PDF IIA-CIA-Part3 Study Guide

The annual depreciation is ($320,000 − $40,000) ÷ 4 = $70,000. Annual savings after tax are $150,000 × 70% = $105,000. The depreciation tax shield is $70,000 × 30% = $21,000. Therefore, annual after-tax cash flow is $126,000. The sum of the present value factors is 0.87 + 0.76 + 0.66 + 0.57 = 2.86. Present value of annual cash flows is $126,000 × 2.86 = $360,360. The residual value present value is $40,000 × 0.57 = $22,800. Total present value is $383,160. Less the initial $320,000 investment, net present value is $63,160. Therefore, Option B is correct.

A product-oriented definition describes the business by what it makes or sells. A market-oriented definition describes the customer need being satisfied. “We make movies” focuses on the product itself, so it is product-oriented. By contrast, “we are a people-and-goods mover” defines the customer need for transportation. “We supply energy” describes a broader market need rather than a single product. “We provide climate control in the home” focuses on the customer benefit, not merely the product. Internal auditors involved in strategy, planning, or operational reviews should understand this distinction because product-oriented thinking can create strategic risk if management ignores changing customer needs, substitute products, or market disruption. A market-oriented definition is usually more flexible and customer-focused. Therefore, Option C is correct.

Physical and environmental controls protect IT assets from physical damage, unauthorized physical access, environmental hazards, and operational disruption. Fire detection and suppression, restricted access to tangible IT resources, and disaster recovery planning are relevant to this review. However, ensuring that a developer has access to both systems and operations is inappropriate because it violates segregation of duties. Developers should generally not have unrestricted operational access because they could introduce unauthorized changes, bypass testing, or manipulate production systems. Internal audit should identify excessive access as a control weakness, not a required control activity. Physical and environmental control reviews should include access badges, visitor logs, server room controls, power supply, fire protection, humidity control, and disaster recovery readiness. Therefore, Option D should not be part of the review.

Audit observations should include condition, criteria, cause, and effect. In this case, the condition (delay risk), criteria (schedule), and effect (penalties) are already presented. What is missing is the cause—the underlying reason for the project delay. Identifying the cause ensures recommendations address the root of the problem.