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

IIA IIA-CIA-PART3 Online Questions & Answers

• Question 221:

  Which of the following application controls can be defined as controls that monitor data Being processed and in storage to ensure it remains consistent and correct?

  A. Input controls
  B. Output controls
  C. Integrity controls
  D. Processing controls
  C. Integrity controls

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  Explanation

• Question 222:

  In a declining industry with a favorable structure, a firm may have the ability to recover additional investment or to earn above-average returns in the remaining pockets of demand. Such a firm is most likely to follow a:

  A. Quick divestment strategy.
  B. Harvest strategy or quick divestment strategy.
  C. Leadership strategy or harvest strategy.
  D. Leadership strategy or niche strategy.
  D. Leadership strategy or niche strategy.

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  Explanation

  A leadership strategy is pursued by a firm that believes it can achieve market share gains to become the dominant firm. An assumption is that additional investment can be recovered. A second assumption is that success will put the firm in a better position to hold its ground or subsequently to follow a harvest strategy. A niche strategy seeks a market segment (pocket of demand) with stable or slowly decreasing demand with the potential for above-average returns. Some of the moves undertaken when following a leadership strategy may be appropriate. The firm may eventually change to a harvest or divest strategy.

• Question 223:

  The benefits of electronic communication for a company and the company's employees include:

  A. More efficient use of resources to increase profitability.
  B. Creation of redundant tasks that allow employees to develop expertise.
  C. Constant development of new procedures.
  D. Elimination of simulation models.
  A. More efficient use of resources to increase profitability.

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  Explanation

  The benefits of electronic communication include better control of information, more timely information, elimination of tedious tasks, improvement of competitiveness due to improved technology, standardization of procedures by computer programs, assistance for strategic planning, and optimization of organizational resources to improve productivity.

• Question 224:

  An organization's headquarters is centrally located and the organization runs numerous computer applications in multiple sites.

  Which of the following would be the most appropriate approach for conducting an audit of the mainframe computer?

  A. Conduct an individual audit of the mainframe general controls and separate application control audits of the individual applications in a phased manner
  B. Conduct a single consolidated audit of both the mainframe general controls and the application controls for all of the applications that use the mainframe
  C. Conduct individual audits of each application and include in each audit the general controls of the mainframe relevant to the individual application
  D. Conduct a series of location-based audits that cover both the general and application IT controls an systems across the location
  D. Conduct a series of location-based audits that cover both the general and application IT controls an systems across the location

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  Explanation

• Question 225:

  After three years of steadily decreasing profits despite of increased sales and a growing economy, which of the following is the preferred course of action for a chief executive officer to take?

  A. Set a turnaround goal of significantly increasing profits within two months.
  B. Reduce staff by 10 percent in every unit.
  C. Reduce staff in the nonvalue-adding functions by 20 percent.
  D. Encourage innovation at all levels and use an early retirement program to reduce staff size.
  D. Encourage innovation at all levels and use an early retirement program to reduce staff size.

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  Explanation

  (Organizational decline loss of effectiveness and efficiency coupled with inflexibility) may lead to downsizing, merger, reorganization, or liquidation. It results from decreased demand, resource limitations, or mismanagement. One characteristic of a declining organization is lack of innovation. Moreover, the most important cause of organizational decline is management complacency. In turn, a characteristic of management complacency is lack of innovation. Consequently, the CEO should encourage innovation at all levels. Also, downsizing has many negative effects. The enlightened view is that employees are not readily disposable commodities, but rather valuable resources who should be terminated only as a last resort. This view seeks alternatives to involuntary termination. One such alternative is a voluntary retirement program that offers accelerated retirement benefits, severance allowances, or other compensation.

• Question 226:

  During the second half of the audit year, the chief audit executive (CAE) identified significant negative variances to the approved audit budget required to complete the internal audit plan. Which of the following actions should the CAE take?

  A. Revise the internal audit plan to reduce coverage of new strategic critical areas so that the approved budget can be met
  B. Reduce the scope of the remainder of the engagements in the internal audit plan to reduce overall costs
  C. Communicate to senior management and the board the risk of not being able to complete the audit plan
  D. Continue to complete the plan regardless of the budget variances, as the audit function is invaluable to sound corporate governance
  C. Communicate to senior management and the board the risk of not being able to complete the audit plan

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  Explanation

  The CAE must ensure transparency with stakeholders when there are significant budget or resource limitations that may prevent completion of the audit plan. Communicating the risk of incomplete coverage to senior management and the

  board allows them to make informed decisions, such as adjusting the budget or revising the plan.

  Options A and B are inappropriate because reducing coverage or scope without board approval undermines risk-based planning. Option D is not feasible since resources are limited.

  IIA Standards - Standard 2020: Communication and Approval; Standard 2060: Reporting to Senior Management and the Board.

• Question 227:

  At which fundamental level of a quality assurance and improvement program is an opinion expressed about the entire spectrum of the internal audit function's work?

  A. At the external perspective level
  B. At the internal audit function level
  C. At the internal audit engagement level
  D. At the self-assessment activity level
  B. At the internal audit function level

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  Explanation

  The QAIP (Quality Assurance and Improvement Program) expresses an opinion at the internal audit function level about the overall efficiency, effectiveness, and conformance with the Standards. Engagement-level reviews assess quality for

  individual audits, but the overall opinion covers the full internal audit activity.

  Options A and D describe perspectives within reviews but do not represent the overall opinion. Option C refers only to engagement-specific assurance, not the full function.

  IIA Standards - Standard 1300: Quality Assurance and Improvement Program.

• Question 228:

  Globalization assists in achieving economies of scale, which is:

  A. Cost benefit
  B. Timing benefit.
  C. Learning benefit.
  D. Arbitrage benefit.
  A. Cost benefit

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  Explanation

  Cost benefits are obtained from economies of scale as a firm expands its operations. Average costs of output decline because of standardization of products or processes, and increased bargaining power versus suppliers of raw materials, components, and services. Moreover, economies of scale may arise from centralized production or from marketing, logistical, or purchasing factors.

• Question 229:

  Which strategy for a global marketing organization balances local responsiveness and global integration?

  A. Global.
  B. Multinational.
  C. Glocal.
  D. Transnational.
  C. Glocal.

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  Explanation

  A glocal strategy combines some elements of local responsiveness or adaptation with some elements of global integration. Successful telecommunications firms are examples of balancing these elements. Local responsiveness is indicated when local product tastes and preferences, regulations, and barriers are significant. Global integration is indicated when demand is homogeneous and economies of productive scale are large.

• Question 230:

  Which of the following performance measures disincentivizes engaging in earnings management?

  A. Linking performance to profitability measures such as return on investment.
  B. Linking performance to the stock price.
  C. Linking performance to quotas such as units produced.
  D. Linking performance to nonfinancial measures such as customer satisfaction and employees training.
  A. Linking performance to profitability measures such as return on investment.

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  Explanation