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Free IIA IIA-CIA-Part3 Exam Questions (page: 12)

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PDF with 1555 Questions

An internal auditor for a large automotive parts retailer wishes to perform a risk analysis and wants to use an appropriate statistical tool to help identify stores that would be out of line compared to the majority of stores. The most appropriate statistical tool to use is:

  1. Line artime series analysis.
  2. Cross-sectional regression analysis.
  3. Cross tabulations with chi-square analysis of significance.
  4. Time series multiple regression analysis to identify changes in individual stores over time.

Answer(s): B

Explanation:

Time series data pertain to a given entity over a number of prior time periods. Cross-sectional data, however, pertain to different entities for a given time period or at a given time. Thus, cross- sectional regression analysis is the most appropriate statistical tool because it compares attributes of all stores' operating statistics at one moment in time.



What coefficient of correlation results from the following data?

  1. 0
  2. -1
  3. +1
  4. Cannot be determined from the data given.

Answer(s): B

Explanation:

The coefficient of correlation (in standard notation, r) measures the strength of the linear relationship. The magnitude of r is independent of the scales of measurement of x and y. Its range is -1 to +1. A value of -1 indicates a perfectly inverse linear relationship between x and y. A value of zero indicates no linear relationship between x and y. A value of 1 indicates a perfectly direct relationship between x and y As x increases by 1, y consistently decreases by 2. Hence, a perfectly inverse relationship exists, and r must be equal to -1.



In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variables?

  1. 1.03
  2. -.02
  3. -.89
  4. .75

Answer(s): C

Explanation:

Because the range of values is between-1 and 1.-89 suggests a very strong inverse relationship between the independent and dependent variables. A value of --1 signifies a perfect inverse relationship, and a value of 1 signifies a perfect direct relationship.



The following data on variables x and y was collected from June to October.

The correlation coefficient between variables x and y is nearest to:

  1. 1.0
  2. -1.0
  3. 0.5
  4. 0.0

Answer(s): B

Explanation:

The simplest way to solve this problem is to use a scatter diagram:


The data points appear to form a straight line with a negative slope. Thus,-1 is the best estimate of the coefficient of correlation.



The correlation coefficient that indicates the weakest linear association between two variables is:

  1. -0.73
  2. -0.11
  3. 0.12
  4. 0.35

Answer(s): B

Explanation:

The correlation coefficient can vary from -1 to +1. A--1 relationship indicates a perfect inverse correlation, and a +1 relationship indicates a perfect direct correlation. A zero correlation coefficient indicates no linear association between the variables. Thus, the correlation coefficient that is nearest to zero would indicate the weakest linear association. Of the options given in the question, the correlation coefficient that is nearest to zero is -0.11.



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