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

Under the periodic inventory method, closing inventory is calculated using goods available for sale less cost of goods sold. Goods available for sale equals opening inventory of $300,000 plus purchases of $980,000, totaling $1,280,000. Gross margin is 40 percent of sales, so cost of goods sold is 60 percent of sales. Sales of $1,850,000 × 60 percent = $1,110,000 cost of goods sold. Closing inventory is therefore $1,280,000 − $1,110,000 = $170,000. Option B, C, and D do not follow the gross margin calculation correctly. Internal auditors reviewing inventory balances should verify the relationship between sales, gross margin, cost of goods sold, purchases, and ending inventory. Therefore, Option A is correct.

A tolerance threshold is a recognized control that allows for efficiency while preventing abuse. By setting a monetary limit, the process permits legitimate small variances (e.g., transport costs) while ensuring significant discrepancies are flagged and cannot be bypassed.

Option A is overly rigid and impractical. Option B is administratively burdensome. Option D lacks control and exposes the process to risk.

Understanding the Call Center Performance Issue:

The key performance indicators (KPIs) show a positive trend, meaning the call center appears to be performing well.

However, customer complaints are increasing, indicating that the KPIs are not accurately reflecting service quality.

This suggests that employees may be prioritizing call quantity over call quality, likely due to pressure to meet call quotas.

Why De-Emphasizing Call Quotas is the Best Solution:

Encourages Quality Over Speed: Reducing the emphasis on call volume allows agents to spend more time resolving customer issues effectively.

Improves Customer Satisfaction: Agents can provide more thorough assistance, reducing repeat calls and complaints.

Aligns KPIs with Service Quality: Shifting focus from quantity-based KPIs to quality-based KPIs ensures performance measurements reflect actual customer experience.

Why Other Options Are Incorrect:

A. Review the call center script used by customer service agents to interact with callers, and update the script if necessary – Incorrect.

While updating scripts may help, it does not address the root issue of employees rushing through calls to meet quotas.

C. Retrain call center staff on area processes and common technical issues that they will likely be asked to resolve – Incorrect.

Training is useful, but if agents are pressured to complete calls quickly, training alone will not resolve the issue.

D. Increase the incentive for call center employees to complete calls quickly and raise the number of calls completed daily – Incorrect.

This would worsen the issue by further incentivizing speed over customer satisfaction, leading to more complaints.

IIA’s Perspective on Performance Metrics and Customer Service Quality:

IIA Standard 2120 – Risk Management requires organizations to ensure that performance metrics align with actual business objectives.

IIA GTAG (Global Technology Audit Guide) on Performance Measurement recommends balancing quantitative KPIs (e.g., call volume) with qualitative KPIs (e.g., customer satisfaction scores).

COSO Internal Control Framework supports adjusting performance incentives to ensure alignment with business objectives.

IIA References:

IIA Standard 2120 – Risk Management & KPI Alignment

IIA GTAG – Performance Metrics in Customer Service

COSO Internal Control Framework – Effective KPI Design

Thus, the correct and verified answer is B. De-emphasize the importance of call center employees completing a certain number of calls per hour.

When internal audit identifies a risk that appears unacceptable, the CAE should first discuss the matter with the responsible management. This ensures management has an opportunity to explain their rationale or adjust actions before escalation.

Option A (direct escalation to senior management) or Option C (to the board) are appropriate only if management refuses to act. Option B (sending a letter with a deadline) is not aligned with IIA guidance.