Latest CIA-I Exam Questions and Practice Tests 2024

Question #1

The dominant firm in a market pursues a market-leader strategy. This strategy may involve

A. olding the market stable to avoid attracting new competitors

B. flank defense to strengthen the firm's brand

C. ending market signals as a mobile defense

D. nnovations as an offensive strategy

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Correct Answer: D

Question #2

Which of the following environments is most likely to help prevent fraud within an organization?I). Realistic organizational goals and objectives have been set.II). Legal counsel is available for consultation on a timely basis.III). Procedures exist to investigate fraud when it is identified.IV). A well-designed control system exists.

A. and II only

B. and IV only

C. I and III only

D. II and IV only

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Correct Answer: B

Question #3

Finance leases are differentiated from operating leases in that finance leases normally

A. rovide for maintenance service at no extra cost to the lessee

B. re cancelable at any time upon request by the lessee

C. ave rental payments that are approximately equal to the amortized cost of the leased asset

D. re used only by financial institutions

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Correct Answer: C

Question #4

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 #5

Which inventory pricing method generally approximates current cost for each of the following?

A. ption A

B. ption B

C. ption C

D. ption D

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Correct Answer: C

Question #6

What is the annual carrying cost, stated as a percentage of investment in inventory, that would be used in model?

A. 2%

B. 7%

C. 4%

D. 2%

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Correct Answer: A

Question #7

Which of the following would provide the most reliable information on the risk associated with an auditable activity?

A. vent scenarios with regression analysis

B. ast audit findings and instances of management failures

C. onsequences and economic predictability of loss

D. anagement assessment and corroboration by the internal audit activity

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Correct Answer: D

Question #8

When interviewing an individual suspected of fraud, what type of questions would be asked after the introductory questions?

A. nformational questions

B. dmission seeking questions

C. ssessment questions

D. losing questions

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Correct Answer: A

Question #9

What decision-making approach should a facilitator initiate if a group addresses an unfamiliar situation during a control self-assessment session?

A. pontaneous agreement

B. onsensus building

C. ajority voting

D. ompromise

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Correct Answer: B

Question #10

Which of the following items should be addressed in an organization's privacy statement?I). Intended use of collected information.II). Data storage and security.III). Network/infrastructure authentication controls IV). Data retention policy of the organization.V). Parties authorized to access information.

A. and II only

B. and IV only

C. , II, and V only

D. I, III, IV, and V only

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Correct Answer: C

Question #11

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 #12

With regard to inventory management, an increase in the frequency of ordering will normally

A. educe the total ordering costs

B. ave no impact an total ordering costs

C. educe total carrying costs

D. ave no impact on total carrying costs

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Correct Answer: C

Question #13

A company purchased a new machine on an installment payment plan and is to make equal annual payments beginning one year from the date of purchase. Using an interest rate of 10%, the cost of the machine can be determined by multiplying one payment by the

A. uture value of one currency unit

B. uture value of an annuity due of one currency unit

C. resent value of one currency unit

D. resent value of an ordinary annuity of one currency unit

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Correct Answer: D

Question #14

What is the most important risk in determining the validity of construction delay claims?

A. ontractor claims may be submitted prior to completion of the work

B. ontractor claims may include costs considered in the fixed price portion of the work

C. ontractor claims may include subcontractor estimates of balances due to the subcontractor

D. ontractor claims may be understated

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Correct Answer: B

Question #15

Sales representatives for a manufacturing company are reimbursed for 100 percent of their cellular telephone bills. Cellular telephone costs vary significantly from representative to representative and from month to month, complicating the budgeting and forecasting processes. Management has requested that the internal auditors develop a method for controlling these costs. Which of the following would most appropriately be included in the scope of the consulting project?

A. ontrol self-assessment involving sales representatives

B. enchmarking with other cellular telephone users

C. usiness process review of procurement and payables routines

D. erformance measurement and design of the budgeting and forecasting processes

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Correct Answer: C

Question #16

A global firm establishes a cost-based price for its product in each country The most likely negative outcome is that this pricing strategy will

A. et too high a price in countries where the firm's costs are high

B. verprice the product in some markets and underprice it in others

C. reate a gray market

D. esult in dumping

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Correct Answer: A

Question #17

A major justification for investments in computer-integrated manufacturing CIM) projects is

A. eduction in the costs of spoilage, reworked units, and scrap

B. ower Carr ring amount and depreciation expense for factory equipment

C. ncreased working capital

D. tabilization of market share

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Correct Answer: A

Question #18

Which of the following audit steps would be most effective to review proper recording of and accountability over physical assets?I). Physically inspect all assets on the organization's property.II). Select a sample department and physically inspect assets in the department.III). Select a sample from the organization's records of physical assets and physically locate each asset.IV). Identify assets at a sample of locations and trace to the organization's records.

A. only

B. and IV only

C. I and III only

D. II and IV only

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Correct Answer: D

Question #19

The EOQ economic order quantity) model calculates the cost-minimizing quantity of a product to order, based an a constant annual demand, carrying costs per unit per annum, and cost per order. For example, the EOQ is approximately 447 units if the annual demand is 10, 000 units, carrying costs are US $1 per item per annum, and the cost of placing an order is US $10. What will the EOQ be if the demand falls to 5, 000 units per annum and the carrying and ordering costs remain at US $1 and US $10, respectively?

A. 16

B. 47

C. 83

D. 00

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Correct Answer: A

Question #20

Which of the following conclusions would be appropriate for a beginning auditor performing an audit of a payroll department?

A. mployee taxes have been deducted at the correct rates, and the taxes have been forwarded to the appropriate government agency

B. lthough there is insufficient segregation of duties, the impact is mitigated by compensating controls

C. he payroll computer system should be replaced

D. he payroll department staff has the appropriate level of skills

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Correct Answer: A

Question #21

An entity has the following contingencies at a balance sheet date:I). An obligation for clean-up costs relating to environmental damage may, but probably will not, require an outflow of resources. II). An obligation for decommissioning costs of a nuclear reactor may, but probably will not, require an outflow o1 resources.III). The entity is jointly and severally liable for an obligation arising from a lawsuit: the likelihood of an outflow of resources is remote.Which of the above items must be disclosed in

A. and II only

B. I and Ill only

C. and Ill only

D. , II, and Ill

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Correct Answer: A

Question #22

Risk assessments can vary in format, but generally includeI). A description of identified risks.II). Tests of audit controlsIII). A system of rating risksIV). Sample size identification

A. and II only

B. and III only

C. , III, and IV only

D. I, III, and IV only

View answer

Correct Answer: B

Question #23

Which of the following should be incorporated in a risk management policy?I). Boundaries and limit structures.II). Requirements for reporting risk.III). Risk authorities.

A. and II only

B. and III only

C. I and III only

D. , II, and III

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Correct Answer: D

Question #24

Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a followup of audit recommendations when developing engagement work schedules. Does the CAE's decision violate the Standards?

A. o, because the Standards do not specify whether followup is needed

B. o, because when there is evidence of sufficient motivation by the client, there is no need for followup action

C. es, because scarcity of resources is not a sufficient reason to omit followup action

D. es, because the Standards require the auditors to determine whether the client has appropriately implemented all of the auditor's recommendations

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Correct Answer: C

Question #25

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

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Correct Answer: D

Question #26

An auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation. The primary deficiency with the above process is that

A. he auditor failed to consider the importance of the information offered

B. questionnaire was used in a situation where a structured interview should have been used

C. sing a questionnaire precludes the auditor from documenting other information

D. he engagement program was incomplete

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Correct Answer: A

Question #27

Which of the following would be the least effective in preventing purchasing agents from taking kickbacks or gifts from vendors in exchange for favorable contracts?

A. specific corporate policy prohibiting the acceptance of anything of value from a vendor

B. corporate code of ethics prohibiting any activity that might impair objectivity

C. requirement for purchasing agents to develop a company profile of each new vendor before it is added to the authorized vendor list

D. he establishment of long-term contracts with major vendors, with the contract terms approved by senior management

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Correct Answer: C

Question #28

Which of the following represents appropriate evidence of supervisory review of engagement workpapers?I). A supervisor's initials on each workpaper.II). An engagement workpaper review checklist.III). A memorandum specifying the nature, extent, and results of the supervisory review of workpapers.IV). Performance appraisals that assess the quality of workpapers prepared by auditors.

A. I and IV only

B. , II, and III only

C. , III, and IV only

D. , II, III, and IV

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Correct Answer: B

Question #29

During a meeting of an internal audit team, two members of the team disagree, and one accuses the other of trying to advance personal interests over the interests of the audit.The audit manager should

A. iscipline both auditors after the meeting for their lack of professional conduct

B. ontinue the meeting but speak to the accusing auditor later regarding the inappropriate conduct

C. eet with both auditors after the meeting to resolve the conflict and the inappropriate behavior

D. top the meeting and refer the matter to the entire team for discussion

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Correct Answer: C

Question #30

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 #31

A new asset with a fair value of US $100.000 and a useful life of 10 years is being leased by an entitylessee). Which ch of the situations below will most likely result in classifying the lease on the lessee's books as a finance lease?

A. he lease term is 7 years

B. he lease term is 8 years

C. he present value of the minimum lease payments is US $60

D. he present value of the minimum lease payments is US $70

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Correct Answer: B

Question #32

The company uses a planning system that focuses first on the amount and timing of finished goods demanded and then determines the derived demand for raw material, components, and subassemblies at each of the prior stages of production. This system is referred to as

A. conomic order quantity

B. aterial requirements planning

C. inear programming

D. ust-in-time purchasing

View answer

Correct Answer: B

Question #33

If a company is customer-centered, its customers are defined as

A. nly people external to the company who have purchased something from the company

B. nly people internal to the company who directly use its product

C. nyone external to the company and those internal who rely an its product to get their jab done

D. verybody external to the company who is currently doing, or may in the future do, business with the company

View answer

Correct Answer: C

Question #34

The internal audit activity's responsibility to follow up on reported audit findings should be defined in the

A. ngagement memo issued prior to each audit assignment

B. ission statement of the audit committee

C. nternal audit activity's written charter

D. urpose statement within the applicable audit report

View answer

Correct Answer: C

Question #35

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

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Correct Answer: C

Question #36

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 #37

Assuming an available-for-sale financial asset that is not part of a hedge is remeasured to fair value at the balance sheet, the gain or loss not arising from foreign exchange transactions or impairment

A. ust be recognized in profit or loss

B. ust be recognized directly in equity

C. ay be recognized in profit or loss or directly in equity

D. ust be recognized in profit or loss if the result is a loss and directly in equity if the result is a gain

View answer

Correct Answer: B

Question #38

In Year 1. Company C introduced a new line of compute '.r products that carry a 2-year warranty against defects and workmanship. The entire/ estimates that the total warranty cost will be 10% of sales, with 40% of the expenditures occurring during the first year and 60% during the second year_ Sales and actual warranty expenditures for Year 1 and Year 2 were as follows:At the end of Year 2, what will the balance in the estimated accrued warranty liability account be?

A. S $24, 000

B. S $46, 000

C. S $58, 000

D. S $28, 000

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Correct Answer: D

Question #39

Which of the following is required in order for an entity to record a provision?

A. he exact payee must be known

B. he exact date payable must be known

C. t must be reasonably possible that an outflow of resources will be required to settle the obligation

D. t must be possible to determine a reliable estimate of the amount of the obligation

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Correct Answer: D

Question #40

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 #41

Which sampling plan requires no additional sampling once the first error is found?

A. tratified sampling

B. ttributes sampling

C. top or go sampling

D. iscovery sampling

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Correct Answer: D

Question #42

The practice of recording advanced payments from customers as liabilities is an application of the

A. oing concern assumption

B. onetary unit assumption

C. istoric cost principle

D. evenue recognition principle

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Correct Answer: D

Question #43

Which of the following would not compromise an internal auditor's objectivity?

A. reparing bank reconciliations

B. eviewing procedures before they are implemented

C. uditing an activity for which the auditor had responsibility in the past year

D. roviding both advisory services and audit services for a project

View answer

Correct Answer: B

Question #44

When internal auditors provide consulting services, the scope of the engagement is primarily determined by

A. nternal auditing standards

B. he audit engagement team

C. he engagement client

D. he internal audit activity's charter

View answer

Correct Answer: C

Question #45

In assessing the independence of the internal audit activity, a member of a peer review team should consider all of the following factors except:

A. ccess to and frequency of communications with the board of directors or its audit committee

B. he criteria of education and experience considered necessary when filling vacant positions on the audit staff

C. he degree to which auditors assume operating responsibilities

D. he scope and depth of engagement objectives for the audit engagements included in the review

View answer

Correct Answer: B

Question #46

The chief audit executive for an organization has just completed a risk assessment process, identified the areas with the highest risk, and assigned an audit priority to each. Which of the following statements is true and consistent with the International Professional Practices Framework?I). Items should be ranked in the order of quantifiable dollar exposure to the organization.II). The audit priorities should be in order of major control deficiencies.III). The risk assessment, though quantified, is the res

A. only

B. II only

C. I and III only

D. , II, and III

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Correct Answer: B

Question #47

The feasible solution region is bounded by the lines connecting points

A. , 4, 6, and 7

B. , 5, 6, and 8

C. , 4, , , and 8

D. , E

View answer

Correct Answer: A

Question #48

Which of the following best describes the most important criteria when assigning responsibility for specific tasks required in an audit engagement?

A. uditors must be given assignments based primarily upon their years of experience

B. ll auditors assigned an audit task must have the knowledge and skills necessary to complete the task satisfactorily

C. asks must be assigned to the audit team member who is most qualified to perform them

D. ll audit team members must have the skills necessary to satisfactorily complete any task that will be required in the audit engagement

View answer

Correct Answer: B

Question #49

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 #50

Under IAS 2, Inventories. all of the following should be decided when reporting inventories except

A. he use of the lower-of-cost-or-net-realizable-value method, if applicable

B. he cost formulas used

C. he carrying amount of inventories in classifications appropriate to the entire/

D. n estimated amount of obsolete inventory included in the total inventory valuation_

View answer

Correct Answer: D

Question #51

On a balanced scorecard, which is more of an internal process measure than an external- based measure?

A. ycle time

B. rofitability

C. ustomer satisfaction

D. arket share

View answer

Correct Answer: A

Question #52

Which of the following steps would not be included in a program of selecting and developing human resources for an internal audit department?

A. cheduling periodic meetings with individual auditors, during which the chief audit executive provides counsel regarding each auditor's performance and professional career development

B. stablishing an internal review team to assess the auditors' and audit department's compliance with standards, level of audit effectiveness, and compliance with departmental policy

C. eveloping specific job descriptions for audit staff, audit managers, and other auditing positions

D. stablishing in-house training programs and requiring continuing education for audit staff

View answer

Correct Answer: B

Question #53

An internal auditor is deriving cash flow data based on an incomplete set of facts. Bad debt expense was US $2, 000. Additional data for this period follows:How much cash was collected this period on credit sales?

A. S $64, 000

B. S $68, 000

C. S $68, 500

D. S $70, 000

View answer

Correct Answer: B

Question #54

A chief audit executive agrees to conduct an engagement that will focus on customers' perceptions of the quality of the organization's products and services. Which of the following issues should be addressed first?

A. ost effectiveness

B. uality control

C. ustomer complaints

D. upplier deliveries

View answer

Correct Answer: C

Question #55

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 #56

Which of the following statements about a finance lease is false?

A. he lessor capitalizes the net investment in the lease

B. he lessor records the leased item as an asset

C. he lessee records depreciation or finance cost allowance on the leased asset

D. he lease arrangement represents a form of financing

View answer

Correct Answer: B

Question #57

Recommendations should be included in the audit report in order to

A. rovide management with options for addressing audit findings

B. nsure that audit findings are resolved in the manner suggested by the auditor

C. inimize the amount of time required to correct audit findings

D. nsure that audit findings are addressed by management

View answer

Correct Answer: A

Question #58

Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often the actual results achieved from a particular decision are not what was expected when the decision was made. In addition, an alternative that was not selected would have actually been the best decision for the company. The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is

A. xpected value analysis

B. inear programming

C. rogram evaluation review technique PERT)

D. ensitivity analysis

View answer

Correct Answer: D

Question #59

The internal audit activity's key responsibility for information security is to

A. dentify technical aspects, risks, processes, and transactions to be examined

B. etermine the scope and degree of testing to achieve engagement objectives

C. eriodically assess information security practices

D. ocument engagement procedures

View answer

Correct Answer: C

Question #60

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 #61

According to IIA guidance, which of the following roles would be appropriate for an internal auditorregarding fraud risk?1. Identification.2. Mitigation.3. Remediation.4. Reduction.

A. only

B. and 4 only

C. , 3, and 4 only

D. ,2, 3, and 4

View answer

Correct Answer: B

Question #62

The entity has current assets of

A. S $1, 000, 000

B. S $3, 033, 333

C. S $3, 333, 333

D. S $3, 633, 333

View answer

Correct Answer: B

Question #63

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 #64

Which of the following would be the most effective method to prevent installation of new equipment that does not meet environmental permit requirements, or to prevent modification of current processes in such a way that they no longer meet permit requirements?

A. equire that the environmental compliance department perform regular inspections of the manufacturing facility to identify new equipment or process modifications in progress

B. ely on annual inspections by various regulatory agencies to identify equipment or processes that require a permit

C. equire that the staff of the environmental compliance department attend monthly safety meetings in different parts of the facility so that they can hear directly from the workers about any changes

D. nclude the environmental compliance department in the review of proposed process changes and equipment purchases affecting permit requirements

View answer

Correct Answer: D

Question #65

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 #66

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

View answer

Correct Answer: A

Question #67

Which combination below explains the impact of credit card interest incurred and paid during the period on1) equity on the balance sheet and2) the statement of cash flows?

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: B

Question #68

Overall audit efficiency is enhanced between the internal and external audit functions when

A. nternal audit coverage is reduced to avoid potential conflicts of interest

B. udits of the same department are conducted at different times

C. he internal audit department reviews functions or departments prior to the external audit

D. xternal audit scope is reduced based on the internal audit department's activities

View answer

Correct Answer: D

Question #69

Which of the following is not an advantage of face to face interviews over mail surveys?

A. he response rate is typically higher

B. nterviewers can increase a respondent's comprehension of questions

C. urvey designers can use a wider variety of question types

D. hey are less expensive since mailing costs are avoided

View answer

Correct Answer: D

Question #70

A company purchased US $50, 000 worth of office supplies on January 1st and had US $15, 000 of office supplies still on hand at year-end. If the initial purchase of supplies entry on January 1st was to debit office supplies expense and to credit cash for US $50, 000. the adjusting entry on December 31 will be

A. ffice supplies US $15, 000Office supplies dividends US $15, 000

B. ffice supplies dividends US $15, 000Office supplies US $15, 000

C. ffice supplies US $35, 000Office supplies dividends US $35, 000

D. ffice supplies expense US $35, 000Office supplies US $35, 000

View answer

Correct Answer: A

Question #71

Which of the following files, when compared with billing records, would provide the best source of information for determining if all goods shipped are billed to customers?

A. renumbered customer invoices

B. ccounts receivable transactions

C. renumbered shipping documents

D. ustomer purchase orders

View answer

Correct Answer: C

Question #72

The internal auditor of a bank has developed a multiple regression model which has been used for a number of years to estimate the amount of interest income from commercial loans. During the current year, the auditor applies the model and discovers that the R2 value has decreased dramatically, but that the model otherwise seems to be working correctly. Which of the following conclusions is justified by the change?

A. hanging to a cross sectional regression analysis should cause the R2 to increase

B. egression analysis is no longer an appropriate technique to estimate interest income

C. ome new factors, not included in the model, are causing interest income to change

D. linear regression analysis would increase the model's reliability

View answer

Correct Answer: C

Question #73

If an auditor expects to find numerous discrepancies between recorded values and audited values of sample selections, which sampling technique would be most appropriate?

A. ttributes sampling

B. robability proportional to size sampling

C. ifference estimation sampling

D. iscovery sampling

View answer

Correct Answer: C

Question #74

The internal audit activity can be involved with systems development continuously, immediately prior to implementation, after implementation, or not at all. An advantage of continuous internal audit involvement compared to the other types of involvement is that

A. he cost of audit involvement can be minimized

B. here are clearly defined points at which to issue audit comments

C. edesign costs can be minimized

D. he threat of lack of audit independence can be minimized

View answer

Correct Answer: C

Question #75

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 #76

To identify those components of a telecommunications system that present the greatest risk, an internal auditor should first

A. eview the open systems interconnect network model

B. dentify the network operating costs

C. etermine the business purpose of the network

D. ap the network software and hardware products into their respective layers

View answer

Correct Answer: C

Question #77

A characteristic of the basic economic order quantity EOQ) model is that it

A. s relatively insensitive to error

B. hould not be used when carrying costs are large in relation to procurement costs

C. s used when product demand, lead-time, and ordering costs are uncertain

D. hould not be used in conjunction with computerized perpetual inventory systems

View answer

Correct Answer: A

Question #78

An organization receives the most value from an internal audit activity's enterprise-wide risk assessment when the auditor

A. ocuses primarily on enterprise-level risks

B. onsiders activities at all levels of the organization

C. eviews special projects and new initiatives

D. alidates supporting financial and operational data

View answer

Correct Answer: B

Question #79

Is PERT analysis a control tool or a planning tool?

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: B

Question #80

Which of the following audit findings would have the least impact (either positive or negative) on a department's control environment?

A. he department makes long-term investment risk decisions to maximize return on investment

B. he department manager sets and demonstrates a tone of honesty and integrity in all business dealings

C. ny department functions are duplicated or verified by other department employees

D. eficiencies were found in the appropriate authorization of transactions

View answer

Correct Answer: A

Question #81

Which of the following actions by management would reduce an employee's opportunity to commit fraud?

A. stablishing physical controls over company assets

B. liminating bonuses tied to sales or other performance goals

C. efining ethical behavior expectations in the company handbook

D. dentifying consequences, such as termination, for fraudulent activities

View answer

Correct Answer: A

Question #82

Which of the following is an example of a corrective control?

A. ank accounts are reconciled monthly

B. xception reports are investigated and resolved

C. mployees are directed to obtain additional training each year

D. nvoices are reconciled to receiving reports before payments are authorized

View answer

Correct Answer: B

Question #83

The calculation of an economic order quantity EOQ) considers

A. he purchasing manager's salary_

B. corporate charge for advertising expenses

C. he shipping costs to deliver the product to the customer

D. apital costs

View answer

Correct Answer: D

Question #84

Business process reengineering is most likely to

A. mplement modern information systems technology to eliminate some controls

B. e applied within individual departments

C. mprove existing procedures

D. pply a continuous improvement model

View answer

Correct Answer: A

Question #85

During a systems development audit, software developers indicated that all programs were moved from the development environment to the production environment and then tested in the production environment. What should the auditor recommend?I). Implement a test environment to ensure that testing is not performed in the production environment.II). Require developers to move modified programs from the development environment to the test environment and from the test environment to the production environment.III

A. only

B. II only

C. and II only

D. and III only

View answer

Correct Answer: D

Question #86

Productivity statistics are provided quarterly to a company's board of directors. An auditor checked the ratios and other statistics in the four most recent reports. The auditor used scratch paper and copies of the board reports to verify the accuracy of computations and compared the data used in the computations with supporting documents. The auditor wrote a note describing this work for the workpapers and then discarded the scratch paper and report copies. The auditor's note stated .The ratios and other s

A. our quarters is not a large enough sample on which to base a conclusion

B. he auditor's workpapers are not sufficient to facilitate an efficient review of the auditor's work

C. he auditor should have included the scratch paper in the workpapers

D. he auditor should have considered whether the information in the board report was compiled efficiently

View answer

Correct Answer: B

Question #87

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 #88

According to the International Professional Practices Framework, which of the following describes a key objective of the risk management process that would also be a key responsibility of the internal audit activity?

A. etermine the level of risk acceptable to the organization, including the acceptance of risks designed to accomplish the organization's strategic plans

B. esign and implement risk mitigation activities to reduce risk to levels that have been determined to be acceptable

C. eceive periodic reports of the results of the risk management processes

D. onduct ongoing monitoring activities to periodically reassess risk and the effectiveness of the controls to manage risk

View answer

Correct Answer: D

Question #89

If the probability of hot weather, given a hot weather forecast, is 50%, how much would the vendor be willing to pay for the forecast?

A. S $600

B. S $300

C. S $1, 000

D. S $500

View answer

Correct Answer: B

Question #90

According to the International Professional Practices Framework, which of the following areallowable activities for an internal auditor?1. Advocating the establishment of a risk management function.2. Identifying and evaluating significant risk exposures during audit engagements.3. Developing a risk response for the organization if there is no chief risk officer.4. Benchmarking risk management activities with other organizations.5. Documenting risk mitigation strategies and techniques.

A. and 5 only

B.

C.

D.

View answer

Correct Answer: C

Question #91

For a finance lease, the gross investment, lease payments receivable, recorded by the lessor is equal to the

A. resent value of the minimum lease payments minus the unguaranteed residual value accruing to the lessor at the end of the lease term

B. ower of 90% of the present value of the minimum lease payments or the fair value of the leased asset

C. inimum lease payments plus the unguaranteed residual value accruing to the lessor at the end of the lease term

D. ifference between the present value of the minimum lease payments and the unearned finance income

View answer

Correct Answer: C

Question #92

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 #93

Because of the large number of factors that could affect the demand for its new product, interactions among these factors, and the probabilities associated with different values of these factors, the marketing department would like to develop a computerized model for projecting demand for this product. By using a random-number procedure to generate values for the different factors, it will be able to estimate the distribution of demand for this new product. This method of estimating the distribution of dema

A. onte Carlo simulation

B. inear programming

C. orrelation analysis

D. ifferential analysis

View answer

Correct Answer: A

Question #94

A company manufactures banana hooks for retail sale. The bill of materials for this item and the parts inventory for each material required are as follows:

A. ption A

B. ption B

C. ption C

D. ption D

View answer

Correct Answer: B

Question #95

In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variables?

A.

B.

C.

D.

View answer

Correct Answer: C

Question #96

If the bank uses the minimax regret criterion for selecting the location of the branch, it will select

A. 1

B. 2

C. 3

D. 4

View answer

Correct Answer: B

Question #97

What is risk management?

A. dentifying and prioritizing risks

B. easuring risks and determining consequences

C. dentifying threats to the organization and likelihood of occurrence

D. etermining how much risk is acceptable and what action should be taken

View answer

Correct Answer: D

Question #98

An audit to test the system of controls over the purchase, distribution, and use of radioactive material is being conducted at a company's plants. The process is well documented, and employees in the safety department are very familiar with the department's procedures. Since the purchasing and facilities departments are involved in the process, the auditor is considering reviewing their radioactive material-handling procedures as well. The auditor should

A. ave confidence in the rigorous and detailed safety department procedures, since that department has the main responsibility for radiation safety, and should not use audit time to review other departments

B. djust the engagement schedule and budget, if needed, and interview the appropriate individuals in the purchasing and facilities departments to ascertain whether additional controls exist that complement those identified within the safety department

C. est the controls identified within the safety department; if results are unfavorable, the auditor should consider whether to involve the other departments

D. efer questions regarding purchasing, facilities, and other departments until audit projects can be scheduled for those departments

View answer

Correct Answer: B

Question #99

An internal auditor who is working at a company without an enterprise-wide risk management process should

A. iscuss the need for a risk management process with management

B. reate and implement an audit risk assessment process as a substitute

C. evelop a risk management process for use by the board

D. otify the external auditors of the lack of a risk management process

View answer

Correct Answer: A

Question #100

The comparative balance sheet for an enterprise that had profit of US $150, 000 for the year ended December 31, Year 2, and paid US $125, 000 of dividends during Year 2 is as follows:If dividends paid are treated as a cost of obtaining financial resources, the amount of net cash from operating activities during Year 2 was

A. S $70, 000

B. S $90, 000

C. S $150, 000

D. S $210, 000

View answer

Correct Answer: B

Question #101

Which of the following price adjustment strategies is designed to smooth production for the selling firm?

A. ash discounts

B. uantity discounts

C. unctional discounts

D. easonal discounts

View answer

Correct Answer: D

Question #102

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 #103

On August I, Year 1. an entity issued s-year bonds with a face amount of US $10 million. The funds carry a stated interest rate of 11)35 and interest is payable annually on July 31. Which is the appropriate classification of bonds payable and the related accrued interest payable on the December 31, Year 5, balance sheet?

A. lassification

B. lassification

C. lassification

D. lassification

View answer

Correct Answer: A

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