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Exam Number/Code: IIA-CIA-Part3
Exam name: Certified Internal Auditor - Part 3, Business Analysis and Information Technology
n questions with full explanations
Certification: IIA Certification
Last updated on Global synchronizing

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Q291. The problem just described is beast approved by use of which quantitative method? 

A. Integrated autoregressive-moving average ARIMA) modeling. 

B. Exponential smoothing, multiple parameters. 

C. Queuing theory. 

D. Linear programming. 



Two basic casts are involved in queuing waiting-line) models: 1) the cast of providing service including facility casts and operating casts), and 2) the cast of idle resources waiting in line. The latter may be a direct cast if paid employees are waiting, or an opportunity cast in the case of waiting customers. The objective of the queuing theory is to minimize the total cast of the system, including bath service and waiting casts, far a given rate of arrivals. This minimization occurs at the paint where the cast of waiting is balanced by the cast of providing service. A bank has two drive-in lanes to serve customers: one attached to the bank itself and one on an island. One teller serves bath stations. The bank is interested in determining the average waiting times of customers and has developed a model based on random numbers. The two key factors are the time between successive car arrivals and the time customers wait in line. Assume that the analysis begins with cars just arriving at bath service windows. bath requiring 3 minutes of service time. Car 1 is the attached window attached to the bank unless that window has more cars waiting than the island window. The lone teller will always serve the car that arrived first. If two cars arrive simultaneously, the one at the attached window will be served before the one at the island. 

Q292. Because the VAN did not provide the internal auditor with access to its system, that portion of the engagement work program was not completed. Which one of the following should not be done by the internal auditor? 

A. Include the scope limitation in the final engagement communication. 

B. Rewrite the work program to eliminate the step 

C. Obtain the approval of the chief audit executive 

D. Document the VAN's actions in the working papers. 



A scope limitation is a restriction placed upon the IAA that precludes it from accomplishing its objectives and plans. Among other things, a scope limitation may restrict the performance of necessary engagement procedures A scope limitation and its potential effect should be communicated. preferably in writing, to the governing authority. A VAN is an alternative to direct EDI communications between transacting parties. Consequently, it is a vital component of internal control over these transactions, and the internal auditor's inability to obtain access constitutes a material limitation on the scope of the engagement to evaluate risk exposures and the adequacy and effectiveness of internal control. As a result, the original engagement program should be annotated but not rewritten. 

Q293. An entity in a 40% tax bracket needs <List A> of operating income to pay 1 of interest and <List B> of pretax income to pay 1 of dividends. 

A. Option A 

B. Option B 

C. Option C 

D. Option D 



Interest is deductible from operating income to obtain taxable income but dividends are not. Thus, only 1.00 of pretax income is needed to pay 1.00 of interest, but 1.67 of pretax income [1.00 - 1.0 - 4)] is needed to pay 1.00 of dividends if the entity is in a 40% tax bracket. 

Q294. Statistical quality control often involves the use of control charts whose basic purpose is to: 

A. Determine when accounting control procedures are not working. 

B. Control labor costs in production operations. 

C. Detect performance trends away from normal operations. 

D. Monitor internal control applications of information technology. 



Statistical control charts are graphic aids for monitoring the status of any process subject to random variations. The chart consists of three horizontal lines plotted on a horizontal time scale. The vertical scale represents the appropriate quantitative measure. The center line represents the average range or overall mean for the process being controlled. The other two lines are the upper control limit and the lower control limit. The processes are measured periodically, and the values are plotted on the chart. If the value falls within the control limits, no action is taken. If the value falls outside the limits, the process is considered "out of control," and an investigation is made for possible corrective action. Another advantage of the chart is that it makes trends visible. 

Q295. Which of the following is not true about the advantages of adopting ISO 9000 standards? 

A. Adoption of ISO 9000 standards may allow an entity to sell products in foreign markets. 

B. ISO registration makes customers more comfortable with the supplier's products and services. 

C. ISO 9000 allows entities to understand who internal customers and users are without sharing private information. 

D. ISO registration may help entities discover internal process and quality improvements. 



Market pressure is usually the primary reason that entities adopt ISO 9000 standards. However, many entities that register make internal process and quality improvement as a result. ISO 9000 forces entities to share information, which leads to a better understanding of who internal customers and users are. 

Q296. While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. The manager has asked the auditor for advice about increasing advertising of various products. During which stage of the life cycle would it be appropriate to advertise that the company's product is the lowest price and best quality of all competitors? 

A. Introduction stage. 

B. Growth stage. 

C. Maturity stage. 

D. Decline stage. 



The maturity stage is the ideal time for advertising lower prices and superior quality because this is the period during a product's life when competition is greatest. Due to the availability of many alternatives or substitutes, a firm has reasons to set itself apart. Because price and quality are both concerns of customers during the maturity stage, it is ideal for the firm to differentiate its 

product by advertising low prices and higher quality. 

Q297. Which of the following networks provides the least secure means of data transmission? 

A. Value-added. 

B. Public-switched. 

C. Local area. 

D. Private. 



Public-switched networks are wide area networks that use public telephone lire.>s This arrangement may be the most economical, but data transmission may be of lower quality, no connection may be available, and security measures may be ineffective. 

Q298. When a manager generalizes from the evaluation of one or a few traits to the employee's total performance, she has made: 

A. A judgmental evaluation. 

B. An evaluation subject to the halo effect. 

C. A projection. 

D. An objective evaluation 



The halo effect occurs when the appraiser judges one or a few employee traits and carries over this judgment to the evaluation of the employee's other traits. The converse of the halo effect is the horn effect. It occurs when the manager allows one negative trait to influence the evaluation of other traits. 

Q299. A German importer of English clothing has contracted to pay an amount fixed in British pounds 3 months from now. lithe importer worries that the euro may depreciate sharply against the British pound in the interim, it would be well advised to: 

A. Buy pounds in the forward exchange market. 

B. Sell pounds in the forward exchange market. 

C. Buy euros in the futures market. 

D. Sell euros in the futures market. 



The importer should buy pounds now. If the euro depreciates against the pound in the next 90 days, the gain on the forward exchange contract would offset the loss from having to pay more euros to satisfy the Ii ability. 

Q300. A cost-volume-profit model developed in a dynamic environment determined that the estimated parameters used may vary between limits. Subsequent testing of the model with respect to all possible values of the estimated parameters is termed: 

A. A sensitivity analysis. 

B. Statistical estimation. 

C. Statistical hypothesis testing. 

D. A time-series study. 



After a problem has been formulated into any mathematical model, it may be subjected to sensitivity analysis. Sensitivity analysis is a method for studying the effects of changes in one or more variables on the results of a decision model.