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IIA-CIA-Part3 - Certified Internal Auditor - Part 3, Business Analysis and Information Technology - BrainDump Information

Vendor Name : IIA
Exam Code : IIA-CIA-Part3
Exam Name : Certified Internal Auditor - Part 3, Business Analysis and Information Technology
Questions and Answers : 154 Q & A
Updated On : April 23, 2018
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Question: 145

Quality costing is similar in service and manufacturing organizations. Nevertheless, the differences between these organizations have certain implications for quality management. Thus,

  1. Direct labor costs are usually a higher percentage of total costs in manufacturing organizations.

  2. External failure costs are relatively greater in service organizations.

  3. Quality improvements resulting in more efficient use of labor time are more likely to be accepted by employees in service organizations.

  4. Poor service is less likely to result in loss of customers than a faulty product.

Answer: B


External failure costs arise when problems occur after delivery. They occur because products or services are nonconforming or otherwise do not satisfy customers. External failure costs in service enterprises are even more important than in manufacturing environments. Faulty goods sometimes maybe reworked or replaced to a customer’s satisfaction, but poor service tends to result in a loss of customers.

Question: 146

A means of limiting production delays caused by equipment breakdown and repair is to:

  1. Schedule production based on capacity planning.

  2. Plan maintenance activity based on an analysis of equipment repair work orders.

  3. Pre-authorize equipment maintenance and overtime pay.

  4. Establish a preventive maintenance program for all production equipment.

Answer: D


A preventive maintenance program reduces equipment breakdowns and repairs.

Question: 147

The cost of statistical quality control in a product quality cost system is categorized as a(n):

  1. Internal failure cost.

  2. Training cost.

  3. External failure cost.

  4. Appraisal cost.

Answer: D


The following are the four categories of quality costs: prevention, appraisal, internal failure, and external failure (lost opportunity). Appraisal costs include quality control programs, inspection, and testing. However, some authorities regard statistical quality and process control as preventive activities because they not only detect faulty work but also allow for adjustment of processes to avoid future defects.

Question: 148

An organization has collected data on the complaints made by personal computer users and has categorized the complaints.


Using the information collected, the organization should focus on:

  1. The total number of personal computer complaints that occurred.

  2. The number of computer complaints associated with CD-ROM problems and new software usage.

  3. The number of computer complaints associated with the lack of user knowledge and hardware problems.

  4. The cost to alleviate all computer complaints.

Answer: C


Complaints based on lack of user knowledge and hardware problems are by far the most frequent according to this chart. Consequently, the company should devote its resources primarily to these issues.

Question: 149

An organization has collected data on the complaints made by personal computer users and has categorized the complaints.


The chart displays the:

  1. Arithmetic mean of each computer complaint.

  2. Relative frequency of each computer complaint.

  3. Median of each computer complaint.

  4. Absolute frequency of each computer complaint.

Answer: D


This Pareto diagram depicts the frequencies of complaints in absolute terms. It displays the actual number of each type of complaint. The chart does not display arithmetic means, relative frequencies, or medians of each type of complaint.

Question: 150

Statistical quality control often involves the use of control charts whose basic purpose is to:

  1. Determine when accounting control procedures are not working.

  2. Control labor costs in production operations.

  3. Detect performance trends away from normal operations.

  4. Monitor internal control applications of information technology.

Answer: C


Statistical control charts are graphic aids for monitoring the status of any process subject to random variations. The chart consists of three horizontal lines plotted on a horizontal time scale. The vertical scale represents the appropriate quantitative measure. The center line represents the average range or overall mean for the process being controlled. The other two lines are the upper control limit and the lower control limit. The processes are measured periodically, and the values are plotted on the chart. If the value falls within the control limits, no action is taken. If the value falls outside the limits, the process is considered "out of control," and an investigation is made for possible corrective action. Another advantage of the chart is that it makes trends visible.

Question: 151

Management of a company is attempting to build a reputation as a world-class manufacturer of quality products. Which of the following measures would not be used by the firm to measure quality?

  1. The percentage of shipments returned by customers because of poor quality.

  2. The number of parts shipped per day.

  3. The number of defective parts per million.

  4. The percentage of products passing quality tests the first time

Answer: B


The number of parts shipped per day would most likely be used as a measure of the effectiveness and efficiency of shipping procedures, not the quality of the product. This measure does not consider how many of the parts are defective.

Question: 152

All of the following are generally included in a cost-of-quality report except:

  1. Warranty claims.

  2. Design engineering.

  3. Supplier evaluations.

  4. Lost contribution margin.

Answer: D


A cost-of-quality report includes most costs related to quality, specifically the costs of prevention, appraisal, internal failure, and external failure.

Question: 153

In Year 2, a manufacturing company instituted a total quality management (TQM) program producing the following report:


On the basis of this report, which one of the following statements is most likely true?

  1. An increase in prevention and appraisal costs resulted in a higher quality product and therefore resulted in a decrease in failure costs.

  2. An increase in inspection costs was solely responsible for the decrease in quality costs.

  3. Quality costs, such as scrap and rework, decreased by 48%.

  4. Quality costs, such as returns and repairs under warranty, decreased by 40%.

Answer: A


Answer (A) is correct. Prevention and appraisal costs increased substantially, but internal and external failure costs decreased. Thus, the soundest conclusion is that the increase in prevention and appraisal costs resulted in a higher-quality product.

Question: 154

Quality cost indices are often used to measure and analyze the cost of maintaining a given level of quality. One example of a quality cost index, which uses a direct labor base, is computed as:


The following quality cost data were collected for May and June:


Based upon these cost data, the quality cost index:

  1. Decreased four points from May to June.

  2. Was unchanged from May to June.

  3. Increased 10 points from May to June.

  4. Decreased 10 points from May to June.

Answer: A


The index for May was 40 [(US $4,000 + $6,000 + $12,000 + $14,000) + $90,000], and the index for June was 36 [(US $5,000

+ $5,000 + $15,000 + $11.000) + $100,000].


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