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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Financial Management | 20% | - Financial Management and Capital Budgeting
|
| Topic 2: Business Acumen | 35% | - Governance, Risk, and Control
|
| Topic 3: Information Security | 25% | - Security Risks and Controls
|
| Topic 4: Information Technology | 20% | - IT Governance and Strategy
|
>> IIA-CIA-Part3 New Practice Questions <<
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NEW QUESTION # 116
If an organization has a high amount of working capital compared to the industry average, which of the following is most likely true?
Answer: D
Explanation:
Working capital = Current Assets - Current Liabilities
A high amount of working capital compared to industry averages suggests that the organization may not be efficiently using its resources. This could mean that:
* Excess cash is invested in inventory or accounts receivable, instead of being used for growth, investment, or shareholder returns.
* The company may be holding too much inventory, which could lead to obsolescence or additional storage costs.
* The business may have slow turnover in receivables, meaning cash is not being collected efficiently.
* A. Settlement of short-term obligations may become difficult. (Incorrect)
* A high working capital means the organization has sufficient assets to cover short-term obligations, so liquidity issues are unlikely.
* B. Cash may be tied up in items not generating financial value. (Correct)
* High working capital may indicate inefficient use of assets, such as excess inventory, high accounts receivable, or idle cash.
* This can negatively impact return on assets (ROA) and overall financial performance.
* C. Collection policies of the organization are ineffective. (Incorrect)
* While high receivables can be a factor, working capital includes all current assets and liabilities
, not just accounts receivable.
* The issue could be inventory mismanagement or excess liquidity, not just collection policies.
* D. The organization is efficient in using assets to generate revenue. (Incorrect)
* A high working capital does not necessarily mean efficiency. In fact, it may indicate underutilized resources rather than optimized performance.
* IIA GTAG 3 - Continuous Auditing: Implications for Internal Auditors highlights the importance of monitoring key financial metrics such as working capital.
* IIA Practice Advisory 2130-1 - Assessing Organizational Performance emphasizes that internal auditors should assess whether financial resources are being used efficiently.
* Financial Management Principles (IIA Guidance) discuss the impact of excessive working capital on liquidity and return on investment.
Explanation of Answer Choices:IIA References:Thus, the correct answer is B. Cash may be tied up in items not generating financial value.
NEW QUESTION # 117
Which of the following statements is true regarding data backup?
Answer: A
Explanation:
A tape rotation schedule defines how often backup tapes are overwritten or archived, directly impacting data retention periods. This is essential for compliance, disaster recovery, and internal controls over data storage.
* Correct Answer (C - The Tape Rotation Schedule Affects How Long Data is Retained)
* Organizations use backup rotation schemes such as Grandfather-Father-Son (GFS), Tower of Hanoi, or FIFO (First-In-First-Out) to determine how long backups are kept before being overwritten.
* This impacts data retention policies, regulatory compliance, and recovery capabilities.
* The IIA's GTAG 10: Business Continuity Management discusses backup strategies and retention management.
* Why Other Options Are Incorrect:
* Option A (System backups should always be performed real-time):
* Real-time backups (continuous data protection) are useful but not always required.
Many businesses use scheduled backups instead.
* Option B (Backups should be stored in a secured location onsite for easy access):
* Best practice recommends offsite or cloud storage to protect against disasters like fire or cyberattacks.
* Option D (Backup media should be restored only in case of hardware or software failure):
* Backups may also be restored for audit purposes, compliance checks, or business continuity testing.
* GTAG 10: Business Continuity Management - Covers backup strategies, data retention, and disaster recovery.
* IIA Practice Guide: IT Controls - Discusses backup policies and risks in data management.
Step-by-Step Explanation:IIA References for Validation:Thus, the tape rotation schedule (C) is correct because it determines how long data is retained.
NEW QUESTION # 118
An organization's income and retained earnings statement is as follows:
Sales: $3,000
Cost of goods sold: $1,600
Gross profit: $1,400
Operating expenses: $970
Operating income: $430
Interest expense: $30
Income before tax: $400
Income tax: $200
Net income: $200
Plus Jan. 1 retained earnings: $150
Less dividends: $60
Dec. 31 retained earnings: $290
Which of the following is the dividend payout ratio?
Answer: A
Explanation:
The dividend payout ratio is calculated as dividends divided by net income. In the statement, dividends are
$60 and net income is $200. Therefore, the dividend payout ratio is $60 ÷ $200 = 30 percent. Option A would result from comparing dividends to sales or another incorrect base. Option C and Option D do not match the dividend-to-income relationship. Retained earnings balances are useful for reconciling equity, but the payout ratio specifically measures how much of current earnings were distributed to shareholders. Internal auditors reviewing financial ratios should ensure that the numerator and denominator match the ratio definition and that amounts are taken from the correct financial statement line items. Therefore, Option B is correct.
NEW QUESTION # 119
Which of the following should an organization consider when developing strategic objectives for its business processes?
1. Contribution to the success of the organization.
2. Reliability of operational information.
3. Behaviors and actions expected of employees.
4. How inputs combine with outputs to generate activities.
Answer: B
NEW QUESTION # 120
An internal auditor identified a database administrator with an incompatible dual role. Which of the following duties should not be performed by the identified administrator?
Answer: C
Explanation:
A database administrator (DBA) should not perform duties that compromise segregation of duties (SoD).
A conflict arises when a DBA has both design and security responsibilities, as this creates a risk of unauthorized changes, fraud, or data breaches.
* (A) Designing and maintaining the database.
* Incorrect: These tasks are related but do not create a major conflict, as maintenance follows the design phase.
* (B) Preparing input data and maintaining the database.
* Incorrect: While data preparation is typically a business function, maintaining the database does not create a direct security risk.
* (C) Maintaining the database and providing its security.
* Incorrect: Maintenance involves technical upkeep, and while security controls are crucial, they do not inherently conflict.
* (D) Designing the database and providing its security. (Correct Answer)
* A DBA responsible for both design and security could create backdoors or override security settings, leading to potential data manipulation or fraud.
* IIA Standard 2120 - Risk Management requires proper control segregation to prevent fraud and security risks.
* IIA GTAG 4 - Management of IT Auditing recommends separation of design, security, and administration functions to minimize risks.
* IIA Standard 2120 - Risk Management: Encourages proper separation of duties to mitigate risks.
* IIA GTAG 4 - Management of IT Auditing: Recommends strict control over database access and security roles.
Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (D) because combining database design and security responsibilities creates a significant conflict of interest, increasing security risks.
NEW QUESTION # 121
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