Authentic IIA Certification Exam IIA-CIA-Part3 Questions Answers

Understanding Outsourcing:

Outsourcing refers to contracting business processes, functions, or expertise to an external service provider.

Companies use outsourcing to reduce costs, access specialized skills, and improve efficiency.

Why Option B (Contracting Functions or Knowledge-Related Work with an External Provider) Is Correct?

Outsourcing involves delegating specific business functions (e.g., IT support, payroll, customer service) to external specialists.

IIA Standard 2110 – Governance supports evaluating outsourcing risks and effectiveness.

ISO 37500 – Outsourcing Management Framework emphasizes knowledge-based work outsourcing for expertise gains.

Why Other Options Are Incorrect?

Option A (Foreign service providers for cost savings):

While some outsourcing involves foreign providers, outsourcing is not limited to offshoring.

Option C (Internal service provider):

Internal service providers do not involve outsourcing, as the work remains within the company.

Option D (External + internal provider collaboration):

This describes co-sourcing, not pure outsourcing.

Outsourcing involves contracting business functions to an external provider, making option B correct.

IIA Standard 2110 supports governance over outsourcing decisions and risk management.

Final Justification:IIA References:

IPPF Standard 2110 – Governance (Outsourcing & Vendor Risk Management)

ISO 37500 – Outsourcing Management Framework

COSO ERM – Third-Party Risk Management in Outsourcing

Strong Security Governance Requires Well-Defined Policies:

Cybersecurity governance is built upon clear, documented, and enforceable security policies that outline expectations, roles, responsibilities, and processes.

Policies define acceptable behaviors, security controls, incident response, and compliance requirements.

IIA Standard 2110 - Governance: Requires organizations to establish effective IT security governance, including policies that address cybersecurity risks.

IIA GTAG (Global Technology Audit Guide) on Information Security Governance:

Recommends that clear policies should guide security controls, user access, and incident response to address cybersecurity threats.

A. Inventory of information assets (Incorrect)

While identifying critical information assets is essential for risk management, it does not constitute security governance on its own.

Asset inventories support governance but must be reinforced by policies that define how data should be protected.

B. Limited sharing of data files with external parties (Incorrect)

Restricting data sharing is a control measure, not a governance principle.

Policies define when, how, and under what conditions data can be shared securely.

C. Vulnerability assessment (Incorrect)

Assessments help identify security gaps but do not establish governance.

Effective governance ensures that vulnerabilities are identified, prioritized, and remediated in accordance with policies.

Explanation of Answer Choice D (Correct Answer):Explanation of Incorrect Answers:Conclusion:To ensure strong security governance, organizations must have clearly defined security policies (Option D) as a foundation for managing cybersecurity threats.

IIA References:

IIA Standard 2110 - Governance

IIA GTAG - Information Security Governance

Accounting Treatment for Investments with Little Influence:

When an investee has little or no influence over an entity, it uses the cost method (or fair value method, if applicable) to account for the investment.

Under the cost method, cash dividends received are recorded as dividend revenue rather than adjusting the investment account.

IIA Standard 2120 - Risk Management:

Internal auditors must ensure that financial reporting aligns with applicable accounting standards.

Applicable Accounting Standards:

IFRS 9 (Financial Instruments) and U.S. GAAP (ASC 320 - Investments in Equity Securities) state that dividends received should be recognized as income in the period received.

A. The cash dividends received increase the investee investment account accordingly. (Incorrect)

This applies to the equity method, used when an entity has significant influence (usually 20-50% ownership).

Under the cost method, dividend income is recognized as revenue, not as an increase in the investment account.

B. The investee must adjust the investment account by the ownership interest. (Incorrect)

Adjusting the investment account for ownership percentage is a feature of the equity method, not the cost method.

C. The investment account is adjusted downward by the percentage of ownership. (Incorrect)

A downward adjustment only occurs under the equity method when dividends exceed earnings, indicating a return of capital.

Under the cost method, dividends are recorded as revenue.

Explanation of Answer Choice D (Correct Answer):Explanation of Incorrect Answers:Conclusion:When an investee has little influence, dividends are recorded as revenue (Option D), following IFRS 9 and U.S. GAAP standards.

IIA References:

IIA Standard 2120 - Risk Management

IFRS 9 - Financial Instruments

U.S. GAAP ASC 320 - Investments in Equity Securities