IIA-CIA-Part3 Exam Dumps : Business Knowledge for Internal Auditing

Physical controls are security measures that prevent unauthorized physical access to critical assets, such as IT infrastructure, sensitive documents, or restricted areas.

(A) Preventing database administrators from initiating program changes:

This is a logical (IT) control rather than a physical control. Logical controls manage access permissions and prevent unauthorized software changes.

(B) Blocking technicians from getting into the network room (Correct Answer):

This is a physical control because it prevents unauthorized personnel from physically accessing critical IT infrastructure, such as servers and networking devices.

Unauthorized access to a network room could lead to data breaches, hardware manipulation, or cyberattacks.

(C) Restricting system programmers' access to database facilities:

This is an access control measure, which can be either logical (permissions, role-based access) or physical. However, it primarily refers to IT access controls rather than a physical security measure.

(D) Using encryption for data transmitted over the public internet:

This is a technical control, not a physical one. Encryption protects data but does not prevent physical breaches.

IIA GTAG 17: Auditing IT Security – Emphasizes the role of physical security in protecting IT infrastructure.

COBIT Framework – DSS05 (Manage Security Services) – Highlights physical access restrictions as a key security measure.

ISO/IEC 27001: Information Security Management System – Identifies physical security as a fundamental control for IT risk management.

Analysis of Each Option:IIA References:Conclusion:Since physical security controls prevent unauthorized physical access, option (B) is the correct answer.

When an organization buys equity securities for trading purposes, it means that these securities are classified as trading securities. According to International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP):

Trading securities are measured at fair value.

Unrealized gains and losses from changes in fair value are recognized in net income, not in shareholders' equity.

A. At fair value with changes reported in the shareholders' equity section. (Incorrect)

This treatment applies to available-for-sale (AFS) securities under previous GAAP rules, but not to trading securities.

Under IFRS 9, AFS classification has been removed, and most equity investments are recorded at fair value through profit or loss (FVTPL).

B. At fair value with changes reported in net income. (Correct)

This is the correct treatment for trading securities, as per IFRS 9 and ASC 320 (FASB).

C. At amortized cost in the income statement. (Incorrect)

Amortized cost is used for held-to-maturity (HTM) debt securities, not for equity securities held for trading.

D. As current assets in the balance sheet. (Partially Correct but Incomplete)

While trading securities are usually classified as current assets, this answer does not address valuation and reporting of changes in fair value.

IIA Practice Guide: Auditing Investments highlights the importance of correctly valuing securities based on accounting standards.

IFRS 9 – Financial Instruments mandates fair value measurement for trading securities with gains/losses reported in profit or loss.

GAAP ASC 320 – Investments – Debt and Equity Securities aligns with IFRS, requiring fair value reporting through net income.

Explanation of Answer Choices:IIA References:Thus, the correct answer is B. At fair value with changes reported in net income.

Comprehensive and Detailed In-Depth Explanation:

Strategic initiatives are established to address emerging threats and opportunities in the business environment. Organizations continuously evaluate external and internal factors to remain competitive and mitigate risks.

Option A (Risk tolerance) influences strategy, but it is not the primary driver for creating new initiatives.

Option B (Performance) is an outcome rather than a primary driver.

Option D (Governance) provides structure but does not directly drive the need for new initiatives.

Since businesses prioritize initiatives in response to external threats and internal opportunities, option C is the correct answer.