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Free IIA IIA-CIA-Part3 Exam Questions and Answer
NEW QUESTION # 114
Which of the following descriptions of the internal control system are indicators that risks are managed effectively?
1. Existing controls promote compliance with applicable laws and regulations.
2. The control environment is designed to address all identified risks to the organization.
3. Key controls for significant risks to the organization remain consistent over time.
4. Monitoring systems are in place to alert management to unexpected events.
- A. 2 and 4.
- B. 2 and 3.
- C. 1 and 3.
- D. 1 and 4.
Answer: D
Explanation:
Explanation/Reference:
NEW QUESTION # 115
The mobility of personal smart devices significantly increases which of the following risks?
- A. Data integrity risks
- B. Privacy risks
- C. Physical security risks
- D. Compliance risks.
Answer: C
NEW QUESTION # 116
Preferred stock has [List A] like common stock and [List B] payment like bonds.
List A
List B
A maturity date
A fixed periodic
No maturity date
No fixed periodic
A maturity date
No fixed periodic
No maturity date
A fixed periodic
Answer:
Explanation:
pending
A. B. C. D.
NEW QUESTION # 117
Which of the following is an effective preventive control for data center security?
- A. Motion detectors.
- B. Monitoring access to data center workstations
- C. Security cameras.
- D. Key card access to the facility.
Answer: D
NEW QUESTION # 118
A small furniture-manufacturing firm with 100 employees is located in a two-story building and does not plan to expand. The furniture manufactured is not special-ordered or custom-made. The most likely structure for this organization would be:
- A. Divisional organization.
- B. Functional departmentalization.
- C. Product departmentalization.
- D. Matrix organization.
Answer: B
NEW QUESTION # 119
Which of the following statements is true regarding partnership liquidation?
- A. Operations can continue after the liquidation if all partners agree
- B. When a partnership is liquidated, each partner pays creditors from cash received
- C. Partnership liquidation occurs when there is capital deficiency
- D. Partnership liquidation ends both the legal and economic life of an entity
Answer: D
NEW QUESTION # 120
On January 2, Year 1, Kine Co. granted Morgan, its preside -I t. share options to buy 1.000 shares of Kine's US $10 per ordinary stock. The options call for a price of US$20 per share and are exercisable for 3 years following the grant date. Morgan exercised the options on December 31, Year 1. The market price of the shares was US $50 on January 2, Year 1, and US $70 on the following for December 31. The market price of the shares is followed because the fair value of the option is not reliable measurable, by what net amount should equity increased as a result of the grant and exercise of the options?
- A. US $ 20,000
- B. US $50,000
- C. US $30,000
- D. US $70,000
Answer: A
Explanation:
The measurements January 2, Year 'I_ At that date, the intrinsic value of the options is US $30.000 [1,000 shares$50 market price -$20 option price)]. This US $30,000 will be recorded as both compensation expense and options outstanding. The net effect on equity is 0. When the options are exercised the US $20,0001.000 shares $20 option price)]. This US $30,000 will be recorded as both compensation expense and options outstanding will be allocated to share capital as US $30,000 of options are exercised, the US $ 20,0001,000 shares x $20 exercise price) cash received and the US $30,000 of options are exercised price) cash received and the US $30,000 of options outstanding will be allocated to share capital as US $10,000 ordinary stock and US $40,000 additional paid in capital. The net effect on equity will be a US $20,000 increase.
NEW QUESTION # 121
Which of the following is considered a physical security control?
- A. System servers are secured by locking mechanisms with access granted to specific individuals.
- B. Failed system login attempts are recorded and analyzed to identify potential security incidents.
- C. System security settings require the use of strong passwords and access controls.
- D. Transaction logs are maintained to capture a history of system processing.
Answer: A
NEW QUESTION # 122
Responsibility for the control of end-user computing EUC) exists at the organizational, departmental, and individual user level. Which of the following should be a direct responsibility of the individual users?
- A. Acquisition of hardware and software.
- B. Taking equipment inventories.
- C. Strategic planning of end-user computing.
- D. Physical security of equipment.
Answer: D
Explanation:
EUC involves user-created or user-acquired systems that are maintained and operated outside of traditional information systems controls. In this environment, an individual user is ordinarily responsible for the physical security of the equipment s)he uses.
NEW QUESTION # 123
Which of the following characteristics applies to an organization that adopts a flat structure?
- A. The span of control is wide
- B. The structure is dispersed geographically
- C. The tower-level managers are encouraged to exercise creativity when solving problems
- D. The hierarchy levels are more numerous.
Answer: C
NEW QUESTION # 124
According to IIA guidance on IT, which of the following controls the routing of data packets to link computers?
- A. Application program code
- B. Network.
- C. Operating system
- D. Control environment
Answer: B
NEW QUESTION # 125
Which of the following is false with regard to Internet connection firewalls?
- A. Firewalls may be software-based or hardware-based.
- B. Firewalls monitor attacks from the Internet.
- C. Firewalls can protect against computer viruses.
- D. Firewalls provide network administrators tools to retaliate against hackers.
Answer: C
Explanation:
Explanation/Reference:
NEW QUESTION # 126
Which of the following would most likely serve as a foundation for individual operational goats?
- A. Alignment with organizational strategy.
- B. Financial and human resources of the unit.
- C. Individual skills and capabilities.
- D. Targets of key performance indicators
Answer: D
NEW QUESTION # 127
An investment company is attempting to allocate its available funds between two investment alternatives, stocks and bonds, which differ in terms of expected return and risk. The company would like to minimize its risk while earning an expected return of at least 10% and investing no more than 70% in either of the investment alternatives. An appropriate technique for allocating its funds between stocks and bonds is:
- A. Queuing theory.
- B. Capital budgeting.
- C. Differential analysis.
- D. Linear programming.
Answer: D
Explanation:
Linear programming is a mathematical technique for planning resource allocation that optimizes a given objective function that is subject to certain constraints. In this case, the maximum investment is constrained by a 70% limit on either investment choice.
NEW QUESTION # 128
ABC entities, a manufacturer lesser, leased a chine to XYZ on January 1. The lease meets the criteria for a finance lease. Title to the asset will automatically pass to the lessee at the end of the lease term. Other details are as follow:
Assuming the fair value of the asset is at least equal to the present value of the minimum lease payments, the journal entry to record the inception of this lease on the laser's books at January 1 is:
- A. Option A
- B. Option B
- C. Option D
- D. Option C
Answer: C
Explanation:
For this finance lease, the manufacturer-lesser should record
1.As gross investment, the minimum lease payments because there
2.As net investment, the difference between the gross investment in the lease and unearned finance income a credit to a liability
3.As unearned finance income the difference between the gross investment gross investment discounted at the interest rate implicit in the lease)
4.As sales revenue the fair value of the asset o if lower, the present value payments computed at the interest rate implicit in the lease
5.As cost of goods sold, the cost of the leased asset Because the first payment is made at the inception of the lease. the payment structure is that of annuity due. Sales revenue is therefore equal to the US $10.000 periodic payment times the present value of an annuity due of I discounted for 10 years at 10%US $10,000 6.7590 = US $67,590). Given that cash is paid at the beginning of the year, the initial 10.000 cash debit immediately decreases the gross investment in the lease payments receivable) from US $100,000 to US $90,000. The cost of the leased asset US $55,000) must also be charged to cost of sales and credited to inventory. Finally, at the inception of the lease, unearned finance income equals the difference between the gross investment and the sales price US $100,000 ax$67,590 = US 632,410).
NEW QUESTION # 129
The value of the domestic currency in relation to foreign currencies is:
- A. Determined by the forces of supply and demand on the foreign exchange markets.
- B. Determined directly by the price of gold because the value of the domestic currency is tied to the price of gold.
- C. Set by the domestic government in consultation with foreign governments.
- D. Set along with the value of other currencies held by the International Monetary Fund.
Answer: A
Explanation:
Exchange rates are determined by the forces of supply and demand on the exchange markets. Often other forces try to intervene in this process of exchange rate determination, but these reflect only short-run policies. An example of this type of policy would be government or central bank intervention in the international money markets.
NEW QUESTION # 130
Division A produces a product with a variable cost of $5 per unit and an allocated fixed cost of $3 per unit The market price of the product is $15 plus 20% selling cost. Division B currently purchases this product from an external supplier but is going to purchase it from division A for $18 Which of the following methods of transfer pricing is being used?
- A. Full absorption cost
- B. Variable cost
- C. Market price.
- D. Negotiation-based.
Answer: C
NEW QUESTION # 131
The moving-average method of forecasting:
- A. Derives final forecasts by adjusting the initial forecast based on the smoothing constant.
- B. Regresses the variable of interest on a related variable to develop a forecast.
- C. Is a cross-sectional forecasting method.
- D. Includes each new observation in the average as it becomes available and discards the
oldest observation.
Answer: D
Explanation:
The simple moving-average method is a smoothing technique that uses the experience of the past N periods (through time period t) to forecast a value for the next period. Thus, the average includes each new observation and discards the oldest observation. The forecast formula for the next period (for time period t+1) is the sum of the last N observations divided by N.
NEW QUESTION # 132
A company has several departments that conduct technical studies and prepare reports for clients. Recently, there have been long delays in having these reports copied at the company's centralized copy center because of the dramatic increase in business. !Management is considering decentralizing copy services to reduce the turnaround and provide clients with timely reports. An appropriate technique for minimizing turnaround time and the cost of providing copy services is:
- A. Regression analysis.
- B. Queuing theory.
- C. Game theory.
- D. Linear programming.
Answer: B
Explanation:
Two basic costs are involved in queuing waiting-line) models: I) the cost of providing service including facility costs and operating costs), and 2) the cost of idle resources waiting in line. The latter II may be a direct cost if paid employees are waiting, or an opportunity cost in the case of waiting customers. The objective of queuing theory is to minimize the total cost of the system, including both service and waiting costs, for a given rate of arrivals. This minimization occurs at the point at which cost of waiting is balanced by the cost of providing service. This company wishes to reduce the total of waiting costs turnaround time) and the cost of copy services.
NEW QUESTION # 133
Which of the following control features consists of a set of authorization codes that distinguishes among actions such as reading, adding, and deleting records?
- A. Logon passwords
- B. Internally encrypted passwords
- C. System access privileges.
- D. Protocol controls.
Answer: C
NEW QUESTION # 134
An entity experienced sales of US $5 billion, profit before interest and taxes of US $200 million, profit before taxes of US $100 million, and profit of US $70 million. Based on this information and the entity's balance sheet information in Exhibit A. the return on equity ROE is: \
- A. 13.33%
- B. 14%
- C. 6.67%
- D. 4.67%
Answer: D
Explanation:
The return on equity equals profit US $70,000,000) divided by equity $500,000,000) ordinary shares / $1,000,000,000 retained earnings).
NEW QUESTION # 135
The best approach for minimizing the likelihood of software incompatibilities leading to unintelligible messages is for a company and its customers to:
- A. Each write their own version of the EDI-related software.
- B. Agree to use the same software in the same ways indefinitely.
- C. Acquire their software from the same software vendor.
- D. Agree to synchronize their updating of EDI-related software.
Answer: D
Explanation:
EDI entails the exchange of common business data converted into standard message formats. Thus, two crucial requirements are that the participants agree on transaction formats and that translation software be developed to convert messages into a form understandable by other companies. Thus, if one company changes its software, its trading partners must also do so.
NEW QUESTION # 136
Assume that the value of a share of QQ Company ordinary stock at the expiration date is either US $30 or US $45. What is the difference in the net payoff on the portfolio because of a difference in the stock price at the maturity date?
- A. US $0
- B. US $5.00
- C. US $7.50
- D. US $10.00
Answer: A
Explanation:
If the stock price at the maturity date is US $30, AA Company will have a share of stock worth US $30 and a put option worth US $10 $40 exercise price -$30 stock price). The call option will be worthless. Hence, the net payoff is US $40 $30 + $10). If the stock price at the maturity date is US $45, the share of stock will be worth US $45, the put will he worthless, and the loss on the call will be US $5 $45 - $40). Thus, the net payoff will be US $40 $45 - $5). Consequently, the difference in the net payoff on the portfolio because of a difference in the stock price at the maturity date is US $0 $40 - $40).
NEW QUESTION # 137
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