Free Practice Questions for IIA IIA-CIA-Part3 Exam

A Value-Added Network (VAN) is a third-party network service that securely connects an organization with its trading partners, facilitating secure electronic data interchange (EDI) and business communications.

(A) Value-added network (VAN). (Correct Answer)

A VAN is a private, managed network service that provides secure data transmission between business partners.

It is commonly used for B2B transactions, supply chain management, and EDI.

IIA GTAG 7 – IT Outsourcing recognizes VANs as critical third-party networks for secure business data exchange.

(B) Local area network (LAN).

Incorrect: A LAN connects computers within a limited area (e.g., an office or building), but it is not designed for external trading partner connections.

(C) Metropolitan area network (MAN).

Incorrect: A MAN covers a city or region, but it is not designed for B2B communication.

(D) Wide area network (WAN).

Incorrect: A WAN connects multiple geographic locations, but it is a general networking term, not specific to trading partner communications.

IIA GTAG 7 – IT Outsourcing: Discusses the use of third-party networks like VANs for secure data exchange.

IIA Standard 2110 – Governance: Recommends secure third-party integration for business continuity and security.

Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (A) Value-Added Network (VAN) because it is specifically designed for secure communication between an organization and its trading partners.

The matching principle is a fundamental accounting concept that ensures that expenses are recorded in the same period as the revenues they help generate.

Why Option C (Expense recognition is tied to revenue recognition) is Correct:

The matching principle states that expenses should be recognized in the same period as the revenue they help generate to ensure accurate financial reporting.

This principle is applied in accrual accounting under GAAP and IFRS, ensuring that expenses and revenues are properly aligned.

Why Other Options Are Incorrect:

Option A (Revenues should be recognized when earned):

This describes the revenue recognition principle, not the matching principle.

Option B (Revenue recognition is matched with cash):

Incorrect because the matching principle applies to accrual accounting, not cash accounting. Revenue can be recognized before cash is received.

Option D (Expenses are recognized at each accounting period):

Incorrect because expenses are not necessarily recognized in every period; they are matched to revenue.

IIA Practice Guide – "Auditing Financial Reporting Controls": Discusses the importance of the matching principle.

GAAP & IFRS Accounting Standards: Define and require the application of the matching principle.

COSO Internal Control Framework: Emphasizes revenue-expense alignment for accurate financial reporting.

IIA References:

Consideration is a fundamental element of a legally binding contract, referring to something of value exchanged between parties. It ensures that each party receives a benefit or suffers a legal detriment in return for the promise made.

Essential for Contract Enforceability – A contract must involve an exchange of value (e.g., money, services, goods, or a promise to act or refrain from acting).

Legal Reciprocity – Both parties must give and receive something of value to make the contract valid.

Distinguishes Contracts from Gifts – A gift is voluntary and does not require consideration, whereas a contract does.

A. Lawfulness – A contract must be lawful, but lawfulness is a requirement, not something exchanged.

C. Agreement – An agreement is part of a contract, but without consideration, an agreement is not legally binding.

D. Discharge – Discharge refers to ending a contract, not forming one.

IIA’s GTAG on Contract Management Risks – Highlights consideration as a key contract principle.

COSO’s Internal Control Framework – Covers contract law fundamentals in risk management.

Common Law and Uniform Commercial Code (UCC) – Define consideration as an essential element of a contract.

Why Consideration is the Correct Answer?Why Not the Other Options?IIA References:

When reporting internal audit findings related to Enterprise Resource Planning (ERP) systems, IT audit findings must be relevant to business objectives. Business leaders may not fully understand technical IT risks, so reports should translate IT risks into business impacts to ensure actionable decision-making.

(A) Draft separate audit reports for business and IT management.

Incorrect: Fragmenting reports could create misalignment, reducing the effectiveness of integrated risk management.

(B) Connect IT audit findings to business issues. (Correct Answer)

IT auditors should explain how IT risks impact operations, financial reporting, and strategic goals.

IIA Standard 2410 – Criteria for Communicating requires audit findings to be clear, relevant, and actionable for all stakeholders.

IIA GTAG 8 – Auditing Application Controls emphasizes aligning IT controls with business risks.

(C) Include technical details to support IT issues.

Incorrect: While technical details help IT teams, business executives need risk-based insights, not just technical specifics.

(D) Include an opinion on financial reporting accuracy and completeness.

Incorrect: While ERP systems impact financial data, IT auditors should focus on system risks, not directly on financial reporting opinions (which is the role of financial auditors).

IIA Standard 2410 – Criteria for Communicating: Requires clear and business-relevant communication of audit findings.

IIA GTAG 8 – Auditing Application Controls: Advises IT auditors to relate technical risks to business objectives.

Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (B) because IT audit findings should be framed in a way that connects technical risks to business implications, making them more relevant to management.