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IIA
IIA-CIA-Part3
Certified Internal Auditor - Part 3, Business Analysis and Information Technology

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Question: 1

Which of the following statements is correct regarding risk analysis?

A. The 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. The highest risk assessment should always be assigned to the area with the largest potential loss.
C. The highest risk assessment should always be assigned to the area with the highest probability of
occurrence.
D. Risk analysis must be reduced to quantitative terms in order to provide meaningful comparisons
across an organization.

Answer: A

Question: 2

Which of the following statements regarding organizational governance is not correct?

A. An effective internal audit function is one of the four cornerstones of good governance.
B. Those performing governance activities are accountable to the customer.
C. Accountability is one of the key elements of organizational governance.
D. Governance principles and the need for an internal audit function are applicable to governmental
and not-for-profit activities.

Answer: B

Question: 3

Which of the following is a role of the board of directors in the governance process?

A. Conduct periodic assessments of the organization's governance systems.


B. Obtain assurance concerning the effectiveness of the organization's governance systems.
C. Implement an effective system of internal controls to support the organization's governance
systems.
D. Review and approve operational goals and objectives.

Answer: B

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Question: 4

Which is the least effective form of risk management?

A. Systems-based preventive control.


B. People-based preventive control.
C. Systems-based detective control.
D. People-based detective control.

Answer: D

Question: 5

Which of the following statements is correct regarding corporate compensation systems and related
bonuses?
1. A bonus system should be considered part of the control environment of an organization and
should be considered in formulating a report on internal control.
2. Compensation systems are not part of an organization's control system and should not be
reported as such.
3. An audit of an organization's compensation system should be performed independently of an
audit of the control system over other functions that impact corporate bonuses.

A. 1 only
B. 2 only
C. 3 only
D. 2 and 3 only

Answer: A

Question: 6

The first stage in the development of a crisis management program is to:

A. Formulate contingency plans.


B. Conduct a risk analysis.
C. Create a crisis management team.
D. Practice the response to a crisis.

Answer: B

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Question: 7

When developing an effective risk-based plan to determine audit priorities, an internal audit activity
should start by:

A. Identifying risks to the organization's operations.


B. Observing and analyzing controls.
C. Prioritizing known risks.
D. Reviewing organizational objectives.

Answer: D

Question: 8

The decision to implement enhanced failure detection and back-up systems to improve data
integrity is an example of which risk response?

A. Risk acceptance.
B. Risk sharing.
C. Risk avoidance.
D. Risk reduction.

Answer: D

Question: 9

Which of the following activities most significantly increases the risk that a bank will make poor-
quality loans to its customers?

A. Borrowers may not sign all required mortgage loan documentation.


B. Fees paid by the borrower at the time of the loan may not be deposited in a timely manner.
C. The bank's loan documentation may not meet the government's disclosure requirements.
D. Loan officers may override the lending criteria established by senior management.

Answer: D

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Question: 10

The main reason to establish internal controls in an organization is to:

A. Encourage compliance with policies and procedures.


B. Safeguard the resources of the organization.
C. Ensure the accuracy, reliability, and timeliness of information.
D. Provide reasonable assurance on the achievement of objectives.

Answer: D

Question: 11

During a review of a web-based application used by customers to check the status of their bank
accounts, it would be most important for the internal auditor to ensure that:

A. Access to read application logs is restricted to authorized users.


B. Account balance information is encrypted in the database.
C. The web server used to host the application is located in a physically secure area.
D. Sensitive data, such as account numbers, are submitted using encrypted communications.

Answer: D

Question: 12

Which of the following steps should an internal auditor take during an audit of an organization's
business continuity plans?
1. Evaluate the business continuity plans for adequacy and currency.
2. Prepare a business impact analysis regarding the loss of critical business.
3. Identify key personnel who will be required to implement the plans.
4. Identify and prioritize the resources required to support critical business processes.

A. 1 only
B. 2 and 4 only
C. 1, 3, and 4 only
D. 1, 2, 3, and 4

Answer: A

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Question: 13

Which of the following engagement observations would provide the least motivation for
management to amend or replace an existing cost accounting system?

A. The distorted unit cost of a service is 50 percent lower than the true cost, while the true cost is 50
percent higher than the competition's cost.
B. The organization is losing $1,000,000 annually because it incorrectly outsourced an operation
based on information from its current system.
C. The cost of rework, hidden by the current system, is 50 percent of the total cost of all services.
D. 50 percent of total organizational cost has been allocated on a volume basis.

Answer: D

Question: 14

Which of the following control techniques would minimize the risk of interception during
transmission in an electronic data interchange system?
1. Encryption.
2. Traffic padding.
3. Edit checks.
4. Structured data format.

A. 1 and 2 only
B. 2 and 3 only
C. 3 and 4 only
D. 1, 2, and 3 only

Answer: A

Question: 15

For an engineering department with a total quality management program, important elements of
quality management include all of the following except:

A. Basing performance evaluations on the number of projects completed.


B. Comparing results with those of other engineering departments.
C. Creating a quality council within the engineering department.
D. Conducting post-project surveys on performance.

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Answer: A

Question: 16

Refer to the exhibit.

The figure below shows the network diagram for the activities of a large project. What is the
shortest number of days in which the project can be completed?

A. 21 days.
B. 22 days.
C. 27 days.
D. 51 days.

Answer: C

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