An auditor is performing a review of a complex process to identify opportunities to increase
efficiency. What is the most practical way to document the process to identify areas of
inefficiency?

A.

Write a description of the process activities in sequential order.

B.

Develop a PERT (program evaluation and review technique) diagram.

C.

Flowchart the process.

D.

Create a decision tree.

Which of the following methods would an auditor most likely use to document a complex sales
order process?

A.

Develop a horizontal flowchart, with supporting documentation for key control points.

B.

Create a critical path method chart, noting the processes involved for each step.

C.

Perform a process review, assigning time and cost to each step of the process to develop a
hierarchy flowchart.

D.

Utilize a systems narrative, which can be updated during subsequent audits.

An internal auditor is evaluating controls over the purchasing function. The function includes the
material control department, the purchasing department, and the receiving department. Which of
the following is true regarding the presentation of the process flow among the three departments?

A.

A vertical flowchart of each department, showing inputs at the top and outputs at the bottom, would be most useful.

B.

Flowcharts are not useful for documenting process flow.

C.

A horizontal flowchart, with the departments described across the top and the process flowing
horizontally, would be most useful.

D.

Both a flowchart and narratives are needed due to the number of departments involved.

A fast-food company is developing a computer simulation involving arrival time at a drive-through
restaurant. The distribution for arrival times is:
Time
Single-Digit Random
Between Arrivals
Probability
Number Assigned
1 minute
0.1
0
2 minutes
0.2
1, 2
3 minutes
0.3
3, 4, 5
4 minutes
0.4
6, 7, 8, 9
Six random numbers are selected to represent the arrival of six cars: 1, 6, 9, 0, 5, 6. The mean
time between arrivals for these cars, in this run of the simulation model, is:

A.

Answer: 1 minute.
Answer: 2 minutes.
Answer: 3 minutes.
Answer: 4 minutes.
Answer: C

The internal auditor of a bank has developed a multiple regression model which has been used for
a number of years to estimate the amount of interest income from commercial loans. During the
current year, the auditor applies the model and discovers that the R2 value has decreased
dramatically, but that the model otherwise seems to be working correctly. Which of the following
conclusions is justified by the change?

A.

 Changing to a cross-sectional regression analysis should cause the R2 to increase.

B.

Regression analysis is no longer an appropriate technique to estimate interest income.

C.

Some new factors, not included in the model, are causing interest income to change.

D.

A linear regression analysis would increase the model's reliability.

Five brand managers in a consumer products company met to determine how well certain
promotions had performed. The data that they needed to analyze consisted of approximately 50
gigabytes of daily point-of-sale (POS) data for each month. The brand managers tried to download
the POS data from the mainframe and import it into microcomputer spreadsheets for analysis.
Their efforts were unsuccessful, most likely because oF.

A.

The complexity of the mainframe data structure and the large volume of data.

B.

The difficulty of establishing access privileges for each subset of the mainframe data.

C.

Inconsistencies in the mainframe data due to lack of integrity constraints on the data files.

D.

.Error-prone transmission links for downloading the data from the mainframe data files.

After completing a net present value (NPV) calculation on a proposed project, an analyst explores
the change in NPV with changes in the interest rate. This additional analysis is referred to as:

A.

Decision analysis.

B.

Simulation.

C.

Sensitivity analysis.

D.

Variance analysis.

A company used simple regression analysis to analyze maintenance costs against machine hours
(MH) for a 26-week period when the plant was in full operation. The regression yielded the
following estimated cost function:
Maintenance Cost = $60 + $0.25/MH
The regression analysis also generated a coefficient of determination (R2), or goodness of fit, of
0.85. Which of the following statements regarding this regression analysis is appropriate?

A.

This regression can be used to determine the maintenance cost for any period at any activity
level by substituting the machine hours in the equation.

B.

The $60 component represents the best estimate of fixed maintenance costs for the company
in a shutdown situation.

C.

The $0.25 component is the slope coefficient of the cost estimate and represents the average
variable maintenance cost per machine hour.

D.

The coefficient of determination of R2 = 0.85 indicates that the goodness of fit is poor because
the value is close to the maximum value of one

Which of the following techniques could be used to evaluate the effectiveness of changes to the
operation of a computer help line?

A.

Benchmarking.

B.

Baseline measurements.

C.

Walk-throughs.

D.

Quality circles.

One method for dealing with the uncertainty of demand forecasts used in linear programming is to
extend the model solution to include.

A.

Sensitivity analysis.

B.

Goal seeking.

C.

Branch-and-bound solutions.

D.

Nonlinear programming.