Certified Internal Auditor Exam Questions Free Download

Question #1

A major benefit of computer integrated manufacturing CIM) is

A. ncreased amount of scrap available for resale

B. ncreased working capital

C. elivery of customized products with long lead times

D. ncreased flexibility

View answer

Correct Answer: D

Question #2

Which of the following factors would increase the confidence level in a variables sampling plan?I). A larger sample sizeII). A stratified sampleIII). A larger standard deviation

A. and II only

B. and III only

C. I and III only

D. , II, and III

View answer

Correct Answer: A

Question #3

Which of the following is a risk factor that a chief audit executive should consider when prioritizing audit work schedules?I). Quality of internal controlII). Management competenceIII). Time of last audit engagementIV). Degree of change or organizational stability

A. and III only

B. , II, and IV only

C. I, III, and IV only

D. , II, III, and IV

View answer

Correct Answer: D

Question #4

Derivatives that are not hedging instruments are always classified in which category of financial instruments?

A. inancial assets or liabilities held for trading

B. eld-to-maturity investments

C. oans and receivables

D. vailable-for-sale financial assets

View answer

Correct Answer: A

Question #5

The opportunity for franchising comes from the ability to:

A. evelop products

B. ifferentiate products

C. tandardize products

D. iversify products

View answer

Correct Answer: C

Question #6

Which statement beet describes the emphasis of total quality management TQM)?

A. educing the cast of inspection

B. mplementing better statistical quality control techniques

C. oing each job right the first time

D. ncouraging crass-functional teamwork

View answer

Correct Answer: C

Question #7

During a routine audit of a customer service hotline, an internal auditor noticed that an unusually high number of customer complaints pertained to payments not being applied to the customers' accounts. Which of the following would most likely be the reason for the high volume of complaints?

A. n ineffective customer service department

B. oor controls in the invoice approval processes

C. heck tampering by an employee

D. ubmission of fraudulent expense reports

View answer

Correct Answer: C

Question #8

The chief commodity trader for a large energy company learns from a friend that a competitor will likely fail its upcoming regulatory audit and will be forced to temporarily decrease production. If the information is true, the trader has short-term opportunities to make trades that will financially benefit the trader's company and will lead to a substantial increase in the trader's performance bonus. However, if the information is not true, making the trades will significantly increase the company's risk of

A. ake the trade because the company and the trader will both benefit

B. ave another trader on staff make the trade in order to avoid a conflict of interest

C. isclose the information to the risk oversight committee but proceed with the trade to capitalize on the opportunity

D. efer the decision to management and risk the loss of the trading opportunity

View answer

Correct Answer: D

Question #9

The drive-through service at a fast-food restaurant consists of driving up to place an order, advancing to a window to pay for the order, and then advancing to another window to receive the items ordered. This type of waiting-line system is

A. ingle channel, single phase

B. ingle channel, multiple phase

C. ultiple channel, single phase

D. ultiple channel, multiple phase

View answer

Correct Answer: B

Question #10

The assets of a liquidating entity should be shown on the balance sheet at their

A. ndepreciated historical cost

B. air valueC Realizable value

C. urrent cost

View answer

Correct Answer: C

Question #11

The amount of gross profit to be recognized in Year 1 on Year 1 installment sales is

A. S $800

B. S $2, 000

C. S $3, 200

D. S $4, 000

View answer

Correct Answer: A

Question #12

Gray market activity is in essence a form of arbitrage. To prevent this activity by their distributors, multinational firms:I). Raise prices charged to lower-cost distributors.II). Police the firms' distributors.III). Change the product.

A. only

B. and II only

C. I and Ill only

D. , II, and Ill

View answer

Correct Answer: D

Question #13

For a multinational firm, which of the following is a disadvantage of an ethnocentric staffing policy in which all key management positions are filled by parent-company nationals?

A. n ethnocentric staffing policy significantly raises compensation, training, and staffing costs

B. n ethnocentric staffing policy produces resentment among the firm's employees in host countries

C. n ethnocentric staffing policy limits career mobility for parent-country nationals

D. n ethnocentric staffing policy isolates headquarters from foreign subsidiaries

View answer

Correct Answer: B

Question #14

An enterprise decided to sell a separate major line of its business. The assets were sold for US $100, 000 and had a net carrying amount US $70, 000. The applicable tax rate was 20%. The result of this transaction may appear on the

A. alance sheet as a fundamental error

B. ncome statement as an extraordinary item

C. ncome statement as a single amount for a discontinued operation

D. ncome statement as a change in accounting policy

View answer

Correct Answer: C

Question #15

A manufacturer of very expensive precision optical equipment has experienced a significant increase in production costs over the past three months. The plant manager has demanded an immediate audit to identify the cause of the increases. Which of the following is true regarding this request?

A. he chief audit executive (CAE) may accept the request but is not obligated to act upon it

B. he CAE should decline the request because the plant manager is not authorized to make audit requests

C. ccording to the Standards, only audits approved by the audit committee may be performed

D. ccepting the request would jeopardize the integrity of the existing audit plan

View answer

Correct Answer: A

Question #16

Quality control circles are now used all over the world. The circles typically consist of a group of five to ten employees who meet regularly. The primary goal of these circles is

A. o improve the quality of leadership in the organization

B. o tap the creative problem-solving potential of every employee

C. o improve communications between employees and managers by providing a formal communication channel

D. o allow for the emergence of team leaders who can be targeted for further leadership development

View answer

Correct Answer: B

Question #17

Which of the following risk factors is most subjective?

A. hanges in staff, systems, or the environment

B. rior audit findings

C. ize of the unit being audited

D. ompetency of operating management

View answer

Correct Answer: D

Question #18

A financial statement includes all of the following items: profit. depreciation, operating activities, and financing activities. What financial statement is this?

A. alance sheet

B. ncome statement

C. tatement of cash flows

D. tatement of changes in equity

View answer

Correct Answer: C

Question #19

Questions about which of the following can legally be asked in recruiting interviews?

A. ge

B. umber of children

C. ind of military discharge

D. riminal record but only for security clearance purposes)

View answer

Correct Answer: D

Question #20

Which of the following must be true when using regression analysis involving three variables?

A. wo of the variables must have some relationship to each other, but the other can be unrelated

B. ne of the variables must include financial information, and the other two must include nonfinancial information

C. ll of the variables must have some relationship to each other

D. wo of the variables must include financial information, and the other must include nonfinancial information

View answer

Correct Answer: C

Question #21

An organization's chief audit executive (CAE) has been asked to monitor and report on any violations of the organization's code of conduct. The CAE should

A. eview and adjudicate all complaints

B. ead the committee responsible for the oversight of the code

C. evelop specific procedures to ensure that the code is clearly communicated to all employees

D. articipate in an advisory capacity on the committee that adjudicates any violations

View answer

Correct Answer: D

Question #22

A chief audit executive (CAE) decides to implement a quality assurance and improvement program for the internal audit department but encounters some resistance from internal audit staff concerning how the program should be monitored. Internal audit staff would prefer that all monitoring be performed through supervision during an audit engagement. The CAE needs to include in the monitoring program periodic quality assessments by staff independent from the audit engagement. How should the CAE promote the qual

A. ncourage all internal audit staff to see the independent quality assessments as part of a process to continuously improve the internal audit department's performance

B. xplain that independent quality assessments will identify those staff whose performance does not meet the requirements of the internal audit department

C. rrange for internal audit staff to be given appropriate training in all audit engagement procedures

D. ell internal audit staff that the only purpose of the independent quality assessments is to ensure that errors are corrected quickly before reports are issued

View answer

Correct Answer: A

Question #23

A film company determined that income level impacts the number of films that people watch per month, as shown by the graph belowThe graph indicates that

A. richer person always sees more films than a poorer person

B. he number of films seen per month is a linear function of income level

C. 20 percent pay increase is more likely to increase film viewing at lower income levels than at higher income levels

D. 20 percent pay increase is likely to increase film viewing by a constant amount regardless of income level

View answer

Correct Answer: C

Question #24

Which of the following is an objective of internal control?

A. econciliation

B. ccuracy

C. egregation of duties

D. uthorization

View answer

Correct Answer: B

Question #25

Many questionnaires are made up of a series of different questions that use the same response categories (for example strongly agree, agree, neither, disagree, strongly disagree). Some designs will have different groups of respondents answer alternate versions of the questionnaire that present the questions in different orders and reverse the orientation of the endpoints of the scale (for example agree on the right and disagree on the left). The purpose of such questionnaire variations is to

A. liminate intentional misrepresentations

B. educe the effects of pattern response tendencies

C. est whether respondents are reading the questionnaire

D. ake it possible to get information about more than one population parameter using the same questions

View answer

Correct Answer: B

Question #26

Company J produces two components: A-1 and A-2. The unit throughput contribution margins for A-1 and A-2 are US $150 and US $300, respectively. Each component must proceed through two processes: Operation 1 and Operation 2. The capacity of Operation 1 is 180 machine hours, with A-1 and A-2 requiring 1 hour and 3 hours, respectively. Furthermore, Company J can sell only 45 units of A-1 and 100 units of A-2. However, Company J is considering expanding Operation 1's capacity by 90 machine hours at a cost of US

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: C

Question #27

An analysis of an entity's US $150, 000 accounts receivable at year-end resulted in a US $5, 000 ending balance for its allowance for uncollectible accounts and a bad debt expense of US $2, 000. During the past year. recoveries on bad debts previously written off were correctly recorded at US $500. If the beginning balance in the allowance for uncollectible accounts was US $4, 700. what was the amount of accounts receivable written off as uncollectible during the year?

A. S $1, 200

B. S $1, 800

C. S $2, 200

D. S $2, 800

View answer

Correct Answer: C

Question #28

Which of the following factors should an internal auditor consider when planning an audit of an activity?

A. he objectives of the activity, the number of employees involved, and the control system

B. he qualifications of management, the significant risks, and the control system

C. he objectives of the activity, the significant risks, and the control system

D. he number of employees involved, the control system, and the recommendations of external auditors

View answer

Correct Answer: C

Question #29

Michael E Porter developed what is popularly known as the diamond model for determining national advantages in the global business environment. According to this model.

A. actor conditions are production advantages that are nature-made or inherited

B. oreign markets exert less influence than home markets on a firm's ability to detect demand trends

C. eliance on related and supporting industries in the home country weakens a firm's international competitiveness

D. ooperation with domestic competitors clearly aids international competitiveness

View answer

Correct Answer: B

Question #30

At the introduction stage of an innovative product, the profit growth is normally slow due to

A. xpensive sales promotion

B. igh competition

C. mass market

D. vailable alternatives

View answer

Correct Answer: A

Question #31

The General Electric (GE) portfolio model for competitive analysis of strategic business units (SBUs) should be compared with the Boston Consulting Croup's growth-share matrix.The GE model:

A. s a matrix with two variables:relative market share and market growth rate

B. alculates an index for each of its two variables

C. onsiders such factors for business strength as market size, growth rate, and price levels

D. onsiders such factors for market attractiveness as market share, growth rate, and marketing skills

View answer

Correct Answer: B

Question #32

When planning the work program for an assurance engagement, an internal auditor should first review the department's business objectives and then

A. dentify risks

B. eview controls

C. etermine scope

D. valuate vulnerabilities

View answer

Correct Answer: A

Question #33

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. S $40, 000

B. S $50, 000

C. S $90, 000

D. S $100, 000

View answer

Correct Answer: D

Question #34

Company P, which produces computers, uses a target pricing and costing approach. The following is Company P's costs and revenues for the year just ended:Company P plans to increase sales of computers to 15, 000 in the next year by reducing the unit price to US $1, 250. If Company P wishes to achieve a unit target operating income of 10%, by what amount must it reduce the full cost per unit?

A. S $100

B. S $125

C. S $225

D. S $250

View answer

Correct Answer: C

Question #35

Annual inventory holding costs equal

A. S $750

B. S $1, 250

C. S $1, 750

D. S $2, 250

View answer

Correct Answer: C

Question #36

A seller's price is below an appropriate measure of casts. Moreover, the seller has a reasonable prospect of recovering the resulting loss in the future through higher prices or a greater market share. Accordingly, the seller has engaged in

A. ollusive pricing

B. umping

C. redatory pricing

D. rice discrimination

View answer

Correct Answer: C

Question #37

A desired result of the sharing of information by all functions and organizations in the supply chain is

A. ewer rush orders

B. aximization of inventories held by suppliers, manufacturers, and retailers

C. tockouts

D. ncompatibility of the information systems of the parties

View answer

Correct Answer: A

Question #38

One of the best ways for the board of an organization to deter fraudulent financial reporting is to

A. equire board members to have current training and experience in financial accounting standards

B. nly appoint audit committee members with an understanding of financial accounting and reporting

C. ublish and monitor a code of conduct that creates a culture of honesty and high ethical values at all levels

D. equest that the external auditors review and report on the possibility of this type of fraud at each of their audits

View answer

Correct Answer: C

Question #39

According to Michael E. Porter's analysis of the evolution of global industries, the factor that is always necessary for an industry to become global is:

A. he existence of environmental triggers to begin globalization

B. strategic innovation

C. arketing economies of scale

D. hanges in the costs of the factors of production

View answer

Correct Answer: B

Question #40

Access control software on an organization's mainframe computer records detailed information concerning both successful and unsuccessful log on attempts to applications.Which of the following audit tools would be best suited to review the access information that has been recorded?

A. eneralized audit software

B. lowcharting

C. ntegrated test facility

D. est data

View answer

Correct Answer: A

Question #41

A governmental auditor was assigned to determine reasons why the students in one region scored significantly higher on education evaluation tests than did the students in another region. Previous research showed that there is a direct correlation between public financial support and student results. Which of the following is most likely to explain the difference in the regional results?

A. he more successful region spends 30 percent more money on education than does the other region

B. higher percentage of the general tax fund is spent on education in the more successful region than in the other region

C. he more successful region spends more money per student on education than does the other region

D. he more successful region has increased educational spending by an average of 10 percent each year for the last three years, whereas the other region's increase averaged only three percent

View answer

Correct Answer: C

Question #42

When performing benchmarking during the planning phase of a performance audit, an internal auditor should

A. etermine the current performance gap

B. roject future performance levels

C. evelop functional action plans

D. dentify comparative organizations

View answer

Correct Answer: D

Question #43

Which component is the foundation of the COSO internal control framework?

A. isk assessment

B. ontrol environment

C. ontrol activities

D. onitoring

View answer

Correct Answer: B

Question #44

The marketing department of a company is deciding on the price to charge for a key product. In setting this price, marketing needs to consider the price that a major competitor will charge for a similar product because the competitor's price will affect the demand for the company's product. Similarly, in setting its price, the competitor will consider what the company will charge. What is an appropriate mathematical technique for analyzing such a decision?

A. ame theory

B. robability theory

C. inear programming

D. ensitivity analysis

View answer

Correct Answer: A

Question #45

A manufacturing company is attempting to implement a just-in-time JIT) purchase policy system by negotiating with its primary suppliers to accept long-term purchase orders which result in more frequent deliveries of smaller quantities of raw materials. If the JIT purchase policy is successful in reducing the total inventory costs of the manufacturing company, which of the following combinations of cost changes would be most likely to occur?

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: D

Question #46

Responsibility for the coordination of internal audit and external audit efforts should be documented in the

A. ngagement work schedule

B. nternal audit charter

C. nternal assessment report

D. nternal audit activity's strategic plan

View answer

Correct Answer: B

Question #47

The rate of gross profit on Year 2 installment sales is

A. 0%

B. 0%

C. 0%

D. 0%

View answer

Correct Answer: A

Question #48

Which of the following is correct with respect to interim communication during an audit engagement?I). Unsubstantiated information that warrants management's attention can be communicated, provided that its nature is disclosed.II). Audit recommendations should be reserved for the final audit report.III). Significant findings should be communicated immediately rather than waiting until completion of the engagement.

A. only

B. and III only

C. I and III only

D. , II, and III only

View answer

Correct Answer: B

Question #49

An internal audit activity that reports both functionally and administratively to the chief financial officer is more likely to

A. roduce business-oriented and relevant findings

B. ave its audit independence questioned

C. roduce fewer audit recommendations

D. ave its recommendations implemented by management

View answer

Correct Answer: B

Question #50

An entity is currently being sued by a customer. A reliable estimate can be made of the costs that would result from a ruling unfavorable to the entity, and the amount involved is material. The entity's managers, lawyers, and auditors agree that the likelihood of an unfavorable ruling is remote. This contingent liability

A. hould be disclosed in a note

B. hould be disclosed as a parenthetical comment in the balance sheet

C. eed not be disclosed

D. hould be disclosed by an appropriation of retained earnings

View answer

Correct Answer: C

Question #51

The economic order quantity is the size of the order that minimizes total inventory costs which include ordering and holding carrying) costs. It can be calculated using the formulaIf Q = order size in units, D = annual demand in units, p = cost per purchase order, s = carrying cost per year for one unit of inventory. If the annual demand decreases by 369/o the optimal order size will

A. ecrease by 20%

B. ncrease by 20°!a

C. ncrease by 6%

D. ecrease by 6%

View answer

Correct Answer: A

Question #52

A company had US $30 million in total sales last year and expects US $40 million in total sales this year. Ten percent of each year's sales are on credit that will be paid the following year. The company anticipates the following expenses for this year:· Depreciation of US $5 million.· Labor, materials, taxes, and other expenses of US $51 million. Assume the company begins this year with a zero cash balance. At the end of this year, the company will have a cash deficit of

A. S $8 million

B. S $12 million

C. S $15 million

D. S $17 million

View answer

Correct Answer: B

Question #53

Which of the following is a benefit of implementing the achievement-oriented leader approach rather than the directive leader approach?

A. mployee development is enhanced

B. he structured environment allows employees to better achieve the organization's goals

C. loser supervision is provided for employees who perform better in a structured work atmosphere

D. mployees have more opportunities to develop creativity and meet challenges

View answer

Correct Answer: D

Question #54

A country has a comparative advantage in international trade when

A. irms in the country have a lower cost of production because of natural resources

B. t has an absolute advantage with respect to at least one input to production

C. irms in the country have a lower cost of production because of transportation and other geographic factors

D. t produces whatever it can produce most efficiently

View answer

Correct Answer: D

Question #55

Which of the following factors related to an organization's performance management system would not contribute to the organization's success?

A. erformance management is linked to competence and knowledge management

B. ubordinates and superiors have shared responsibility for the performance management process

C. taff members own the performance management process, thereby ensuring implementation and accountability

D. erformance management is integrated into other organizational processes and human resource processes

View answer

Correct Answer: C

Question #56

Company A is a producer of citrus flavored dessert products. Its most popular product is its key, lime pies, which are made with many fine ingredients, including egg yolks. Company A also sells the egg whites that are left over from its production process. These egg whites are sold at any price that is greater than the cost of storing and delivering them. What is the pricing of the egg whites?

A. y-product pricing

B. aptive-product pricing

C. roduct-bundle pricing

D. alue pricing

View answer

Correct Answer: A

Question #57

Which of the following is not a criterion for hedge accounting?

A. he hedge is expected to be highly effective and can be reliably measured

B. he hedge is assessed only at its inception

C. forecast transaction subject to a cash flow hedge must be highly probable

D. he hedge is formally designated and documented at its inception

View answer

Correct Answer: B

Question #58

Which one of the following temporary differences will result in a deferred tax asset?

A. se of the straight-line depreciation method for determining accounting profit and an accelerated method for determining taxable profittax loss)

B. nstallment sale profits accounted for on the accrual basis for determining accounting profit and on a cash basis for determining taxable profittax loss)

C. dvance rental receipts accounted for on the accrual basis for financial statement purposes and on a cash basis for tax purposes

D. repaid expenses accounted for on the accrual basis for determining accounting profit and on a cash basis for determining taxable profittax loss)

View answer

Correct Answer: C

Question #59

What is the most effective and efficient control to prevent the diversion of office supplies to an employee's residence by entering an alternate delivery location in an electronic data interchange system?

A. ompare the total number of items ordered with the total number of items received at all mail rooms, and investigate shortages

B. enerate a periodic report that lists any orders with delivery destinations other than company mail rooms, and trace to shipping documents

C. llow only valid mail room location fields to be used, and require changes to the table of valid locations to be approved on-line

D. nstruct the vendor to deliver only to the mail room for the largest location, and have company personnel send supplies to other locations as needed

View answer

Correct Answer: C

Question #60

The difference between a tall organization structure and a flat organization structure is that, in the former.

A. he communication process takes longer and is of poorer quality

B. aintenance of the organization is less costly

C. he morale of lower-level employees is generally higher

D. higher degree of coordination and cooperation is created

View answer

Correct Answer: A

Question #61

Company F applies a target pricing and costing approach. The following information about costs and revenues of Company F's product are available for the year just ended:Company F plans to increase unit sales to 80, 000 by reducing the product's unit price to US $320. If Company F desires a unit target operating income of 12%, by what amount must it reduce the full cost per unit?

A. S $32

B. S $38

C. S $70

D. S $80

View answer

Correct Answer: C

Question #62

An entity introduced a new product that carries a 2-year warranty against defects. It estimates that warranty costs ill be 27, of sales in the year of sale and 3% of sales in the year following the year of sale. Sales in Year 1 and US $5 million and US $7 million, respectively. Actual costs of servicing the warranty in Year 1 and Year 2 were US $110, 000 and US $260.000, respectively. What provision for warranty costs must the entity Year 2?

A. S $260

B. S $290

C. S $350

D. S $370

View answer

Correct Answer: C

Question #63

With the shift in some countries' economies toward service industries, a new form of organization has developed. This organization structure is referred to as the professional bureaucracy. While this structure resembles the machine bureaucracy which relies on standardized work processes) in several respects, it is different in one key aspect. This significant difference is that in a professional bureaucracy:

A. enior management has had to give up a substantial amount of control

B. asks are accomplished with a high degree of efficiency

C. here is strict adherence to rules

D. here is a tendency for subunit conflicts to develop

View answer

Correct Answer: A

Question #64

An audit of an organization's claims department determined that a large number of duplicate payments had been issued due to problems in the claims processing system. During the exit conference, the vice president of the claims department informed the auditors that attempts to recover the duplicate payments would be initiated immediately and that the claims processing system would be enhanced within six months to correct the problems. Based on this response, the chief audit executive should

A. djust the scope of the next regularly scheduled audit to assess controls within the claims processing system

B. iscuss the findings with the audit committee and ask the committee to determine the appropriate followup action

C. chedule a followup engagement within six months to assess the status of corrective action

D. onitor the status of corrective action and schedule a followup engagement when appropriate

View answer

Correct Answer: D

Question #65

A decrease in inventory order costs will

A. ecrease the economic order quantity

B. ncrease the reorder point

C. ncrease the economic order quantity

D. ecrease the holding cost percentage

View answer

Correct Answer: A

Question #66

Which of the following elements of an organization requires people to be accountable to superiors?

A. oordination of effort

B. ivision of labor

C. ommon goal or purpose

D. ierarchy of authority

View answer

Correct Answer: D

Question #67

Which of the following statements, if true, could justify an auditor's decision not to report governance-related control deficiencies to the audit committee?

A. anagement plans to initiate corrective action

B. he board of directors has a separate corporate governance committee

C. he amounts and the potential risks associated with the deficiencies are not material to the overall organization

D. overnance issues are complex and the auditor should rely on management's analysis of the extent of the problem

View answer

Correct Answer: C

Question #68

The measurement date in accounting for shares issued to employees in share option plans accounted for in accordance with the fair value method prescribed by !FRS 2 is

A. he date on which options are granted to specified employees

B. he earliest date on which both the number of shares to be issued and the option price are known

C. he date on which the options are exercised by the employees

D. he date the entity forgoes alternative use of the shares to be sold under option

View answer

Correct Answer: A

Question #69

In which of the following industry environments would an internal auditor be most likely to recommend strategies such as franchising and horizontal mergers?

A. merging industries

B. eclining industries

C. ragmented industries

D. ature industries

View answer

Correct Answer: C

Question #70

What is the number of production runs per year of computer chairs that would minimize the sum of carrying and setup costs for the coming year?

A.

B.

C.

D.

View answer

Correct Answer: D

Question #71

Your company Company '' 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 mare 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

A. ero-sum game

B. ooperative game

C. risoner's dilemma

D. ame against nature

View answer

Correct Answer: A

Question #72

Which of the following does not represent a difficulty in using red flags as fraud indicators?

A. any common red flags are also associated with situations where no fraud exists

B. ome red flags are difficult to quantify or to evaluate

C. ed flag information is only gathered in extraordinary circumstances

D. he red flags literature is not well enough established to have a positive impact on auditing

View answer

Correct Answer: D

Question #73

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. inear time series analysis

B. ross-sectional regression analysis

C. ross tabulations with chi-square analysis of significance

D. ime series multiple regression analysis to identify changes in individual stores overtime

View answer

Correct Answer: B

Question #74

Which of the following stakeholder groups is least likely to be involved in the development of an organization's performance scorecard?

A. enior managers

B. istributors

C. iddle managers

D. abor union representatives

View answer

Correct Answer: B

Question #75

An investment company is attempting to allocate its available funds between two investment alternatives, stocks and bonds, which differ in terms of expected return and risk. The company would like to minimize its risk while earning an expected return of at least 10% and investing no more than 70% in either of the investment alternatives. An appropriate technique for allocating its funds between stocks and bonds is

A. inear programming

B. apital budgeting

C. ifferential analysis

D. ueuing theory

View answer

Correct Answer: A

Question #76

In reviewing the appropriateness of the minimum quantity level of inventory established by a department, an auditor would be least likely to consider

A. tockout costs, including lost customers

B. easonal variations in forecasting inventory demand

C. ptimal order sizes determined by an economic order quantity model

D. he potential for obsolescence of inventory items

View answer

Correct Answer: C

Question #77

In which order should an environmental auditor audit the following manufacturing plants?Factor Hazard rating Prior audit results Plant population Plant 1 Medium Average SmallPlant 2 High Poor MediumPlant 3 Low Good Large

A. , 2, 3

B. , 3, 2

C. , 1, 3

D. , 3, 1

View answer

Correct Answer: C

Question #78

In the Boston Consulting Group (BCG) growth-share matrix, which strategic business units generate large amounts of cash, need heavy investment to grow and maintain competitive positioning, but usually have modest net cash flow?

A. ash cows

B. uestion marks

C. ogs

D. tars

View answer

Correct Answer: D

Question #79

Which of the following statements is true with regard to a vertically integrated acquisition?

A. grocery store chain that purchases a dairy and begins to make milk-based products under its own brand is forward integrated

B. movie producer that acquires a chain of theaters is backward integrated

C. clothing manufacturer that acquires a chain of clothing stores is forward integrated

D. soda maker that purchases its leading competitor is backward integrated

View answer

Correct Answer: C

Question #80

The most likely span of control to apply over 14 data-entry clerks who do essentially the same job and work in the same office would be:

A. lose

B. arrow

C. oderate

D. ide

View answer

Correct Answer: D

Question #81

Research on the common characteristics of leaders of global firms found that:

A. mbition and relentless drive were more significant than honesty and trustworthiness

B. he leaders tended to have multidisciplinary problem solving ability

C. eing multilingual was unimportant

D. aving traveled extensively before entering the working world was relatively uncommon

View answer

Correct Answer: B

Question #82

Which of the following statements is correct regarding risk analysis?

A. he extent to which management judgments are required in an area could serve as a risk factor in assisting the auditor in making a comparative risk analysis

B. he highest risk assessment should always be assigned to the area with the largest potential loss

C. he highest risk assessment should always be assigned to the area with the highest probability of occurrence

D. isk analysis must be reduced to quantitative terms in order to provide meaningful comparisons across an organization

View answer

Correct Answer: A

Question #83

The following are potential sources of evidence regarding the effectiveness of a division's total quality management program. The least persuasive evidence would be a comparison of

A. mployee morale before and after program implementation

B. crap and rework costs before and after program implementation

C. ustomer returns before and after program implementation

D. anufacturing and distribution costs per unit before and after program implementation

View answer

Correct Answer: A

Question #84

Which of the following would be the appropriate analytical approach when comparing the number of employees working at a factory site with the direct cost of production each month over a period of one year?

A. rend analysis

B. atio analysis

C. egression analysis

D. orizontal analysis

View answer

Correct Answer: C

Question #85

A firm wishing to become global must consider how many national markets to enter. A firm should enter fewer national markets when

A. ommunication adaptation costs are low

B. he product need not be adapted

C. ntry costs are low

D. he first countries chosen are heavily populated and have high incomes

View answer

Correct Answer: D

Question #86

Which one of the following is generally not beneficial to group decision making in an organization?

A. ore information

B. cceptance

C. ore knowledge

D. ominant members

View answer

Correct Answer: D

Question #87

Evaluating performance is not done to

A. etermine the amount of nondiscriminatory benefits that each employee deserves

B. ssess the available human resources of the firm

C. otivate the employees

D. etermine which employees deserve salary increases

View answer

Correct Answer: A

Question #88

Line and staff positions are most likely to be in conflict because:

A. ine managers have no authority over staff employees

B. taff managers consider line managers' functional authority threatening to staff managers' own authority

C. ine managers believe that staff managers are resistant to line managers' advice

D. taff managers dislike relying on line expertise

View answer

Correct Answer: A

Question #89

A manager believes that positive employee attitudes are extremely important. The manager cooperates with employees in solving problems. A likely effect on employee behavior of this leadership style is:

A. istrust of the manager

B. lack of extraordinary performance

C. igh employee turnover

D. ncreased employee creativity

View answer

Correct Answer: D

Question #90

Which line segment identifies the quantity of safety stock maintained?

A. B

B. E

C. C

D. C

View answer

Correct Answer: B

Question #91

To keep costs at a minimum and decrease the completion time by 1-1/2 days, Networks, Inc.should crash activity i es)

A. D and AB

B. E

C. D

D. B and CE

View answer

Correct Answer: A

Question #92

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. l 'hich of the following approaches would best provide the analysis suggested by the audit manager?

A. evelop a classical variables sampling estimate of cost of production per department, with the sample stratified by the dollar value of each product produced

B. evelop a -gear ratio analysis of the cost of production compared to the cost of raw inventory across the three departments

C. evelop a multiple regression analysis of production costs, including such variables as raw material inventory costs, number of employees in the department, and overtime pay

D. evelop a linear regression analysis relating the cost of production to the cost of goods sold

View answer

Correct Answer: C

Question #93

An internal auditor found that the cost of some material installed on capital projects had been transferred to the inventory account because the capital budget had been exceeded. Which of the following would be an appropriate technique for the auditor to use to determine the extent of the problem?

A. dentify variances between amounts capitalized each month and the capital budget

B. nalyze a sample of capital transactions each quarter to detect instances in which installed material was transferred to inventory

C. eview all journal entries that transferred costs from capital to inventory accounts

D. ompare inventory receipts with debits to the inventory account and investigate discrepancies

View answer

Correct Answer: C

Question #94

How will profit or loss be affected by the amortization of a premium on bonds payable?

A. nterest expense is decreased, so profit or loss is increased

B. nterest expense is increased, so profit or loss is decreased

C. nterest income is increased, so profit or loss is increased

D. nterest income is decreased, so profit or loss is decreased

View answer

Correct Answer: A

Question #95

The economic order quantity. Q. is the size of the order that minimizes total inventory costs. These costs, which are composed of ordering and holding costs, can be computed using the following expression:If the organization decides to order 4.000 units at a time rather than 2.000 units. by hour much will its total inventory costs change?

A. S $500 increase

B. S $1

C. S $1 , 000 decrease

D. S $900 increase

View answer

Correct Answer: A

Question #96

Which of the following should be included in the internal audit activity's annual plan?

A. egree of testing that will be required to achieve the plan's objectives

B. cope of internal audit work and any limitations placed on that scope

C. etails of preliminary surveys to be carried out before each engagement

D. rocedures that will be used to conduct each planned engagement

View answer

Correct Answer: B

Question #97

Which of the following channel structures have the best means of managing channel conflict?I). ConventionalII). VerticalIII). HorizontalIV). Multichannel

A. and lI

B. I, III, and IV

C. , III, and IV

D. I and III

View answer

Correct Answer: B

Question #98

Of the following reasons for employees to resist a major change in organizational processes, which is least likely?

A. hreat of job loss

B. equired attendance at training classes

C. reakup of existing work groups

D. mposition of new processes by senior management without prior discussion

View answer

Correct Answer: B

Question #99

Which of the following statements regarding benchmarking is false?

A. enchmarking involves continuously evaluating the practices of best-in-class organization and adapting company processes to incorporate the best of these practices

B. enchmarking, in practice, usually involves a company's formation of benchmarking teams

C. enchmarking is an ongoing process that entails quantitative and qualitative measurement of the difference between the company's performance of an activity and the performance by the best in the world or the best in the industry

D. he benchmarking organization against which a firm is comparing itself must be a direct competitor

View answer

Correct Answer: D

Question #100

A U.S firm most likely may decide to enter the Australian market because of

A. eography

B. he unmet needs of an undeveloped country

C. sychic proximity

D. opulation

View answer

Correct Answer: C

Question #101

In December Year 1 catalogs were printed for use in a special promotion in January Year2. The catalogs were delivered by the printer on December 13. Year 1 with an invoice for US $70, 000 attached. Payment was made in January Year 2. The US $70.000 should be reported as a deferred cost at the December 31. Year I). balance sheet date because of the

A. atching principle

B. evenue recognition principle

C. eliability principle

D. ost principle

View answer

Correct Answer: A

Question #102

Which of the following activities is designed to provide feedback on the effectiveness of an internal audit function?I). Proper supervision.II). Proper training.III). Internal assessmentsIV). External assessments

A. , II, and III only

B. , II, and IV only

C. , III, and IV only

D. I, III, and IV only

View answer

Correct Answer: C

Question #103

A public university would be considered which type of organization?

A. ommonweal organization

B. usiness organization

C. onprofit service organization

D. utual benefit organization

View answer

Correct Answer: C

Question #104

Risoner Company plans to purchase a machine with the following conditions:· Purchase price = US $300, 000· The down payment = 10% of purchase price with remainder financed at an annual interest rate of 16%. The financing period is 8 years with equal annual payments made every year.· The present value of an annuity of US $1 per year for 8 years at 16% is 4.3436. · The present value of US $1 due at the end of 8 years at 16% is 3050 The annual paymentrounded) is

A. S $39, 150

B. S $43, 200

C. S $62, 160

D. S $82

View answer

Correct Answer: C

Question #105

Which of the following would be most helpful to a governmental auditor searching for the existence of multiple welfare claims that were filed under different names but used the same address?

A. agging and tracing

B. eneralized audit software

C. ntegrated test facility

D. preadsheet analysis

View answer

Correct Answer: B

Question #106

Assume that additional workers are hired for the bottleneck operation to expedite setups and materials handling. The cost of the additional workers is US $50, 000 per year. As a result, the annual output of the bottleneck operation will increase by 500 units. The change in operating income attributable to the increase in workers is

A. S $50, 000

B. S $36, 000

C. S $ 14, 000)

D. S $ 20, 000)

View answer

Correct Answer: C

Question #107

Which of the following is an appropriate role for the board in governance?

A. reparing written organizational policies that relate to compliance with laws, regulations, ethics, and conflicts of interest

B. nsuring that financial statements are understandable, transparent, and reliable

C. ssisting the internal audit activity in performing annual reviews of governance

D. orking with the organization's attorneys to develop a strategy regarding current litigation, pending litigation, or regulatory proceedings governance

View answer

Correct Answer: B

Question #108

A retail entity maintains a markup of 25 % based on cost. The entity has the following information for the current year:Beginning inventory was

A. S $40, 000

B. S $85, 000

C. S $110, 000

D. S $265, 000

View answer

Correct Answer: B

Question #109

Which line segment represents the reorder lead time?

A. B

B. E

C. F

D. C

View answer

Correct Answer: D

Question #110

Continuing Professional Education (CPE) hours for Certified Internal Auditors may be achieved by

A. ttending audit staff meetings

B. erifying that all completed audit tests are fully documented

C. ublishing an article on the company's internal audit department

D. btaining experience on the job

View answer

Correct Answer: C

Question #111

Which of the following situations allows for the most objectivity on the part of an internal auditor?

A. ssessing testing procedures in a new computer system

B. erforming a risk assessment of a new financial instrument

C. rawing conclusions from a sample of financial transactions

D. omparing current environmental activities against legislation

View answer

Correct Answer: D

Question #112

The major distinction between the function-of-expense format for the income statement and the "condensed" format recognized under U.S. GAAP is the separation of

A. perating and nonoperating data

B. ncome tax expense and administrative expenses

C. ost of goods sold expense and administrative expenses

D. he effect on income taxes of extraordinary items and the effect on income taxes of profit or loss from ordinary activities

View answer

Correct Answer: A

Question #113

During an audit engagement, an internal auditor finds that management is not complying with previous commitments made to the external auditors. However, the auditor determines management's actions to be justified due to significant changes in the business. The best course of action for the auditor to take would be to

A. roceed with the audit engagement and assess the changes actually implemented by management

B. nform the external auditors and seek their guidance

C. nform the external auditors and remove the associated work from the internal audit scope

D. ompare the recommended changes against the changes made by management and advise management which action to take

View answer

Correct Answer: A

Question #114

Internal auditors who are concerned with potential risks due to the mishandling of records or transactions should take into consideration

A. he type and nature of the activities to be examined

B. hether employees in key positions of trust are bonded

C. he history of losses suffered by the company

D. he results of prior risk assessments

View answer

Correct Answer: A

Question #115

A flat organization structure is one with relatively few levels of hierarchy and is characterized by wide spans of management control. A tall organization has many levels of hierarchy and narrow spans of control. Which of the following situations is consistent with a flat organization structure?

A. asks require little direction and control of subordinates

B. ork areas are geographically dispersed

C. asks are highly complex and varied

D. ubordinates perform distinctly different tasks

View answer

Correct Answer: A

Question #116

Which of the following characteristics is common with a mature group?

A. armony is emphasized at the expense of addressing the problems

B. o attempt to force unanimity

C. embers begin to identify with the group

D. edistributions of power and authority may occur

View answer

Correct Answer: B

Question #117

A manufacturer uses a materials requirements planning (MRP) system to track inventory, orders, and raw materials requirements. What condition should an auditor search for in the MRP database if a preliminary assessment indicated that inventory is understated?I). Item cost set at zero.II). Negative quantities on hand.III). Order quantity exceeding requirements.IV). Inventory lead times exceeding delivery schedule.

A. and II only

B. and IV only

C. I and IV only

D. II and IV only

View answer

Correct Answer: A

DON'T WANT TO MISS A THING?

100% Pass Cisco, PMP, CISA, CISM, AWS Practice test on SALE!
Get Now

Certified Internal Auditor Exam Questions Free Download | SPOTO

View The Updated CIA Exam Questions

View Answers after Submission

DON'T WANT TO MISS A THING?

100% Pass Cisco, PMP, CISA, CISM, AWS Practice test on SALE! Get Now

Certified Internal Auditor Exam Questions Free Download | SPOTO

View The Updated CIA Exam Questions

View Answers after Submission

100% Pass Cisco, PMP, CISA, CISM, AWS Practice test on SALE!
Get Now