Which of the following statements is true regarding outsourced business processes?

• A.Generally, independence is improved when the internal audit activity reviews outsourced business processes.
• B.The key controls of outsourced business processes typically are more difficult to audit because they are designed and managed externally.
• C.The system of internal controls may be better and more efficient when the business process is outsourced compared to internally sourced.
• D.Outsourced business processes should not be considered in the internal audit universe because the controls are owned by the external service provider.

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According to Maslow's hierarchy of needs theory, which of the following best describes a strategy where a manager offers an assignment to a subordinate specifically to support his professional growth and future advancement?

• A.Esteem by colleagues.
• B.Self-fulfillment.
• C.Sense of belonging in the organization.
• D.Job security.

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During the last year, an organization had an opening inventory of $300,000, purchases of $980,000, sales of $1,850,000, and a gross margin of 40 percent. What is the closing inventory if the periodic inventory system is used?

• A.$540,000
• B.$300,000
• C.$280,000
• D.$170,000

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Company A is producer of citrus-flavor products. Its most popular product is its key lime pies, which are made with many fine ingredients, including egg yolks. Company A also sells the egg whites that are left over from its production process. These egg whites are sold at any price that is greater than the cost of storing and delivering them. What is the pricing of the egg whites?

• A.By-product pricing.
• B.Captive-product pricing.
• C.Product-bundle pricing.
• D.Value pricing.

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An entity has daily cash receipts of US $100,000 and collection time of 2 days. A bank has offered to reduce the collection time on the entity's deposits by 2 days for a monthly fee of US $500. If money market rates are expected to average 6% during the year, the net annual benefit loss) from having this service is:

• A.US $3,000
• B.US $12,000
• C.US $0
• D.US $6,000

Correct Answer: D

If collection time is 2 days, and average daily receipts are US $ 100,000, the average cash balance will increase by I. $200,000 if the bank's system is adopted At a 6% interest rate, US $200,000 will generate US $12,000 of interest revenue annually. The US $500 monthly charge by the bank will result in an annual expense of US $6,000. Thus, the net annual benefit is US $6,000 $12,000 - 6,000).

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