IIA IIA-CIA-PART3 Online Practice Questions and Exam Preparation

IIA IIA-CIA-PART3 Online Questions & Answers

• Question 161:

  A chief audit executive (CAE) joined an organization in the middle of the financial year. A risk-based annual audit plan has been approved by the board and is already underway. However, after discussions with key stakeholders, the CAE realizes that some significant key risk areas have not been covered in the original audit plan.

  How should the CAE respond?

  A. Commit to delivering the original annual audit plan as it has already been approved by the board
  B. Revise the plan to incorporate the newly identified risks, and communicate significant interim changes to senior management and the board for review and approval
  C. Ensure that the newly identified risks are included in the next year's annual audit plan
  D. Assign internal auditors to immediately perform assurance engagements in the areas where the new risks have been identified, due to their significance
  B. Revise the plan to incorporate the newly identified risks, and communicate significant interim changes to senior management and the board for review and approval

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  Explanation

  The IIA Standards emphasize that the internal audit plan must remain dynamic and responsive to changes in risks and priorities. If significant risks are identified after the plan has been approved, the CAE must revise the plan and

  communicate the interim changes to senior management and the board for review and approval.

  Option A ignores emerging risks. Option C delays addressing significant risks. Option D bypasses governance approval and does not respect the board's oversight role.

  IIA Standards - Standard 2020: Communication and Approval.

• Question 162:

  An internal audit manager is explaining to a newly hired staff auditor the various analytics techniques frequently used by the internal audit activity

  Which of the following statements is true regarding these analytics techniques?

  A. Process mining is a type of data analysts where the data subject is a process
  B. Process analysis is a type of data mining where the data subject is a designated area of a process
  C. Data mining is a type of data analysis that focuses on finding statistical relationships in order to create profiles
  D. Data mining involves examining small amounts of structured data in a systematic manner
  C. Data mining is a type of data analysis that focuses on finding statistical relationships in order to create profiles

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  Explanation

• Question 163:

  Which of the following functions of a quality assurance and improvement program (QAIP) must be performed by personnel independent of the internal audit function?

  A. External assessments
  B. Communication of QAIP results to the board
  C. Disclosure of nonconformance
  D. Internal assessments
  A. External assessments

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  Explanation

  A QAIP includes both internal and external assessments. While internal assessments can be performed by audit staff or within the activity, external assessments must be conducted by a qualified, independent party outside of the internal

  audit activity.

  Options B and C are the CAE's responsibilities. Option D (internal assessments) is not independent and is part of routine quality control.

  IIA Standards - Standard 1312: External Assessments.

• Question 164:

  When evaluating the help desk services provided by a third-party service provider, which of the following is likely to be the internal auditor's greatest concern?

  A. Whether every call that the service provider received was logged by the help desk
  B. Whether a unique identification number was assigned to each issue identified by the service provider
  C. Whether the service provider used its own facilities to provide help desk services
  D. Whether the provider's responses and resolutions were well defined according to the service-level agreement
  D. Whether the provider's responses and resolutions were well defined according to the service-level agreement

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  Explanation

• Question 165:

  When applied to international economics, the theory of comparative advantage proposes that total worldwide output will be greatest when:

  A. Each nation's total imports approximately equal its total exports.
  B. Each good is produced by the nation that has the lowest opportunity cost for that good.
  C. Goods that contribute to a nation's balance-of-payments deficit are no longer imported.
  D. International trade is unrestricted and tariffs are not imposed.
  B. Each good is produced by the nation that has the lowest opportunity cost for that good.

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  Explanation

• Question 166:

  The dominant firm in a market pursues a market-leader strategy. It may defend its market share by offensive and defensive actions. According to Kotler and Singh, which defensive strategy involves market broadening?

  A. Mobile defense.
  B. Flank defense.
  C. Contraction defense.
  D. Counteroffensive defense.
  A. Mobile defense.

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  Explanation

  A mobile defense may involve market broadening, a reorientation from a specific product to the underlying need. An example is the repositioning of oil companies as energy companies. An alternative is market diversification, an effect of conglomerate mergers of firms in wholly different industries.

• Question 167:

  Which of the following attributes of data is the most significantly impacted by the internet of things?

  A. Normalization.
  B. Velocity.
  C. Structurization.
  D. Veracity.
  C. Structurization.

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  Explanation

• Question 168:

  The basic purposes of an organization's internal communications network include all of the following except:

  A. Obtaining a common focus among employees.
  B. Informing potential investors about company operations and financial results.
  C. Aiding high-quality decision making.
  D. Integrating the efforts of specialists.
  B. Informing potential investors about company operations and financial results.

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  Explanation

  Because all managerial functions require communication, it is the secret to the success of any manager. A manager's ability to understand other people, and their ability to understand the manager, are crucial to accomplishing organizational objectives. Communication is the link that ties an organization together and transforms a diverse group of people into a cohesive whole. An organization's internal communications network is designed to facilitate decision making among managers, to promote goal congruence among employees, integrate the efforts of all employees, and build high morale and mutual trust. Informing potential investors about company operations is a purpose of the external, not internal, communications network.

• Question 169:

  A firm is performing an analysis of a capacity expansion decision. The simplest element of the analysis is

  A. Choosing the expansion method.
  B. Determining the expansion plans of rival firms.
  C. Calculating the net present value.
  D. Estimating total long-term demand.
  C. Calculating the net present value.

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  Explanation

  The formal capital budgeting process entails predicting future cash flows related to the expansion project, discounting them at an appropriate interest rate, and determining whether the net present value (NPV) is positive. This process permits comparison with other uses of the firm's resources. The apparent simplicity of this process is deceptive because it depends upon, among many other things, which expansion method is chosen, developments in technology, and profitability. Profitability in turn depends on such uncertainties as total long-term demand and the expansion plans of rival firms. However, once the assumptions of the NPV model have been determined, the calculation is straightforward.

• Question 170:

  Which factor most likely encourages entry into an existing market?

  A. Governmental subsidies for new investors.
  B. High product differentiation, principally produced by trademarks.
  C. Knowledge of the industry, with high investments in development. D Low fixed exit costs.
  A. Governmental subsidies for new investors.

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  Explanation

  Subsidies for new firms lower entry barriers. Thus, new firms may enter the industry and intensify competition. Government policy also may affect competition via regulations that encourage or discourage substitutes or affect costs, that govern competitive behavior, or that limit growth. Government also may be a buyer or supplier.