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NEW QUESTION: 1
During a security audit of IT processes, an IS auditor found that there were no documented security procedures. The IS auditor should:
A. terminate the audit.
B. create the procedures document.
C. identify and evaluate existing practices.
D. conduct compliance testing.
Answer: C
Explanation:
One of the main objectives of an audit is to identify potential risks; therefore, the most proactive approach would be to identify and evaluate the existing security practices being followed by the organization. IS auditors should not prepare documentation, as doing so could jeopardize their independence. Terminating the audit may prevent achieving one of the basic audit objectives, i.e., identification of potential risks. Since there are no documented procedures, there is no basis against whichto test compliance.

NEW QUESTION: 2
In his determination of a project's NPV and IRR, a financial analyst with Smith, Kleen, & Beetchnutty indexes the project's anticipated cash flows for the expected effects of inflation. However, the discount rate applied to these cash flows does not factor an adjustment for inflation. Assuming a positive inflation figure for the every period in the project's lifespan, which of the following correctly describes the effects of the omission on the NPV and IRR calculations?
A. NPV and IRR will be biased downward
B. NPV and IRR will be biased upward
C. NPV will remain unaffected, IRR will be biased downward
D. NPV will be biased upward, IRR will be unaffected
E. NPV will be biased downward, IRR will be biased upward
F. NPV will be biased downward, IRR will be unaffected
Answer: D
Explanation:
Explanation/Reference:
Explanation:
By failing to include an the effects of anticipated inflation in the discount rate applied to the project's cash inflows, this analyst is creating a situation in which the NPV calculations will be biased upward. This is due to the fact that the project's inflows have been adjusted for the anticipated effects of POSITIVE inflation, i.e. these cash flows have been indexed upward, while at the same time the rate at which these cash flows are being discounted has not increased. In effect, the cash inflows of the project are being overstated, and this will lead to an upward bias in the NPV calculation. Remember that the Internal Rate of Return calculation does not specify an explicit discount rate, rather calculates the discount rate that equates the cash inflows of a project with its cash outflows. The fact that this analyst has not incorporated the effects of inflation into the discount rate has no bearing on IRR, because the IRR equation does not call for a discount rate.

NEW QUESTION: 3
Bank Alpha is making a decision about lending 10-year loans in a sector that is fairly illiquid and is looking at various options to fund the loans. Which of the following options to fund the loans exhibits the most exogenous liquidity risk?
A. Foreign exchange markets
B. The 6-month LIBOR markets
C. The 1-year treasury markets
D. Overnight interbank markets
Answer: D