EMT Practice Test

1. Question Content...

---

Question1: Which of the following conditions could lead an organization to enter into a new business through internal development rather than through acquisition?

Question2: An entity uses the retail method of inventory estimation for interim reporting purposes.
Management expects some normal shrinkage in the inventory because of theft. What effect will the failure to consider this shrinkage have on the computation of1) the cost retail ratio, and2) the estimated ending inventory at retail?

Question3: The calculation of an economic order quantity EOQ) considers:

Question4: Organizations mat adopt just-in-time purchasing systems often experience which of the following?

Question5: An entity obtained a short-term bank loan of US $250,000 at an annual interest rate of 6%. As a condition of the loan, the entity is required to maintain a compensating balance of US $50,000 in its checking account. The entity's checking account earns interest at an annual rate of 2 %. Ordinarily, the entity maintains a balance of US $25,000 in its checking
account for transaction purposes. What is the effective interest rate of the loan?

Question6: The chart displays the:

Question7: According to MA guidance on IT. which of the following best describes a logical access control?

Question8: Which of the following is true about the impact of price inflation on financial ratio analysis?

Question9: Which of the following concepts of managerial accounting is focused on allocating overheads to products?

Question10: Dale has 20 days to complete production of an order for an important customer. The customer wants 96 units of product that may be painted either red or white. The red units can be produced at a rate of 4 per day. The white units, because of a different quality of paint, can be produced at a rate of 7 per day. The materials for the red units cost US $80 each, while the white units cost US $120 each. Dale wants to keep costs at a minimum. What is the constraint that expresses the number of units to be produced?

Question11: Maintenance cost at a hospital was observed to increase as activity level increased. The following data was gathered:
Activity Level Maintenance Cost
Month Patient Days Incurred January 5,600 $7,900
February 7,100 $8,500
March 5,000 $7,400
April 6,500 $8,200
May 7,300 $9,100
June 8,000 $9,800
If the cost of maintenance is expressed in an equation, what is the independent variable for this data?

Question12: A cash flow hedge mitigates risk exposure due to variability in cash flows associated with which of the following?

Question13: Which of the following authentication device credentials is the most difficult to revoke when an employee's access rights need to be removed?

Question14: In an inventory system on a database management system DBMS), one stored record contains part number, part name, part color, and part weight. These individual items are called:

Question15: If a company is customer-centered, its customers are defined as:

Question16: An analysis of an entity's US $150,000 accounts receivable at year-end resulted in a US $5,000 ending balance for its allowance for uncollectible accounts and a bad debt expense of US $2,000. During the past year recoveries on bad debts previously written off were correctly recorded at US $500. If the beginning balance in the allowance for uncollectible accounts was US $4,700. What was the amount of accounts receivable written off as uncollectible during the year?

Question17: IFPS 2, Share-Based payment, normally requires entities to a account for their share based employee compensation plans in accordance with which of the following methods?

Question18: Refer to the exhibit.

The figure below shows the network diagram for the activities of a large project. What is the shortest number of days in which the project can be completed?

Question19: The ending inventory balance under the first-in, first-out-FIFO) method of inventory valuation is:

Question20: The decision to implement enhanced failure detection and back-up systems to improve data integrity is an example of which risk response?

Question21: According to the waterfall cycle approach to systems development, which of the following sequence of events is correct?

Question22: Which of the following is a noncash item?

Question23: The costs of quality that are incurred in detecting units of product that do not conform to product specifications are referred to as

Question24: Which of the following budgets must be prepared first?

Question25: While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. The manager has asked the auditor for advice about increasing advertising of various products. During which stage of the life cycle would it be appropriate to advertise that the company's product is the lowest price and best quality of all competitors?

Question26: Which of the following assists in ensuring mat information exchanged over IT systems is encrypted?

Question27: Which of the following statements is most accurate with respect to various forms, elements, and characteristics of business contracts?

Question28: An internal auditor was asked to review an equal equity partnership In one sampled transaction Partner A transferred equipment into the partnership with a self-declared value of $10,000 and Partner B contributed equipment with a self-declared value of $15 000 The capital accounts of each partner were subsequently credited with S12,500. Which of the following statements is true regarding this transaction?

Question29: The leadership of an organization encourages employees to form voluntary problem-solving groups whereby several employees from the same work area meet regularity during work hours to discuss improvements and creative ways to reduce costs. Which of the following best describes this approach?

Question30: The process of scenario planning begins with which of the following steps?

Question31: Which of the following are typical audit considerations for a review of authentication? 1.Authentication policies and evaluation of controls transactions.
2.Management of passwords, independent reconciliation, and audit trail.
3.Control self-assessment tools used by management.
4.Independent verification of data integrity and accuracy.

Question32: Which of the following application software features is the least effective control to protect passwords?

Question33: An audit manager has just returned from an executive training program and has suggested that the audit department develop a mathematical model to help identify factors that may be causing changes in the cost of production. According to the manager, the model should recognize that the company currently has three separate production (cost) centers.
Which of the following approaches would best provide the analysis suggested by the audit manager?

Question34: Which line segment identifies the quantity of safety stock maintained?

Question35: The Huron Corporation purchases 60,000 headbands per year. The average purchase lead time is 20 working days, and the maximum lead time is 27 working days. Safety stock equals 1,750 units. The corporation works 240 days per year. Huron should reorder headbands when the quantity in inventory reaches:

Question36: During the growth stage of a product's life cycle,

Question37: If the bank uses the minimax regret criterion for selecting the location of the branch, it will select.

Question38: An organization produces two products, X and Y. The materials used for the production of both products are limited to 500 kilograms (kg) per month. All other resources are unlimited and their costs are fixed. Individual product details are as follows:
Product X
Product Y
Selling price per unit
$10
$13
Materials per unit (at $1/kg)
2 kg
6 kg
Monthly demand
100 units
120 units
In order to maximize profit, how much of product Y should the organization produce each month?

Question39: Which of the following is a disadvantage in a centralized organizational structure?

Question40: Which of the following is not true of responsibility accounting?

Question41: Which stage in the industry life cycle is characterized by many different product variations?

Question42: A company has excess capacity in production-related fixed assets. If in a given year these fixed assets were being used to only 80 percent of capacity and the sales level in that year was US $2,000,000, the full capacity sales level is:

Question43: Market-skimming pricing strategies could be appropriate when:

Question44: To mitigate a possible loss and offset risk, an entity can use derivatives or other hedging instruments. Which of the following?

Question45: A U.S. company and a European company purchased the same stock on a European stock exchange and held the stock for one year. If the value of the euro weakened against the U.S dollar during the period, in comparison with the European company's return, the U.S company's return will be:

Question46: When comparing absorption costing with variable costing, which of the following statements is not true?

Question47: With regard to e-commerce, risk is best defined as the uncertainty of an event that could:

Question48: If a call option is out-of-the-money, the:

Question49: Fulford Company applies the target pricing and costing approach. The following information about costs and revenues of Fulford's product are available for the year just ended:

Fulford plans to increase unit sales to 80,000 by reducing the product's unit price to US $320.
If Fulford desires a unit target operating income of 12CYo, by what amount must it reduce the full cost per unit?

Question50: A cost-volume-profit model developed in a dynamic environment determined that the estimated parameters used may vary between limits. Subsequent testing of the model with respect to all possible values of the estimated parameters is termed:

Question51: The amortization of intangible assets with finite useful lives is justified by the:

Question52: Which of me following is true of matrix organizations?

Question53: Which of the following is a strategy that organizations can use to stimulate innovation?
1. Source from the most advanced suppliers.
2. Establish employee programs that reward initiative.
3. Identify best practice competitors as motivators.
4. Ensure that performance targets are always achieved.

Question54: The primary reason for adopting TOM was to achieve:

Question55: A company purchased a new machine on an installment payment plan and is to make equal annual payments beginning one year from the date of purchase. Using an interest rate of 10%, the cost of the machine can be determined by multiplying one payment by the:

Question56: According to MA guidance, which of the following best describes an adequate management (audit) trail application control for the general ledger?

Question57: If legal or regulatory standards prohibit conformance with certain parts of The IIA's Standards, the auditor should do which of the following?

Question58: The economic order quantity for inventory is higher for an organization that has:

Question59: Which of the following is most important for an internal auditor to check with regard to the database version?

Question60: Quality cost indices are often used to measure and analyze the cost of maintaining a given level of quality. One example of a quality cost index, which uses a direct labor base, is computed as:

The following quality cost data were collected for May and June:

Based upon these cost data, the quality cost index

Question61: Which of the following statements is true regarding outsourced business processes?

Question62: If Bandit Co. reports expenses on an accrual basis, interest expense for the first year of operations is

Question63: The defined post employment benefit obligation of an entity includes benefit obligations to <List A> employees at <List B> salary levels. List A List B:

Question64: A characteristic of the basic economic order quantity EOQ) model is that it:

Question65: An entity is subject to warranty claims. A reliable estimate is that between US $1 million and US $3 million will probably be paid out. No estimate of loss within this range is more likely than any other. The entity should:

Question66: A client installed the most sophisticated controls using biometric attributes of employees to gain access to their computer system. This technology most likely replaced which of the following controls?

Question67: Assume that the average collection period is 25 days. After the credit policy is well established, what is the expected average accounts receivable balance for the entity at any moment in time, assuming a 365-day year?

Question68: At December 31, Year 2, an entity had the following obligations that were expected to be refinanced:

The 17% note payable was issued on October 1, Year 1, and matures on July 1, Year 3.
No loan agreement existing at the balance sheet date provides for refinancing. The 15% note payable was issued on May 1, Year 1. and matures on May 1, Year 3. On February 1, Year 3, the entire US $140,000 balance of the 17% note payable was refinanced by issuance of a long-term debt instrument. On February 7, Year 3, the entity entered into a noncancelable agreement with a lender to refinance the 15% note payable on a long-term basis. The financial statements were authorized to be issued on March 1, Year 3. The total amount of obligations that may be properly excluded from current liabilities on the entity's December 31, Year 2, balance sheet is:

Question69: Presented below are partial year-end financial statement data (000 omitted from dollar amounts) for companies A and B:
If company A has a quick ratio of 2:1, then it has an accounts receivable balance of:

Question70: Management of a bookkeeping company observed that the average time spent to perform identical tasks using a new software package decreases as the number of tasks performed increases. The following information on the use of the new software was collected.

If this learning effect continues, what is the average time to perform each of the first eight tasks?

Question71: Tie-in sales e.g., the sale of camera and film together) most likely are legal if:

Question72: The sales manager for a builder of custom yachts developed the following conditional table for annual production and sales:

According to the table, how many yachts should be built?

Question73: Violation of which assumption underlying regression analysis is prevalent in time series analysis?

Question74: An example of an internal nonfinancial benchmark is:

Question75: A bank is developing a computer system to help evaluate loan applications. The information systems IS staff interview the bank's mortgage underwriters to extract their knowledge and decision processes for input into the computer system. The completed system should be able to process information the same as do the underwriters and make final recommendations regarding loan decisions. This approach is called:

Question76: The comparative balance sheet for an enterprise that had profit of US $150,000 for the year ended December 31, Year 2, and paid US $125,000 of dividends during Year 2 is as follows:

If dividends paid are treated as a cost of obtaining financial resources, the amount of net cash from operating activities during Year 2 was:

Question77: An internal auditor is reviewing physical and environmental controls for an IT organization. Which control activity should not be part of this review?

Question78: Which of the following describes the most appropriate set of tests for auditing a workstation's logical access controls?

Question79: Which of the following describes a typical desktop workstation used by most employees in their daily work?

Question80: The share split proposal will <List A> earnings per share by <List B> than will the share

Question81: The credit instrument known as a banker's acceptance:

Question82: Good planning will help an organization restore computer operations after a processing outage. Good recovery planning should ensure that:

Question83: Only two companies manufacture Product A. The finished product is identical regardless of which company manufactures it. The cost to manufacture Product A is US $1, and the selling price is US $2. One company considers reducing the price to achieve 100c'% market share but fears the other company will respond by further reducing the price. Such a scenario would involve a:

Question84: Which of the following statements is true regarding reversing entries in an accounting cycled

Question85: If Projects A and B. are independent, which of the following statements is true?

Question86: Which of the following techniques would be best for evaluating the management performance of a department that is operated as a cost center?

Question87: A perpetual inventory system uses a minimum quantity on hand to initiate purchase ordering procedures for restocking. In reviewing the appropriateness of the minimum quantity level established by the stores department, the internal auditor is least likely to consider:

Question88: A bank is designing an on-the-job training program for its branch managers. The bank would like to design the program so that participants can complete it as quickly as possible. The training program requires that certain activities be completed before others. For example, a participant cannot make credit loan decisions without first having obtained experience in the loan department. An appropriate scheduling technique for this training program is:

Question89: The immediate goal of a theory of constraints (TOC) analysis is to:

Question90: Quality control programs employ many tools for problem definition and analysis. A scatter diagram is one of these tools. The objective of a scatter diagram is to:

Question91: Which of the following IT controls includes protection for mainframe computers and workstations?

Question92: How do data analysis technologies affect internal audit testing?

Question93: Which of the following statements is true regarding a bring-your-own-device (BYOD) environment?

Question94: In a business combination, the sum of the amounts assigned by the acquiring entity to assets acquired and liabilities incurred and assumed exceeds the consideration paid for the acquired entity. The excess should be reported as a:

Question95: Which of the following characteristics distinguishes computer processing from manual processing?

Question96: Organization X owns a 38 percent equity stake in Organization Y.
Which of the following statements is true regarding the financial treatment for this relationship?

Question97: In a traditional manufacturing operation, direct costs would normally include:

Question98: An internal auditor observed that the organization's disaster recovery solution will make use of a code site in a town several miles away Which of the following is likely to be a characteristic of this disaster recovery solution?

Question99: A competitive marketing strategy in which a firm specializes in serving customers overlooked or ignored by major competitors is called a:

Question100: Refer to the exhibit.
If the profit margin of an organization decreases, and all else remains equal, which of the following describes how the "Funds Needed" line in the graph below will shift?

Question101: Which of the following are the most appropriate measures for evaluating the change in an organization's liquidity position?

Question102: A company uses a target pricing and costing approach. The following is its costs and revenues for the current year:

The company intends to increase unit sales to 120,000 in the next year by reducing the unit price to US $8. If the company is to achieve a unit target operating income of 15%, by what amount must it reduce the full cost per unit?

Question103: Which of the following methods, if used in conjunction with electronic data interchange (EDI), will improve the organization's cash management program, reduce transaction data input time and errors, and allow the organization to negotiate discounts with EDI vendors based on prompt payment?

Question104: At the beginning of Year 1 a company began work on a 3-year construction contract.
This contract is accounted for by the percentage-of-completion method for financial accounting purposes and the completed-contract method for tax purposes. Dun l fig "(par 1, the company reported US $800,UUU of in from this contract. However, because of cost overruns incurred in Year 2 the company reported a US $500,000 loss from this contract. What should the company's Year 2 balance sheet include?

Question105: A systems development approach used to quickly produce a model of user interfaces, user interactions with the system, and process logic is called:

Question106: Which of the following are included in ISO 31000 risk principles and guidelines?

Question107: Based on a comparison of RST's quick ratios in Year 5 and Year 6, what is a likely conclusion?

Question108: An entity with total aside t, of US $100,000,000 and profit of US purchases staplers with an estimated life of 10 years for US $1,000. In connection with the purchase, the company debits miscellaneous expense. This scenario is most closely associated with which of the following cone opts or principles?

Question109: An organization accumulated the following data for the prior fiscal year:
Value of
Percentage of
Quarter
Output Produced
Cost X
1
$4,750,000
2.9
2
$4,700,000
3.0
3
$4,350,000
3.2
4
$4,000,000
3.5
Based on this data, which of the following describes the value of Cost X in relation to the value of Output Produced?

Question110: Which of the following principles are common to both hierarchical and open organizational structures?
1.Employees at all levels should be empowered to make decisions.
2.A supervisor's span of control should not exceed seven subordinates. 3.Responsibility should be accompanied by adequate authority.
4.A
superior cannot delegate the ultimate responsibility for results.

Question111: Changes in accounting estimates are viewed as:

Question112: An accounts payable program posted a payable to a vendor not included in the online vendor master file. A control that would prevent this error is a:

Question113: Using an EOQ analysis (assuming a constant demand), it is determined that the optimal order quantity is 2,500. The company desires a safety stock of 500 units. A 5-day lead time is needed for delivery. Annual inventory holding costs equal 25% of the average inventory level. It costs the company US $4 per unit to buy the product, which it sells for US $8. It costs the company US $150 to place a detailed order, and the monthly demand for the product is 4,000 units.
Annual inventory holding costs equal:

Question114: The current generation of ERP software ERP II) may include an advanced planning and scheduling system that:

Question115: Annual inventory holding costs equal:

Question116: Senior management has decided to implement the Three Lines of Defense model for risk management. Which of the following best describes senior management's duties with regard to this model?

Question117: Which of me following statements is true regarding the reporting of tangible and intangible assets?

Question118: An entity has a majority of its customers located in states A and B. A major west coast bank has agreed to provide a lockbox system to the entity at a fixed fee of US $50,000 per year and a variable fee of US $0.50 for each payment processed by the bank. On average, the entity receives 50 payments per day, each averaging US $20,000. With the lockbox system, the entity's collection float will decrease by 2 days. The annual interest rate on money market securities is 6%. If the entity makes use of the lockbox system, what would be the net benefit to the entity? Use 365 days per year.

Question119: Which of the following is the primary benefit of including end users in the system development process?

Question120: In Year 1, Company C introduced a new line of computer products that carry a 2-year warranty against defects and workmanship. The entire/ estimates that the total warranty cost will be 10% of sales, with 40% of the expenditures occurring during the first year and 60% during the second year_ Sales and actual warranty expenditures for Year 1 and Year 2 were as follows:

At the end of Year 2, what will the balance in the estimated accrued warranty liability account be?

Question121: Which of me following responsibilities would ordinary fall under the help desk function of an organization?

Question122: Evaluating performance is not done to:

Question123: The process of scenario planning begins with which of the following steps?

Question124: Which of the following performance measures would be appropriate for evaluating an investment center, which has responsibility for its revenues, costs, and investment base, but would not be appropriate for evaluating cost, revenue, or profit centers?

Question125: An entity changes its method of accounting for depreciation during the current year because it believes that the result will be reliable and more relevant information. In its financial statements for the year, how should the entity report the adjustment resulting from the change in accounting policy if the practicability criterion is met?

Question126: A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically. 30% of the company's sales are cash sales. The remaining 70% are credit sales with the following collection pattern:

Sales for the first 5 months of the coming year are forecast as follows:

For the month of April, the total cash receipts from sales and collections on account would be:

Question127: Correlation is a term frequently used in conjunction with regression analysis and is measured by the value of the coefficient of correlation. The best explanation of the value r is that it:

Question128: Which of the following is most important for an internal auditor to check with regard to the database version?

Question129: Total quality management (TQM) in a manufacturing environment is best exemplified by:

Question130: What is the economic term used to describe the situation in which each nation specializes in the production of goods that it produces relatively more efficiently than other nations and imports those goods that are produced relatively more efficiently by other nations?

Question131: All of the following are true with regard to the first-in, first-out inventory valuation method except:

Question132: Which of the following statements pertaining to a market skimming pricing strategy is not true?

Question133: The trough of a business cycle is generally characterized by:

Question134: The average labor cost per unit for the first batch produced by a new process is US $120. The cumulative average labor cost after the second batch is US $72 per product. Using a batch size of 100 and assuming the learning curve continues, the total labor cost of four batches will be:

Question135: The drive-through service at a fast-food restaurant consists of driving up to place an order, advancing to a window to pay for the order, and then advancing to another window to receive the items ordered. This type of waiting-line system is:

Question136: The time that car 3 will have to wait to be serviced:

Question137: If legal or regulatory standards prohibit conformance with certain parts of The IIA's Standards, the auditor should do which of the following?

Question138: A bank uses customer departmentalization to categorize its departments. Which of the following groups best exemplifies this method of categorization?

Question139: Data access security related to applications may be enforced through all of the following except:

Question140: As of week 8, the Gantt chart shows that the project is:

Question141: When auditing an application change control process, which of the following procedures should be included in the scope of the audit?
1. Ensure system change requests are formally initiated, documented, and approved.
2. Ensure processes are in place to prevent emergency changes from taking place.
3. Ensure changes are adequately tested before being placed into the production environment.
4. Evaluate whether the procedures for program change management are adequate.

Question142: Which of the following statements is false regarding the efficient and economical achievement of the organization's objectives?

Question143: During the past few gears, Wilder Company has experienced the following average number of power outages:

Each power outage results in out-of-pocket costs of U $300. For U $1,000 per month, At US
$800 can lease generator to provide power during outages. If Wilder leases a generator in the coming year, the estimated savings or additional expense) for the year will be:

Question144: At the end of September, a entity has outstanding accounts receivable of US $350 on third-
quarter credit sales, composed as follows.

The percentage of receivables in the 31-to-5O-day age group at the end of September is:

Question145: An internal auditor is assigned to perform data analytics. Which of the following is the next step the auditor should undertake after she has ascertained the value expected from the review?

Question146: An entity has the following contingencies at a balance sheet date:
I. An obligation for clean-up costs relating to environmental damage may, but probably will not, require an outflow of resources.
II. An obligation for decommissioning costs of a nuclear reactor may, but probably will not, require an outflow o1 resources.
III. The entity is jointly and severally liable for an obligation arising from a lawsuit: the likelihood of an outflow of resources is remote.
Which of the above items must be disclosed in the notes to the financial statements?

Question147: Business process reengineering is most likely to:

Question148: Heniser Pet Foods manufactures two products, X. and Y. The unit contribution margins for
Products X. and Y are US $30 and US $50, respectively. Each product uses Materials A and
B. Product uses 6 pounds of Material A and 12 pounds of Material B. Product Y uses 12 pounds of Material A and 8 pounds of Material B. The company can purchase only 1,200 pounds of Material A and 1,760 pounds of Material B. The optimal mix of products to manufacture is:

Question149: Which of the following is not true about international transfer prices for a multinational firm?

Question150: At December 31, Year 1, an entity had the following equity accounts:

Each of the 40,000 ordinary shares outstanding was issued at a price of US $26. On January 2, Year 2, 2,000 shares were reacquired for US $30 per share. The cost method is used in accounting for these treasury shares. Which of the following correctly describes the effect of the acquisition of the treasury shares?

Question151: Which of the following options correctly defines a transmission control protocol/Internet protocol (TCP/IP)?

Question152: Which of the following is a logical access control designed to enhance the security of a computer-based application system?