Which of the following is the most appropriate activity for an internal auditor to perform during a review of systems development activity?

• A.Serve on the IT steering committee that determines what new systems are to be developed.
• B.Review the methodology used to monitor and control the system development function.
• C.Recommend specific automated procedures to be incorporated into new systems that will provide reasonable assurance that all data submitted to an application are converted to machine-readable form.
• D.Recommended specific operational procedures that will ensure that all data submitted for processing are converted to machine-readable form.

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The ABC Company manufactures components for use in producing one of its finished products. When 12,000 units are produced, the full cost per unit is US $35, separated as follows: The XYZ Company has offered to sell 12,000 components to ABC for US $37 each. If ABC accepts the offer, some of the facilities currently being used to manufacture the components can be rented as warehouse space for US $40,000. However, US $3 of the fixed overhead currently applied to each component would have to be covered by ABC's other products. What is the differential cost to the ABC Company of purchasing the components from the XYZ Company?

• A.US $8,000
• B.US $20,000
• C.US $24,000
• D.US $44,000

Correct Answer: B

Differential incremental) cost is the difference in total cost between two decisions. The relevant costs do not include unavoidable costs, such as the US $3 of fixed overhead. It would cost ABC an additional US $20,000 to purchase, rather than manufacture, the components.

The segmented income statement for a retail company with three product lines is presented below:

The company buys the goods in the three product lines directly from manufacturers' representatives. Each product line is directed by a manager whose salary is included in the administrative expenses. Administrative expenses are allocated to the three product lines equally because the administration is spread evenly among the three product lines.
Salaries represent payments to the workers in each product line and therefore are traceable costs of each product line. Advertising promotes the entire company rather than the individual product lines. As a result, the advertising is allocated to the three product lines in proportion to the sales revenue. Commissions are paid to the salespersons in each product line based on 2% of gross sales. Rent represents the cost of the retail store and warehouse under a lease agreement with 5 years remaining. The product lines share the retail and warehouse space, and the rent is allocated to the three product lines based on the square footage occupied by each of the product lines.

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An internal auditor is using data analytics to locus on high-risk areas during an engagement. The auditor has obtained data and is working to eliminate redundancies in the dat a. Which of me following statements is true regarding this scenario?

• A.The auditor is normalizing data in preparation for analyzing it
• B.The auditor is cleaning the data in preparation for determining which processes may tie involved
• C.The auditor is analyzing the data in preparation for communicating the results
• D.The auditor is reviewing the data prior to defining the question

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Which of the following is a type of network in which an organization permits specific users (such as existing customers) to have access to its internal network through the Internet by
building a virtual private network?

• A.Intranet.
• B.Digital subscriber line.
• C.Broadband.
• D.Extranet.

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A company began work on a long-term construction contract in Year 1. The contract price was US $3,000,000. Year-end information related to the contract is as follows

If the company uses the percentage-of-completion method of accounting for this contract, the profit to be recognized in Year 1 is:

• A.US $(100,000)
• B.US $(100,000)
• C.US $(200,000)
• D.US $(350,000)

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