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NEW QUESTION 106
The details of the audit program used to audit e-commerce activities in specific organizations will vary depending on all but which of the following factors?
- A. Organizational culture
- B. Legal and business models.
- C. Country.
- D. Industry.
Answer: A
Explanation:
The details of the audit program used to audit e-commerce activities in specific organizations will vary depending on industry, country, and legal and business models.
NEW QUESTION 107
At what point during the systems development process should an internal auditor verify that the new application's connectivity to the organization's other systems has been established correctly?
- A. Prior to testing the new application.
- B. During implementation of the new application.
- C. During maintenance of the new application.
- D. During testing of the new application.
Answer: A
NEW QUESTION 108
Senior management has decided to implement the Three Lines of Defense model for risk management. Which of the following best describes senior management's duties with regard to this model?
- A. Ensure compliance with the model.
- B. Set goals for implementation.
- C. Identify emerging issues.
- D. Identify management functions.
Answer: A
NEW QUESTION 109
An organization is projecting sales of 100,000 units, at a unit price of $12. Unit variable costs are $7. If fixed costs are $350,000, what is the projected total contribution margin?
- A. $500,000
- B. $850,000
- C. $350,000
- D. $1,200,000
Answer: A
Explanation:
Explanation
NEW QUESTION 110
While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix.
Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the life cycle?
- A. Introduction stage.
- B. Decline stage.
- C. Maturity stage.
- D. Growth stage.
Answer: D
Explanation:
During the growth stage, the opportunity for cost reductions is at its maximum because production volume is increasing at a high rate. Thus, fixed costs are being spread over more units of production, and the benefits of the learning curve are being realized.
NEW QUESTION 111
Risoner Company plans to purchase a machine with the following conditions:
Purchase price = US $300,000
The down payment = 10% of purchase price with remainder financed at an annual interest rate of 16%. The financing period is 8 years with equal annual payments made every year.
The present value of an annuity of US $1 per year for 8 years at 16% is 4.3436.
The present value of US $1 due at the end of 8 years at 16% is 3050
The annual payment rounded is:
- A. US $39,150
- B. US $43,200
- C. US $82.350
- D. US $62,160
Answer: D
Explanation:
The periodic payment is found by dividing the amount to be accumulated US $300,000 price - $30.000 down payment = US $270,000) by the interest factor for the present value of an ordinary annuity for 8 years at 16%. Consequently, the payment is US $62.160$270,000 - 4.3436).
NEW QUESTION 112
Which of the following statements about market signaling is correct?
1.The organization releases information about a new product generation.
2.The organization limits a challenger's access to the best source of raw materials or labor.
3.The organization announces that it is fighting a new process technology.
4.The organization makes exclusive arrangements with the channels.
- A. 1 and 3 only
- B. 1 and 4 only
- C. 2 and 3 only
- D. 2 and 4 only
Answer: A
NEW QUESTION 113
The following data on variables x and y was collected from June to October:
The correlation coefficient between variables x and y is nearest to:
- A. 0.0
- B. -1.0
- C. 0.5
- D. 1.0
Answer: B
Explanation:
The simplest way to solve this problem is to use a scatter diagram:
The data points appear to form a straight line with a negative slope. Thus, -1 is the best estimate of the coefficient of correlation.
NEW QUESTION 114
Which of the following statements is in accordance with COBIT?
1. Pervasive controls are general while detailed controls are specific.
2. Application controls are a subset of pervasive controls.
3. Implementation of software is a type of pervasive control.
4. Disaster recovery planning is a type of detailed control.
- A. 1 and 4 only
- B. 2, 3, and 4 only
- C. 1, 2, and 4 only
- D. 2 and 3 only
Answer: A
NEW QUESTION 115
On January 1, an entity issued a 10-year US $500,000 bond at 96% of its face amount. The bond bears interest at 12%, payable on January 1 and July 1. The entry to record the issuance of the bond on January 1 is:
- A. Option A
- B. Option C
- C. Option D
- D. Option B
Answer: B
Explanation:
The entity received US $480,000 cash on the issuance of the bond. Its face amount is US $500,000, the amount to be paid at maturity. Hence, the credit to bonds payable is US $500,000. The US$20,000 difference is recorded as a discount on bonds payable a debit and is amortized over the life of the issue.
NEW QUESTION 116
Which of the following methods of employee evaluation is best used when employees are heavily involved in teamwork?
- A. 360-degree performance appraisal.
- B. Critical incident technique.
- C. Attribution method.
- D. Behaviorally anchored rating scales BARS)
Answer: A
Explanation:
The 360-degree performance appraisal is a model for employee assessment in the age of teamwork. It is based on giving workers feedback from peers, customers, supervisors, and those who work for the employee. Feedback is typically provided anonymously and is usually subjective.
NEW QUESTION 117
A firm must decide the mix of production of Product X and Product Y. There are only two resources used in the two products, resources A and B. Data related to the two products is given in the following table:
What is the appropriate objective function to maximize profit?
- A. 8X + 6Y
- B. 5X + 8Y
- C. 2X+Y
- D. 3X + 7Y
Answer: A
Explanation:
The objective function is the function to be optimized. This firm wishes to maximize profits on the sales of two products X and Y). Based on profits per unit US $8 and US $6, respectively), the objective function is 8X + 6Y.
NEW QUESTION 118
Which of the following would best prevent unauthorized external changes to an organization's data?
- A. Firewall, data encryption, backup procedures.
- B. Antivirus software, firewall, data encryption.
- C. Antivirus software, firewall, backup procedures.
- D. Antivirus software, data encryption, change logs.
Answer: B
NEW QUESTION 119
A call option on an ordinary share is more valuable when there is a lower:
- A. Time to maturity on the option.
D Variability of market price on the underlying share. - B. Exercise price on the option.
- C. Market value of the underlying share.
Answer: B
Explanation:
The lower the exercise price, the more valuable the call option. The exercise price is the
price at which the call holder has the right to purchase the underlying share.
NEW QUESTION 120
A company updates its accounts receivable master file weekly and retains the master files and corresponding update transactions for the most recent 2-week period.
The purpose of this practice is to
- A. Verify run-to-run control totals for receivables.
- B. Permit reconstruction of the master file if needed.
- C. Match internal labels to avoid writing on the wrong volume.
- D. Validate groups of update transactions for each version.
Answer: B
Explanation:
The grandfather-father-son approach normally employs magnetic tapes to furnish backup in a batch processing system. The procedure involves creation and retention of three generations of master files so that lost or destroyed data may be regenerated from the remaining master files and transaction data. In this case, a master file the grandfather) and the first week's transactions are used to generate a second master file (the father). This file and the second week's transactions are the basis for the current master file the son). Online systems employ rollback and recovery procedures. i.e., the master file is periodically dumped onto a storage medium. Reconstruction is then possible using the backup copy and the transactions lord.
NEW QUESTION 121
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 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.
Answer: A
NEW QUESTION 122
An organization installed antivirus software on all its personal computers. The software was designed to prevent initial infections, stop replication attempts, detect infections after their occurrence, mark affected system components, and remove viruses from infected components. The major risk in relying on antivirus software is that antivirus software may:
- A. Interfere with system operations
- B. Make software installation overly complex.
- C. Not detect certain viruses.
- D. Consume too many system resources.
Answer: C
Explanation:
Antivirus software designed to identify and remove known viruses is sometimes know as a vaccine. A vaccine works only for known viruses and may not be effective for variants of those viruses or new viruses.
NEW QUESTION 123
Ramseur's equivalent units for direct materials for the current month would be:
- A. 200,000 units
- B. 181.500 units
- C. 195,000 units
- D. 175,000 units
Answer: C
Explanation:
The equivalent units for direct materials equals 195,000 units 20,000 BWIP + 150,000 units started and completed + 25,000 EWIP). This calculation recognizes that direct materials had not been added to beginning inventory 60% complete) and spoiled units 70% complete), but that ending inventory 80% complete) includes direct materials.
Ramseur Company employs a process costing system for its two-department manufacturing operation using the first-in, first- out FIFO) inventory method. When units are completed in Department 1, they are transferred to Department 2 for completion. Inspection takes place in Department 2 immediately before the direct materials are added, when the process is 70% complete with respect to conversion. The specific identification method is used to account for lost units. The number of defective units that is, those failing inspection) is usually below the normal tolerance limit of 4% of units inspected. Defective units have minimal value, and the company sells them without any further processing for whatever it can. Generally, the amount collected equals, or slightly exceeds, the transportation cost. A
summary of the manufacturing activity for Department 2, in units for the current month, is
presented in the next column.
NEW QUESTION 124
In which of the following organizational structures does total quality management (TQM) work best?
- A. Teams of people from different specialties.
- B. Specialists working individually.
- C. Teams of people from the same specialty.
- D. Hierarchal.
Answer: A
Explanation:
TQM advocates replacement of the traditional hierarchal structure with teams of people from different specialties. This change follows from TQM's emphasis on empowering employees and teamwork. Employees should (1) have proper training, necessary information, and the best tools; (2) be fully engaged in the decision process; and (3) receive fair compensation. If such empowered employees are assembled in teams of individuals with the required skills, TQM theorists believe they will be more effective than people performing their tasks separately in a rigid structure.
NEW QUESTION 125
For the year just ended, the entity had a rate of return on equity, rounded to two decimals, of:
- A. 67.50%
- B. 58.06%
- C. 31.21%
- D. 71.68%
Answer: C
Explanation:
Rate of return on equity, a profitability ratio, measures the rate of return on investment.
The ratio equals profit minus any preference dividends) divided by average ordinary equity.
NEW QUESTION 126
According to IIA guidance, which of the following steps are most important for an internal auditor to perform when evaluating an organization's social and environmental impact on the local community?
* Determine whether previous incidents have been reported, managed, and resolved.
* Determine whether a business contingency plan exists.
* Determine the extent of transparency in reporting.
* Determine whether a cost/benefit analysis was performed for all related projects.
- A. 2 and 3.
- B. 1 and 3.
- C. 2 and 4.
- D. 1 and 4.
Answer: B
NEW QUESTION 127
A controller became aware that a competitor appeared to have access to the company's pricing information. The internal auditor determined that the leak of information was occurring during the electronic transmission of data from branch offices to the head office.
Which of the following controls would be most effective in preventing the leak of information?
- A. Asynchronous transmission.
- B. Use of fiber-optic transmission lines.
- C. Encryption.
- D. Use of passwords.
Answer: C
Explanation:
Encryption software uses a fixed algorithm to manipulate plain text and an encryption key a set of random data bits used as a starting point for application of the algorithm to introduce variation. Although data may be accessed by tapping into the transmission line, the encryption key is necessary to understand the data being sent.
NEW QUESTION 128
At December 31, Year 1, an entity has the following account balances:
The preference shares are cumulative and nonparticipating and have a call price of US $55 per share. The journal entry to record the redemption of all preferences shares on January
2. Year 2, pursuant to the call provision is
- A. Option A
- B. Option D
- C. Option C
- D. Option B
Answer: B
Explanation:
The exercise of the call provision resulted in the redemption of the 10.000 preference shares issued and outstanding at the call price of US 8550.00010.000 shares $55 call price per share). To eliminate the carrying amount of the preference shares and recognize the cash paid in this transaction, the required journal entry is to debit preference shares for US $500.000. debit share premium: preference for US $20.000, and credit cash for US $550.000. The difference of US $30.000$550.000 cash - $520,000 carrying amount of the preference shares) is charged to equity debit retained earnings). No loss is reported because the recognition of a gain or loss on transactions involving an entity's own shares is prohibited.
NEW QUESTION 129
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