is true regarding a multi-domestic strategy?

47. Which is the least effective form of risk management?

48. All of the following are possible explanations for a significant unfavorable material efficiency variance except:

49. Which of the following is useful for forecasting the required level of inventory?

1) Statistical modeling.

2) Information about seasonal variations in demand.

3) Knowledge of the behavior of different business cycles.

4) Pricing models linked to seasonal demand.

50. They are helpful but limited in value in a rapidly changing environment.

51. Which of the following is not a common feature of cumulative preferred stock?

52. Which of the following borrowing options is an unsecured loan?

53. What are the objectives of governance as defined by the Standards?

54. Which of the following is a characteristic of an emerging industry?

55. For an engineering department with a total quality management program, important elements of quality management include all of the following except:

56. Organizational activities that complement each other and create a competitive advantage are called a:

57. Which of the following is a limiting factor for capacity expansion?

58. Which of the following statements accurately describes one of the characteristics that distinguishes a multinational company from a domestic company?

59. Which of the following costs would be incurred in an inventory stockout?

60. Which of the following is a key characteristic of a zero-based budget?

61. Which of the following is a type of network in which an organization permits specific users (such as existing customers) to have access to its internal network through the Internet by building a virtual private network?

62. Which of the following is not a barrier to effective communication?

63. Which of the following does not provide operational assurance that a computer system is operating properly?

64. According to IIA guidance, which of the following corporate social responsibility (CSR) activities is appropriate for the internal audit activity to perform?

65. Which of the following statements about matrix organizations is false?

66. A company's financial balance sheet is presented below:

The company has net working capital of:

67. An organization produces two products, X and Y. The materials used for the production of both products are limited to 500 kilograms (kg) per month.

All other resources are unlimited and their costs are fixed. Individual product details are as follows:

Product X

Product Y

Selling price per unit

$10

$13

Materials per unit (at $1/kg)

2 kg

6 kg

Monthly demand

100 units

120 units

In order to maximize profit, how much of product Y should the organization produce each month?

68. Which of the following must be adjusted to index a progressive tax system to inflation?

69. Which of the following are appropriate functions for an IT steering committee?

1) Assess the technical adequacy of standards for systems design and programming.

2) Continually monitor of the adequacy and accuracy of software and hardware in use.

3) Assess the effects of new technology on the organization`s IT operations.

4) Provide broad oversight of implementation, training, and operation of new systems.

70. Import quotas that limit the quantities of goods that a domestic subsidiary can buy from its foreign parent company represent which type of barrier to the parent company?

71. Which of the following statements is true regarding outsourced business processes?

72. Which of the following is the best approach to overcome entry barriers into a new business?

73. Which of the following methods, if used in conjunction with electronic data interchange (EDI), will improve the organization's cash management program, reduce transaction data input time and errors, and allow the organization to negotiate discounts with EDI vendors based on prompt payment?

74. Refer to the exhibit.

The figure below shows the network diagram for the activities of a large project .

What is the shortest number of days in which the project can be completed?

75. An organization is considering the outsourcing of its business processes related to payroll and information technology functions .

Which of the following is the most significant area of concern for management regarding this proposed agreement?

76. A key advantage of developing a computer application by using the prototyping approach is that it:

77. According to IIA guidance, which of the following steps are most important for an internal auditor to perform when evaluating an organization's social and environmental impact on the local community?

1) Determine whether previous incidents have been reported, managed, and resolved.

2) Determine whether a business contingency plan exists.

3) Determine the extent of transparency in reporting.

4) Determine whether a cost/benefit analysis was performed for all related projects.

78. At what point during the systems development process should an internal auditor verify that the new application's connectivity to the organization's other systems has been established correctly?

79. Which of the following techniques would be least effective in resolving the conflict created by an internal audit client's perception of the audit report as a personal attack on his management performance?

80. In an organization where enterprise risk management practices are mature, which of the following is a core internal audit role?

81. A global business organization is selecting managers to post to various international (expatriate) assignments.

In the screening process, which of the following traits would be required to make a manager a successful expatriate?

1) Superior technical competence.

2) Willingness to attempt to communicate in a foreign language.

3) Ability to empathize with other people.

82. Which of the following standards would be most useful in evaluating the performance of a customer-service group?

83. Technological uncertainty, subsidy, and spin-offs are usually characteristics of:

84. Which of the following statements best describes the frameworks set forth by the International Standards Organization?

85. Which of the following distinguishes the added-value negotiation method from traditional negotiating methods?

86. When developing an effective risk-based plan to determine audit priorities, an internal audit activity should start by:

87. Which of the following best describes an objective for an audit of an environmental management system?

88. An internal auditor performed a review of IT outsourcing and found that the service provider was failing to meet the terms of the service level agreement .

Which of the following approaches is most appropriate to address this concern?

89. Which of the following describes the result if an organization records merchandise as a purchase, but fails to include it in the closing inventory count?

90. If legal or regulatory standards prohibit conformance with certain parts of The IIA's Standards, the auditor should do which of the following?

91. The decision to implement enhanced failure detection and back-up systems to improve data integrity is an example of which risk response?

92. Which of the following is the best reason for considering the acquisition of a nondomestic organization?