IIA Updated IIA-CIA-Part3 Exam Questions and Answers by osian

Comprehensive and Detailed In-Depth Explanation:

The development phase of contracting involves drafting, negotiating, and finalizing the contract terms for a business activity. This phase ensures that agreements align with legal and operational requirements before execution.

Option A (Initiation phase) involves identifying needs and planning but does not include drafting contracts.

Option B (Bidding phase) focuses on soliciting and evaluating proposals but does not yet involve contract drafting.

Option D (Management phase) occurs after contracts are finalized and focuses on monitoring performance.

Since the development phase is when contracts are written and finalized, Option C is correct.

Comprehensive and Detailed In-Depth Explanation:

The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of a project equal to zero. It is used to evaluate the profitability of investments.

Option A (Annual cost of capital) – While related, the IRR should be compared directly to the required rate of return (hurdle rate).

Option B (Annual interest rate) – Not always relevant, as the cost of borrowing may differ from the required return on investments.

Option D (Compare to NPV) – NPV is a different method of capital budgeting; while related, it is not used for direct comparison with IRR.

Since the IRR is accepted if it meets or exceeds the required rate of return, Option C is correct.

Comprehensive and Detailed In-Depth Explanation:

Gain sharing is a compensation program where employees receive bonuses tied directly to the company's cost-saving measures and productivity improvements. This approach aligns employees' interests with organizational goals by rewarding them for identifying and implementing efficiencies that reduce costs. Unlike profit sharing, which is based on overall profitability, gain sharing focuses specifically on performance improvements that lead to cost savings. Commissions are typically related to sales performance, and pensions are long-term retirement benefits not directly linked to immediate cost-saving efforts. Therefore, gain sharing is the most indicative of targeting cost-saving objectives.

Comprehensive and Detailed In-Depth Explanation:

Project crashing is a schedule compression technique used in project management to shorten the project duration without altering the project scope. This is achieved by allocating additional resources to critical path activities, thereby reducing their completion time. While this approach can lead to increased costs due to the added resources, it helps in meeting tight deadlines. It's important to note that crashing focuses on accelerating project timelines by adding resources, not by changing the sequence of activities (as in fast-tracking) or by reassessing project requirements. However, project crashing can increase risks and may lead to rework if not managed carefully.