Last Attempt IIA-CIA-Part3 Questions

An overstatement of ending inventory directly affects assets and income, not liabilities. If ending inventory is overstated, total assets are overstated, cost of goods sold is understated, and net income is overstated. Retained earnings may also be overstated through the income effect. However, accounts payable, accrued liabilities, debt, and other liabilities are not directly changed by the inventory valuation error. Option D is incorrect because inventory errors affect both the balance sheet and income statement, not only the income statement. Internal auditors reviewing inventory should understand how count errors, valuation errors, and cutoff errors affect financial statements. Since liabilities are not directly affected by overstated ending inventory, Option A is correct.

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.

A production budget determines the number of units that must be produced to meet expected sales and desired ending inventory levels. The basic formula is budgeted unit sales plus desired ending inventory minus beginning inventory. Estimated ending unit inventory is therefore a key factor in the production budget. Direct materials units required are determined later in the direct materials budget. Projected sales revenue supports the sales budget, not directly the production budget, because production is based on units rather than revenue. Variable overhead costs are considered in manufacturing overhead budgets, not in calculating the number of units to produce. Internal auditors reviewing budgeting should verify links among sales, production, inventory, and materials budgets. Therefore, Option B is correct.

The Business Impact Analysis (BIA) plan is a key component of business continuity planning that identifies critical business processes and determines their Recovery Time Objectives (RTOs) and Recovery Point Objectives (RPOs).

Correct Answer (C - Business Impact Analysis Plan)

The BIA is a systematic process that identifies essential functions, assesses potential disruptions, and determines the recovery time requirements to ensure business continuity.

The Recovery Time Objective (RTO) defines the maximum acceptable downtime for critical business functions.

The Recovery Point Objective (RPO) identifies how much data loss is tolerable.

According to the IIA Global Technology Audit Guide (GTAG) 10: Business Continuity Management, a BIA is essential for assessing the financial, operational, and reputational impact of disruptions.

Why Other Options Are Incorrect:

Option A (Business Continuity Management Charter):

A charter defines the governance, responsibilities, and overall framework of business continuity but does not focus on RTOs or critical business processes.

Option B (Business Continuity Risk Assessment Plan):

A risk assessment identifies threats and vulnerabilities but does not define recovery time objectives.

While risk assessments inform the BIA, they do not replace it.

Option D (Business Case for Business Continuity Planning):

A business case justifies investment in continuity planning but does not map business processes to RTOs.

GTAG 10: Business Continuity Management – Defines BIA as the process for identifying critical business functions and their RTOs.

IIA Practice Guide: Auditing Business Continuity – Emphasizes the role of BIA in business resilience.

Step-by-Step Explanation:IIA References for Validation:Thus, the Business Impact Analysis (BIA) Plan (C) is the correct answer because it pairs critical business processes with recovery time objectives.