When developing an effective risk-based plan to determine audit priorities, an internal audit activity should start by:
Correct Answer: D
Question 72
The expected payoff if the vendor has perfect information is:
Correct Answer: B
The vendor would like to sell coffee on cold days US $2,000) and soft drinks on hot days US $2,500). Hot days are expected 40°l0 of the time. Hence, the probability is 40°f0 of making US $2,500 by selling soft drinks. The chance of making US $2,000 by selling coffee is 600k. The payoff equation is: 4 US $2,600) + .6 $2,000 = US $2,200 A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make US $2,500; if the weather is cold, the profit will be U $1,000. If the stand sells coffee and the weather is hot, it will make US $1,900; if the weather is cold, the profit will be U $2,000. The probability of cold weather on a given day at this time is 60%.
Question 73
Which of the following describes a typical desktop workstation used by most employees in their daily work?
Correct Answer: B
Question 74
An organization had three large centralized divisions: one that received customer orders for service work; one that scheduled the service work at customer locations; and one that answered customer calls about service problems. These three divisions were restructured into seven regional groups, each of which performed all three functions. One advantage of this restructuring would be:
Correct Answer: C
The restructuring moves work from centralized functional silos into regional groups that perform the full service cycle: receiving orders, scheduling work, and responding to service problems. This type of structure can improve workflow because related activities are coordinated within the same regional unit, reducing handoffs, delays, communication gaps, and fragmented accountability. Option A is not necessarily true because decentralization may weaken controls if policies and oversight are inconsistent across regions. Option B is incorrect because economies of scale are usually stronger in centralized structures. Option D is also incorrect because the change reduces specialization by combining multiple functions within each regional group. From an internal audit perspective, the key benefit is process flow improvement, while the audit risk is inconsistent regional execution. Therefore, Option C is correct.
Question 75
If a central bank wishes to implement an expansionary monetary policy, which one of the following actions would it take?
Correct Answer: B
A central bank affects monetary policy primarily through the purchase and sale of government securities. A purchase of securities is expansionary because it increases bank reserves and the money supply. However, the sale of government securities by the central bank contracts the money supply by removing resources from the economy. Lowering the reserve requirement the percentage of deposits that a bank must keep on hand) also expands the money supply by increasing the loan able funds held by banks. Similarly, lowering the rate at which member banks may borrow from the central bank encourages borrowing and increases the money supply.
