Pass Your IIA Exam with IIA-CIA-Part3 Exam Dumps (Updated 344 Questions)

IIA-CIA-Part3 Exam Dumps - IIA Practice Test Questions

NEW QUESTION # 15
According to the COSO enterprise risk management (ERM) framework, which of the following is not a typical responsibility of the chief risk officer?

• A. Defining ERM roles and responsibilities.
• B. Establishing risk category definitions and a common risk language for likelihood and impact measures.
• C. Guiding integration of ERM with other management activities.
• D. Providing the board with an independent, objective risk perspective on financial reporting.

Answer: D

NEW QUESTION # 16
For the year just ended, the entity had a rate of return on equity, rounded to two decimals, of:

• A. 71.68%
• B. 31.21%
• C. 67.50%
• D. 58.06%

Answer: B

Explanation:
Rate of return on equity, a profitability ratio, measures the rate of return on investment.
The ratio equals profit minus any preference dividends) divided by average ordinary equity.

NEW QUESTION # 17
In a review of an EDI application using a third-party service provider, the auditor should:
I. Ensure encryption keys meet ISO standards
II. Determine whether an independent review of the service provider's operation has been conducted.
III. Verify that only public-switched data networks are used by the service provider
IV.
Verify that the service provider's contracts include necessary clauses, such as the right to audit

• A. II and III.
• B. I and ll.
• C. I and IV.
• D. II and IV.

Answer: D

Explanation:
An auditor should review trading partner agreements and contracts with third-party service providers. These documents should contain necessary clauses and appropriately limit liabilities. Moreover, legal counsel should have reviewed the agreements or contracts. An auditor should also determine whether the third- party service provider's operations and controls have been independently reviewed e.g., by public accountants).
Topic 4, Volume D

NEW QUESTION # 18
The relationship between the present value of a future sum and the future value of a present sum can be expressed in terms of their respective interest factors the present value of US $200,000 due at the end of 8 years at 10% is US $93,300 what is the approximate future value of US $200,000 invested for the same length of time and at the same rate?

• A. US $293,300
• B. US $200,000
• C. US $93,300
• D. US $428,724

Answer: D

Explanation:
The interest factor for the future value of a present sum is equal to the reciprocal of the interest factor for the present value of a future sum. Thus, the future value is US $428,724 [($200,000 $93,300) x $200,000].

NEW QUESTION # 19
The auditor wishes to determine if the change in investment income during the current year was due to a) changes in investment strategy, b) changes in portfolio mix, or c) other factors. Which of the following analytical review procedures should the auditor use?

• A. Simple linear regression that compares investment income changes over the past 5 years to determine the nature of the changes.
• B. Ratio analysis that compares changes in the investment portfolio on a monthly basis.
• C. Trend analysis that compares the changes in investment income as a percentage of total assets and of investment assets over the past 5 years.
• D. Multiple regression analysis that includes independent variables related to the nature of the investment portfolio and market conditions.

Answer: D

Explanation:
Regression analysis develops an equation to explain the behavior of a dependent variable for example, investment income) in terms of one or more independent variables for example, market risk and the risks of particular investments). Multiple regression analysis is the best approach because it allows the auditor to regress the change in investment income on more than one independent variable.

NEW QUESTION # 20
A direct effect of imposing a protective tariff on an item for which there are both foreign and domestic producers is that domestic producers will sell, <List A> of the item while domestic consumers consume ,List B> of the item.

• A. Option C
• B. Option B
• C. Option A
• D. Option D

Answer: B

Explanation:
Domestic producers are not subject to the tariff and will therefore have a price advantage over their foreign competitors. However, absent such competition, the domestic price of the item will be higher. Domestic producers will sell more at a higher price, and domestic consumers will consume less following the price increase.

NEW QUESTION # 21
When a new application is being created for widespread use in a large organization, the principal liaison between the IT function and the rest of an organization is normally a(n):

• A. Maintenance programmer.
• B. Systems analyst
• C. Application programmer.
• D. End user.

Answer: B

Explanation:
Systems analysts are specifically qualified to analyze and design computer information systems. They survey the existing system, analyze the organization's information requirements, and design new systems to meet those needs. Systems analysts communicate with the entire organization and act as a liaison between the organization and the IT function.

NEW QUESTION # 22
Which of the following is not true about the advantages of adopting ISO 9000 standards?

• A. Adoption of ISO 9000 standards may allow an entity to sell products in foreign markets.
• B. ISO 9000 allows entities to understand who internal customers and users are without sharing private information.
• C. ISO registration makes customers more comfortable with the supplier's products and services.
• D. ISO registration may help entities discover internal process and quality improvements.

Answer: B

Explanation:
Market pressure is usually the primary reason that entities adopt ISO 9000 standards. However, many entities that register make internal process and quality improvement as a result. ISO 9000 forces entities to share information, which leads to a better understanding of whose internal customers and user are.

NEW QUESTION # 23
A condensed comparative balance sheet for an entity appears below:

In looking at liquidity ratios at both balance sheet dates, what happened to the 1) current ratio and 2) acid-test (quick) ratio?

• A. Option C
• B. Option D
• C. Option B
• D. Option A

Answer: B

Explanation:
The current ratio is determined by dividing current assets by current liabilities. The acidtest
ratio is determined by dividing quick assets by current liabilities. At December 31. Year 1. The current ratio is 6 to 1 [(US $40,000 + $120,000 + $200,000) - $60,01101. December
31. Year 2, the current ratio is 4.3 to 1 [(US $30,000 + $100,000 + $300,000) -$100,000]. Hence, there was a decrease in the current ratio. At December 31, Year 1, the acid-test ratio is 2.667 to 1 [(US $40,000 + $120,000) - $60.000]. At December 31, Year 2, the acid-test ratio is 1.3 to 1 [(US $3:0,000 + $100,000) - $100,000]. Thus, the acidtest ratio also declined. An entity's financial statements for the current year are presented below:

NEW QUESTION # 24
An accounting change requiring retrospective treatment is a change in:

• A. A provision for warranty costs.
• B. Depreciation methods from straight-line to diminishing-balance.
• C. An accounting policy inseparable from a change in an accounting estimate.
• D. The residual value of equipment.

Answer: B

Explanation:
A change in depreciation methods is reported as a change in accounting policy. A voluntary change in accounting policy is applied retrospectively unless it is impracticable. Retrospective application means adjusting the opening balances of equity for the first period presented and restating other comparative amounts.

NEW QUESTION # 25
Using the cost-recovery method of revenue, profit on an installment sale is recognized:

• A. After cash collections equal to the cost of goods sold have been received.
• B. On the date of the installment sale.
• C. On the date the final cash collection is received.
• D. In proportion to the cash collections.

Answer: A

Explanation:
Under the cost-recovery method, no revenue is recognized until cash payments by the buyer exceed the seller's cost of the merchandise sold. This method is appropriate when collection of the revenue is very uncertain.

NEW QUESTION # 26
An internal auditor for a large automotive parts retailer wishes to perform a risk analysis and wants to use an appropriate statistical tool to help identify stores that would be out of line compared to the majority of stores. The most appropriate statistical tool to use is

• A. Linear time series analysis.
• B. Time series multiple regression analysis to identify changes in individual stores overtime.
• C. Cross-sectional regression analysis.
• D. Cross tabulations with chi-square analysis of significance.

Answer: C

Explanation:
Time series data pertain to a given entity over a number of prior time periods. Cross sectional data, however, pertain to different entities for a given time period or at a given time.
Thus, cross-sectional regression analysis is the most appropriate statistical tool because it compares attributes of all stores' operating statistics at one moment in time.

NEW QUESTION # 27
According to lIA guidance on IT, which of the following plans would pair the identification of critical business processes with recovery time objectives?

• A. The business continuity management charter.
• B. The business case for business continuity planning
• C. The business continuity risk assessment plan.
• D. The business Impact analysis plan

Answer: D

NEW QUESTION # 28
Using absorption costing, the company's operating profit was:

• A. US $750.000
• B. US $900,000 C US $975,000 D US $1,020,000

Answer: B

Explanation:
Under absorption costing, product costs include fixed and variable manufacturing costs. The unit product cost under absorption costing is US $10 [ $600,000 + $400,000) 100,000 units produced]. All nonmanufacturing costs are expensed in the period incurred. Thus operating profit is US $900.000.

A company manufactures and sells a single product. Planned and actual production in its first year of operation was 100,000 units. Planned and actual costs for that year were as follow:

The company sold 85.000 units of product at a selling price of US $30 per unit.

NEW QUESTION # 29
In which of the following organizational structures does total quality management (TQM) work best?

• A. Hierarchal.
• B. Teams of people from different specialties.
• C. Teams of people from the same specialty.
• D. Specialists working individually.

Answer: B

Explanation:
TQM advocates replacement of the traditional hierarchal structure with teams of people from different specialties. This change follows from TQM's emphasis on empowering employees and teamwork. Employees should (1) have proper training, necessary information, and the best tools; (2) be fully engaged in the decision process; and (3) receive fair compensation. If such empowered employees are assembled in teams of individuals with the required skills, TQM theorists believe they will be more effective than people performing their tasks separately in a rigid structure.

NEW QUESTION # 30
An organization discovered fraudulent activity involving the employee time-tracking system. One employee regularly docked in and clocked out her co-worker friends on their days off, inflating their reported work hours and increasing their wages. Which of the following physical authentication devices would be most effective at disabling this fraudulent scheme?

• A. Face or finger recognition equipment,
• B. A combination of a smart card and a password to clock in and clock out.
• C. A requirement to clock in and clock out with a unique personal identification number.
• D. Radiofrequency identification chips to authenticate employees with cards.

Answer: B

NEW QUESTION # 31
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IIA-CIA-Part3 (Business Knowledge for Internal Auditing) Certification Exam is an essential certification exam for internal auditors seeking to advance their knowledge and skills in the field of business management. IIA-CIA-Part3 exam is designed to assess the candidate's understanding of key concepts in finance, accounting, economics, and management, as well as their ability to apply these concepts in the context of internal auditing.

The IIA IIA-CIA-Part3 exam is divided into six domains: governance and business ethics, risk management, organizational structure and business processes, communication, management and leadership principles, and information technology and business continuity. These domains cover a wide range of topics that are critical for internal auditors to understand in order to effectively assess and monitor an organization's operations.

 

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