Updated Feb 07, 2022 Certification Exam IIA-CIA-Part3 Dumps - Practice Test Questions
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NEW QUESTION 205
A company is deciding whether to purchase an automated machine to manufacture one of its products. Expected net cash flows from this decision depend on several factors, interactions among those factors, and the probabilities associated with different levels of those factors. The method that the company should use to evaluate the distribution of net cash flows from this decision and changes in net cash flows resulting from changes in levels of various factors is:
- A. Differential analysis.
- B. Simulation and sensitivity analysis.
- C. Linear programming.
- D. Correlation analysis.
Answer: B
Explanation:
Simulation is a technique for experimenting with logical and mathematical models using a computer. Sensitivity analysis examines how the model's outcomes change as the parameters change.
NEW QUESTION 206
The following transactions + occurred during a company's first year of operations:
I. Purchased a delivery van for cash
II. Borrowed money by issuance of short-term debt
III. Purchased treasury stock
Which of the items above caused a change in the amount of working capital?
- A. II and III only
- B. I only
- C. I and II only
- D. I and III only
Answer: D
Explanation:
Working capital is computed by deducting total current liabilities from total current assets.
The purchase of a delivery van for cash reduces current assets and has no effect on current liabilities. The borrowing of cash by incurring short-term debt increases current assets by the same amount as it increases current liabilities, hence, it will have no effect on working capital. The purchase of treasury stock decreases current assets but has no effect on current liabilities. Thus, the purchases of the van and treasury stock affect working capital.
NEW QUESTION 207
The management and employees of a large household goods moving company decided to adopt total quality management (TQM) and continuous improvement (CI). The company believes that if it became nationally known as adhering to TQM and CI, one result would be an increase in the company's profits and market share.
The primary reason for adopting TQM was to achieve
- A. Reduced delivery time.
- B. Greater customer satisfaction.
- C. Greater employee participation.
- D. Reduced delivery charges.
Answer: B
Explanation:
TQM is an integrated system that anticipates, meets, and exceeds customers' needs, wants, and expectations.
NEW QUESTION 208
An investor has been given several financial ratios for an entity but none of the financial reports. Which combination of ratios can be used to derive return on equity?
- A. Price-to-earnings ratio and return-on-assets ratio.
- B. Market-to-book-value ratio and total-debt-to-total-assets ratio.
- C. Profit margin, total assets turnover, and equity multiplier.
- D. Price-to-earnings ratio, earnings per share, and profit margin.
Answer: C
Explanation:
The profit margin equals the profit available to ordinary shareholders divided by sales, the total assets turnover equals sales divided by total assets, and the product of these two ratios is the return on assets. This result is the basic Du Pont equation. In the extended Du Pont equation, the return on assets is multiplied by the leverage factor, also called the equity multiplier total assets + ordinary equity at carrying amount). The extended Du Pont equation gives the return on ordinary equity. This result is obtained because the total assets and sales factors cancel in the multiplication of the three ratios.
NEW QUESTION 209
The following are the January 1 and June 30 balance sheets of an entity/From January 1 to June 30, the net works no capital:
- A. Increased by US $2 million
- B. Stayed the s
- C. Increased by US $1 million
- D. Decreased by US $1 million
Answer: C
Explanation:
Net working capital equals current assets cash, accounts receivable, inventories for this entity minus current liabilities accounts payable. notes payable, accrued wages). From January 1 to June 30. the net working capital increased by US $1.000.000 {[($4 + $4 +$10)
-$3 + $3 + $2)] - [($3 + $5 + $8) - $2 + $4 + $1)]}.
NEW QUESTION 210
The problem just described is beast approved by use of which quantitative method?
- A. Linear programming.
- B. Queuing theory.
- C. Exponential smoothing, multiple parameters.
- D. Integrated autoregressive-moving average ARIMA) modeling.
Answer: B
Explanation:
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.
NEW QUESTION 211
Which of the following is a malicious program, the purpose of which is to reproduce itself throughout the network and produce a denial of service attack by excessively utilizing system resources?
- A. Worm.
- B. Logic bomb.
- C. Virus.
- D. Trojan horse.
Answer: A
Explanation:
A worm is an independent program that reproduces by copying itself from one system to another over a network and consumes computer and network resources.
NEW QUESTION 212
Advantages of life cycle methodologies are:
- A. Lower overall development costs when requirements change frequently.
- B. Reduced application development time to achieve a functioning system.
- C. Enhanced management and control of the development process.
- D. Ability to give users a functioning system quickly.
Answer: C
Explanation:
The systems development life cycle approach is the most common methodology applied to the development of large, highly structured application systems. The life cycle approach is based on the idea that an information system has a finite life span that is limited by the changing needs of the organization. This cycle is analytically divisible into stages. A new system life cycle begins when the inadequacy of the current system leads to a decision to develop a new or improved system. This method is a structured process for controlling the creative activity required to devise, develop, and implement an information system. The process is described in varying terms by different writers, but the nature and sequence of the steps are essentially the same. Life cycle methodologies provide enhanced management and control of the development process because they provide structure for a creative process by dividing it into manageable steps and specifying what must be produced in each phase.
NEW QUESTION 213
Which of the following is a product-oriented definition of a business rather than a market-oriented definition of a business?
- A. We make movies.
- B. We provide climate control in the home.
- C. We are a people-and-goods mover.
- D. We supply energy.
Answer: A
NEW QUESTION 214
Which of the following budgets must be prepared first?
- A. Production budget.
- B. Sales budget.
- C. Cash budget.
- D. Selling and administrative expenses budget.
Answer: B
NEW QUESTION 215
What selling price would the company have to charge for its product in Year 2 to maintain the same contribution margin percentage rate as in Year 1?
- A. US $6450
- B. US $6180
- C. US $7200
- D. US $6400
Answer: D
Explanation:
The CMR equals unit contribution margin UCM) divided by unit selling price. The UCM equals the unit selling price minus unit variable cost. The original unit selling price was US $60 $9,000,000 revenue 150,000 units), and the original unit variable cost was US $27 [ $1,800,000 + $720,000 + $1,080,000 + $450,000) + 150,000 units]. The original CPr1R was therefore US $.55 [ $60 - $27) + $60]. The new unit variable cost was calculated as US $28.80. Accordingly the unit selling price X) is US $64.
NEW QUESTION 216
An entity has made the decision to finance next year's capital projects through debt rather than additional equity. The benchmark cost of capital for these projects should be the:
- A. After-tax cost of new-debt financing.
- B. Cost of equity financing.
- C. Weighted-average cost of capital.
- D. Before-tax cost of new-debt financing.
Answer: C
Explanation:
A weighted average of the costs of all financing sources should be used, with the weights determined by the usual financing proportions. The terms of any financing raised at the time of initiating a particular project do not represent the cost of capital for the entity.
When an entity achieves its optimal capital structure, the weighted-average cost of capital is minimized. The cost of capital is a composite, or weighted average, of all financing sources in their usual proportions. The cost of capital should also be calculated on an aftertax basis.
NEW QUESTION 217
Which of the following describes the most appropriate set of tests for auditing a workstation's logical access controls?
- A. Review the list of people who attempted to access the workstation and failed, as well as error messages.
- B. Review the list of people with access badges to the room containing the workstation and a log of those who accessed the room.
- C. Review the password length, frequency of change, and list of users for the workstation's login process.
- D. Review the passwords of those who attempted unsuccessfully to access the workstation and the log of their activity.
Answer: B
NEW QUESTION 218
In a company, products pass through some or all of the production departments during
manufacturing, depending upon the product being manufactured. Direct material and dire] labor costs are traced directly to the products as they flow through each production department Manufacturing overhead is assigned in each department using separate departmental manufacturing overhead rates. The inventory costing method that the manufacturing company is using in this situation is:
- A. Absorption costing.
- B. Variable costing.
- C. Activity-based costing.
- D. Backflush costing.
Answer: A
Explanation:
Absorption costing inventories all direct manufacturing costs and both variable and fixed manufacturing overhead indirect) costs.
NEW QUESTION 219
The audit committee has asked the internal audit activity to integrate data analytics into all work programs going forward. To accomplish this, which of the following describes the first step an audit team should take when planning for an audit?
- A. Gain management's approval and willingness to accept audit findings based on data analytics.
- B. Ensure that there are sufficient audit resources or train personnel in data analytics.
- C. Obtain and assess as much data as possible for the audit.
- D. Identify the business question or need, data required, and expected results.
Answer: D
Explanation:
Explanation/Reference:
NEW QUESTION 220
New data privacy laws require an organization to use collected customer information for me sole purpose of meeting the organization's business requirements. Which of the following best addresses the risk of the organization not complying with this objective?
- A. Provide training on social engineering attacks
- B. Allocate access profiles for each end user of the information
- C. Encrypt the customer information retained by the organization
- D. Establish policies that discipline those who misuse customer information
Answer: C
NEW QUESTION 221
Quality control programs employ many tools for problem definition and analysis. A scatter diagram is one of these tools. The objective of a scatter diagram is to:
- A. Display a population of items for analysis.
- B. Divide a universe of data into homogeneous groups.
- C. Show frequency distribution in graphic form.
- D. Show the vital trend and separate trivial items.
Answer: A
Explanation:
The objective of a scatter diagram is to depict degrees of correlation. Each observation is represented by a dot on a graph corresponding to specific values of x (the independent variable) and)/(the dependent variable).
NEW QUESTION 222
When writing a business memorandum, the writer should choose a writing style that achieves all of the following except:
- A. Suits the method of presentation and delivery.
- B. Develops ideas without overstatement.
- C. Treats all receivers with respect.
- D. Draws positive attention to the writing style.
Answer: D
NEW QUESTION 223
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