[2025] Pass IIA IIA-CIA-Part3 Test Practice Test Questions Exam Dumps
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IIA-CIA-Part3 certification is highly respected in the internal auditing profession and is recognized globally as a mark of excellence. Achieving this certification demonstrates a commitment to ongoing professional development and a dedication to staying current with the latest industry best practices and trends.
NEW QUESTION # 210
According to 11A guidance on IT, which of the following are indicators of poor change management?
1. Inadequate control design.
2. Unplanned downtime.
3. Excessive troubleshooting .
4. Unavailability of critical services.
- A. 1, 3, and 4 only
- B. 1, 2, and 3 only
- C. 2 and 3 only.
- D. 2, 3, and 4 only
Answer: D
NEW QUESTION # 211
The board has requested that the internal audit activity be involved in all phases of the organization's outsourcing of its network management. During which of the following stages is the internal auditor most likely to verify that the organization's right-to-audit clause is drafted effectively?
- A. Implementation and transition phase.
- B. Decision-making and business-case phase.
- C. Tendering and contracting phase.
- D. Monitoring and reporting phase
Answer: C
NEW QUESTION # 212
Which of the following application controls is the most dependent on the password owner?
- A. Password selection
- B. Password aging
- C. Password rotation
- D. Password lockout
Answer: A
NEW QUESTION # 213
Which of the following capital budgeting techniques considers the expected total net cash flows from investment?
- A. Cash payback
- B. Annual rate of return
- C. Incremental analysis
- D. Net present value
Answer: D
NEW QUESTION # 214
Which of the following controls would be most efficient to protect business data from corruption and errors?
- A. Controls to quickly identify malicious intrusion attempts.
- B. Controls to encrypt the data so that corruption is likely ineffective.
- C. Controls to calculate batch totals to identify an error before approval.
- D. Controls to ensure data is unable to be accessed without authorization.
Answer: C
Explanation:
To efficiently protect business data from corruption and errors, the best approach is proactive detection through validation controls. Batch total calculations help verify data integrity before approval, ensuring errors are caught early.
* (A) Controls to ensure data is unable to be accessed without authorization.
* Incorrect: Access controls prevent unauthorized access, but they do not detect or prevent data corruption/errors.
* (B) Controls to calculate batch totals to identify an error before approval. (Correct Answer)
* Batch control totals ensure that data entries match expected values before processing, helping detect errors before approval.
* IIA GTAG 3 - Continuous Auditing recommends automated validation and reconciliation checks for data integrity.
* (C) Controls to encrypt the data so that corruption is likely ineffective.
* Incorrect: Encryption protects data confidentiality, but it does not prevent or detect errors or corruption.
* (D) Controls to quickly identify malicious intrusion attempts.
* Incorrect: Intrusion detection systems focus on cybersecurity, not data corruption or errors.
* IIA Standard 2120 - Risk Management: Recommends controls for error prevention and early detection.
* IIA GTAG 3 - Continuous Auditing: Suggests automated validation processes like batch totals to detect errors before approval.
Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (B) because batch total calculations effectively detect errors before approval, ensuring data integrity.
NEW QUESTION # 215
According to IIA guidance on IT, which of the following plans would pair the identification of critical business processes with recovery time objectives?
- A. The business continuity management charter
- B. The business continuity risk assessment plan
- C. The business case for business continuity planning
- D. The business impact analysis plan
Answer: D
Explanation:
Reference: IIA Business Knowledge for Internal Auditing, Business Continuity Planning section.
NEW QUESTION # 216
Which of the following distinguishes the added-value negotiation method from traditional negotiating methods?
- A. Each party's negotiator presents a menu of options to the other party.
- B. Each party adopts one initial position from which to start.
- C. Each negotiator minimizes the information provided to the other party.
- D. Each negotiator starts with an offer, which is optimal from the negotiator's perspective.
Answer: A
NEW QUESTION # 217
An organization contracted a third-party service provider to plan, design, and build a new facility. Senior management would like to transfer all of the risk to the builder. Which type of procurement contract would the organization use?
- A. Cost-plus contract.
- B. Turnkey contract.
- C. Solutions contract.
- D. Service contract.
Answer: B
Explanation:
A turnkey contract is a type of procurement agreement where the contractor is responsible for the entire project from planning and design to construction and delivery, ensuring that the organization receives a fully operational facility. In this case, the organization wants to transfer all risks to the builder, making a turnkey contract the most appropriate choice.
* Full Risk Transfer: The contractor assumes all project risks, including design flaws, cost overruns, and delays.
* Single-Point Responsibility: The builder is accountable for all aspects of the project until it is fully operational.
* Minimal Client Involvement: The client does not have to manage the project's complexities.
* Option A (Cost-plus contract): This contract type does not transfer all risk to the builder; instead, the client bears some risk as they pay for actual costs plus a profit margin.
* Option C (Service contract): Service contracts typically cover specific services (e.g., maintenance, consulting), not full construction projects.
* Option D (Solutions contract): A solutions contract generally refers to software or technology solutions, not physical facility construction.
* IIA's Practice Guide on Contract Management and Risk Transfer: Highlights turnkey contracts as a method to shift project risks to third parties.
* IIA's Business Knowledge for Internal Auditing (CIA Exam Part 3 Syllabus): Covers procurement and contract types, emphasizing risk transfer mechanisms.
Why Option B is Correct:Why Other Options Are Incorrect:IIA References:Thus, the most appropriate answer is B. Turnkey contract.
NEW QUESTION # 218
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?
- A. $200,000
- B. $100.000
- C. $500,000
- D. $275,000
Answer: B
NEW QUESTION # 219
During which phase of the contracting process are contracts drafted for a proposed business activity?
- A. Bidding phase.
- B. Management phase.
- C. Initiation phase.
- D. Development phase.
Answer: C
NEW QUESTION # 220
Which of the following should be established by management during implementation of big data systems to enable ongoing production monitoring?
- A. Master data management
- B. Reports of software customization.
- C. Change and patch management.
- D. Key performance indicators.
Answer: D
Explanation:
When implementing big data systems, organizations must establish ongoing production monitoring to ensure system performance, efficiency, and reliability.
* Why Option A (Key performance indicators) is Correct:
* KPIs (Key Performance Indicators) measure the effectiveness and success of big data systems.
* KPIs help track system efficiency, data processing speed, accuracy, and resource utilization during production.
* Examples of KPIs in big data systems include data ingestion rate, processing time, query performance, system uptime, and error rates.
* Why Other Options Are Incorrect:
* Option B (Reports of software customization):
* Incorrect because software customization reports document system modifications but do not monitor system performance.
* Option C (Change and patch management):
* Incorrect because change and patch management deals with software updates and security fixes, not ongoing performance monitoring.
* Option D (Master data management):
* Incorrect because master data management focuses on data governance and consistency, not real-time system performance.
* IIA GTAG - "Auditing Big Data Systems": Recommends using KPIs to measure the effectiveness of big data implementation.
* COBIT 2019 - APO08 (Manage Performance and Capacity): Emphasizes KPI tracking for IT and data system performance.
* NIST Big Data Framework: Highlights the importance of KPIs for monitoring big data system performance.
IIA References:
NEW QUESTION # 221
If the construction company uses the percentage-of-completion [cost-to-cost basis) method of revenue recognition, in Year 1 the amount of revenue it will recognize on the long-term contract will be:
- A. US $3,000,000
- B. US $6,000,000
- C. US $4,705,882
- D. US $5,000,000
Answer: C
Explanation:
Under the cost-to-cost approach to determining the stage of completion of the contract, the stage of completion equals contract costs incurred to date divided by the most recent estimate of total contract costs Hence, the revenue to be recognized in the first year is US $4,705,882 [$10,000,000 $4,000,000 $8,500,000.)]. amount equals costs incurred plus recognized profit. On January 1, Year 1, a construction company signed a contract with a property management firm involving the construction of a large urban office tower. The total price of constructing the tower was agreed to be US $10 million with US $2 million being paid on the date of the agreement. Construction began immediately upon the signing of the contract and was expected to take 3 years to complete. The original estimate of total construction costs was US $8 million. During the year ended De _ _tuber 31, Year 1, US $4 million of construction costs were incurred, and engineering estimates indicated that the office tower was 30% complete at year-end. At year-end, the revised estimate of total construction costs was US. million and the property management firm had been billed a further US $4 million, although only US $1 million of that amount had been collected by year-end.
NEW QUESTION # 222
Which of the following situations best illustrates a "false positive" in the performance of a spam filter?
- A. The spam filter routed to the "junk|r folder a newsletter that appeared to include links to fake websites.
- B. The spam filter blocked a fitness club gift card that coworkers sent to an employee for her birthday.
- C. The spam filter removed Incoming communication that included certain keywords and domains.
- D. The spam filter deleted commercial ads automatically, as they were recognized as unwanted.
Answer: B
Explanation:
A false positive occurs when a system incorrectly identifies a legitimate item as a threat or an unwanted entity. In the case of a spam filter, a false positive happens when the filter mistakenly classifies a genuine email as spam, even though it is legitimate.
* Option A: "The spam filter removed incoming communication that included certain keywords and domains."
* This describes a general filtering mechanism but does not indicate a mistake. If the filter was correctly configured, it is not necessarily a false positive. (Incorrect)
* Option B: "The spam filter deleted commercial ads automatically, as they were recognized as unwanted."
* If the ads were indeed unwanted, this is a true positive, meaning the system worked correctly.
(Incorrect)
* Option C: "The spam filter routed to the 'junk' folder a newsletter that appeared to include links to fake websites."
* If the newsletter contained suspicious links, the filter was functioning as designed. This is not necessarily an error. (Incorrect)
* Option D: "The spam filter blocked a fitness club gift card that coworkers sent to an employee for her birthday."
* This is a clear example of a false positive because the email was not spam or malicious, yet the filter mistakenly blocked it. (Correct Answer)
* IIA GTAG (Global Technology Audit Guide) on Cybersecurity and IT Risks: Discusses false positives and negatives in automated security controls.
* IIA's "Auditing IT Security Controls" Report: Emphasizes the need for tuning security filters to reduce false positives.
* COBIT 2019 - DSS05.07 (Manage Security Services): Highlights the importance of minimizing false positives to ensure business communication is not disrupted.
Analysis of Each Option:IIA References:Thus, the correct answer is D. The spam filter blocked a fitness club gift card that coworkers sent to an employee for her birthday.
NEW QUESTION # 223
A one-time password would most likely be generated in which of the following situations?
- A. When an employee accesses an online digital certificate
- B. When an employee's biometrics have been accepted.
- C. When an employee creates a unique digital signature,
- D. When an employee uses a key fob to produce a token.
Answer: D
NEW QUESTION # 224
Which of the following is true regarding the COSO enterprise risk management framework?
- A. Control environment is one of the framework's eight components.
- B. The framework facilitates effective risk management, even if objectives have not been established.
- C. The framework integrates with, but is not dependent upon, the corresponding internal control framework.
- D. The framework categorizes an organization's objectives to distinct, non overlapping objectives.
Answer: C
NEW QUESTION # 225
Which of the following criteria would be most useful to a sales department manager in evaluating the performance of the manager's customer-service group?
- A. Customer complaints should be processed promptly.
- B. The customer is always right.
- C. Employees should maintain a positive attitude when dealing with customers.
- D. All customer inquiries should be answered within 7 days of receipt.
Answer: D
Explanation:
A criterion that requires all customer inquiries to be answered within 7 days of receipt permits accurate measurement of performance. The quantitative and specific nature of the appraisal using this standard avoids the vagueness, subjectivity, and personal bias that may afflict other forms of personnel evaluations.
NEW QUESTION # 226
An internal auditor is trying to assess control risk and the effectiveness of an organization's internal controls. Which of the following audit procedures would not provide assurance to the auditor on this matter?
- A. Interviewing the organization's employees.
- B. Observing the organization's operations.
- C. Reading the board's minutes.
- D. Inspecting manuals and documents.
Answer: C
NEW QUESTION # 227
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. Activity-based costing.
- B. Variable costing.
- C. Backflush costing.
- D. Absorption costing.
Answer: D
Explanation:
Absorption costing inventories all direct manufacturing costs and both variable and fixed manufacturing overhead indirect) costs.
NEW QUESTION # 228
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?
- A. The percentage of cases flagged by the model and confirmed as positives.
- B. The feedback of auditors involved with developing the model.
- C. The number of criminal investigations initiated based on the outcomes of the model
- D. The development and maintenance costs associated with the model
Answer: A
Explanation:
To assess the success of a piloted data analytics model in identifying anomalies in vendor payments and potential fraud, the most appropriate criterion is the accuracy of the model in identifying true positives-cases flagged as anomalies that were later confirmed as valid fraud risks.
* Effectiveness of the Model: The primary goal of the model is to enhance the internal audit activity's ability to detect fraudulent transactions. The best way to measure success is to analyze how many flagged transactions were confirmed as fraudulent or erroneous.
* Reduction of False Positives and False Negatives: A model that generates too many false positives (incorrectly flagged transactions) can lead to inefficiencies, while too many false negatives (missed fraudulent cases) can reduce the effectiveness of fraud detection.
* Alignment with Internal Audit Standards: According to IIA Standard 1220 - Due Professional Care, internal auditors must apply appropriate tools and techniques (such as data analytics) to enhance audit effectiveness. The model's success should be assessed based on its ability to provide reliable, actionable insights.
* IIA Practice Guide on Data Analytics: Recommends assessing the predictive accuracy of models by comparing flagged transactions against actual outcomes.
* B. The development and maintenance costs associated with the model (Incorrect)
* While cost is a consideration, it does not directly assess the effectiveness of the model in detecting fraud.
* High costs may indicate inefficiency, but they do not determine whether the model is accurately identifying fraudulent transactions.
* IIA Standard 2100 - Nature of Work emphasizes that internal audit activities must contribute to the improvement of governance, risk management, and control, which requires a focus on results rather than just cost.
* C. The feedback of auditors involved with developing the model (Incorrect)
* Feedback is useful but subjective. The ultimate test of success is not auditor perception but whether the model correctly identifies fraudulent or anomalous transactions.
* IIA Practice Guide: Auditing Data Analytics suggests that while stakeholder feedback is valuable, empirical validation (accuracy of flagged cases) should be the primary success measure.
* D. The number of criminal investigations initiated based on the outcomes of the model (Incorrect)
* While fraud detection can lead to investigations, the number of investigations is not necessarily an accurate measure of model success.
* Some flagged cases may not lead to criminal investigations due to materiality, lack of sufficient evidence, or management decisions.
* According to IIA Standard 2120 - Risk Management, internal auditors must evaluate fraud risk management effectiveness, which includes detecting and preventing fraud, not just the legal consequences.
Explanation of Answer Choice A (Correct Answer):Explanation of Incorrect Answers:Conclusion:The best success criterion for the piloted data analytics model is the percentage of cases flagged by the model and confirmed as positives (Option A), as it directly measures the model's effectiveness in detecting actual fraud cases.
IIA References:
* IIA Standard 1220 - Due Professional Care
* IIA Standard 2100 - Nature of Work
* IIA Standard 2120 - Risk Management
* IIA Practice Guide: Auditing Data Analytics
NEW QUESTION # 229
According to IIA guidance, which of the following statements is true regarding analytical procedures?
- A. Data relationships cannot include comparisons between operational and statistical data
- B. Analytical procedures are intended primarily to ensure the accuracy of the information being examined
- C. Data relationships are assumed to exist and to continue where no known conflicting conditions exist
- D. Analytical procedures can be used to identify differences, but cannot be used to identify the absence of differences
Answer: C
Explanation:
Reference: IIA Business Knowledge for Internal Auditing, Analytical Procedures section.
NEW QUESTION # 230
Which audit approach should be employed to test the accuracy of information housed in a database on an un-networked computer?
- A. Submit batches of test transactions through the current system and verify with expected results.
- B. Evaluate compliance with the organization's change management process.
- C. Select a sample of records from the database and ensure it matches supporting documentation.
- D. Use a test program to simulate the normal data entering process.
Answer: C
NEW QUESTION # 231
An entity had the following selected per-unit data relating to work-in-process:
Selling price US $100
Comparison cost 10
Historical cost 91
Replacement cost 108
Normal gross profit 20
Selling cost 5
In comparison with historical cost, what will be the per-unit impact on gross profit of measuring ending inventory?
- A. Increase of US $5.
- B. No effect
- C. Reduction of US $26
- D. Reduction of US %6.
Answer: D
Explanation:
Inventories are measured at the lower of cost or net realizable value NRV). NRV equals selling price minus completion and selling costs. Given that historical cost is US $91 and NRV is US $84price of $100 - $100 - $10 completion cost - $5 selling cost, the effect on per-unit gross profit is a reduction of US $6. This amount is the write down expensed.
NEW QUESTION # 232
As it relates to the data analytics process, which of the following best describes the purpose of an internal auditor who cleaned and normalized data?
- A. The auditor organized data to minimize useless information
- B. The auditor ensured data fields were consistent and that data could be used for a specific purpose
- C. The auditor eliminated duplicate information
- D. The auditor made data usable for a specific purpose by ensuring that anomalies were identified and addressed
Answer: B
Explanation:
Reference: IIA Business Knowledge for Internal Auditing, Data Preparation section.
NEW QUESTION # 233
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?
- A. Allowances
- B. Commissions.
- C. Gain-sharing bonuses.
- D. Stock options
Answer: D
Explanation:
The best method of compensation to align senior management incentives with the long-term health of the organization is stock options. Stock options encourage executives to focus on sustained growth and profitability rather than short-term gains, ensuring that their interests align with those of shareholders and stakeholders.
* Long-Term Value Creation:
* Stock options reward executives only if the company's stock price appreciates over time.
* This encourages leadership to focus on long-term profitability, operational efficiency, and sustainability.
* Alignment with Shareholder Interests:
* If the company performs well, stock prices rise, benefiting both shareholders and executives.
* Poor decision-making that harms long-term value results in devalued stock options, discouraging risky short-term strategies.
* Retention of Key Executives:
* Stock options typically have a vesting period (e.g., 3-5 years), which helps retain top management and ensures commitment to long-term objectives.
* Risk Management Considerations:
* Unlike cash bonuses or short-term commissions, stock options require executives to consider risks and ethical decision-making over an extended period.
* This supports the governance principles outlined by IIA's International Standards for the Professional Practice of Internal Auditing (IPPF) - Standard 2110 (Governance), which emphasizes aligning incentives with risk tolerance and long-term objectives.
* A. Commissions: These are typically tied to short-term sales performance rather than long-term strategic success.
* C. Gain-sharing bonuses: These provide short-term financial rewards based on operational performance but do not incentivize sustained value creation.
* D. Allowances: Fixed allowances do not fluctuate based on company performance and do not drive long-term strategic focus.
* IIA Standard 2110 - Governance: Ensures that management incentives align with the organization's mission and risk tolerance.
* IIA Practice Guide: Evaluating Corporate Governance: Emphasizes long-term incentive structures such as stock options to promote sustainable decision-making.
* COSO Enterprise Risk Management (ERM) Framework: Highlights how executive compensation should support long-term organizational strategy.
Step-by-Step Justification:Why Not the Other Options?IIA References:
NEW QUESTION # 234
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