The internal auditor found that the purchasing department has a policy of setting all purchasing lead times to the highest number of days experienced within each product subassembly}, even though some subassemblies required 3 or more months to complete. To address the objective of reducing inventory holding costs related to this policy, the internal auditor should focus on:

• A.Reviewing production requirements for a sample of products to determine at which point in the production process materials and subassemblies are needed.
• B.Evaluating whether product-line assignments were rotated among the members of the purchasing department.
• C.Identifying signature approval authority} among members of the purchasing department in relation to any computer system controls.
• D.Testing those products having the highest sales to determine the average number of days that the completed products were held in inventory.

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Which of the following is an advantage of a decentralized organizational structure, as opposed to a centralized structure?

• A.Greater cost-effectiveness
• B.Increased economies of scale
• C.Larger talent pool
• D.Strong internal controls

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If receivables transferred with recourse qualify for derecognition, the proceeds from the transfer are:

• A.Explanation:
  The entity derecognizes financial assets if it has transferred substantially all of the risks and rewards of ownership. Derecognition also is appropriate when the entity neither has transferred nor retained substantially all the risks and rewards of ownership, providing the entity does not have control. After derecognition, periodic profit or loss will include the difference between the carrying amount transferred and the proceeds, plus or minus any prior adjustment r fl ling the fair value of the asset that had been reported in equity. If a new financial asset is created or a financial liability is assumed, the calculation is adjusted for the fair value of the asset or liability. Thus, the proceeds of the sale are reduced by the fair value of the resource obligationa new financial liability). When the transfer does not meet these criteria, the transfer is accounted for as a collateralized borrowing. A transferor entity most likely should continue to recognize a transferred financial asset if the:
  A. Transferor may reacquire the asset, and the asset is readily obtainable in the market
  B. Transferee may sell the full fair value of the asset
  C. Transferor has an option to reacquire the asset, and the reacquisition price is fair value
  D. Transferor is entitled and obligated to repurchase the asset, and the transferee receives a lender's return.
• B.Accounted for as a collateralized borrowing.
• C.Recorded at the historical cost of the assets obtained.
• D.Reduced by the fair value of the recourse obligation.
• E.Recorded at fair value for the assets obtained and liabilities incurred.

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Which of the following is a systems software control?

• A.Restricting server room access to specific individuals.
• B.Housing servers with sensitive software away from environmental hazards.
• C.Ensuring that all user requirements are documented.
• D.Performing intrusion testing on a regular basis.

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Which of the following is an accepted example of electronic data interchange?

• A.Request for an airline reservation by a travel agent.
• B.Withdrawal of cash from an automated teller by a bank's customer.
• C.Transfer of summary data from a local area network to a centralized mainframe.
• D.Placement of order entry transactions from a customer to its supplier.

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