CIA Challenge Exam Test Questions, Online Mock Exam

Question #1

Which must be part of any risk model involving inventory valuation?

A. roduct warranty policies

B. endor pricing policies

C. nventory shrinkage expense

D. nnual sales forecasts

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Correct Answer: C

Question #2

A quantitative risk assessment model has all of the following advantages except

A. ccommodating a large number of risk factors in the assessment

B. roviding documentation for the chief audit executive, who must defend the long- range audit plan

C. roviding a systematic method of applying weightings to risks and priorities

D. emoving the need for judgment on the part of the chief audit executive

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Correct Answer: D

Question #3

A traditional quality control process in manufacturing consists of mass inspection of goods only at the end of a production process. A major deficiency of the traditional control process is that

A. t is expensive to do the inspections at the end of the process

B. t is not possible to rework defective items

C. t is not 100% effective

D. t does not focus on improving the entire production process

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Correct Answer: D

Question #4

A vendor sells specialty inks on consignment to a manufacturer of colored paper at a price of US $200 per barrel. Payment is made to the vendor in the month the manufacturer uses the barrels in production. The vendor records revenues when the barrels are shipped and makes no adjusting entries to record unearned revenues until the December 31 closing of the books. At the end of July. the manufacturer had 40 barrels of ink on consignment. During August, the vendor consigned 50 barrels and received payment for

A. S $3, 000

B. S $4, 000

C. S $11, 000

D. S $12, 000

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Correct Answer: C

Question #5

General Electric has popularized a model for competitive analysis. In this portfolio matrix,

A. ach of the firm's businesses is represented by a circle proportional to its size

B. usiness strength and market attractiveness are measured using a multifactor index

C. he number of cells varies with the number of factors used by the firm in its analysis

D. he four quadrants represent combinations of high or low market growth rates and business profitability

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Correct Answer: B

Question #6

The chairperson of an organization's audit committee has obtained a risk management report that identifies significant industry concerns that impact the organization. The chairperson has asked the chief audit executive (CAE) to review these concerns and advise if they are relevant to the organization. How should the CAE respond?

A. ccept the engagement but communicate only with the audit committee to protect the confidentiality of the request

B. ecline the engagement because it is outside of the scope of the internal audit charter

C. ecline the engagement because it impairs the internal audit activity's independence

D. ccept the engagement but inform senior management of the request

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Correct Answer: D

Question #7

Which of the following is not an example of positive reinforcement of behavior?

A. aying a bonus to employees who had no absences for any four-week period

B. iving written warnings to employees after only every other absence

C. ssigning a mentor to each employee who exhibits a desire to develop leadership skills

D. aving a lottery every month where 10% of the employees with no absences receive a US $200 bonus

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Correct Answer: B

Question #8

What is Lally's current tax expense for Year 2?

A. S $1, 960, 000

B. S $1, 992, 000

C. S $2, 000, 000

D. S $2, 032, 000

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Correct Answer: B

Question #9

Which of the following indicates a high performance team?

A. ride in the team leader

B. uick agreement on the first proposed solution for problems facing the team

C. are in risk-taking

D. ommitment to personal growth of team members

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Correct Answer: D

Question #10

The present value of future benefits payable as a result of work done before the introduction of, or amendment to, postemployment benefits is the

A. dditional minimum liability

B. air value of plan assets

C. efined benefit obligation

D. ast service e cost

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Correct Answer: D

Question #11

When significant change is required, management is least likely to be able to change the organization's

A. embers

B. tructure

C. nvironment

D. echnology

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Correct Answer: C

Question #12

Which of the following best describes the procedures used by the representatives of an organization's stakeholders to provide oversight of the processes administered by management?

A. overnance

B. ontrol

C. isk management

D. onitoring

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Correct Answer: A

Question #13

ABC entities, a manufacturer lessor, leased a chine to XYZ on January 1. The lease meets the criteria for a finance lease. Title to the asset will automatically pass to the lessee at the end of the lease term. Other details are as follow:

A. ption A

B. ption B

C. ption C

D. ption D

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Correct Answer: D

Question #14

Which of the following procedures would be most helpful in providing additional evidence when an auditor suspects that an unidentified employee is submitting and approving invoices for payment?

A. se generalized audit software to identify invoices from vendors with post office box numbers or other unusual features

B. elect a sample of payments made during the year and investigate each one for approval

C. elect a sample of receiving reports representative of the period under investigation and trace to approved payment

D. elect a sample of invoices paid during the past month and trace them to appropriate vendor accounts

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Correct Answer: A

Question #15

Organizations that use a highly structured command-and-control management approach are at greater risk of

A. elayed response due to the inability to reach consensus among decision makers

B. egative consequences that result from lower-level staff's unwillingness to confront errors by superiors

C. rosion of staff morale due to perceptions of ineffective leadership

D. aste and abuse of organizational resources resulting from management override of controls

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Correct Answer: B

Question #16

A regression equation

A. stimates the dependent variables

B. ncompasses factors outside the relevant range

C. s based on objective and constraint functions

D. stimates the independent variable

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Correct Answer: A

Question #17

A likely effect of a bureaucratic structure on employee motivation is that:

A. mployee performance will be mediocre because of inflexible standards and impersonal surroundings

B. n employee will pursue organizational goals because of his/her participation in establishing them

C. orale will be high because of each employee's feeling of belonging and ownership

D. ob enrichment will be high because of each employee's involvement in developing and adapting his/her job description and required tasks

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Correct Answer: A

Question #18

One of the elements included in the economic order quantity EOQ) formula is

A. afety stock

B. early demand

C. elling price of item

D. ead time for delivery

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Correct Answer: B

Question #19

Informal groups often have many favorable effects on the members. Which of the following is one of the favorable effects informal groups have on members but that may have an unfavorable effect on the organization?

A. nformal groups aid in problem-solving situations

B. nformal groups improve coordination and reduce supervision required

C. nformal groups reduce tension and encourage production

D. nformal groups provide another channel of communication

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Correct Answer: D

Question #20

While conducting a control self assessment project in an information technology division, an internal auditor asks managers to rate the severity of each identified risk and the strength of each related control. Which of the following represents the most significant disadvantage of this exercise?

A. udget hours expended will exceed any tangible benefits

B. ubsequent audits of the division may not be conducted

C. anagement may omit important control weaknesses

D. he internal audit department will be viewed as responsible for controls

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Correct Answer: C

Question #21

Which of the following statements regarding an internal auditor's responsibility for detecting fraud is not correct?

A. he auditor should detect fraud if red flags are present

B. he auditor should have sufficient knowledge to correctly identify indicators that fraud may have been committed

C. he auditor should identify control weaknesses which could allow fraud to occur

D. he auditor should evaluate the indicators of fraud sufficiently to determine if a fraud investigation should take place

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Correct Answer: A

Question #22

As part of an operational audit, an auditor compared records of current inventory with usage during the prior two year period and determined that the spare parts inventory was excessive. What step should the auditor perform first?

A. etermine the effects of a stock-out on the organization's profitability

B. etermine whether a clear policy exists for setting inventory limits

C. etermine who approved the purchase orders for the spare parts

D. etermine whether purchases were properly recorded

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Correct Answer: B

Question #23

A manager implementing the directive leader approach should:

A. losely supervise each employee

B. isplay confidence in each employee's ability

C. ork with the employee when developing goals

D. learly signal that the employee is expected to be successful

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Correct Answer: A

Question #24

A plot of land is acquired in exchange for US $250, 000 cash and a noninterest-bearing note with a face amount of US $1, 000.000 on January 1 of the current year. The US $1, 000, 000 is payable in installments of US $250, 000 each, with the first installment due December 31 of the current year. With regard to imputing interest on this note.1) what market rate should be used to account for interest for the current year and2) what should be done in future years when there is a change in prevailing interest ra

A. ption A

B. ption B

C. ption C

D. ption D

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Correct Answer: A

Question #25

Which of the following factors should internal auditors consider when planning an audit engagement?I). The extent of documentation required to complete the engagement.II). Objectives of the area to be reviewed and how activities are controlled.III). Significant risks, resources, and operations.IV). Scope and degree of testing required to achieve the engagement's objectives.

A. and IV only

B. , II, and III only

C. I, III, and IV only

D. , II, III, and IV

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Correct Answer: C

Question #26

All of the following would normally be involved in preparing for and carrying out the internal audit activity's annual plan except

A. stablishing policies and procedures for workpapers and referencing

B. roviding periodic activity reports to the audit committee on audit engagements in progress

C. ssessing the amount of risk in major departments

D. raining audit staff on appropriate audit methodologies for addressing any newly identified risks

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Correct Answer: A

Question #27

An internal auditor would review prior audit reports when planning an audit engagement in order toI). Identify previously reported problem areas for further follow-up.II). Eliminate previously reviewed areas from further examination.III). Gain an understanding of the audited area's business processes and control activities.IV). Understand the concerns or requests of management.

A. I only

B. and III only

C. and IV only

D. I and III only

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Correct Answer: B

Question #28

An organization has 10 groups of teams that each consists of multi-skilled workers. Workers are often transferred between teams when needed, and communication among and within groups is emphasized. The corporation would be classified as a(n)

A. ourglass organization

B. luster organization

C. etwork organization

D. irtual organization

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Correct Answer: B

Question #29

A corporation produces uniforms that it sells and rents to businesses. The corporation recently acquired a textile mill that produces synthetic cloth. This acquisition is an example of:

A. orizontal integration Forward integration

B. orizontal integration Backward integration

C. ertical integration Forward integration

D. ertical integration Backward integration

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Correct Answer: D

Question #30

A firm is attempting to estimate the reserves for doubtful accounts. The probabilities of these doubtful accounts follow a transition process over time. They evolve from their starting value to a changed value. As such, the most effective technique to analyze the problem is

A. arkov chain analysis

B. conometric theory

C. onte Carlo analysis

D. ynamic programming

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Correct Answer: A

Question #31

An entity has publicly announced a detailed, formal plan to dispose in its entirety of a component of the entity that represents a separate major line of business that is distinct operationally and financially. Which of the following is the proper treatment of the disclosures that should be made after the announcement?

A. s part of continuing operations

B. s a discontinued operation

C. s an extraordinary item

D. s a prior-period item

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Correct Answer: B

Question #32

An entity allows customers to redeem 20 coupons for a toycost US $3.00). Estimates are that 40% of coupons distributed will result in redemption. Since beginning the promotion this year, 4 million coupons were distributed and 1 million coupons redeemed. The adjusting entry to accrue for unredeemed coupons at year-end is

A. ption A

B. ption B

C. ption C

D. ption D

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Correct Answer: A

Question #33

An audit of an organization's systems development life cycle (SDLC) found that detailed internal control procedures for mission critical business systems were not developed until the systems were implemented. When reporting this finding, the auditor should recommend the development of such procedures during which SDLC phase?

A. nvestigation

B. esign

C. evelopment

D. mplementation

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Correct Answer: B

Question #34

Identify the management technique in which employees assist in setting goals, making decisions, solving problems, and designing and implementing organizational changes.

A. otal quality control

B. ob enlargement

C. anban

D. articipative management

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Correct Answer: D

Question #35

In production management, product breakdown into component parts and lead times for procuring these parts is necessary for

A. critical path method CPM) system

B. materials requirements planning MRP) system

C. n economic order quantity EOQ) system

D. n ABC system

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Correct Answer: B

Question #36

Increasing the desired precision from $1, 000 to $2, 000 would have what effect on the required size of a sample?

A. t would increase the sample size

B. t would decrease the sample size

C. t would have no effect on the sample size

D. he effect on the sample size is not determinable

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Correct Answer: B

Question #37

An internal quality assessment of the internal audit activity should provide the chief audit executive with

A. ecommendations for improvement

B. bjectives for internal audit engagements

C. onfirmation of action on past audit recommendations

D. ppraisals of internal audit staff performance

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Correct Answer: A

Question #38

In forming a team to investigate an organization's potential adoption of an activity based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of

A. ctivities and cost drivers

B. nformation processing procedures

C. urrent product cost structures

D. nternal control alternatives

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Correct Answer: D

Question #39

A fragmented industry is most likely to:

A. ave substantial economies of scale

B. ave low transportation costs

C. e characterized by suppliers with little bargaining power

D. pproximate pure competition

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Correct Answer: D

Question #40

When a multinational firm decides to sell its products abroad, one of the risks the firm faces is that the government of the foreign market charges the firm with dumping. Dumping occurs when

A. he same product sells at different prices in different countries

B. firm charges less than the cost to make the product so as to enter or win a market

C. ower quality versions of the product are sold abroad so as to be affordable

D. ransfer prices are set artificially high so as to minimize tax payments

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Correct Answer: B

Question #41

According to the contingency theory of leadership, a manager will be most effective when the manager:

A. onsistently initiates structure

B. dapts style to specific circumstances

C. s task oriented

D. s relationship oriented

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Correct Answer: B

Question #42

Which of the following is not a limit on emerging industry development?

A. aw materials and components

B. ubsidies

C. roduct quality

D. egulatory approval

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Correct Answer: B

Question #43

According to the International Professional Practices Framework, which of the following is an acceptable method of Continuing Professional Education?I). Attending college courses.II). Attending conferences and seminars.III). Joining and participating in professional societies.IV). Participating in research projects.

A. and III only

B. I and IV only

C. , II, and III only

D. , II, III, and IV

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Correct Answer: D

Question #44

Buyer-based pricing involves

A. dding a standard markup to the cost of the product

B. etermining the price at which the product will earn a target profit

C. asing prices on the product's perceived value

D. asing prices on competitors' prices

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Correct Answer: C

Question #45

Which of the following is an example of a contingent liability?

A. retail store in a shopping mall pays the lessor a minimum monthly rent plus an agreed-upon percentage of sales

B. company is refusing to pay the invoice for the annual audit because it seems higher than the amount agreed upon with the public accounting entity's partner

C. company accrues income tax payable in its interim financial statements

D. lessee agrees to reimburse a lessor for a shortfall in the residual value of an asset under lease

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Correct Answer: D

Question #46

The sampling method that is most appropriate to use when one deviation is considered critical is

A. equential sampling

B. ean per unit sampling

C. atio estimation sampling

D. iscovery sampling

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Correct Answer: D

Question #47

A company uses a target pricing and costing approach. The following is its costs and revenues for the current year:The company intends to increase unit sales to 120, 000 in the next year by reducing the unit price to US $8. If the company is to achieve a unit target operating income of 15%, by what amount must it reduce the full cost per unit?

A. S $0

B. S $1

C. S $I

D. S $1

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Correct Answer: D

Question #48

During which stages do the primary issues among group members involve uncertainty about power and authority relationships?

A. es Yes

B. es No

C. o Yes

D. o No

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Correct Answer: B

Question #49

Which of the following is not an advantage of group decision making as compared to individual decision making?

A. roups obtain an increased degree of acceptance of a solution so that it may be more easily implemented

B. roup decision making is consistent with democratic methods

C. roup members bring more complete information and knowledge into the decision process

D. roup members avoid expressing opinions that deviate from what appears to be the group consensus

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Correct Answer: D

Question #50

A medium-sized municipality provides 8.5 billion gallons of water per year for 31, 000 customers. The water meters are replaced at least every five years to ensure accurate billing. The department recently issued the following activity report ActivityMonth OneMonth TwoMonth ThreeActual 1st Quarter1st Quarter GoalMeters replaced1, 2351, 425Leaks reportedLeaks repaired100%Based on the activity reported for the meter replacement program, an internal auditor would conclude that

A. stablished operating standards are understood and are being met

B. ny corrective action needed has probably been taken during the quarter

C. eviations from the goal should be analyzed and corrected

D. eters should be changed every three years

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Correct Answer: C

Question #51

While researching a topic during a telecommunications audit, an auditor identified a security vulnerability with the entity's revenue accounting system. The accounting system is outside the scope of the current audit engagement. The auditor should

A. isregard the security vulnerability and address it during the audit of the revenue accounting system

B. nclude the revenue accounting system in the scope of the current audit engagement and address the vulnerability in the report

C. lert management to the identified security vulnerability

D. evelop a solution to the security vulnerability and then inform management

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Correct Answer: C

Question #52

Which of the following will allow a manufacturer with limited resources to maximize profits?

A. he Delphi technique

B. xponential smoothing

C. egression analysis

D. inear programming

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Correct Answer: D

Question #53

A company uses the percentage-of-completion method and reports the foil wing:The contract price is US $1.000. What is the profit recognized in Year 2?

A. S $150

B. S $400

C. S $550

D. S $800

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Correct Answer: C

Question #54

An auditor plans to analyze customer satisfaction, including (1) customer complaints recorded by the customer service department during the last three months; (2) merchandise returned in the last three months; and (3) responses to a survey of customers who made purchases in the last three months. Which of the following statements regarding this audit approach is correct?

A. lthough useful, such an analysis does not address any risk factors

B. he survey would not consider customers who did not make purchases in the last three months

C. teps 1 and 2 of the analysis are not necessary or cost-effective if the customer survey is comprehensive

D. nalysis of three months' activity would not evaluate customer satisfaction

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Correct Answer: B

Question #55

All of the following are impediments to global competition except:

A. conomies of scale

B. apid changes in technology

C. iffering marketing tasks

D. ensitivity to lead times

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Correct Answer: A

Question #56

A firm discounts never-before-discounted items. This action is an example of a:

A. ivergence from industry precedent

B. ross-parry

C. ivergence from prior strategic objectives

D. luff

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Correct Answer: A

Question #57

Strategic management includes developing the organization's grand strategy. This strategy is based on:

A. xisting strategic business units (SBUs)

B. SWOT analysis

C. ortfolio management of the organization's businesses

D. trategic planning

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Correct Answer: B

Question #58

An objective for an audit of a medical research corporation is to evaluate management's controls to ensure that timely reports are submitted to sponsors of contracted research projects. In planning the audit to achieve this objective, the auditor should begin by

A. eviewing policies and procedures

B. nterviewing a group of research managers

C. bserving report preparation in a number of laboratories

D. ending a questionnaire to a sample of research sponsors

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Correct Answer: A

Question #59

Due to urgent requests from management, a busy internal audit activity finds that it can no longer meet all of its commitments contained in the annual audit plan. The best course of action for the chief audit executive to take would be to

A. ontinue with the plan and seek opportunities to adjust priorities and reallocate resources

B. dvise senior management and request that they reconsider these additional requests using more rigorous risk assessment and prioritization factors

C. dvise the board and senior management and request a reassessment of the plan

D. dvise the board immediately and seek their support for additional resources to meet the needs of the plan

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Correct Answer: C

Question #60

The correlation coefficient that indicates the weakest linear association between two variables is

A. 0

B. 0

C.

D.

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Correct Answer: B

Question #61

An entity has appropriately used the installment method of accounting sit began operations at the beginning of the current year. The following information pertains to its operations for this year:The amount of gross profit deferred at the end of the current year should be

A. S $720, 000

B. S $288, 000

C. S $216, 000

D. S $144, 000

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Correct Answer: C

Question #62

Which of the following best defines an audit opinion?

A. summary of the significant audit observations and recommendations

B. n auditor's evaluation of the effects of the observations and recommendations on the activities reviewed

C. conclusion which must be included in the audit report

D. recommendation for corrective action

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Correct Answer: B

Question #63

A leader who is able to gain compliance from a group based solely on personal attraction is said to have:

A. eward power

B. oercive power

C. eferent power

D. egitimate power

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Correct Answer: C

Question #64

Firms that sell products worldwide are most likely to have the lowest costs with a marketing mix that is

A. dapted to each market

B. tandardized for all markets

C. combination of new and adapted products in each market

D. combination of standardized products and adapted promotions

View answer

Correct Answer: B

Question #65

A firm must decide the mix of production of Product X and Product Y. There are only two resources used in the two products, resources A and B. Data related to the two products is given in the following table:What is the appropriate objective function to maximize profit?

A. X + 7Y

B. X+Y

C. X + 6Y

D. X + 8Y

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Correct Answer: C

Question #66

Which of the following is true regarding Fiedler's studies of contingency theory?

A. he three dimensions to contingency theory are position power, task structure, and relationship structure

B. he two types of leaders that emerged from Fiedler's studies include task-oriented style and leader-member style

C. lacement of leaders in the organization is not as important as the leaders' leadership skills

D. eople become leaders not only because of personality attributes, but also because of various situational factors and the interaction between the leaders and the situation

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Correct Answer: D

Question #67

The channel structure in which producers, wholesalers, and retailers act as a unified system is a

A. orizontal distribution system

B. ertical distribution system

C. nilateral distribution system

D. ultichannel system

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Correct Answer: B

Question #68

The following data on variables x and y was collected from June to October:The correlation coefficient between variables x and is nearest to

A.

B. 1

C.

D.

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Correct Answer: B

Question #69

The four components of time series data are secular trend, cyclical variation, seasonality, and random variation. The seasonality in the data can be removed by

A. ultiplying the data by a seasonality factor

B. gnoring it

C. aking the weighted average over four time periods

D. ubtracting a seasonality factor from the data

View answer

Correct Answer: C

Question #70

Which of the following is a source of global competitive advantage?

A. ow fixed costs

B. roduction economies of scale

C. eak copyright protection

D. ntensive local service requirements

View answer

Correct Answer: B

Question #71

At the conclusion of an audit of an organization's treasury department, a report was issued to the treasurer, chief financial officer, president, and board. Because of the sensitivity of some findings, a followup review was performed. The auditor should provide the report of followup findings to theI). Treasurer.II). Chief financial officer.III). President.IV). Board.

A. and II only

B. II and IV only

C. , II, and III only

D. , II, III, and IV

View answer

Correct Answer: D

Question #72

IFPS 2, Share-Based payment, normally requires entities to a account for their share- based employee compensation plans in accordance with which of the following methods?

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: B

Question #73

A chief audit executive (CAE) is obtaining information required by a regulatory oversight body and discovers a situation that requires management to take immediate corrective action. What is the best course of action for the CAE to take?

A. ait until all of the information has been gathered and reported to the oversight body before reporting the situation to management

B. heck with legal counsel to determine whether the situation can be reported to management before all information has been submitted to the oversight body

C. eport the situation to management immediately

D. chedule an engagement to explore the situation in depth, before reporting to either management or the oversight body

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Correct Answer: C

Question #74

A structural characteristic of an emerging industry is:

A. trategic uncertainty

B. ustomers are sophisticated

C. echnological uncertainty has been overcome

D. ndustry development is unlimited

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Correct Answer: A

Question #75

An example of an internal nonfinancial benchmark is

A. he labor rate of comparably skilled employees at a major competitor's plant

B. he average actual cost per pound of a specific product at the company's most efficient plant

C. US $50, 000 limit on the cost of employee training programs at each of the company's plants

D. he percentage of customer orders delivered on time at the company's most efficient plant

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Correct Answer: D

Question #76

At its balance sheet date, an entity reliably estimates that the expected cost of compensated absences resulting from short-term disability will be US $100, 000. This unused entitlement arose from employee services rendered during the period and is accumulating. How should it be accounted for?

A. nly a disclosure should be made because recognition does not occur until the absences occur

B. n expense should be recorded for US $100, 000

C. n asset of US $100, 000 should be recognized

D. direct reduction to retained earnings of US $100, 000 should occur

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Correct Answer: B

Question #77

Which of the following would an internal auditor consider when developing engagement objectives?I). Estimated time to complete the engagement.II). Probability of significant errors.III). Risks, controls, and governance processes.IV). Budgeted cost and resource requirements.

A. I only

B. and IV only

C. and III only

D. , III, and IV only

View answer

Correct Answer: C

Question #78

What role, if any, should the internal audit activity have in the process of following up on observations and recommendations made by the external auditors?

A. he internal audit activity should have no role in this process in order to ensure independence

B. he internal audit activity should become involved only if the chief audit executive has sufficient evidence that the follow-up is not occurring

C. he internal audit activity should review the adequacy and effectiveness of management's follow-up actions

D. he internal audit activity should become involved only if specifically requested by management or the board of directors

View answer

Correct Answer: C

Question #79

An organization's sales professionals are potentially abusing the use of cellular phones, resulting in an alarming increase in telephone expenses. Which of the following controlsis least likely to curb this abuse?

A. eveloping periodic reports to management that show type, length, and number of calls per sales professional, with related totals and comparisons

B. equiring sales professionals to pay monthly cellular phone bills and subsequently submit only business calls for reimbursement using an expense report process

C. equiring sales managers to approve monthly bills prior to payment, explain budget variances, and explain increases from previous periods

D. equiring authorization of the cellular phone bill payment by the manager of the telecommunications department

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Correct Answer: D

Question #80

According to the International Professional Practices Framework, which of the following criteria should be used to evaluate an organization's governance process?

A. isk, control activities, information, and monitoring

B. trategies, policies, procedures, and operations

C. alues, goals, monitoring, and accountability

D. egulations, rules, laws, and systems

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Correct Answer: C

Question #81

Bandit Co. will report a value of , List A, for the parking and storage facility if it prepares financial reports consistent with the , List B, principle.

A. ption A

B. ption B

C. ption C

D. ption D

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Correct Answer: B

Question #82

According to the growth-share matrix approach developed by the Boston Consulting Group, a harvest strategy is most likely to be used for SBUs that are

A. uestion marks that may become stars

B. trong cash cows

C. eak cash cows

D. ogs that reduce the firm's profits

View answer

Correct Answer: C

Question #83

A chief audit executive (CAE) believes that senior management has accepted a level of residual risk that is unacceptable to the organization. According to the Standards, the CAE must first discuss the matter with the organization's

A. enior management

B. udit committee

C. xternal auditors

D. oard

View answer

Correct Answer: A

Question #84

If participants in a control self assessment workshop begin breaking their agreed upon ground rules, the facilitator should

A. gnore the behavior and continue the workshop

B. llow them to continue briefly and then remind them of the ground rules

C. ave the participants modify the ground rules

D. trictly enforce the ground rules

View answer

Correct Answer: B

Question #85

In deciding whether to have a work group make a decision or to make the decision personally, a manager should consider

A. hen the decision is needed

B. ow important it is for the work group to accept the decision

C. hether there are strong individuals in the work group who could dominate the decision making process

D. ll of the answers are correct

View answer

Correct Answer: D

Question #86

Actual and projected sales of an entity for September and October are a'-, follows:All credit sales are collected in the month following the month in which the sale is made. The September 30 cash balance is US $23, 000. Cash disbursements in October are projected to be US $94, 000. To maintain a minimum cash balance of US $15, 000 on October 31, the entity will need to borrow

A. S $0

B. S $6, 000

C. S $11, 000

D. S $16, 000

View answer

Correct Answer: B

Question #87

The inventory model that follows the concept that 80% of the value of an inventory is in 20% of the inventory items is the

A. BC system

B. conomic order quantity EOQ) model

C. ust-in-time inventory system

D. aterials requirements planning MRP) system

View answer

Correct Answer: A

Question #88

The following information is available for an entity for the quarter ended March 31. of the current year:The gross profit margin is normally 200 of sales. What is the estimated cost of the merchandise inventory at March 31. of the current year?

A. S $20, 000

B. S $40, 000

C. S $60

D. S $180, 000

View answer

Correct Answer: C

Question #89

An organization contracted a third party to construct a new facility that was estimated to cost $25 million. Which of the following is the most pertinent reason for the organization to audit the contractor's records?

A. he contract includes a right to audit clause

B. he contractor will be paid on a cost plus basis

C. he estimated cost is high

D. he contractor has subcontracted much of the work

View answer

Correct Answer: B

Question #90

With the globalization of economies, many organizations have expanded their operations to international locations. As an advisor to management, an internal auditor will most likelyrecommend that a geocentric, or worldwide, attitude be adopted. Select the reason the geocentric attitude is preferred.

A. t promotes a simpler organizational structure

B. t provides greater autonomy for host country managers

C. t provides the best balance of local and worldwide objectives

D. t promotes tighter organizational control

View answer

Correct Answer: C

Question #91

A firm sold the same product in many foreign countries but changed the ad copy to allow for language and cultural differences. According to teegan's model of adaptation strategies, the firm adopted a strategy of:

A. roduct adaptation

B. ommunication adaptation

C. ual adaptation

D. traight extension

View answer

Correct Answer: B

Question #92

An appropriate technique for planning and controlling manufacturing inventories, such as raw materials, components, and subassemblies whose demand depends on the level of production is

A. aterials requirements planning

B. egression analysis

C. apital budgeting

D. inear programming

View answer

Correct Answer: A

Question #93

An internal auditor has been asked to provide a report to an external party for which internal audit services were provided. Which of the following should be considered prior to complying with the request?I). Need for a written agreement concerning the information to be reported.II). Limitations on the distribution or sharing of the information provided.III). Nature of the report, including conclusions, recommendations, and status of findings.IV). Appropriateness of revising or editing the report to make it

A. and III only

B. I and IV only

C. , II, and III only

D. , II, III, and IV

View answer

Correct Answer: D

Question #94

A firm sells the same product in different countries and uses the same promotion methods. According to keegan's model of adaptation strategies, this firm has adopted a strategy of

A. traight extension

B. roduct adaptation

C. roduct invention

D. ual adaptation

View answer

Correct Answer: A

Question #95

Only two companies manufacture Product A. The finished product is identical regardless of which company manufactures it. The cost to manufacture Product A is US $1, and the selling price is US $2. One company considers reducing the price to achieve 100c'% market share but fears the other company will respond by further reducing the price. Such a scenario would involve a

A. o-win strategy

B. ual-win strategy

C. ne win-one lose strategy

D. eutral strategy

View answer

Correct Answer: A

Question #96

Which of the following lists these audit steps in the correct chronological order?I). Create the engagement work program.II). Conduct the exit conference.III). Perform fieldwork.IV). Schedule the audit engagement.V). Issue a summary report of audit findings.

A. , IV, III, II, V

B. , IV, II, III, V

C. V, I, III, II, V

D. V, III, I, V, II

View answer

Correct Answer: C

Question #97

An internal auditor pays to participate in the company's annual golf tournament, which is held outside of normal business hours. The auditor wins the putting contest and is awarded an all-expense-paid weekend vacation. According to the IIA Code of Ethics regarding objectivity, the auditor's best course of action would be to

A. efuse the prize because the amount is significant

B. ccept the prize because the event was held outside of normal business hours

C. efuse the prize because it represents an impairment to objectivity

D. ccept the prize because the auditor received no special treatment

View answer

Correct Answer: D

Question #98

Which of the following is a red flag associated with improper asset valuation?

A. nusual increase in gross margin

B. nusual decrease in the number of days' purchases in inventory

C. ecurring positive cash flows from operations

D. llowance for bad debts that is increasing in percentage terms

View answer

Correct Answer: A

Question #99

An employee who recently transferred into the internal audit activity has been assigned to audit the accounts payable system. Which function, if previously performed by the auditor, would represent a conflict of interest?

A. onitoring the allowance for doubtful accounts

B. riting procedures for the handling of duplicate payments

C. igning timekeeping cards for subordinates

D. eviewing shipping documents for accuracy

View answer

Correct Answer: B

Question #100

Dutch researcher Geert Hofstede has examined the cultural dimensions of organizational behavior in 40 countries. The United States ranked the highest in which dimension?

A. ower distance

B. ncertainty avoidance

C. ndividualism

D. asculinity

View answer

Correct Answer: C

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