IIA-CIA-Part3 Self-Study Guide for Becoming an Business Knowledge for Internal Auditing Expert
IIA-CIA-Part3 Study Guide Realistic Verified IIA-CIA-Part3 Dumps
NEW QUESTION # 192
A real estate brokerage firm is moving into a building that is already equipped with extensive telephone wiring. The firm is considering the installation of a digital private branch exchange PBX) to connect computers and other office devices, such as copying machines, printers, and fax machines. A limitation of using a PBX-based system for this network is that:
- A. Coaxial cabling would have to be installed throughout the building.
- B. The system cannot easily handle large volumes of data.
- C. Relocating devices in the office would be difficult and expensive.
- D. The firm would be dependent on others for system maintenance.
Answer: B
Explanation:
A PBX has the advantage of using existing telephone lines and therefore not needing special wiring. Moreover, equipment can be moved without necessitating rewiring. However, because PBX-based systems use telephone wiring most often copper wire), they cannot easily handle large volumes of data.
NEW QUESTION # 193
Which of me following represents an inventory costing technique that can be manipulated by management to boost net income by selling units purchased at a low cost?
- A. First-in first-out method (FIFO)
- B. Average-cost method
- C. Specific identification method
- D. Last-in first-out method (LIFO)
Answer: A
NEW QUESTION # 194
Below are data concerning the hours spent by a manufacturer's two products in its two processes.
The constraint is
- A. Cannot be determined from the information given.
- B. Product B in Assembly.
- C. Product
- D. The assembly activity.
Answer: D
Explanation:
In theory of constraints (TOC) analysis, the constraint (bottleneck) operation is the slowest part of the process. It can usually be identified as the one where work-in-process backs up the most. Of this manufacturer's two operations, the one that requires the most total time is assembly.
NEW QUESTION # 195
A company that wishes to improve its rate of retention of its experienced employees might:
- A. Initiate job simplification programs.
- B. Abolish its hire-from-within policy.
- C. Improve its fringe benefit package.
- D. Set a mandatory retirement age.
Answer: C
Explanation:
Fringe benefits e.g., pensions and profit-sharing plans) may be contingent on duration of employment. Accordingly, they motivate employees to remain with the company.
NEW QUESTION # 196
An organization has adopted the robust quality approach. According to this view of quality,
- A. Improving quality requires tradeoffs among categories of quality costs.
- B. Costs in all categories of quality costs may be reduced while improving quality.
- C. Beyond some point, incurrence of prevention and appraisal costs is not cost beneficial
- D. The minimum point on the total quality cost curve occurs when conformance cost per unit equals nonconformance cost per unit.
Answer: B
Explanation:
The optimal level of quality costs traditionally has been deemed to occur where the conformance cost curve intercepts the nonconformance cast curve, which corresponds to the minimum point on the total cost curve. Thus, beyond some point, incurrence of prevention and appraisal costs is not cost beneficial. However, the modern robust quality view is that this relationship does not always hold. Improving quality and reducing costs in each category may be possible if the most efficient prevention methods are applied. For example, selection of a supplier meeting high quality standards regarding defect rates and delivery times may drive dawn not only failure casts but also the prevention and appraisal casts incurred when supplier performance was less reliable. Thus, conformance casts do not have to continue to increase to obtain additional reductions in nonconformance casts.
NEW QUESTION # 197
Which of the following is not a barrier to effective communication?
- A. Similar frames of reference.
- B. Lack of source credibility.
- C. Communication overload.
- D. Filtering.
Answer: A
NEW QUESTION # 198
During the 10-year life of the asset, the entity will report as deferred tax an amount that:
- A. Is constant.
- B. Decreases and then increases.
- C. Increases and then decreases.
- D. Increases steadily for the 10 years.
Answer: C
Explanation:
The cumulative deferred tax increases, peaks, and then decreases to zero over the life of the asset. In the early years, the asset is depreciated more quickly for tax purposes than for financial reporting purposes. This temporary difference reverses in later years. Hence, in the early years, actual taxes payable will be less than tax expense reported in the financial statements and a deferred tax liability will be recognized. By the end of the asset's useful life, cumulative actual taxes paid will equal cumulative reported tax expense, so the deferred tax balance will be zero. An entity has purchased an asset with a 10-y.'ar useful life. It will use an accelerated depreciation method for determining taxable profit or tax loss. For determining accounting profit, it will use straight-line depreciation.
NEW QUESTION # 199
What amounts should be retorted for prepaid insurance and insurance expense in the annual financial statements prepared at December 31?
- A. Option C
- B. Option B
- C. Option D
- D. Option A
Answer: B
Explanation:
The insurance policy in effect at the beginning of the year expired and was renewed during the year. Hence, the entire US $3,600 beginning balance in the prepaid insurance account should be expensed. The amount of the prepayment on the new policy to be expensed is US $1,500 [3 months elapsed x$18,000 - 36-month duration of the policy)].
The debit balance in prepaid insurance at year-end is therefore US $16,500$18,000 $1,500), and total insurance expense is US $5,100$3,600 + $1.500).
NEW QUESTION # 200
A U.S. company and a European company purchased the same stock on a European stock exchange and held the stock for one year. If the value of the euro weakened against the U.S dollar during the period, in comparison with the European company's return, the U.S company's return will be:
- A. Indeterminate from the information provided.
- B. Higher.
- C. Lower.
- D. The same.
Answer: C
Explanation:
Because the return to the U.S. company is adversely affected and the return to the European company is unaffected, the return to the U.S. company will definitely be lower than the return to the European company.
NEW QUESTION # 201
Which of the following is classified as a product cost using the variable costing method?
1. Direct labor costs
2. Insurance on a factory.
3. Manufacturing supplies.
4. Packaging and shipping costs
- A. 1 and 2
- B. 1 and 3
- C. 2 and 4
- D. 3 and 4
Answer: B
NEW QUESTION # 202
Which one of the following groups would be the primary beneficiary of a tariff?
- A. Domestic producers of
- B. Domestic producers of goods protected by the tariff.
- C. Domestic consumers of goods protected by the tariff.
- D. Foreign producers of goods protected by the tariff.
Answer: B
Explanation:
Despite the advantages of free trade, nations often levy tariffs to discourage the importation of certain products. A tariff is a tax on imports intended to protect a domestic producer from foreign competition. For instance, a tariff on imported autos benefits domestic auto
manufacturers because it is an additional cost imposed on domestic consumers of such products. The disadvantages of the tariff are that it may protect an inefficient domestic producer and increase prices paid by domestic consumers.
NEW QUESTION # 203
The average labor cost per unit for the first batch produced by a new process is US $120. The cumulative average labor cost after the second batch is US $72 per product. Using a batch size of 100 and assuming the learning curve continues, the total labor cost of four batches will be:
- A. US$10,368
- B. US$4,320
- C. US$2,592
- D. US$17,280
Answer: D
Explanation:
The learning curve reflects the increased rate at which people perform tasks as they gain experience. The time required to perform a given task becomes progressively shorter. Ordinarily, the curve is expressed in a percentage of reduced time to complete a task for each doubling of cumulative production. One common assumption in a learning curve model is that the cumulative average time (and labor cost) per unit is reduced by a certain percentage each time production doubles. Given a US $120 cost per unit for the first 100 units and a US $72 cost per unit when cumulative production doubled to 200 units, the learning curve percentage must be 60% (US $72 -$120). If production is again doubled to 400 units (four batches), the average unit labor cost should be US $43.20 ($72 x 60%). Hence, total labor cost for 400 units is estimated to be US $17,280 (400 units x $43.20).
NEW QUESTION # 204
Which of these instances accurately describes the responsibilities for big data governance?
- A. Internal auditors must ensure the quality and security of data, with a heightened focus on the riskiest data elements.
- B. The board must implement controls around data quality dimensions to ensure that they are effective.
- C. Management must ensure information storage systems are appropriately defined and processes to update critical data elements are clear.
- D. External auditors must ensure that analytical models are periodically monitored and maintained.
Answer: C
NEW QUESTION # 205
The entity has current assets of:
- A. US $3,033,333 C US $3,333,333
- B. US $3,633,333
- C. US $1,000,000
Answer: A
Explanation:
Return on total assets3% equals profit US $100,000) divided by total assets. Consequently, total assets equal US $3,333,333$100,000 - 03). Current assets must therefore equal US $3,033,333$3,333,333 total assets - $300,000 other assets).
NEW QUESTION # 206
Senior management has decided to implement the Three Lines of Defense model for risk management.
Which of the following best describes senior management's duties with regard to this model?
- A. Identify emerging issues.
- B. Ensure compliance with the model.
- C. Set goals for implementation.
- D. Identify management functions.
Answer: B
NEW QUESTION # 207
Which of the following options correctly defines a transmission control protocol/Internet protocol (TCP/IP)?
- A. A network of servers used to control a variety of mission-critical operations.
- B. System software that translates hypertext markup language to allow users to view a remote webpage.
- C. A standardized set of guidelines that facilitates communication between computers on different networks.
- D. System software that acts as an interface between a user and a computer.
Answer: C
NEW QUESTION # 208
The bullwhip, or whiplash, effect on inventories begins when retailers face uncertain demand from consumers caused by randomness in buying habits. It can be avoided by:
- A. The need to purchase or manufacture goods in cost-efficient batches.
- B. Changes in price that may encourage purchases in anticipation of future increases.
- C. Sharing of information and coordination among the organizations in the supply chain.
- D. Shortages that may lead to rationing by suppliers or manufacturers and hoarding by manufacturers or retailers.
Answer: C
Explanation:
Sharing information about sales, inventory, pricing, advertising campaigns, and sales forecasts by all functions and organizations in the supply chain moderates demand uncertainty for all parties. The desired results are (1) minimization of inventories held by suppliers, manufacturers, and retailers; (2) avoidance of stock outs; (3) fewer rush orders; and (4) production as needed by retailers.
NEW QUESTION # 209
Quality costing is similar in service and manufacturing organizations. Nevertheless, the differences between these organizations have certain implications for quality management. Thus,
- A. External failure costs are relatively greater in service organizations.
- B. Quality improvements resulting in more efficient use of labor time are more likely to be accepted by employees in service organizations.
- C. Direct labor costs are usually a higher percentage of total costs in manufacturing organizations.
- D. Poor service is less likely to result in loss of customers than a faulty product.
Answer: A
Explanation:
External failure costs arise when problems occur after delivery. They occur because products or services are nonconforming or otherwise do not satisfy customers. External failure costs in service enterprises are even more important than in manufacturing environments. Faulty goods sometimes maybe reworked or replaced to a customer's satisfaction, but poor service tends to result in a loss of customers.
NEW QUESTION # 210
At December 31 of Year 1, an entity had a provision of US $40,000 for the "Estimated
Liability under Warranties" account. During Year 2, the entity sold 1,000 new units under warranties reliably estimated at US $100 per unit. The actual parts and labor warranty expenditures for Year 2 were US $90,000. Warranty expense for Year 2 should be
- A. US $50,000
- B. US $40,000
- C. US $100,000
- D. US $90,000
Answer: C
Explanation:
Recognition of provisions is appropriate when the entity has a legal or constructive present obligation resulting from a past event (called an obligating event), it is probable that an outflow of economic benefits will be necessary to settle the obligation, and its amount can be reliably estimated. Accordingly, a provision should be recognized for warranty expense in the period in which the matching revenue is recorded. Thus, the debit to warranty expense and the credit to provision for warranty expense in Year 2 is US $100,0001,000 units x $100).
NEW QUESTION # 211
On January 1, an entity issued a 10-year US $500,000 bond at 96% of its face amount. The bond bears interest at 12%, payable on January 1 and July 1. The entry to record the issuance of the bond on January 1 is:
- A. Option C
- B. Option D
- C. Option A
- D. Option B
Answer: A
Explanation:
The entity received US $480,000 cash on the issuance of the bond. Its face amount is US $500,000, the amount to be paid at maturity. Hence, the credit to bonds payable is US $500,000. The US$20,000 difference is recorded as a discount on bonds payable a debit and is amortized over the life of the issue.
NEW QUESTION # 212
In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?
- A. An increase in the cost of capital.
- B. A longer average collection period.
- C. A higher cost per unit sold.
- D. A tougher collections policy that reduces the bad debt loss ratio.
Answer: D
NEW QUESTION # 213
Given an acid-test ratio of 2.0, current assets of US $5,000, and inventory of US $2,000, the value of current liabilities is:
- A. US $2,500
- B. US $6,000
- C. US $1,500
- D. US $3,500
Answer: C
Explanation:
The acid-test or quick ratio equals the ratio of the quick assets cash, net accounts receivable, and marketable securities) divided by current liabilities Current assets equal the quick assets plus inventory and prepaid expenses. This question assumes that the entity has no prepaid expenses. Given current assets of US $5,001.i, inventory of US $2,000 and no prepaid expenses, the quick assets must be US $3,000. Because the acid-test ratio is 2,.0 the quick assets are double the current liabilities. Current liabilities therefore are dual to $1,500 ($3,000 quick assets - 2.0).
NEW QUESTION # 214
A post office serves customers in a single line at one service window. During peak periods, the rate of arrivals has a Poisson distribution with an average of 100 customers per hour and service times that are exponentially distributed with an average of 60 seconds per customer. From this, one can conclude that the:
- A. Average customer waiting time is 2.5 minutes.
- B. Server will be idle one-sixth of the time.
- C. Queue will expand to infinity.
- D. Average rate is 100 customers per hour.
Answer: C
Explanation:
One hundred customers arrive in line per hour and only 60 are serviced per hour. Accordingly, the queue will expand to infinity during peak periods.
NEW QUESTION # 215
Cost of goods sold in Year 2 was:
- A. US $160,000
- B. US $167,000
- C. US $180,000
- D. US $147,000
Answer: D
Explanation:
Cost of goods sold equals beginning inventory, plus purchases, minus ending inventory. To determine cost of goods purchases must be calculated. Purchases equal US $167,000$49,000 ending accounts payable + $ 130,000 payments to suppliers - $62,000 beginning accounts payable). Thus, cost of goods sold equals US $ 147,000$120,000 beginning inventory + $167,000 purchases - $140,000 ending inventory).
Balance sheets on December 31, Year 1, and December 31, Year 2, are presented below
NEW QUESTION # 216
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IIA-CIA-Part3 exam, also known as the Business Knowledge for Internal Auditing exam, is one of the three exams required to obtain the Certified Internal Auditor (CIA) designation. IIA-CIA-Part3 exam is designed to test the candidate's knowledge and understanding of business concepts, governance principles, risk management, and the role of internal auditing in an organization. The IIA-CIA-Part3 exam consists of 100 multiple-choice questions and is four hours long.
IIA-CIA-Part3 certification is highly respected in the internal auditing profession and is recognized globally as a mark of excellence. Achieving this certification demonstrates a commitment to ongoing professional development and a dedication to staying current with the latest industry best practices and trends.
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