If certain goods owned by an entity were not recorded as a purchase and were not counted in ending inventory, in error, then:

• A.Cost of goods sold for the period will be understated.
• B.Cost of goods sold for the period will be overstated.
• C.Profit for the period will be understated.
• D.There will be no effect on cost of goods sold or profit for the period.

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Employees at an events organization use a particular technique to solve problems and improve processes. The technique consists of five steps: define, measure, analyze, improve, and control. Which of the following best describes this approach?

• A.Theory of constraints.
• B.Value chain analysis.
• C.Six Sigma,
• D.Quality circle.

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When sales volume is seasonal in nature, certain items in the budget must be coordinated.
The three most significant items to coordinate in budgeting seasonal sales volume are:

• A.Production volume, finished goods inventory, and sales volume.
• B.Direct labor hours, work-in-process inventory, and sales volume.
• C.Raw material inventory, direct labor hours, and manufacturing overhead costs.
• D.Raw material inventory, work-in-process inventory, and production volume.

Correct Answer: A

The most difficult items to coordinate in any budget, particularly for a seasonal business are production volume, finished goods inventory, and sales. Budgets usually begin with sales volume and proceed to production volume, but the reverse is sometimes used when production is more of an issue than generation of sales. Inventory levels are also important because sales cannot occur without inventory and the maintenance of high inventory levels is costly. The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a US $200,000 line of credit with its bank at a 12% annual rate of interest on which borrowings for cash deficits must be made in US$ increments. There is no outstanding balance on the line of credit loan on April 1 Collections. 50% of the current month's sales budget and 50% of the Principal repayments are to be made in any month in which previous month's sales budget there is a surplus of cash. Interest is to be paid monthly. If Accounts Payable Disbursements. 75% of the current month's there are no outstanding balances on the loans. Raymar will invest any cash in excess of its desired end-of-month cash accounts payable budget and 25% of the previous month's accounts payable budget balance in U.S Treasury bills. Raymar intends to maintain a All other disbursements occur in the month in which they are budgeted minimum balance of US $100,000 at the end of each month by either borrowing for deficits below the minimum balance or investing any excess cash. Expected monthly collection and disbursement patterns are shown in the columns to the right.

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According to IIA guidance, which of the following would be a primary reason for an internal auditor to test the organization's IT contingency plan?

• A.To ensure that tests contribute to improvement of the program.
• B.To ensure that deficiencies identified by the audit are promptly addressed.
• C.To identify and address potential security weaknesses within the system.
• D.To ensure that adequate controls exist to prevent any significant business interruptions.

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Cash collections from customers in Year 2 were:

• A.US $341.000
• B.US $338,000
• C.US $344,000
• D.US $335,000

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