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

IIA IIA-CIA-PART3 Online Questions & Answers

• Question 811:

  An internal auditor reviewed Finance Department records to obtain a list of current vendor addresses. The auditor then compared the vendor addresses to a record of employee addresses maintained by the Payroll Department.

  Which of the following types of data analysis did the auditor perform?

  A. Duplicate testing.
  B. Joining data sources.
  C. Gap analysis.
  D. Classification.
  B. Joining data sources.

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  Explanation

• Question 812:

  A milk producer company acquires its own dairy farms to supply milk. The growth strategy adopted by the company is:

  A. Horizontal integration.
  B. Vertical integration.
  C. Concentric diversification.
  D. Conglomerate diversification.
  B. Vertical integration.

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  Explanation

  Vertical integration occurs when a company becomes its own supplier or distributor. It combines within a firm production, distribution, selling, or other separate economic processes needed to deliver a product or service to a customer.

• Question 813:

  Which of the following would be a risk in the development of end-user computing (EUC) applications, compared to traditional information systems?

  A. Management might place the same degree of reliance in reports produced by EUC applications as it does in reports produced under traditional systems development procedures.
  B. The organization may incur higher application development and maintenance costs for EUC systems.
  C. Since development time is typically longer for EUC applications, management may not be able to respond quickly to competitive pressures
  D. Management may not be able to make quick and accurate decisions due to a diminished capacity to respond to managerial requests for computerized information
  A. Management might place the same degree of reliance in reports produced by EUC applications as it does in reports produced under traditional systems development procedures.

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  Explanation

• Question 814:

  A firm in a declining industry ordinarily adopts one of four strategies. A firm that follows a:

  A. Quick divestment strategy should have divested during the maturity phase.
  B. Leadership strategy may assume that success will enable the firm to subsequently pursue a harvest strategy.
  C. Harvest strategy seeks a pocket of stable demand.
  D. Niche strategy is engaged in a gradual liquidation.
  B. Leadership strategy may assume that success will enable the firm to subsequently pursue a harvest 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. This strategy may entail aggressive pricing, marketing, or other investments that raise the stakes for competitors; reducing competitors' exit barriers by acquisitions of their capacity or products, assuming their contracts, and producing spare parts and generic versions of goods for them; demonstrations of strength and resolve to remain in the industry; and publicizing accurate data about the reality of future decline so as to dispel competitors' uncertainty.

• Question 815:

  How should internal auditors respond when the manager of an area under review disagrees with a finding?

  A. Escalate the disagreements to the CEO
  B. Ignore the manager's concerns and proceed with finalizing the audit report
  C. Escalate the disagreements to the chief audit executive
  D. Reperform the audit process where there are disagreements
  C. Escalate the disagreements to the chief audit executive

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  Explanation

  When management disagrees with audit findings, the auditor should escalate the matter to the CAE. The CAE can determine whether to include both perspectives in the report or escalate further if unresolved. This ensures objectivity and fair representation.

  Option A (escalation to CEO) is premature. Option B ignores management's input, reducing objectivity. Option D (reperforming work) is only necessary if there is evidence the work was flawed, not simply because of disagreement.

  IIA Standards - Standard 2410: Criteria for Communicating.

• Question 816:

  Which of the following best explains why an organization would enter into a capital lease contract?

  A. To increase the ability to borrow additional funds from creditors.
  B. To reduce the organization's free cash flow from operations.
  C. To improve the organization's free cash flow from operations.
  D. To acquire the asset at the end of the lease period at a price lower than the fair market value.
  D. To acquire the asset at the end of the lease period at a price lower than the fair market value.

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  Explanation

• Question 817:

  A clothing company sells shirts for $8 per shirt. In order to break even, the company must sell 25,000 shirts. Actual sales total $300,000.

  What is margin of safety sales for the company?

  A. $100,000
  B. $200,000
  C. $275,000
  D. $500,000
  B. $200,000

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  Explanation

• Question 818:

  A bond that matures after one year has a face value of $250,000 and a coupon of $30,000. If the market price of the bond is $265,000, which of the following would be the market interest rate?

  A. Less than 12 percent.
  B. 12 percent.
  C. Between 12. 01 percent and 12. 50 percent.
  D. More than 12. 50 percent.
  A. Less than 12 percent.

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  Explanation

• Question 819:

  An organization had three large centralized divisions: one that received customer orders for service work; one that scheduled the service work at customer locations; and one that answered customer calls about service problems. These three divisions were restructured into seven regional groups, each of which performed all three functions. One advantage of this restructuring would be:

  A. Better internal controls.
  B. Greater economies of scale.
  C. Improved work flow.
  D. Increasedspecialization.
  C. Improved work flow.

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  Explanation

• Question 820:

  Which of the following statements are true regarding the use of heat maps as risk assessment tools?

  1. They focus primarily on known risks, limiting the ability to identify new risks.

  2. They rely heavily on objective assessments and related risk tolerances.

  3. They are too complex to provide an easily understandable view of key risks.

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

  A. 1 and 2 only
  B. 1 and 4 only
  C. 2 and 3 only
  D. 3 and 4 only
  B. 1 and 4 only

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  Explanation