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IIA-CIA-Part3 Business Knowledge for Internal Auditing Questions and Answers

Questions 4

An organization with global headquarters in the United States has subsidiaries in eight other nations. If the organization operates with an ethnocentric attitude, which of the following statements is true?

Options:

A.

Standards used for evaluation and control are determined at local subsidiaries, not set by headquarters.

B.

Orders, commands, and advice are sent to the subsidiaries from headquarters.

C.

Poop o of local nationality are developed for the best positions within their own country.

D.

There is a significant amount of collaboration between headquarters and subs diaries.

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Questions 5

Which of the following can be classified as debt investments?

Options:

A.

Investments in the capital stock of a corporation

B.

Acquisition of government bonds.

C.

Contents of an investment portfolio,

D.

Acquisition of common stock of a corporation

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Questions 6

An organization has a declining inventory turnover but an Increasing gross margin rate, Which of the following statements can best explain this situation?

Options:

A.

The organization's operating expenses are increasing.

B.

The organization has adopted just-in-time inventory.

C.

The organization is experiencing Inventory theft

D.

The organization's inventory is overstated.

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Questions 7

According to IIA guidance, which of the following links computers and enables them to -communicate with each other?

Options:

A.

Application program code

B.

Database system

C.

Operating system

D.

Networks

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Questions 8

A large retail customer made an offer to buy 10.000 units at a special price of $7 per unit. The manufacturer usually sells each unit for §10, Variable Manufacturing costs are 55 per unit and fixed manufacturing costs are $3 per unit. For the manufacturer to accept the offer, which of the following assumptions needs to be true?

Options:

A.

Fixed and Variable manufacturing costs are less than the special offer selling price.

B.

The manufacturer can fulfill the order without expanding the capacities of the production facilities.

C.

Costs related to accepting this offer can be absorbed through the sale of other products.

D.

The manufacturer’s production facilities are currently operating at full capacity.

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Questions 9

An internal auditor is assessing the risks related to an organization's mobile device policy. She notes that the organization allows third parties (vendors and visitors) to use outside smart devices to access its proprietary networks and systems. Which of the following types of smart device risks should the internal

Auditor be most concerned about?

Options:

A.

Compliance.

B.

Privacy

C.

Strategic

D.

Physical security

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Questions 10

Which of the following is a security feature that Involves the use of hardware and software to filter or prevent specific Information from moving between the inside network and the outs de network?

Options:

A.

Authorization

B.

Architecture model

C.

Firewall

D.

Virtual private network

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Questions 11

Which of the following practices impacts copyright issues related to the manufacturer of a smart device?

Options:

A.

Session hijacking.

B.

Jailbreaking

C.

Eavesdropping,

D.

Authentication.

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Questions 12

The chief audit executive (CAE) has been asked to evaluate the chief technology officer's proposal to outsource several key functions in the organization's IT department. Which of the following would be the most appropriate action for the CAE to determine whether the proposal aligns with the organization's strategy?

Options:

A.

Understand strategic context and evaluate whether supporting information is reliable and complete.

B.

Ascertain whether governance and approval processes are transparent, documented, and completed.

C.

Perform a due diligence review or asses management's review of provider operations.

D.

Identify key performance measures and data sources.

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Questions 13

During which of the following phases of contracting does the organization analyze whether the market is aligned with organizational objectives?

Options:

A.

Initiation phase

B.

Bidding phase

C.

Development phase

D.

Negotiation phase

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Questions 14

An internal auditor considers the financial statement of an organization as part of a financial assurance engagement. The auditor expresses the organization's electricity and depreciation expenses as a percentage of revenue to be 10% and 7% respectively. Which of the following techniques was used by the internal auditor In this calculation?

Options:

A.

Horizontal analysis

B.

Vertical analysis

C.

Ratio analysis

D.

Trend analysis

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Questions 15

An organization buys equity securities for trading purposes and sells them within a short time period. Which of the following is the correct way to value and report those securities at a financial statement date?

Options:

A.

At fair value with changes reported in the shareholders' equity section.

B.

At fair value with changes reported in net income.

C.

At amortized cost in the income statement.

D.

As current assets in the balance sheet

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Questions 16

Which of the following is the most appropriate beginning step of a work program for an assurance engagement involving smart devices?

Options:

A.

Train all employees on bring-your-own-device (BYOD) policies.

B.

Understand what procedures are in place for locking lost devices

C.

Obtain a list of all smart devices in use

D.

Test encryption of all smart devices

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Questions 17

When would a contract be dosed out?

Options:

A.

When there's a dispute between the contracting parties

B.

When ail contractual obligations have been discharged.

C.

When there is a force majenre.

D.

When the termination clause is enacted.

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Questions 18

Which of the following practices circumvents administrative restrictions on smart devices, thereby increasing data security risks?

Options:

A.

Rooting.

B.

Eavesdropping.

C.

Man in the middle.

D.

Session hijacking.

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Questions 19

An organization has a declining inventory turnover but an increasing gross margin rate. Which of the following statements can best explain this situation?

Options:

A.

he organization's operating expenses are increasing.

B.

The organization has adopted just-in-time inventory.

C.

The organization is experiencing inventory theft.

D.

The organization's inventory is overstated.

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Questions 20

An attacker, posing as a bank representative, convinced an employee to release certain, financial information that ultimately resulted in fraud. Which of the following best describes this cybersecurity risk?

Options:

A.

Shoulder suiting

B.

Pharming,

C.

Phishing.

D.

Social engineering.

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Questions 21

Which of the following disaster recovery plans includes recovery resources available at the site, but they may need to be configured to support the production system?

Options:

A.

Warm site recovery plan.

B.

Hot site recovery plan.

C.

Cool site recovery plan.

D.

Cold site recovery plan.

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Questions 22

Which of the following describes a mechanistic organizational structure?

Options:

A.

Primary direction of communication tends to be lateral.

B.

Definition of assigned tasks tends to be broad and general.

C.

Type of knowledge required tends to be broad and professional.

D.

Reliance on self-control tends to be low.

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Questions 23

After purchasing shoes from an online retailer, a customer continued to receive additional unsolicited offers from the retailer and other retailers who offer similar products.

Which of the following is the most likely control weakness demonstrated by the seller?

Options:

A.

Excessive collecting of information

B.

Application of social engineering

C.

Retention of incomplete information.

D.

Undue disclosure of information

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Questions 24

Which of the following actions would senior management need to consider as part of new IT guidelines regarding the organization's cybersecurity policies?

Options:

A.

Assigning new roles and responsibilities for senior IT management.

B.

Growing use of bring your own devices for organizational matters.

C.

Expansion of operations into new markets with limited IT access.

D.

Hiring new personnel within the IT department for security purposes.

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Questions 25

An organization decided to outsource its human resources function. As part of its process migration, the organization is implementing controls over sensitive employee data.

What would be the most appropriate directive control in this area?

Options:

A.

Require a Service Organization Controls (SOC) report from the service provider

B.

Include a data protection clause in the contract with the service provider.

C.

Obtain a nondisclosure agreement from each employee at the service provider who will handle sensitive data.

D.

Encrypt the employees ' data before transmitting it to the service provider

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Questions 26

Which of the following parties is most likely to be responsible for maintaining the infrastructure required to prevent the failure of a real-time backup of a database?

Options:

A.

IT database administrator.

B.

IT data center manager.

C.

IT help desk function.

D.

IT network administrator.

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Questions 27

Which of the following should be established by management during implementation of big data systems to enable ongoing production monitoring?

Options:

A.

Key performance indicators.

B.

Reports of software customization.

C.

Change and patch management.

D.

Master data management

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Questions 28

Which of the following best describes the primary objective of cybersecurity?

Options:

A.

To protect the effective performance of IT general and application controls.

B.

To regulate users' behavior it the web and cloud environment.

C.

To prevent unauthorized access to information assets.

D.

To secure application of protocols and authorization routines.

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Questions 29

What is the primary risk associated with an organization adopting a decentralized structure?

Options:

A.

Inability to adapt.

B.

Greater costs of control function.

C.

Inconsistency in decision making.

D.

Lack of resilience.

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Questions 30

Which of the following lists best describes the classification of manufacturing costs?

Options:

A.

Direct materials, indirect materials, raw materials.

B.

Overhead costs, direct labor, direct materials.

C.

Direct materials, direct labor, depreciation on factory buildings.

D.

Raw materials, factory employees' wages, production selling expenses.

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Questions 31

A small chain of grocery stores made a reporting error and understated its ending inventory. What effect would this have on the income statement for the following year?

Options:

A.

Net income would be understated.

B.

Net income would not be affected.

C.

Net income would be overstated.

D.

Net income would be negative.

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Questions 32

Which of the following attributes of data is most likely to be compromised in an organization with a weak data governance culture?

Options:

A.

Variety.

B.

Velocity.

C.

Volume.

D.

Veracity.

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Questions 33

A company records income from an investment in common stock when it does which of the following?

Options:

A.

Purchases bonds.

B.

Receives interest.

C.

Receives dividends

D.

Sells bonds.

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Questions 34

An organization that relies heavily on IT wants to contain the impact of potential business disruption to a period of approximately four to seven days. Which of the following

business recovery strategies would most efficiently meet this organization's needs?

Options:

A.

A recovery strategy whereby a separate site has not yet been determined, but hardware has been reserved for purchase and data backups.

B.

A recovery strategy whereby a separate site has been secured and is ready for use, with fully configured hardware and real-time synchronized data

C.

A recovery strategy whereby a separate site has been secured and the necessary funds for hardware and data backups have been reserved.

D.

A recovery strategy whereby a separate site has been secured with configurable hardware and data backups.

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Questions 35

While performing an audit of a car tire manufacturing plant, an internal auditor noticed a significant decrease in the number of tires produced from the previous operating

period. To determine whether worker inefficiency caused the decrease, what additional information should the auditor request?

Options:

A.

Total tire production labor hours for the operating period.

B.

Total tire production costs for the operating period.

C.

Plant production employee headcount average for the operating period.

D.

The production machinery utilization rates.

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Questions 36

Which of the following describes a third-party network that connects an organization specifically with its trading partners?

Options:

A.

Value-added network (VAN).

B.

Local area network (LAN).

C.

Metropolitan area network (MAN).

D.

Wide area network (WAN).

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Questions 37

Which of the following is a sound network configuration practice to enhance information security?

Options:

A.

Change management practices to ensure operating system patch documentation is retained.

B.

User role requirements are documented in accordance with appropriate application-level control needs.

C.

Validation of intrusion prevention controls is performed to ensure intended functionality and data integrity.

D.

Interfaces reinforce segregation of duties between operations administration and database development.

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Questions 38

An organization is considering outsourcing its IT services, and the internal auditor as assessing the related risks. The auditor grouped the related risks into three categories;

- Risks specific to the organization itself.

- Risks specific to the service provider.

- Risks shared by both the organization and the service provider

Which of the following risks should the auditor classify as specific to the service provider?

Options:

A.

Unexpected increases in outsourcing costs.

B.

Loss of data privacy.

C.

Inadequate staffing.

D.

Violation of contractual terms.

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Questions 39

Which of the following best describes owner's equity?

Options:

A.

Assets minus liabilities.

B.

Total assets.

C.

Total liabilities.

D.

Owners contribution plus drawings.

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Questions 40

Which of the following is most influenced by a retained earnings policy?

Options:

A.

Cash.

B.

Dividends.

C.

Gross margin.

D.

Net income.

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Questions 41

Which of the following actions is likely to reduce the risk of violating transfer pricing regulations?

Options:

A.

The organization sells inventory to an overseas subsidiary at fair value.

B.

The local subsidiary purchases inventory at a discounted price.

C.

The organization sells inventory to an overseas subsidiary at the original cost.

D.

The local subsidiary purchases inventory at the depreciated cost.A

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Questions 42

Which of the following is an effective preventive control for data center security?

Options:

A.

Motion detectors.

B.

Key card access to the facility.

C.

Security cameras.

D.

Monitoring access to data center workstations

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Questions 43

According to IIA guidance on IT, which of the following strategies would provide the most effective access control over an automated point-of-sale system?

Options:

A.

Install and update anti-virus software.

B.

Implement data encryption techniques.

C.

Set data availability by user need.

D.

Upgrade firewall configuration

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Questions 44

Which of the following scenarios best illustrates a spear phishing attack?

Options:

A.

Numerous and consistent attacks on the company's website caused the server to crash and service was disrupted.

B.

A person posing as a representative of the company's IT help desk called several employees and played a generic prerecorded message requesting password data.

C.

A person received a personalized email regarding a golf membership renewal, and he clicked a hyperlink to enter his credit card data into a fake website.

D.

Many users of a social network service received fake notifications of a unique opportunity to invest in a new product

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Questions 45

An internal auditor is assigned to perform data analytics. Which of the following is the next step the auditor should undertake after she has ascertained the value expected from the review?

Options:

A.

Normalize the data,

B.

Obtain the data

C.

Identify the risks.Analyze the data.

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Questions 46

During which phase of the contracting process are contracts drafted for a proposed business activity?

Options:

A.

Initiation phase.

B.

Bidding phase.

C.

Development phase.

D.

Management phase.

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Questions 47

An analytical model determined that on Friday and Saturday nights the luxury brands stores should be open for extended hours and with a doubled number of employees

present; while on Mondays and Tuesdays costs can be minimized by reducing the number of employees to a minimum and opening only for evening hours Which of the

following best categorizes the analytical model applied?

Options:

A.

Descriptive.

B.

Diagnostic.

C.

Prescriptive.

D.

Prolific.

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Questions 48

According to IIA guidance, which of the following statements is true with regard to workstation computers that access company information stored on the network?

Options:

A.

Individual workstation computer controls are not as important as companywide server controls

B.

Particular attention should be paid to housing workstations away from environmental hazards

C.

Cybersecurity issues can be controlled at an enterprise level, making workstation-level controls redundant

D.

With security risks near an all-time high, workstations should not be connected to the company network

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Questions 49

Which of the following network types should an organization choose if it wants to allow access only to its own personnel?

Options:

A.

An extranet.

B.

A local area network (LAN).

C.

An intranet.

D.

The internet.

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Questions 50

Given the information below, which organization is in the weakest position to pay short-term debts?

Organization A: Current assets constitute $1,200,000; Current liabilities are $400,000

Organization B: Current assets constitute $1,000,000; Current liabilities are $1,000,000

Organization C: Current assets constitute $900,000; Current liabilities are $300,000

Organization D: Current assets constitute $1,000,000; Current liabilities are $250,000

Options:

A.

Organization A

B.

Organization B

C.

Organization C

D.

Organization D

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Questions 51

An organization with global headquarters in the United States has subsidiaries in eight other nations. If the organization operates with an ethnocentric attitude, which of the following statements is true?

Options:

A.

Standards used for evaluation and control are determined at local subsidiaries, not set by headquarters

B.

Orders, commands, and advice are sent to the subsidiaries from headquarters

C.

People of local nationality are developed for the best positions within their own country

D.

There is a significant amount of collaboration between headquarters and subsidiaries

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Questions 52

Which of the following principles is shared by both hierarchical and open organizational structures?

A superior can delegate the authority to make decisions but cannot delegate the ultimate responsibility for the results of those decisions.

A supervisor's span of control should not exceed seven subordinates.

Responsibility should be accompanied by adequate authority.

Employees at all levels should be empowered to make decisions.

Options:

A.

1 and 3 only

B.

1 and 4 only

C.

2 and 3 only

D.

3 and 4 only

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Questions 53

Which of the following lists is comprised of computer hardware only?

Options:

A.

A central processing unit, a scanner, and a value-added network

B.

A computer chip, a data warehouse, and a router

C.

A server, a firewall, and a smartphone

D.

A workstation, a modem, and a disk drive

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Questions 54

Which of the following risks is best addressed by encryption?

Options:

A.

Information integrity risk.

B.

Privacy risk.

C.

Access risk.

D.

Software risk.

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Questions 55

The IT department maintains logs of user identification and authentication for all requests for access to the network. What is the primary purpose of these logs?

Options:

A.

To ensure proper segregation of duties

B.

To create a master repository of user passwords

C.

To enable monitoring for systems efficiencies

D.

To enable tracking of privileges granted to users over time

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Questions 56

Which of the following physical access controls is most likely to be based on the "something you have" concept?

Options:

A.

A retina characteristics reader.

B.

A PIN code reader.

C.

A card-key scanner.

D.

A fingerprint scanner.

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Questions 57

According to IIA guidance on IT, which of the following plans would pair the identification of critical business processes with recovery time objectives?

Options:

A.

The business continuity management charter

B.

The business continuity risk assessment plan

C.

The business impact analysis plan

D.

The business case for business continuity planning

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Questions 58

Which of the following controls refers to requiring employees to use a combination of PINs, passwords, and/or biometrics to access an organization's smart device apps and data?

Options:

A.

Remote wipe.

B.

Software encryption.

C.

Device encryption.

D.

Authentication.

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Questions 59

Which of the following is a primary driver behind the creation and prioritization of new strategic initiatives established by an organization?

Options:

A.

Risk tolerance.

B.

Performance.

C.

Threats and opportunities.

D.

Governance.

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Questions 60

An investor has acquired an organization that has a dominant position in a mature, slow-growth industry and consistently creates positive financial income. Which of the following terms would the investor most likely label this investment in her portfolio?

Options:

A.

A star

B.

A cash cow

C.

A question mark

D.

A dog

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Questions 61

Which of the following statements is true regarding data backup?

Options:

A.

System backups should always be performed in real-time.

B.

Backups should be stored in a secured location onsite for easy access.

C.

The tape rotation schedule affects how long data is retained.

D.

Backup media should be restored only in case of a hardware or software failure.

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Questions 62

Based on test results, an IT auditor concluded that the organization would suffer unacceptable loss of data if there was a disaster at its data center. Which of the following test results would likely lead the auditor to this conclusion?

Options:

A.

Requested backup tapes were not returned from the offsite vendor in a timely manner

B.

Returned backup tapes from the offsite vendor contained empty spaces

C.

Critical systems have been backed up more frequently than required

D.

Critical system backup tapes are taken off site less frequently than required

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Questions 63

Which of the following is an advantage of a decentralized organizational structure, as opposed to a centralized structure?

Options:

A.

Greater cost-effectiveness

B.

Increased economies of scale

C.

Larger talent pool

D.

Strong internal controls

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Questions 64

Which of the following statements is true regarding cost-volume-profit analysis?

Options:

A.

Contribution margin is the amount remaining from sales revenue after fixed expenses have been deducted

B.

Breakeven is the amount of units sold to cover variable costs

C.

Breakeven occurs when the contribution margin covers fixed costs

D.

Following breakeven, net operating income will increase by the excess of fixed costs less the variable costs per unit sold

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Questions 65

For employees, the primary value of implementing job enrichment is which of the following?

Options:

A.

Validation of the achievement of their goals and objectives

B.

Increased knowledge through the performance of additional tasks

C.

Support for personal growth and a meaningful work experience

D.

An increased opportunity to manage better the work done by their subordinates

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Questions 66

According to Herzberg’s Two-Factor Theory of Motivation, which of the following factors are mentioned most often by satisfied employees?

Options:

A.

Salary and status.

B.

Responsibility and advancement.

C.

Work conditions and security.

D.

Peer relationships and personal life.

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Questions 67

According to Maslow’s hierarchy of needs theory, which of the following best describes a strategy where a manager offers an assignment to a subordinate specifically to support his professional growth and future advancement?

Options:

A.

Esteem by colleagues

B.

Self-fulfillment

C.

Sense of belonging in the organization

D.

Job security

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Questions 68

Which of the following is an example of an application control?

Options:

A.

Automated password change requirements.

B.

System data backup process.

C.

User testing of system changes.

D.

Formatted data fields.

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Questions 69

Which of the following describes the most appropriate set of tests for auditing a workstation’s logical access controls?

Options:

A.

Review the list of people with access badges to the room containing the workstation and a log of those who accessed the room

B.

Review the password length, frequency of change, and list of users for the workstation’s login process

C.

Review the list of people who attempted to access the workstation and failed, as well as error messages

D.

Review the passwords of those who attempted unsuccessfully to access the workstation and the log of their activity

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Questions 70

Which of the following authentication controls combines what a user knows with the unique characteristics of the user, respectively?

Options:

A.

Voice recognition and token

B.

Password and fingerprint

C.

Fingerprint and voice recognition

D.

Password and token

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Questions 71

A large retail customer made an offer to buy 10,000 units at a special price of $7 per unit. The manufacturer usually sells each unit for $10. Variable manufacturing costs are $5 per unit and fixed manufacturing costs are $3 per unit. For the manufacturer to accept the offer, which of the following assumptions needs to be true?

Options:

A.

Fixed and variable manufacturing costs are less than the special offer selling price

B.

The manufacturer can fulfill the order without expanding the capacities of the production facilities

C.

Costs related to accepting this offer can be absorbed through the sale of other products

D.

The manufacturer’s production facilities are currently operating at full capacity

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Questions 72

According to IIA guidance, which of the following would be the best first step to manage risk when a third party is overseeing the organization’s network and data?

Options:

A.

Creating a comprehensive reporting system for vendors to demonstrate their ongoing due diligence in network operations

B.

Drafting a strong contract that requires regular vendor control reports and a right-to-audit clause

C.

Applying administrative privileges to ensure right-to-access controls are appropriate

D.

Creating a standing cybersecurity committee to identify and manage risks related to data security

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Questions 73

With regard to project management, which of the following statements about project crashing is true?

Options:

A.

It leads to an increase in risk and often results in rework.

B.

It is an optimization technique where activities are performed in parallel rather than sequentially.

C.

It involves a revaluation of project requirements and/or scope.

D.

It is a compression technique in which resources are added to the project.

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Questions 74

When management uses the absorption costing approach, fixed manufacturing overhead costs are classified as which of the following types of costs?

Options:

A.

Direct product costs

B.

Indirect costs

C.

Direct period costs

D.

Indirect period costs

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Questions 75

An internal auditor observed that the organization's disaster recovery solution will make use of a cold site in a town several miles away. Which of the following is likely to be a characteristic of this disaster recovery solution?

Options:

A.

Data is synchronized in real time.

B.

Recovery time is expected to be less than one week.

C.

Servers are not available and need to be procured.

D.

Recovery resources and data restore processes have been defined.

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Questions 76

Which of the following responsibilities would ordinarily fall under the help desk function of an organization?

Options:

A.

Maintenance service items such as production support

B.

Management of infrastructure services, including network management

C.

Physical hosting of mainframes and distributed servers

D.

End-to-end security architecture design

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Questions 77

Which of the following security controls would be appropriate to protect the exchange of information?

Options:

A.

Firewalls.

B.

Activity logs.

C.

Antivirus software.

D.

File encryption.

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Questions 78

Which of the following purchasing scenarios would gain the greatest benefit from implementing electronic cate interchange?

Options:

A.

A just-in-time purchasing environment

B.

A Large volume of custom purchases

C.

A variable volume sensitive to material cost

D.

A currently inefficient purchasing process

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Questions 79

A small software development firm designs and produces custom applications for businesses. The application development team consists of employees from multiple departments who all report to a single project manager. Which of the following organizational structures does this situation represent?

Options:

A.

Functional departmentalization.

B.

Product departmentalization

C.

Matrix organization.

D.

Divisional organization

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Questions 80

An organization uses the management-by-objectives method whereby employee performance is based on defined goals. Which of the following statements is true regarding this approach?

Options:

A.

It is particularly helpful to management when the organization is facing rapid change.

B.

It is a more successful approach when adopted by mechanistic organizations.

C.

It is mere successful when goal setting is performed not only by management, but by all team members, including lower-level staff.

D.

It is particularly successful in environments that are prone to having poor employer-employee relations.

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Questions 81

An organization has instituted a bring-your-own-device (BYOD) work environment. Which of the following policies best addresses the increased risk to the organization's network incurred by this environment?

Options:

A.

Limit the use of the employee devices for personal use to mitigate the risk of exposure to organizational data.

B.

Ensure that relevant access to key applications is strictly controlled through an approval and review process.

C.

Institute detection and authentication controls for all devices used for network connectivity and data storage.

D.

Use management software scan and then prompt parch reminders when devices connect to the network

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Questions 82

Which of the following is the best example of IT governance controls?

Options:

A.

Controls that focus on segregation of duties, financial, and change management,

B.

Personnel policies that define and enforce conditions for staff in sensitive IT areas.

C.

Standards that support IT policies by more specifically defining required actions

D.

Controls that focus on data structures and the minimum level of documentation required

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Questions 83

Which of the following is classified as a product cost using the variable costing method?

1. Direct labor costs.

2. Insurance on a factory.

3. Manufacturing supplies.

4. Packaging and shipping costa.

Options:

A.

1 and 2

B.

1 and 3

C.

2 and 4

D.

3 and 4

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Questions 84

Which of the following statements is true regarding an investee that received a dividend distribution from an entity and is presumed to have little influence over the entity?

Options:

A.

The cash dividends received increase the investee investment account accordingly.

B.

The investee must adjust the investment account by the ownership interest

C.

The investment account is adjusted downward by the percentage of ownership.

D.

The investee must record the cash dividends as dividend revenue

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Questions 85

An internal audit activity is piloting a data analytics model, which aims to identify anomalies in payments to vendors and potential fraud indicators. Which of the following would be the most appropriate criteria for assessing the success of the piloted model?

Options:

A.

The percentage of cases flagged by the model and confirmed as positives.

B.

The development and maintenance costs associated with the model

C.

The feedback of auditors involved with developing the model.

D.

The number of criminal investigations initiated based on the outcomes of the model

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Questions 86

Which type of bond sells at & discount from face value, then increases in value annually until it reaches maturity and provides the owner with the total payoff?

Options:

A.

High-yield bonds

B.

Commodity-backed bonds

C.

Zero coupon bonds

D.

Junk bonds

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Questions 87

Which of the following is a disadvantage in a centralized organizational structure?

Options:

A.

Communication conflicts

B.

Slower decision making.

C.

Loss of economies of scale

D.

Vulnerabilities in sharing knowledge

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Questions 88

How do data analysis technologies affect internal audit testing?

Options:

A.

They improve the effectiveness of spot check testing techniques.

B.

They allow greater insight into high risk areas.

C.

They reduce the overall scope of the audit engagement,

D.

They increase the internal auditor's objectivity.

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Questions 89

Which of the following should be included in a data privacy poky?

1. Stipulations for deleting certain data after a specified period of time.

2. Guidance on acceptable methods for collecting personal data.

3. A requirement to retain personal data indefinitely to ensure a complete audit trail,

4. A description of what constitutes appropriate use of personal data.

Options:

A.

1 and 2 only

B.

2 and 3 only

C.

1, 2 and 4 only

D.

2, 3, and 4 only

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Questions 90

An organization and its trading partner rely on a computer-to-computer exchange of digital business documents. Which of the following best describes this scenario?

Options:

A.

Use of a central processing unit

B.

Use of a database management system

C.

Use of a local area network

D.

Use of electronic data Interchange

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Questions 91

Which of the following techniques would best detect on inventory fraud scheme?

Options:

A.

Analyze invoice payments just under individual authorization limits.

B.

Analyze stratification of inventory adjustments by warehouse location.

C.

Analyze Inventory Invoice amounts and compare with approved contract amounts.

D.

Analyze differences discovered curing duplicate payment testing.

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Questions 92

Which of the following is a result of Implementing on e-commerce system, which relies heavily on electronic data interchange and electronic funds transfer, for purchasing and biting?

Options:

A.

Higher cash flow and treasury balances.

B.

Higher inventory balances

C.

Higher accounts receivable.

D.

Higher accounts payable

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Questions 93

For employees, the primary value of implementing job enrichment is which of the following?

Options:

A.

Validation of the achievement of their goals anti objectives

B.

Increased knowledge through the performance of additional tasks

C.

Support for personal growth and a meaningful work experience

D.

An increased opportunity to manage better the work done by their subordinates

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Questions 94

Based on lest results, an IT auditor concluded that the organization would suffer unacceptable loss of data if there was a disaster at its data center. Which of the following test results would likely lead the auditor to this conclusion?

Options:

A.

Requested backup tapes were not returned from the offsite vendor In a timely manner.

B.

Returned backup tapes from the offsite vendor contained empty spaces.

C.

Critical systems have boon backed up more frequently than required.

D.

Critical system backup tapes are taken off site less frequently than required

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Questions 95

According to IIA guidance, which of the following is a broad collection of integrated policies, standards, and procedures used to guide the planning and execution of a project?

Options:

A.

Project portfolio.

B.

Project development

C.

Project governance.

D.

Project management methodologies

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Questions 96

An investor has acquired an organization that has a dominant position in a mature. slew-growth Industry and consistently creates positive financial income.

Which of the following terms would the investor most likely label this investment in her portfolio?

Options:

A.

A star

B.

A cash cow

C.

A question mark

D.

A dog

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Questions 97

Which of the following would most likely be found in an organization that uses a decentralized organizational structure?

Options:

A.

There is a higher reliance on organizational culture.

B.

There are clear expectations set for employees.

C.

There are electronic monitoring techniques employed

D.

There is a defined code far employee behavior.

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Questions 98

A retail organization mistakenly did have include $10,000 of Inventory in the physical count at the end of the year. What was the impact to the organization's financial statements?

Options:

A.

Cost of sales and net income are understated.

B.

Cost of sales and net income are overstated.

C.

Cost of sales is understated and not income is overstated.

D.

Cost of sales is overstated and net Income is understated.

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Questions 99

Which of the following best explains why an organization would enter into a capital lease contract?

Options:

A.

To increase the ability to borrow additional funds from creditors

B.

To reduce the organization's free cash flow from operations

C.

To Improve the organization's free cash flow from operations

D.

To acquire the asset at the end of the lease period at a price lower than the fair market value

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Questions 100

According to lIA guidance on IT, which of the following plans would pair the identification of critical business processes with recovery time objectives?

Options:

A.

The business continuity management charter.

B.

The business continuity risk assessment plan.

C.

The business Impact analysis plan

D.

The business case for business continuity planning

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Questions 101

Which of the following statements is true regarding activity-based costing (ABC)?

Options:

A.

An ABC costing system is similar to conventional costing systems in how it treats the allocation of manufacturing overhead.

B.

An ABC costing system uses a single unit-level basis to allocate overhead costs to products.

C.

An ABC costing system may be used with either a job order or a process cost accounting system.

D.

The primary disadvantage of an ABC costing system is less accurate product costing.

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Questions 102

Which of the following is an example of a contingent liability that a company should record?

Options:

A.

A potential assessment of additional income tax.

B.

Possible product warranty costs.

C.

The threat of a lawsuit by a competitor.

D.

The remote possibility of a contract breach.

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Questions 103

According to I1A guidance on IT. which of the following activities regarding information security Is most likely to be the responsibility of line management as opposed to executive management, internal auditors, or the board?

Options:

A.

Review and monitor security controls.

B.

Dedicate sufficient security resources.

C.

Provide oversight to the security function.

D.

Assess information control environments.

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Questions 104

According to IIA guidance on IT, which of the following best describes a logical access control?

Options:

A.

Require complex passwords to be established and changed quarterly

B.

Require swipe cards to control entry into secure data centers.

C.

Monitor access to the data center with closed circuit camera surveillance.

D.

Maintain current role definitions to ensure appropriate segregation of duties

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Questions 105

A clothing company sells shirts for $8 per shirt. In order to break even, the company must sell 25.000 shirts. Actual sales total S300.000. What is margin of safety sales for the company?

Options:

A.

$100.000

B.

$200,000

C.

$275,000

D.

$500,000

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Questions 106

The manager of the sales department wants to Increase the organization's net profit margin by 7% (from 43% in the prior year to 50% in the current year). Given the information provided in the table below, what would be the targeted sales amount for the current year?

IIA-CIA-Part3 Question 106

Options:

A.

$20,000,000

B.

$24.500.000

C.

$30.000.000

D.

$35.200.000

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Questions 107

Which of the following statements describes the typical benefit of using a flat organizational structure for the internal audit activity, compared to a hierarchical structure?

Options:

A.

A flat structure results in lower operating and support costs than a hierarchical structure.

B.

A flat structure results in a stable and very collaborative environment.

C.

A flat structure enables field auditors to report to and learn from senior auditors.

D.

A flat structure is more dynamic and offers more opportunities for advancement than a hierarchical structure.

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Questions 108

An internal auditor was assigned to test for ghost employees using data analytics. The auditor extracted employee data from human resources and payroll. Using spreadsheet functions, the auditor matched data sets by name and assumed that employees who were not present in each data set should be investigated further. However, the results seemed erroneous, as very few employees matched across all data sets. Which of the following data analytics steps has the auditor most likely omitted?

Options:

A.

Data analysis.

B.

Data diagnostics.

C.

Data velocity.

D.

Data normalization.

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Questions 109

According to The IIA's Three Lines Model, which of the following IT security activities is commonly shared by all three lines?

Options:

A.

Assessments of third parties and suppliers.

B.

Recruitment and retention of certified IT talent.

C.

Classification of data and design of access privileges.

D.

Creation and maintenance of secure network and device configuration.

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Questions 110

Which of the following best describes a cyberattacK in which an organization faces a denial-of-service threat created through malicious data encryption?

Options:

A.

Phishing.

B.

Ransomware.

C.

Hacking.

D.

Makvare

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Questions 111

What is the primary purpose of data and systems backup?

Options:

A.

To restore all data and systems immediately after the occurrence of an incident.

B.

To set the maximum allowable downtime to restore systems and data after the occurrence of an incident.

C.

To set the point in time to which systems and data must be recovered after the occurrence of an incident.

D.

To restore data and systems to a previous point in time after the occurrence of an incident

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Questions 112

Which of following best demonstrates the application of the cost principle?

Options:

A.

A company reports trading and investment securities at their market cost

B.

A building purchased last year for $1 million is currently worth ©1.2 million, but the company still reports the building at $1 million.

C.

A building purchased last year for ©1 million is currently worth £1,2 million , and the company adjusts the records to reflect the current value

D.

A company reports assets at either historical or fair value, depending which is closer to market value.

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Questions 113

Which of the following statements is true regarding change management?

Options:

A.

The degree of risk associated with a proposed change determines whether the change request requires authorization

B.

Program changes generally are developed and tested in the production environment.

C.

Changes are only required by software programs

D.

To protect the production environment, changes must be managed in a repeatable, defined, and predictable manner

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Questions 114

Which of the following statements is true regarding user developed applications (UDAs) and traditional IT applications?

Options:

A.

UDAs arid traditional JT applications typically follow a similar development life cycle

B.

A UDA usually includes system documentation to illustrate its functions, and IT-developed applications typically do not require such documentation.

C.

Unlike traditional IT applications. UDAs typically are developed with little consideration of controls.

D.

IT testing personnel usually review both types of applications thoroughly to ensure they were developed properly.

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Questions 115

Which of the following is a limitation of the remote wipe for a smart device?

Options:

A.

Encrypted data cannot be locked to prevent further access

B.

Default settings cannot be restored on the device.

C.

All data, cannot be completely removed from the device

D.

Mobile device management software is required for successful remote wipe

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Questions 116

While conducting' audit procedures at the organization's data center an internal auditor noticed the following:

- Backup media was located on data center shelves.

- Backup media was organized by date.

- Backup schedule was one week in duration.

The system administrator was able to present restore logs.

Which of the following is reasonable for the internal auditor to conclude?

Options:

A.

Backup media is not properly stored, as the storage facility should be off-site.

B.

Backup procedures are adequate and appropriate according to best practices.

C.

Backup media is not properly indexed, as backup media should be indexed by system, not date.

D.

Backup schedule is not sufficient, as full backup should be conducted daily.

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Questions 117

In accounting, which of the following statements is true regarding the terms debit and credit?

Options:

A.

Debit indicates the right side of an account and credit the left side

B.

Debit means an increase in an account and credit means a decrease.

C.

Credit indicates the right side of an account and debit the left side.

D.

Credit means an increase in an account and debit means a decrease

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Questions 118

Which of the following characteristics applies to an organization that adopts a flat structure?

Options:

A.

The structure is dispersed geographically

B.

The hierarchy levels are more numerous.

C.

The span of control is wide

D.

The tower-level managers are encouraged to exercise creativity when solving problems

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Questions 119

Which of the following sites would an Internet service provider most likely use to restore operations after its servers were damaged by a natural disaster?

Options:

A.

On site.

B.

Cold site.

C.

Hot site.

D.

Warm site

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Questions 120

Which of the following is an example of a physical control designed to prevent security breaches?

Options:

A.

Preventing database administrators from initiating program changes

B.

Blocking technicians from getting into the network room.

C.

Restricting system programmers' access to database facilities

D.

Using encryption for data transmitted over the public internet

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Questions 121

The board of directors wants to implement an incentive program for senior management that is specifically tied to the long-term health of the organization. Which of the following methods of compensation would be best to achieve this goal?

Options:

A.

Commissions.

B.

Stock options

C.

Gain-sharing bonuses.

D.

Allowances

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Questions 122

Which of the following financial statements provides the best disclosure of how a company's money was used during a particular period?

Options:

A.

Income statement.

B.

Owner's equity statement.

C.

Balance sheet.

D.

Statement of cash flows.

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Questions 123

According to UA guidance on IT, at which of the following stages of the project life cycle would the project manager most likely address the need to coordinate project resources?

Options:

A.

Initiation.

B.

Planning.

C.

Execution.

D.

Monitoring.

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Questions 124

When management uses the absorption costing approach, fixed manufacturing overhead costs are classified as which of the following types of costs?

Options:

A.

Direct, product costs.

B.

Indirect product costs.

C.

Direct period costs,

D.

Indirect period costs

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Exam Code: IIA-CIA-Part3
Exam Name: Business Knowledge for Internal Auditing
Last Update: Mar 31, 2025
Questions: 416

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