CIA-III Exam Questions and Answers | Exam-Dumps (Page: 3)

QUESTION: 11 Exam Topic: 1, Volume A

The cost of scrap, rework, and tooling changes in a product quality cost system is categorized as a (n):

Training cost.
External failure cost.
Internal failure cost.
Prevention cost.

Answer(s): C

Explanation:

Internal failure costs are incurred when detection of defective products occurs before shipment. Examples of internal failure costs are scrap, rework, tooling changes, and downtime.

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QUESTION: 12 Exam Topic: 1, Volume A

The four categories of costs associated with product quality costs are:

External failure, internal failure, prevention, and carrying.
External failure, internal failure, prevention, and appraisal.
External failure, internal failure, training, and appraisal.
Warranty, product liability, training, and appraisal.

Answer(s): B

Explanation:

Prevention costs are incurred to prevent defects. Appraisal costs are incurred to detect defective output during and after the production process. Internal failure costs are associated with defective output discovered before shipping. External failure costs are associated with defective output discovered after it has reached the customer.

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QUESTION: 13 Exam Topic: 1, Volume A

Which of the following costs of quality is a failure cost?

Systems development costs.
Costs of inspecting in-process items.
Contract penalty for delivery of nonconforming goods.
Costs of quality circles.

Answer(s): C

Explanation:

Failure costs are incurred after defective output has been removed from production. A contract penalty for faulty goods is an example of an external failure cost.

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QUESTION: 14 Exam Topic: 1, Volume A

Listed below are costs of quality that a manufacturing company has incurred throughout its operations.

The U.S. dollar amount of the costs of quality classified as prevention costs for the manufacturing firm would be:

US$643,000
US$701,000
US$736,000
US$768,000

Answer(s): B

Explanation:

Prevention costs are incurred to prevent defects. Examples are the costs of employee training, review of equipment design, preventive maintenance, and evaluation of suppliers. Accordingly, the prevention costs equal US $701,000 ($275,000 design reviews + $180,000 process engineering + $90,000 scheduled maintenance + $156,000 training).

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QUESTION: 15 Exam Topic: 1, Volume A

The costs of quality that are incurred in detecting units of product that do not conform to product specifications are referred to as:

Prevention costs.
Appraisal costs.
Rework costs.
Failure costs.

Answer(s): B

Explanation:

Appraisal activities include inspection and testing. Appraisal costs (such as test equipment maintenance and destructive testing) are incurred to detect products not conforming to specifications.

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Financial CIA-III Exam (page: 3) Financial The Certified Internal Auditor Part 3 Updated on: 25-Dec-2025

QUESTION: 11 Exam Topic: 1, Volume A

Explanation:

QUESTION: 12 Exam Topic: 1, Volume A

Explanation:

QUESTION: 13 Exam Topic: 1, Volume A

Explanation:

QUESTION: 14 Exam Topic: 1, Volume A

Explanation:

QUESTION: 15 Exam Topic: 1, Volume A

Explanation:

Financial CIA-III Exam (page: 3)
Financial The Certified Internal Auditor Part 3
Updated on: 25-Dec-2025