[Nov 26, 2023] Latest Questions IIA-CIA-Part3 Guide to Prepare Free Practice Tests
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NEW QUESTION # 15
While auditing an organization's customer call center, an internal auditor notices that key performance indicators show a positive trend despite the fact that there have been increasing customer complaints over the same period Which of the following audit recommendations would most likely correct the cause of this inconsistency?
- A. Increase the incentive for call center employees to complete calls quickly and raise the number of calls completed daily
- B. Retrain call center staff on area processes and common technical issues that they will Likely be asked to resolve
- C. Review the the call center script used by customer service agents to interact with callers and update the script rf necessary
- D. De-emphasize the importance of call center employees completing a certain number of calls per hour
Answer: C
NEW QUESTION # 16
In forecasting purchases of inventory for a firm, all of the following are useful except:
- A. Knowledge of the behavior of business cycles.
- B. Internal allocations of costs to different segments of the firm.
- C. Econometric modeling.
- D. Information on the seasonal variations in demand.
Answer: B
Explanation:
Internal allocations of costs relate to costs already incurred, that is, to sunk costs. Sunk costs are not relevant to decision making, for example, to forecasting future purchases.
NEW QUESTION # 17
An organization's board of directors is particularly focused on positioning, the organization as a leader in the industry and beating the competition. Which of the following strategies offers the greatest alignment with the board's focus?
- A. Increasing investment in research and development for a new product.
- B. Divesting product lines expected to have negative profitability.
- C. Increasing the diversity of strategic business units.
- D. Relocating the organization's manufacturing to another country.
Answer: A
NEW QUESTION # 18
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. Specific identification method
- B. Average-cost method
- C. First-in first-out method (FIFO)
- D. Last-in first-out method (LIFO)
Answer: C
NEW QUESTION # 19
A supervisor receives a complaint from an employee who is frustrated about having to learn a new software program. The supervisor responds that the new software will enable the employee to work more efficiently and with greater accuracy. This response is an example of:
- A. Reframing.
- B. Empathetic listening.
- C. Reflective listening.
- D. Dialogue.
Answer: A
NEW QUESTION # 20
An audit manager has just returned from an executive training program and has suggested that the audit department develop a mathematical model to help identify factors that may be causing changes in the cost of production. According to the manager, the model should recognize that the company currently has three separate production cost) ': enters. Which of the following approaches would best provide the analysis suggested by the audit manager?
- A. Develop a -gear ratio analysis of the cost of production compared to the cost of raw inventory across the three departments.
- B. Develop a linear regression analysis relating the cost of production to the cost of goods sold.
- C. Develop a classical variables sampling estimate of cost of production per department, with the sample stratified by the dollar value of each product produced.
- D. Develop a multiple regression analysis of production costs, including such variables as raw material inventory costs, number of employees in the department, and overtime pay.
Answer: D
Explanation:
Regression analysis extends correlation to find an equation for the linear relationship among variables. The behavior of a dependent variable, such as cost of production, is explained in terms of one or more independent variables for example, raw material costs, employees, overtime). Thus, multiple regression analysis determines functional relationships among quantitative variables.
NEW QUESTION # 21
An internal auditor discovered that several unauthorized modifications were made to the production version of an organization's accounting application. Which of the following best describes this deficiency?
- A. Application controls weakness.
- B. Authorization controls weakness.
- C. Change controls weakness.
- D. Production controls weakness.
Answer: C
NEW QUESTION # 22
A manufacturing resource planning MRP II) system:
- A. Performs the same back-office functions for a manufacturer as an ERP system.
- B. Uses a master production schedule.
- C. Lacks the forecasting and budgeting capabilities typical of an ERP system.
- D. Performs the same front-office functions for a manufacturer as an ERP system.
Answer: B
Explanation:
Manufacturing resource planning MRP II) continued the evolution begun with MRP. It is a closed-loop manufacturing system that integrates all facets of manufacturing, including production, sales, inventories, schedules, and cash flows. The same system is used for accounting and finance functions, which use the same transactions and numbers. MRP II uses an MPS master production schedule), a statement of the anticipated manufacturing schedule for selected items for selected periods. MRP also uses the MPS.
Thus, MRP is a component of an MRP II system.
NEW QUESTION # 23
Which of the following is the most appropriate way to record each partner's initial investment in a partnership?
- A. At fair value.
- B. At the value agreed upon by the partners.
- C. At the original cost.
- D. At book value.
Answer: B
Explanation:
Explanation/Reference: https://www.slideshare.net/ArthikDavianti/accounting-for-partnership-46681465
NEW QUESTION # 24
Division A produces a product with a variable cost of $5 per unit and an allocated fixed cost of $3 per unit The market price of the product is $15 plus 20% selling cost. Division B currently purchases this product from an external supplier but is going to purchase it from division A for $18 Which of the following methods of transfer pricing is being used?
- A. Market price.
- B. Variable cost
- C. Negotiation-based.
- D. Full absorption cost
Answer: A
NEW QUESTION # 25
Which of the following capital budgeting techniques considers the tune value of money?
- A. Cash payback
- B. Annual rate of return.
- C. Discounted cash flow.
- D. Incremental analysis.
Answer: C
NEW QUESTION # 26
Your company (Company Y) has decided to enter the European market with one of its products and is now considering three advertising strategies. This market currently belongs to Company X. Company X is aware that your company is entering the market and is itself considering steps to protect its market. An analyst for your company has identified three strategies Company X might develop and has shown the payoffs for each in the tables below.
The analyst has formulated this problem as a:
- A. Prisoner's dilemma.
- B. Cooperative game.
- C. Zero-sum game.
- D. Game against nature.
Answer: C
Explanation:
Game theory is a mathematical approach to decision making when confronted with an enemy or competitor. Games are classified according to the number of players and the algebraic sum of the payoffs. In a two-player game, if the payoff is given by the loser to the winner, the algebraic sum is zero, and the game is a zero-sum game; if it is possible for both players to profit, the game is a positive-sum game. In this situation, the sum of the payoffs for each combination of strategies is zero. For example, if X takes no action and Y chooses limited advertising, X's payoff is -1 and Ys is 1.
NEW QUESTION # 27
A local area network LAN) is best described as a(n):
- A. Computer system that connects computers of all sizes, workstations, terminals, and
other devices within a limited proximity - B. System to allow computer users to meet and share ideas and information.
C Electronic library containing millions of items of data that can be reviewed, retrieved, and
analyzed.
D Method to offer specialized software, hardware, and data-handling techniques that
improve effectiveness and reduce costs.
Answer: A
Explanation:
A LAN is a local distributed computer system, often housed within a single building. Computers, communication devices, and other equipment are linked by cable. Special software facilitates efficient data communication among the hardware devices.
NEW QUESTION # 28
Assume that the average collection period is 25 days. After the credit policy is well established, what is the expected average accounts receivable balance for the entity at any moment in time, assuming a 365-day year?
- A. US $684.93
- B. US $1,808.22
- C. US $27,123.30
- D. US $45,205.48
Answer: D
Explanation:
The expected average accounts receivable balance equals the average collection period times the credit sales per day. Thus, the average accounts receivable balance is US $45.205.48 {[(10,000 units sold on credit x $66 price) - 365 days] x 25 days}. The foregoing calculation assumes that receivables are recorded at their gross amounts.
NEW QUESTION # 29
Which of the following statements accurately describes one of the characteristics that distinguishes a multinational company from a domestic company?
- A. A multinational company operates outside of its country of origin.
- B. A multinational company has stockholders in other countries.
- C. A multinational company uses raw materials and components from more than one country.
- D. A multinational company exports its products to other countries.
Answer: A
NEW QUESTION # 30
The greatest advantage of functional departmentalization is that it:
- A. Helps to focus on the achievement of organizational goals.
- B. Accommodates geographically dispersed companies
- C. Provides for efficient use of specialized knowledge .
- D. Facilitates communication between primary functions.
Answer: C
NEW QUESTION # 31
Refer to the exhibit.
If the profit margin of an organization decreases, and all else remains equal, which of the following describes how the "Funds Needed" line in the graph below will shift?
- A. The "Funds Needed" line will point downward with a minimal slope.
- B. The "Funds Needed" line will remain pointed upward, but will become less steep.
- C. The "Funds Needed" line will remain pointed upward, but will become more steep.
- D. The "Funds Needed" line will point downward with an extreme slope.
Answer: C
NEW QUESTION # 32
Based on lest results, an IT auditor concluded that the organization would suffer unacceptable loss of data if there was a disaster at its data center. Which of the following test results would likely lead the auditor to this conclusion?
- A. Critical systems have boon backed up more frequently than required.
- B. Returned backup tapes from the offsite vendor contained empty spaces.
- C. Critical system backup tapes are taken off site less frequently than required
- D. Requested backup tapes were not returned from the offsite vendor In a timely manner.
Answer: C
NEW QUESTION # 33
Exchange rates are determined by:
- A. Each industrial country's government.
- B. The International Monetary Fund.
- C. Exporters and importers of manufactured goods.
- D. Supply and demand in the foreign currency market.
Answer: D
Explanation:
Although currencies can be supported by various means for short periods, the primary determinant of exchange, rates is the supply of and demand for the various currencies. Under current international agreements, exchange rates are allowed to "float_" During periods of extreme fluctuations, however, governments and control banks may intervene to maintain stability in the market.
NEW QUESTION # 34
Suppose that an entity has paid one of its liabilities t ice during the year in error The effects of this mistake would be?
- A. Assets Liabilities, and equity are understated.
- B. Assets and profit and equity} are understated, and liabilities are overstated.
- C. Assets and liabilities are understated.
- D. Assets, net income, and equity are unaffected
Answer: C
Explanation:
When a liability is paid, an entry debiting accounts payable and crediting cash is made. If an entity erroneously pays a liability twice, the accounts payable and cash accounts will be understated by the amount of the liability. Hence, assets and liabilities will be understated.
NEW QUESTION # 35
An internal audit manager is explaining to a newly hired staff auditor the various analytics techniques frequently used by the internal audit activity Which of the following statements is true regarding these analytics techniques?
- A. Data mining is a type of data analysis that focuses on finding statistical relationships in order to create profiles
- B. Process mining is a type of data analysts where the data subject is a process
- C. Process analysis is a type of data mining where the data subject is a designated area of a process
- D. Data mining involves examining small amounts of structured data in a systematic manner
Answer: A
NEW QUESTION # 36
If bonds are sold at a discount and the effective interest method of amortization is used, interest expense will:
- A. Equal the cash interest payment each period.
- B. Remain constant from one period to another.
- C. Be less than the cash interest payment each period.
- D. Increase from one period to another.
Answer: D
Explanation:
Interest expense equals the carrying value of the liability at the beginning of the period times the effective interest rate. The carrying value of the liability equals the face value of the of the bond minus the discount. As the discount is amortized over the life of the bond, the carrying value increases, consequently the interest expense increases over the life of the bond.
NEW QUESTION # 37
Companies characterized by the production of basically homogeneous products will most likely use which of the following methods for the purpose of averaging costs and providing management with unit-cost data?
- A. Job-order costing.
- B. Absorption costing.
- C. Direct costing.
- D. Process costing.
Answer: D
Explanation:
Like products that are mass produced should be accounted for using process costing techniques to assign costs to products. Costs are accumulated by departments or cost centers rather than by jobs, work-in-process is stated in terms of equivalent units, and unit costs are established on a departmental basis. Process costing is an averaging process that calculates the average cost of all units.
NEW QUESTION # 38
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