QUESTION: 45

A multinational organization has multiple divisions that sell their products internally to other divisions When selling internally, which of the following transfer prices would lead to the best decisions for the organization?

Full cost
Full cost plus a markup.
Market price of the product.
Variable cost plus a markup.

Answer(s): C

Explanation:

Using the market price of the product for internal transfer pricing leads to the best decisions for the organization because it reflects the true economic value of the goods or services being transferred. This method promotes efficiency and fairness within the divisions. Economic Value: Market price reflects the true economic value, ensuring that the internal transactions are conducted at fair and competitive prices. Performance Measurement: It provides a consistent basis for evaluating the performance of different divisions, as they are measured against external market conditions. Resource Allocation: Helps in optimal allocation of resources by ensuring that internal transactions are economically justified and comparable to external transactions.

Reference:

"Management Accounting: Principles and Practices," which discusses the advantages of using market-based transfer pricing .

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QUESTION: 46

The audit plan requires a review of the testing procedures used in pre-production of a large information system prior to its live launch. If the chief audit executive (CAE) is uncertain that the current audit team has all the required knowledge to conduct the engagement, which of the following would be the most appropriate course of action for the CAE to take to preserve independence?

Contract with the software vendor to provide an appropriate resource
Ask for a knowledgeable resource from the IT department
Make use of an external service provider.
Request audit resources through the external auditor.

Answer(s): C

Explanation:

If the chief audit executive (CAE) is uncertain that the current audit team has all the required knowledge to conduct the engagement, the most appropriate course of action is to use an external service provider. This helps preserve the independence and objectivity of the internal audit function. Expertise: External service providers bring specialized knowledge and expertise that may not be available within the internal team.
Independence: Utilizing an external provider ensures that the audit maintains its independence and objectivity, avoiding any potential conflicts of interest. Quality: Ensures that the audit engagement is conducted with the highest standards, leveraging the external provider's experience and skills.

Reference:

"Internal Audit and Assurance," which outlines the benefits and considerations of engaging external service providers for specialized audit tasks.

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QUESTION: 47

For a new board chair who has not previously served on the organization's board, which of the following steps should first be undertaken to ensure effective leadership to the board*?

Chair should learn the current organizational culture of the company.
Chair should learn the current risk management system of the company
Chair should determine the appropriateness of the current strategic risks.
Chair should gain an understanding of the needs of key stakeholders.

Answer(s): A

Explanation:

For a new board chair who has not previously served on the organization's board, the first step should be to learn the current organizational culture of the company. Understanding the culture is crucial for effective leadership and decision-making. Organizational Culture: It shapes the behavior, values, and practices within the company, and understanding it is essential for aligning the board's actions with the company's ethos.

Leadership: A deep understanding of the culture helps the chair to lead more effectively, fostering a positive environment and ensuring cohesive governance. Strategic Alignment: Ensures that the board's strategies and policies are in sync with the organizational culture, promoting better implementation and acceptance.

Reference:

"Corporate Governance: Principles and Practices," which highlights the importance of understanding organizational culture for effective board leadership .

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QUESTION: 48

According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the Internal audit activity^

CAE reviews and approves the annual audit plan.
CAE meets privately with the CEO at least annually
CAE meets privately with the board at least annually.
CAE reports to the board regarding audit staff performance evaluation and compensation.

Answer(s): C

Explanation:

According to IIA guidance, one of the best practices for enhancing the organizational independence of the internal audit activity is for the chief audit executive (CAE) to meet privately with the board at least annually. This practice reinforces the independence of the internal audit function by ensuring direct and unfiltered communication with the board.
Direct Communication: Private meetings with the board allow the CAE to discuss audit findings, concerns, and other important matters without management's influence, thereby preserving the objectivity and independence of the internal audit function. Board Support: This direct line of communication helps to secure the board's support for the internal audit activity, which is critical for its effective functioning. Independence: Such meetings underscore the independence of the internal audit activity from management, reinforcing its role in providing unbiased assurance.

Reference:

"IIA Standards for the Professional Practice of Internal Auditing," which recommends private meetings between the CAE and the board to support independence .

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Free IIA-CHAL-QISA Exam Braindumps (page: 12)

QUESTION: 45

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QUESTION: 48

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