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  1. Home
  2. IIA Certification
  3. IIA-CIA-Part3 Exam
  4. IIA.IIA-CIA-Part3.v2025-07-07.q379 Dumps
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Question 121

A common mistake in valuing the entity to be acquired in a business combination is:

Correct Answer: C
If the net incremental cash flows to the acquirer's shareholders are to be valued, the discount rate used should be the cost of equity capital. Moreover, this rate should reflect the risk associated with the use of funds rather than their source. The rate therefore should not be the cost of capital of the acquirer but rather the cost of equity of the combined entity after the combination. This calculation requires a new estimate of beta to be used in the Capital Asset Pricing Model.
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Question 122

On June 1 of the current year, XYZ Company purchased British pounds for 10,000 euros. It also acquired land for 25,000 euros. At the end year or XYZ Company's fiscal year on December 31, the spot rate for the pound was 1.20 euros. The land had a value of 27,500 euros. XYZ Company records its nonmonetary items at historical cost. Which of the following is the correct presentation of this transaction on XYZ Company's balance sheet?

Correct Answer: C
At the balance sheet date, monetary items are reported at the closing rate, which is often the spot rate on the balance sheet date. Nonmonetary items measured at historical cost reported at the rate on the transaction date. Thus, the pounds are reported at EUR12.0001.20
EUR/E x EUR10,000), and the land is reported at EUR25,000.
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Question 123

A rapidly expanding retail organization continues to be tightly controlled by its original small management team. Which of the following is a potential risk in this vertically centralized organization?

Correct Answer: C
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Question 124

During a payroll audit, the internal auditor is assessing the security of the local area network of the payroll department computers. Which of the following IT controls should the auditor test?

Correct Answer: A
Reference: IIA Business Knowledge for Internal Auditing, IT Application Controls section.
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Question 125

Listed below are selected line items from the cost-of-quality report for Company B for
What is Company B's total prevention and appraisal cost for last month?

Correct Answer: C
The costs of prevention and appraisal are conformance costs that serve as financial measures of internal performance. Prevention costs are incurred to prevent defective output. These costs include preventive maintenance, employee training, review of equipment design, and evaluation of suppliers. Appraisal costs are incurred to detect nonconforming output. They embrace such activities as statistical quality control programs, inspection, and testing. The equipment maintenance cost of US $1,154 is a prevention cost. The product testing cost of US $786 is an appraisal cost. Their sum is US $1,940.
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