IIA Certified Internal Auditor Part 3 (Business Knowledge for Internal Auditing CIA Part 3) Practice Test

CIA-III Exam Format | Course Contents | Course Outline | Exam Syllabus | Exam Objectives

2019 CIA Exam Syllabus, Part 3 – Business Knowledge for Internal Auditing
100 questions l 2.0 Hours (120 minutes)

The CIA exam Part 3 includes four domains focused on business acumen, information security, information technology, and financial management. Part 3 is designed to test candidates knowledge, skills, and abilities particularly as they relate to these core business concepts.​

Domains Collapse All
I. Business Acumen (35%)
​ ​ ​Cognitive Level
​​1. Organizational Objectives, Behavior, and Performance
A​ ​Describe the strategic planning process and key activities (objective setting, globalization and competitive considerations, alignment to the organization's mission and values, etc.) Basic
​B ​Examine common performance measures (financial, operational, qualitative vs. quantitative, productivity, quality, efficiency, effectiveness, etc.) Proficient
​C ​​Explain organizational behavior (individuals in organizations, groups, and how organizations behave, etc.) and different performance management techniques (traits, organizational politics, motivation, job design, rewards, work schedules, etc.) ​Basic
​D ​​Describe managements effectiveness to lead, mentor, guide people, build organizational commitment, and demonstrate entrepreneurial ability ​Basic
2. Organizational Structure and Business Processes
A ​Appraise the risk and control implications of different organizational configuration structures (centralized vs. decentralized, flat structure vs. traditional, etc.) Basic​
​B ​Examine the risk and control implications of common business processes (human resources, procurement, product development, sales, marketing, logistics, management of outsourced processes, etc.) Proficient
​C ​Identify project management techniques (project plan and scope, time/team/resources/cost management, change management, etc.) ​Basic
​D Recognize the various forms and elements of contracts (formality, consideration, unilateral, bilateral, etc.) Basic
​3. Data Analytics
​A ​Describe data analytics, data types, data governance, and the value of using data analytics in internal auditing ​Basic
​B ​Explain the data analytics process (define questions, obtain relevant data, clean/normalize data, analyze data, communicate results) ​Basic
​C Recognize the application of data analytics methods in internal auditing (anomaly detection, diagnostic analysis, predictive analysis, network analysis, text analysis, etc.) ​Basic
II. Information Security (25%)
​ ​ ​Cognitive Level
​​1. Information Security
A​ ​Differentiate types of common physical security controls (cards, keys, biometrics, etc.) Basic
​B ​Differentiate the various forms of user authentication and authorization controls (password, two-level authentication, biometrics, digital signatures, etc.) and identify potential risks Basic
​C ​​Explain the purpose and use of various information security controls (encryption, firewalls, antivirus, etc.) ​Basic
D​ ​Recognize data privacy laws and their potential impact on data security policies and practices Basic​
​E ​​Recognize emerging technology practices and their impact on security (bring your own device [BYOD], smart devices, internet of things [IoT], etc.) Basic​
​F ​Recognize existing and emerging cybersecurity risks (hacking, piracy, tampering, ransomware attacks, phishing attacks, etc.) ​Basic
G​ ​​Describe cybersecurity and information security-related policies ​Basic
III. Information Technology (20%)
​ ​ ​Cognitive Level
​​1. Application and System Software
A​ Recognize core activities in the systems development lifecycle and delivery (requirements definition, design, developing, testing, debugging, deployment, maintenance, etc.) and the importance of change controls throughout the process Basic
​B ​Explain basic database terms (data, database, record, object, field, schema, etc.) and internet terms (HTML, HTTP, URL, domain name, browser, click-through, electronic data interchange [EDI], cookies, etc.) Basic
​C ​​Identify key characteristics of software systems (customer relationship management [CRM] systems; enterprise resource planning [ERP] systems; and governance, risk, and compliance [GRC] systems; etc.) ​Basic
2. IT Infrastructure and IT Control Frameworks
A ​Explain basic IT infrastructure and network concepts (server, mainframe, client-server configuration, gateways, routers, LAN, WAN, VPN, etc.) and identify potential risks Basic​
​B Define the operational roles of a network administrator, database administrator, and help desk Basic​​
​C Recognize the purpose and applications of IT control frameworks (COBIT, ISO 27000, ITIL, etc.) and basic IT controls ​Basic
​3. Disaster Recovery
​A Explain disaster recovery planning site concepts (hot, warm, cold, etc.) ​Basic
​B Explain the purpose of systems and data backup ​Basic
​C ​Explain the purpose of systems and data recovery procedures ​Basic
IV. Financial Management (20%)
​ ​ ​Cognitive Level
​​1. Financial Accounting and Finance
A​ ​Identify concepts and underlying principles of financial accounting (types of financial statements and terminologies such as bonds, leases, pensions, intangible assets, research and development, etc.) Basic
​B ​Recognize advanced and emerging financial accounting concepts (consolidation, investments, fair value, partnerships, foreign currency transactions, etc.) Basic
C​ ​​Interpret financial analysis (horizontal and vertical analysis and ratios related to activity, profitability, liquidity, leverage, etc.) Proficient​
D​ ​​Describe revenue cycle, current asset management activities and accounting, and supply chain management (including inventory valuation and accounts payable) Basic​
​E ​​Describe capital budgeting, capital structure, basic taxation, and transfer pricing Basic​
2. Managerial Accounting
A ​Explain general concepts of managerial accounting (cost-volume-profit analysis, budgeting, expense allocation, cost- benefit analysis, etc.) Basic​
​B ​Differentiate costing systems (absorption, variable, fixed, activity-based, standard, etc.) Basic​​
​C ​Distinguish various costs (relevant and irrelevant costs, incremental costs, etc.) and their use in decision making ​Basic
Additional noteworthy elements related to the revised CIA Part Three exam syllabus:

The number of topics covered on the Part Three exam has been greatly refocused to the core areas that are most critical for internal auditors.
The exam syllabus features a new subdomain on data analytics.
The information security portion of the exam has been expanded to include additional topics such as cybersecurity risks and emerging technology practices.
The largest domain is “Business Acumen,” which makes up 35% of the exam.
A portion of the exam requires candidates to demonstrate a basic comprehension of concepts; another portion requires candidates to demonstrate proficiency in their knowledge, skills, and abilities.

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QUESTION: 307
Which of the following is an important senior management responsibility with regard to
information systems security?
A. Assessing exposures.
B. Assigning access privileges.
C. Identifying ownership of data.
D. Training employees in security matters.
Answer: A
Senior management is responsible for risk assessment, including identification of risks and
consideration of their significance, the likelihood of their occurrence, and how they should
be managed. Senior management is also responsible for establishing organizational
policies regarding computer security and implementing a compliance structure. Thus,
senior management should assess the risks to the integrity, confidentiality, and
availability of information systems data and resources.
QUESTION: 308
Management's enthusiasm for computer security seems to vary with changes in the
environment, particularly the occurrence of other computer disasters. Which of the
following concepts should be addressed when making a comprehensive recommendation
regarding the costs and benefits of computer security?
Potential loss if security is not implemented
Probability of occurrences
Cost and effectiveness of the implementation and operation of computer security
A. I only.
B. I and II only.
C. III only.
B. I, Il, and Ill.
Answer: D
Potential loss is the amount of dollar damages associated with a security problem or loss
of assets. Potential loss times the probability of occurrence is an estimate expected value)
of the exposure associated with lack of security. It represents a potential benefit associated
with the implementation of security measures. To perform a cost-benefit analysis, the
costs should be considered. Thus, all three items need to be addressed.
QUESTION: 309
Of the following, the greatest advantage of a database server) architecture is
A. Data redundancy can be reduced.
B. Conversion to a database system is inexpensive and can be accomplished quickly.
C. Multiple occurrences of data items are useful for consistency checking.
D. Backup and recovery procedures are minimized.
Answer: A
Data organized in files and used by the organization's various applications programs are
collectively known as a database. In a database system, storage structures are
created that render the applications programs independent of the physical or logical
arrangement of the data. Each data item has a standard definition, name, and format, and
related items are linked by a system of pointers. The programs therefore need only to
specify data items by name, not by location. A database management system handles
retrieval and storage. Because separate files for different applications programs are
unnecessary, data redundancy can be substantially reduced.
QUESTION: 310
In an inventory system on a database management system DBMS), one stored record
contains part number, part name, part color, and part weight. These individual items are
called
A. Fields.
B. Stored files.
C. Bytes.
D. Occurrences.
Answer: A
A record is a collection of related data items fields). A field data item) is a group of
characters representing one unit of information.
QUESTION: 311
An inventory clerk, using a computer terminal, views the following on screen part
number, part description, quantity on hand, quantity on order, order quantity, and reorder
point for a particular inventory item. Collectively, these data make up a
A. Field.
B. File.
C. Database.
D. Record.
Answer: D
A record is a collection of related data items fields). A field data item) is a group of
characters representing one unit of information. The part number, part description, etc.,
are represented by fields.
QUESTION: 312
Which of the following is the elementary unit of data storage used to represent individual
attributes of an entity?
A. Database.
B. Data field.
C. File.
D. Record.
Answer: B
A data item or field) is a group of characters. It is used to represent individual attributes of
an entity, such as an employee's address. A field is an item in a record.
QUESTION: 313
A file-oriented approach to data storage requires a primary record key for each file. Which
of the following is a primary record key?
A. The vendor number in an accounts payable master file.
B. The vendor number in a closed purchase order transaction file.
C. The vendor number in an open purchase order master file_
D. All of the answers are correct.
Answer: A
The primary record key uniquely identifies each record in a file. Because there is only one
record for each vendor in an accounts payable master file. the vendor number would be the
appropriate key.
QUESTION: 314
A business is designing its storage for accounts receivable information. What data file
concepts should be used to provide the ability to answer customer inquiries as they are
received?
A. Sequential storage and chains.
B. Sequential storage and indexes.
C. Record keys, indexes, and pointers.
D. Inverted file structure indexes, and internal labels.
Answer: C
A record key is an attribute that uniquely identifies or distinguishes each record from the
others. An index is a table listing storage locations for attributes, often including those
other than the unique record key attribute. A pointer is a data item that indicates the
physical address of the next logically related record.
QUESTION: 315
Auditors making database queries often need to combine several tables to get the
information they want. One approach to combining tables is known as
A. Extraction.
B. Joining.
C. Sorting.
D. Summarization.
Answer: B
In data management terminology, joining is the combining of data files based on a
common data element. For example, if rows in a table containing information about
specified parts have been selected, the result can be joined with a table that contains
information about suppliers. The join operation may combine the two tables using the
supplier number assuming both tables contained this element) to provide information
about the suppliers of particular parts.
QUESTION: 316
Users making database queries often need to combine several tables to get the information
they want. One approach to combining tables is
A. Joining.
B. Merging.
C. Projecting.
D. Pointing.
Answer: A
Joining is the combining of two or more relational tables based on a common data
element. For example, if a supplier table contains information about suppliers and a parts
table contains information about parts, the two tables can be joined using the supplier
number assuming both tables contain this attribute) to give information about the supplier
of particular parts.
QUESTION: 317
All of the following are methods for distributing a relational database across multiple
servers except
A. Snapshot making a copy of the database for distribution).
B. Replication creating and maintaining replica copies at multiple locations)_
C. Normalization separating the database into logical tables for easier user processing).
D. Fragmentation separating the database into parts and distributing where they are
needed).
Answer: C
A distributed database is stored in two or more physical sites. The two basic methods of
distributing a database are partitioning and replication_ However. normalization is a
process of database design, not distribution. Normalization is the term for determining
how groups of data items in a relational structure are arranged in records in a database.
This process relies on "normal forms," that is. conceptual definitions of data records and
specified design rules_ Normalization is intended to prevent inconsistent updating of data
items. It is a process of breaking down a complex data structure by creating smaller,
more efficient relations, thereby minimizing or eliminating the repeating groups in each
relation.
QUESTION: 318
In a database system, locking of data helps preserve data integrity by permitting
transactions to have control of all the data needed to complete the transactions. However,
implementing a locking procedure could lead to
A. Inconsistent processing.
B. Rollback failures.
C. Unrecoverable transactions.
D. Deadly embraces retrieval contention).
Answer: D
In a distributed processing system, the data and resources a transaction may update or use
should be held in their current status until the transaction is complete. A deadly embrace
occurs when two transactions need the same resource at the same time. If the system does
not have a method to cope with the problem efficiently, response time worsens or the
system eventually fails. The system should have an algorithm for undoing the effects of
one transaction and releasing the resources it controls so that the other transaction can run
to completion.
QUESTION: 319
One advantage of a database management system DBMS) is
A. That each organizational unit takes responsibility and control for its own data.
B. The cost of the data processing department decreases as users are now responsible for
establishing their own data handling techniques.
C A decreased vulnerability as the database management system has numerous security
controls to prevent disasters.
D The independence of the data from the application programs. which allows the
programs to be developed for the user's specific needs without concern for data capture
problems.
Answer: D
A fundamental characteristic of databases is that applications are independent of the
database structure; when writing programs or designing applications to use the database.
only the name of the desired item is necessary. Programs can be developed for the user's
specific needs without concern for data capture problems. Reference can be made to the
items using the data manipulation language, after which the DBMS takes care of locating
and retrieving the desired items. The physical or logical structure of the database can be
completely altered without having to change any of the programs using the data items,
only the schema requires alteration.
QUESTION: 320
Which of the following is a false statement about a database management system
application environment?
A. Data are used concurrently by multiple users.
B. Data are shared by passing files between programs or systems.
C. The physical structure of the data is independent of user needs.
D. Data definition is independent of any one program.
Answer: B
In this kind of system, applications use the same database There is no need to pass files
between applications.
QUESTION: 321
Which of the following should not be the responsibility of a database administrator?
A. Design the content and organization of the database.
B. Develop applications to access the database.
C. Protect the database and its software.
D. Monitor and improve the efficiency of the database.
Answer: B
The database administrator DBA) is the person who has overall responsibility for
developing and maintaining the database. One primary responsibility is for
designing the content of the database. Another responsibility of the DBA is to protect
and control the database. A third responsibility is to monitor and improve the efficiency of
the database. The responsibility of developing applications to access the database belongs
to systems analysts and programmers.
QUESTION: 322
The responsibilities of a data administrator DA) include monitoring
A. The database industry.
B. The performance of the database.
C. Database security.
D. Backup of the system.
Answer: A
The DA handles administrative issues that arise regarding the database. The DA acts as an
advocate by suggesting new applications and standards. One of the DA's responsibilities is
to monitor the database industry for new developments. In contrast, the database
administrator DBA) deals with the technical aspects of the database
QUESTION: 323
To trace data through several applies qti on programs, an auditor needs to know what
programs use the data, which files contain the data, and which print-td reports display the
data. If data exist only in a database system, the auditor could probably find all of this
information in a
A. Data dictionary.
B. Database schema.
C. Data encryptor.
D. Decision table.
Answer: A
The data dictionary is a file possibly manual but usually computerized) in which the
records relate to specified data items. It contains definitions of data items, the list of
programs used to process them, and the reports in which data are found. Only certain
persons or entities are permitted to retrieve data or to modify data items. Accordingly.
these access limitations are also found in the data dictionary.
QUESTION: 324
Image processing systems have the potential to reduce the volume of paper
circulated throughout an organization. To reduce the likelihood of users relying on the
wrong images, management should ensure that appropriate controls exist to maintain the
A. Legibility of image data.
B. Accessibility of image data.
C. Integrity of index data.
D. Initial sequence of index data.
Answer: C
Data integrity is a protectibility objective. If index data for image processing systems are
corrupted, users will likely be relying on the wrong images.
QUESTION: 325
What language interface would a database administrator use to establish the structure of
database tables?
A. Data definition language.
B. Data control language.
C. Data manipulation language.
D. Data query language.
Answer: A
The schema is a description of the overall logical structure of the database using data-
definition language DDL), which is the connection between the logical and physical
structure of the database. DDL is used to define, or determine, the database.
QUESTION: 326
Query facilities for a database system would most likely include all of the following
except
A. Graphical output capability.
B. Data dictionary access.
C. A data validity checker.
D. A query-by-example interface.
Answer: C
The least likely feature of a query tool would be a data validity checker because the
database system has already enforced any validity constraints at the time the data were
inserted in the database. Any further data validity checking would be a function of a user
application program rather than a query.
QUESTION: 327
Which of the following would be the most appropriate starting point for a compliance
evaluation of software licensing requirements for an organization with more than 15,000
computer workstations?
A. Determine if software installation is controlled centrally or distributed throughout the
organization.
B. Determine what software packages have been installed on the organization' s
computers and the number of each package installed.
C. Determine how many copies of each software package have been purchased by the
organization.
D. Determine what mechanisms have been installed for monitoring software usage.
Answer: A
The logical starting point is to determine the point(s) of control. Evidence of license
compliance can then be assessed. For example, to shorten the installation time for revised
software in a network, an organization may implement electronic software distribution
ESD), which is the computer-to-- computer installation of software on workstations.
Instead of weeks, software distribution can be accomplished in hours or days and can be
controlled centrally. Another advantage of ESD is that it permits tracking or metering of
PC program licenses.
QUESTION: 328
Use of unlicensed software in an organization
I. Increases the risk of introducing viruses into the organization
II. Is not a serious exposure if only low-cost software is involved
III. Can be detected by software checking routines that run from a network server
A. I only.
B. I and II only.
C. I, II, and Ill.
D. I and Ill only.
Answer: D
Antivirus measures should include strict adherence to software acquisition policies.
Unlicensed software is less likely to have come from reputable vendors and to have been
carefully tested.Special software is available to test software in use to determine whether it
has been authorized.
QUESTION: 329
The Internet consists of a series of networks that include
A. Gateways to allow personal computers to connect to mainframe computers.
B. Bridges to direct messages through the optimum data path_
C. Repeaters to physically connect separate local area networks LANs).
D. Routers to strengthen data signals between distant computers.
Answer: A
The Internet facilitates information transfer between computers. Gateways are hardware or
software products that allow translation between two different protocol families. For
example, a gateway can be used to exchange messages between different email systems.
QUESTION: 330
Which of the following is true concerning HTML?
A. The acronym stands for HyperText Material Listing.
B. The language is among the most difficult to learn
C. The language is independent of hardware and software.
D. HTML is the only language that can be used for Internet documents.
Answer: C
HTML is the most popular language for authoring Web pages. It is hardware and software
independent, which means that it can be read by several different applications and on
many different kinds of computer operating systems. HTML uses tags to mark information
for proper display on Web pages.
QUESTION: 331
Which of the following is a false statement about XBRL?
A. XBRL is freely licensed.
B. XBRL facilitates the automatic exchange of information
C. XBRL is used primarily in the U.S.
D. XBRL is designed to work with a variety of software applications.
Answer: C
XBRL stands for eXtensible Business Reporting Language. It is being developed for
business and accounting applications. It is an XML-based application used to create,
exchange, and analyze financial reporting information and is being developed for
worldwide use.
/( 48(67,216

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IIA Certified Internal Auditor Part 3 (Business Knowledge for Internal Auditing CIA Part 3) Mock Exam
IIA Certified Internal Auditor Part 3 (Business Knowledge for Internal Auditing CIA Part 3) Premium Questions and Ans
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