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NEW QUESTION 48
A large hospital has an existing contract with a vendor in another country to provide software support and maintenance of the hospital's patient records information system. From the hospital management's perspective, which of the following controls would be most effective to address privacy risks related to this outsourcing arrangement?
- A. Include a "right to audit" clause in the contract and impose detailed security obligations on the outsourced vendor
- B. Conduct periodic reviews of the privacy policy to ensure that the existing policy meets current legislation requirements in both regions.
- C. Develop an incident monitoring and response plan to track breaches from internal and external sources
- D. Implement mandatory privacy training for management to help with identifying privacy risks when outsourcing services
Answer: A
NEW QUESTION 49
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:
- A. Seasonal variations in forecasting inventory demand.
- B. Optimal order sizes determined by the economic order quantities model.
- C. Stock out costs, including lost customers.
- D. Available storage space and potential obsolescence.
Answer: B
Explanation:
The basic economic order quantity (EOQ) model is based on the following variables: demand, variable cost per purchase order, and variable unit carrying cost. Thus, minimum stocking levels do not affect the EOQ.
NEW QUESTION 50
The cost of materials has risen steadily over the year. Which of the following methods of estimating the ending balance of the materials inventory account will result in the highest profit assuming all other variables remain constant?
- A. Last-in, first-out LIFO
- B. First-in, first-out FIFO C Weighted average D Specific identification
Answer: B
Explanation:
Profit will be higher when cost of goods sold is lower. other factors held constant. Cost of goods sold equals beginning inventory. plus purchases. minus ending inventory. Accordingly, cost of goods sold will be lowest when the ending inventory is highest.
Ending inventory is highest under FIFO because the older, less expensive items are deemed to have been sold, leaving the more expensive items in the ending !inventory.
NEW QUESTION 51
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 100% market share but fears the other company will respond by further reducing the price. Such a scenario would involve a:
- A. Neutral strategy.
- B. Dual-win strategy.
- C. No-win strategy.
- D. One win-one lose strategy.
Answer: C
Explanation:
If both firms reduce the selling price of Product A, neither will gain sales and the resultant price war will cause both firms to earn lower profits. This outcome is inevitable when reduced profit margins do not result in a significant increase in sales. This is classified as a no-win strategy.
NEW QUESTION 52
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