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

IIA IIA-CIA-PART3 Online Questions & Answers

• Question 81:

  The inherent attractiveness of a national market is most likely increased by which factor?

  A. The firm's strategic position.
  B. The market's exclusion from a regional free trade zone.
  C. Unmet needs of a developing nation.
  D. Product adaptation is costly.
  C. Unmet needs of a developing nation.

  ---

  Explanation

  Attractiveness is a function of such factors as geography, income, climate, population, and the product. Another major factor is the unmet needs of a developing nation, for example, China or India.

• Question 82:

  The board has requested that the internal audit activity be involved in all phases of the organization's outsourcing of its network management. During which of the following stages is the internal auditor most likely to verify that the organization's right-to-audit clause is drafted effectively?

  A. Implementation and transition phase.
  B. Monitoring and reporting phase
  C. Decision-making and business-case phase.
  D. Tendering and contracting phase.
  D. Tendering and contracting phase.

  ---

  Explanation

• Question 83:

  Which of the following statements is false regarding the internal audit approach when a set of standards other than The IIA's Standards is applicable to a specific engagement?

  A. The internal auditor may cite the use of other standards during audit communications.
  B. If the other standards are government-issued, the internal auditor should apply them in conjunction with The IIA's Standards.
  C. If there are inconsistencies between the other standards and The IIA's Standards, the internal auditor must use the more restrictive standards.
  D. If there are inconsistencies between the other standards and The IIA's Standards, the internal auditor must use the less restrictive standards.
  D. If there are inconsistencies between the other standards and The IIA's Standards, the internal auditor must use the less restrictive standards.

  ---

  Explanation

• Question 84:

  An organization had a gross profit margin of 40 percent in year one and in year two. The net profit margin was 18 percent in year one and 13 percent in year two.

  Which of the following could be the reason for the decline in the net profit margin for year two?

  A. Cost of sales increased relative to sales.
  B. Total sales increased relative to expenses.
  C. The organization had a higher dividend payout rate in year two.
  D. The government increased the corporate tax rate.
  A. Cost of sales increased relative to sales.

  ---

  Explanation

• Question 85:

  Which of the following best describes owner's equity?

  A. Assets minus liabilities.
  B. Total assets.
  C. Total liabilities.
  D. Owners contribution plus drawings.
  A. Assets minus liabilities.

  ---

  Explanation

  Owner's equity represents the residual interest in a company's assets after deducting liabilities. It is a fundamental concept in financial accounting, reflecting the net worth of a business.

  Formula:Owner's Equity=Assets#Liabilities\text{Owner's Equity} = \text{Assets} - \text{Liabilities}Owner' s Equity=Assets#Liabilities

  Represents the True Value of Ownership - It measures the owner's claim on the business after settling all obligations.

  Directly Tied to the Accounting Equation - Assets=Liabilities+Owner's Equity\text{Assets} = \text {Liabilities} + \text{Owner's Equity}Assets=Liabilities+Owner's Equity Rearranging the equation: Owner's Equity=Assets#Liabilities\text{Owner's Equity} = \text{Assets} - \text{Liabilities}Owner' s Equity=Assets#Liabilities

  Commonly Used in Financial Statements - Found in the Balance Sheet under the "Equity" section.

  Option B: Total assets - Incorrect because assets include both owner-financed and liability-financed resources.

  Option C: Total liabilities - Incorrect because liabilities represent debts owed, not ownership value.

  Option D: Owner's contribution plus drawings - Incorrect because it only considers investments and withdrawals , not retained earnings or net assets.

  IIA's GTAG on Business Financial Management - Discusses financial statement analysis, including owner's equity.

  COSO's Internal Control - Integrated Framework - Highlights financial reporting accuracy, including equity calculations.

  IFRS and GAAP Accounting Standards - Define owner's equity as assets minus liabilities in financial reporting.

  Why Option A is Correct?Why Not the Other Options? IIA References:

• Question 86:

  In many jobs, excessive specialization can eventually lead to poor motivation, boredom, and alienation. In order to cope with the potential problems in such a situation, managers should:

  A. Focus on the employees' higher-level needs in order to help them achieve self- actualization.
  B. Remove dissatisfiers such as low salary, bad supervision, lack of job security, and poor working conditions.
  C. Implement an optimal organizational rewards system and provide all needed training to keep employees up to date on technology.
  D. Change the jobs to fit the employees' needs or rotate employees to jobs that satisfy the employees' needs.
  D. Change the jobs to fit the employees' needs or rotate employees to jobs that satisfy the employees' needs.

  ---

  Explanation

  Job design theories of motivation specifically address the issue of overspecialization. These theories focus on the match between the person and the job as the key to motivation. The recommendation for dealing with the potential problems of overspecialization and boredom is either to enrich the job or to move the employee to a job that provides the appropriate level of challenge.

• Question 87:

  Which of the following is best associated with the matching principle of accounting?

  A. Debits must equal credits and are dependent upon each other.
  B. Assets must equal liabilities plus owner's equity.
  C. Expenses must be recognized in the same period as the associated revenues.
  D. The left column agrees with the right column in a trial balance.
  C. Expenses must be recognized in the same period as the associated revenues.

  ---

  Explanation

• Question 88:

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

  A. Risk acceptance.
  B. Risk sharing.
  C. Risk avoidance.
  D. Risk reduction.
  D. Risk reduction.

  ---

  Explanation

• Question 89:

  Which of the following factors would reduce dissatisfaction for a management trainee but would not particularly motivate the trainee?

  A. A sense of achievement.
  B. Promotion.
  C. Recognition.
  D. An incremental increase in salary.
  D. An incremental increase in salary.

  ---

  Explanation

• Question 90:

  Departmentalization is a common form of business integration. Grouping together all related jobs, activities, and processes for a given business objective into a major organizational subunit is an example of:

  A. Product-service departmentalization.
  B. Functional departmentalization.
  C. Geographic location departmentalization.
  D. Customer classification departmentalization.
  A. Product-service departmentalization.

  ---

  Explanation

  Departmentation by product or service is growing in importance for multiline, large-scale enterprises and is an outgrowth of functional departmentation. The result is that productservice subunits may be treated as separate businesses with a high degree of autonomy. Managers must therefore have a broad perspective, not a merely functional orientation.