Pass the IIA CIA IIA-CIA-Part3 Questions and answers with CertsForce

System software controls refer to security measures and protocols that protect an organization's IT infrastructure from unauthorized access, cyber threats, and system failures. Intrusion testing (penetration testing) is a key system software control used to detect vulnerabilities in IT environments.

Correct Answer (D - Performing Intrusion Testing on a Regular Basis)

Intrusion testing is a critical system software security measure that helps identify weaknesses in software configurations and security defenses.

This falls under system software controls because it directly tests the security of operating systems, applications, and network software.

The IIA’s GTAG 11: Developing IT Security Audits highlights penetration testing as a necessary control for system software security.

Why Other Options Are Incorrect:

Option A (Restricting server room access to specific individuals):

This is a physical access control, not a system software control.

Option B (Housing servers away from environmental hazards):

This is an environmental control, focusing on disaster prevention rather than software security.

Option C (Ensuring that all user requirements are documented):

This relates to project documentation and system development, but it does not control software security.

IIA GTAG 11: Developing IT Security Audits – Recommends regular penetration testing as a system software control.

IIA Practice Guide: Auditing IT Security – Discusses system software security measures.

IIA References for Validation:Thus, D is the correct answer because intrusion testing is a core system software control ensuring security.

A physical control is a security measure designed to protect assets, facilities, and personnel from physical threats such as fire, theft, or unauthorized access. Fire detection and suppression equipment (e.g., fire alarms, sprinklers, extinguishers) directly protects physical assets, making it a clear example of a physical control.

(A) Providing fire detection and suppression equipment. ✅

Correct. This is a direct physical security control that helps mitigate fire risks by detecting and suppressing fires.

IIA GTAG "Physical Security and IT Asset Protection" identifies fire detection as an essential physical security measure.

(B) Establishing a physical security policy and promoting it throughout the organization. ❌

Incorrect. A policy is an administrative control, not a physical control. While important, it does not provide direct physical protection.

(C) Performing business continuity and disaster recovery planning. ❌

Incorrect. This is a procedural control, not a physical one. Planning for disasters does not physically secure assets but instead prepares an organization for recovery.

(D) Keeping an offsite backup of the organization's critical data. ❌

Incorrect. This is an IT security control, ensuring data availability rather than physically protecting assets.

IIA GTAG – "Physical Security and IT Asset Protection"

IIA Standard 2110 – Governance (Risk Management Controls)

COBIT Framework – Physical and Environmental Security Controls

Analysis of Answer Choices:IIA References:Thus, the correct answer is A, as fire detection and suppression equipment provides direct physical protection against fire-related risks.

Understanding the Cash Conversion Cycle (CCC):

The Cash Conversion Cycle (CCC) measures the time taken for a company to convert raw materials into cash flow.

CCC is calculated using the formula: CCC=DaysInventoryOutstanding(DIO)+DaysSalesOutstanding(DSO)−DaysPayableOutstanding(DPO)CCC = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) - Days Payable Outstanding (DPO)CCC=DaysInventoryOutstanding(DIO)+DaysSalesOutstanding(DSO)−DaysPayableOutstanding(DPO)

Where:

DIO (Days Inventory Outstanding) = 55 days (time to convert raw materials to finished products).

DSO (Days Sales Outstanding) = 42 days (time to collect receivables).

DPO (Days Payable Outstanding) = 10 days (time to pay for raw materials).

Applying the Formula:

CCC=55+42−10CCC = 55 + 42 - 10CCC=55+42−10 CCC=100 daysCCC = 100 \text{ days}CCC=100 days

Why Option C (100 Days) Is Correct?

The CCC represents the time the company’s cash is tied up in production and sales before receiving payment.

This calculation aligns with IIA Standard 2120 – Risk Management, which requires auditors to assess financial liquidity and operational efficiency.

Why Other Options Are Incorrect?

Option A (26 days): Incorrect calculation.

Option B (90 days): Does not subtract DPO correctly.

Option D (110 days): Incorrect addition of all components instead of following the CCC formula.

The correct cash conversion cycle is 100 days, calculated using standard CCC methodology.

IIA Standard 2120 and financial management principles confirm the correct calculation.

Final Justification:IIA References:

IPPF Standard 2120 – Risk Management (Financial Performance & Liquidity Risk)

COSO ERM – Working Capital & Cash Flow Management

Financial Management Best Practices – Cash Conversion Cycle Analysis

When a company invests in common stock, it can earn income in two primary ways:

Dividend income: When the company receives dividends, it recognizes the income.

Capital gains: When the stock is sold for a higher price than its purchase price, it results in a gain.

Why Option C (Receives dividends) is Correct:

Dividends represent income from an investment in common stock when declared and paid by the issuing company.

Under GAAP and IFRS, dividend income is recognized when received, not when declared.

Companies record dividends as investment income in their income statement.

Why Other Options Are Incorrect:

Option A (Purchases bonds):

Incorrect because purchasing bonds is an investment transaction, not income recognition.

Option B (Receives interest):

Incorrect because interest income applies to bond investments, loans, or deposits, not common stock investments.

Option D (Sells bonds):

Incorrect because selling bonds results in capital gains or losses, not regular investment income from common stock.

IIA Practice Guide – "Auditing Investment & Treasury Activities": Discusses the recognition of investment income.

IFRS 9 (Financial Instruments) & GAAP Standards: Provide guidance on recording dividends as investment income.

COSO Internal Control – Integrated Framework: Emphasizes proper financial reporting and income recognition.

IIA References:

Big data is characterized by the 4 Vs:

Volume – Large amounts of data.

Velocity – Data is generated rapidly and continuously changing.

Variety – Data comes in multiple formats (structured, unstructured, multimedia, etc.).

Veracity – Ensuring data quality and reliability.

Among these, constant change (velocity) is a defining characteristic of big data.

(A) Incorrect – Big data is being generated slowly due to volume.

Big data is generated at high speed (velocity), not slowly.

(B) Incorrect – Big data must be relevant for the purposes of organizations.

While relevance is important, it is not a defining characteristic of big data.

(C) Incorrect – Big data comes from a single type of format.

Big data consists of multiple formats, including text, images, videos, and unstructured data.

(D) Correct – Big data is always changing.

Big data is dynamic and constantly updated in real-time.

This high velocity and continuous flow of information is a key characteristic.

IIA’s GTAG (Global Technology Audit Guide) – Big Data and Analytics

Describes how big data is constantly evolving.

NIST Big Data Framework – Key Characteristics

Defines volume, velocity, variety, and veracity as essential traits.

COBIT Framework – IT Governance and Data Management

Emphasizes the need for organizations to manage rapidly changing data.

Analysis of Answer Choices:IIA References and Internal Auditing Standards:

Understanding Data Recovery and Security Risks:

Data must be protected, recoverable, and accessible when needed while maintaining security.

The best practice is to store encrypted backups offsite while keeping encryption keys separate but accessible.

Why Option D is Correct?

Storing encrypted data offsite (a few hours away) ensures protection against disasters (e.g., fire, cyberattacks, physical damage).

Keeping encryption keys at the organization ensures that recovery is quick and controlled without risking unauthorized access.

This aligns with the IIA's IT Audit Practices and ISO 27001 (Information Security Management), which emphasize separate storage of encrypted data and encryption keys for security and recoverability.

IIA Standard 2110 – Governance requires internal auditors to assess whether IT governance ensures the availability and security of critical data.

Why Other Options Are Incorrect?

Option A (Encrypted physical copies and keys stored together at the organization):

If both data and keys are in the same location, a disaster or breach would make recovery impossible.

Option B (Encrypted copies and keys stored in separate locations far away):

While secure, if encryption keys are stored too far, recovery could be delayed, impacting business continuity.

Option C (Encrypted usage reports in a cloud database):

This does not ensure full data recovery; it only provides logs and structure changes, not the actual data.

Storing encrypted data offsite while keeping encryption keys accessible onsite follows best IT security and disaster recovery practices.

IIA Standard 2110 supports evaluating IT governance, including data security and recovery controls.

Final Justification:IIA References:

IPPF Standard 2110 – Governance

ISO 27001 – Information Security Management

NIST SP 800-34 – Contingency Planning Guide for IT Systems

COBIT Framework – Data Security & Recovery Controls

A detective control is a security measure that identifies and alerts an organization to potential cyberthreats after they occur but before they cause harm. Detective controls do not prevent attacks but help detect them in a timely manner.

Why Option B (Monitoring for vulnerabilities based on industry intelligence) is Correct:

Continuous monitoring for vulnerabilities helps detect emerging threats, security breaches, and weaknesses in IT systems.

Uses threat intelligence feeds, security information and event management (SIEM) systems, and intrusion detection systems (IDS).

Helps organizations respond quickly to cyberattacks by identifying patterns, suspicious activity, or known vulnerabilities.

Why Other Options Are Incorrect:

Option A (A list of trustworthy, good traffic and a list of unauthorized, blocked traffic):

Incorrect because this describes a whitelisting/blacklisting technique, which is a preventive control, not a detective control.

Option C (Comprehensive service level agreements with vendors):

Incorrect because service level agreements (SLAs) ensure contractual obligations, but do not detect security threats.

Option D (Firewall and other network perimeter protection tools):

Incorrect because firewalls are preventive controls, designed to block unauthorized access, not detect threats after they occur.

IIA GTAG – "Auditing Cybersecurity Risks": Discusses detective controls such as vulnerability monitoring and threat intelligence.

COBIT 2019 – DSS05 (Manage Security Services): Recommends continuous monitoring for cyber threats as a detective control.

NIST Cybersecurity Framework – Detect Function: Highlights vulnerability management and threat monitoring as key detective measures.

IIA References:Thus, the correct answer is B. Monitoring for vulnerabilities based on industry intelligence.

Organizations that rely on third-party vendors for IT services must ensure secure and controlled communication, especially in areas where external connections are involved. External connections typically include:

Cloud services (e.g., SaaS, PaaS, IaaS)

Third-party APIs

Remote access (VPNs, firewalls, network gateways)

IoT devices and external sensors

These connections introduce cybersecurity risks, requiring continuous monitoring, vendor communication, and security controls.

(A) Applications.

Incorrect. While application security is important, it is typically managed internally. Vendor involvement is needed for software patches and updates, but communication is not as tightly monitored.

(B) Technical infrastructure.

Incorrect. This layer includes internal IT components like servers, databases, and networks, which are mostly managed in-house. Vendor involvement is required for hardware/software updates but not to the same extent as external connections.

(C) External connections. ✅

Correct. External connections require tightly controlled communication with vendors to prevent security breaches, unauthorized access, and data leaks.

IIA GTAG "Auditing IT Governance" highlights third-party risk management as a key area for IT audits.

IIA Standard 2110 requires organizations to establish governance structures for vendor and IT security management.

(D) IT management.

Incorrect. IT management focuses on internal oversight of IT policies and compliance, but does not necessarily require tightly controlled vendor communication.

IIA GTAG – "Auditing IT Governance"

IIA GTAG – "Managing Third-Party Risks"

IIA Standard 2110 – Governance

Analysis of Answer Choices:IIA References:

A declining inventory turnover combined with an increasing gross margin rate suggests that the organization is not selling inventory as quickly as before, but still reporting higher profitability. This can indicate overstated inventory values, meaning that financial statements show higher inventory balances than what actually exists.

(A) Incorrect – The organization’s operating expenses are increasing.

Operating expenses do not directly affect inventory turnover, which measures how quickly inventory is sold.

Higher expenses could reduce net profit, but they would not explain a higher gross margin.

(B) Incorrect – The organization has adopted just-in-time (JIT) inventory.

JIT inventory systems increase inventory turnover by reducing excess stock.

Since turnover is declining, this suggests the opposite of JIT.

(C) Incorrect – The organization is experiencing inventory theft.

Inventory theft usually reduces inventory levels, potentially increasing inventory turnover due to lower stock.

Theft could lower gross margins if significant losses occur.

(D) Correct – The organization’s inventory is overstated.

Overstated inventory leads to lower COGS, artificially inflating gross margin.

If inventory levels are inflated, turnover appears lower because reported inventory is higher than actual sales justify.

IIA’s Global Internal Audit Standards – Financial Statement Audits and Fraud Risk

Covers risks related to inventory misstatements and financial fraud.

IFRS & GAAP Accounting Standards – Inventory Valuation

Defines how inventory overstatement impacts financial ratios.

Analysis of Answer Choices:IIA References and Internal Auditing Standards:

Herzberg's Two-Factor Theory of Motivation divides workplace factors into:

Hygiene factors (which prevent dissatisfaction but do not increase satisfaction) – e.g., salary, security, relationships.

Motivators (which drive job satisfaction and performance) – e.g., recognition, achievement, responsibility, and personal growth.

Employees most often mention recognition as a key factor in job satisfaction, as it directly impacts motivation and engagement.

(A) Incorrect – Security.

Job security is a hygiene factor, meaning its absence causes dissatisfaction, but its presence does not create job satisfaction.

(B) Incorrect – Status.

Status is a hygiene factor, not a motivator. It prevents dissatisfaction but does not enhance motivation significantly.

(C) Correct – Recognition.

Recognition is a motivator, meaning it actively increases job satisfaction and is frequently cited by happy employees.

(D) Incorrect – Relationship with coworkers.

Work relationships are hygiene factors. While poor relationships can lead to dissatisfaction, strong relationships alone do not create motivation.

IIA’s Global Internal Audit Standards – Human Resources and Organizational Behavior

Discusses motivation theories and their impact on employee performance.

Herzberg’s Two-Factor Theory of Motivation

Identifies recognition as a primary factor for employee satisfaction.

Analysis of Answer Choices:IIA References and Internal Auditing Standards: