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IIA IIA-CIA-Part3 Exam
Certified Internal Auditor - Part 3, Business Analysis and Information Technology (Page 20 )

Updated On: 19-Jan-2026
Page 20 of 312
PDF with 1555 Questions

A large fishing operation has information on the interval, time, and probabilities of shrimp schools staying beneath their fishing boats. In order to use this information to predict when and where to send their boats, which of the following techniques should be used?

  1. Simulation.
  2. Least squares.
  3. Queuing theory.
  4. Exponential smoothing.

Answer(s): A

Explanation:

Simulation is a technique for experimenting with logical and mathematical models using a computer. Because of the behavior of the many variables involved and the complexity of their interactions, many problems cannot be solved using simple algebraic formulas. The availability of computer spreadsheets makes the construction of simulation models a practical alternative for all entities.



A cost-volume-profit model developed in a dynamic environment determined that the estimated parameters used may vary between limits. Subsequent testing of the model with respect to all possible values of the estimated parameters is termed:

  1. A sensitivity analysis.
  2. Statistical estimation.
  3. Statistical hypothesis testing.
  4. A time-series study.

Answer(s): A

Explanation:

After a problem has been formulated into any mathematical model, it may be subjected to sensitivity analysis. Sensitivity analysis examines how the model's outcomes change as the parameters change.



A company is deciding whether to purchase an automated machine to manufacture one of its products. Expected net cash flows from this decision depend on several factors, interactions among those factors, and the probabilities associated with different levels of those factors. The method that the company should use to evaluate the distribution of net cash flows from this decision and changes in net cash flows resulting from changes in levels of various factors is:

  1. Simulation and sensitivity analysis.
  2. Linear programming.
  3. Correlation analysis.
  4. Differential analysis.

Answer(s): A

Explanation:

Simulation is a technique for experimenting with logical and mathematical models using a computer. Sensitivity analysis examines how the model's outcomes change as the parameters change.



In forecasting purchases of inventory for a firm, all of the following are useful except

  1. Knowledge of the behavior of business cycles.
  2. Internal allocations of costs to different segments of the firm.
  3. Information on the seasonal variations in demand.
  4. Econometric modeling.

Answer(s): B

Explanation:

Internal allocations of costs relate to costs already incurred, that is. to sunk costs. Sunk costs are not relevant to decision making, for example, to forecasting future purchases.



A widely used approach that managers use to recognize uncertainty about individual items and to obtain an immediate financial estimate of the consequences of possible prediction errors is:

  1. Expected value analysis.
  2. Learning curve analysis.
  3. Sensitivity analysis.
  4. Regression analysis.

Answer(s): C

Explanation:

After a problem has been formulated into any mathematical model, it may be subjected to sensitivity analysis. Sensitivity analysis examines how the model's outcomes change as the parameters change.



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