IIA-CIA-PART4 Exam Questions and Answers

QUESTION: 21

A firm wishing to sell its well-known brand of men's clothing in a certain foreign country redesigned the products because of the greater average size of consumers in that country. However, the firm retained the same basic advertising campaign. According to Keegan's model of adaptation strategies, this firm has adopted a strategy of

Straight extension.
Product adaptation.
Forward invention.
Backward invention.

Answer(s): B

Explanation:

Using a product adaptation strategy, a firm makes changes to the product for each market but not its promotion. This can reduce profit potential but may also provide a marketing advantage by taking into account local wants and needs.

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QUESTION: 22

A firm that manufactures refrigerators sold ice boxes in urban areas of less developed countries. Many residents lacked electricity to power refrigerators but could purchase blocks of ice from local vendors for use in ice boxes. According to Keegan's model of adaptation strategies, this firm adopted a strategy of

Product adaptation.
Dual adaptation.
Backward invention.
Forward invention.

Answer(s): C

Explanation:

Using a product invention strategy, a new product is created specifically for a certain country or regional market. A product may either include advancements for developed countries or have certain elements removed in places where a lower cost is a key selling point. Thus, an ice box, a precursor of the modern refrigerator, is a backward invention.

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QUESTION: 23

Gray market activity is in essence a form of arbitrage. To prevent this activity by their distributors, multinational firms:

I). Raise prices charged to lower-cost distributors.
II). Police the firms' distributors.
III). Change the product.

I only.
I and II only.
II and Ill only.
I, II, and Ill.

Answer(s): D

Explanation:

In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries. These activitiesclearly lower the profits in some markets of the multinational firm that was the initial seller. One response is to monitor the practices of distributors and retaliate if necessary. A second response is to charge higher prices to the low-cost distributors to reduce their incentives to participate in a gray market. A third response is to differentiate products sold in different countries, e.g., by adapting the product or offering distinct service features.

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QUESTION: 24

A firm buys new computer equipment from bankrupt companies and resells it in foreign markets at prices significantly below those charged by competitors. The firm is

Engaged in dumping.
Engaged in price discrimination.
Operating in a gray market.
Operating in a black market.

Answer(s): C

Explanation:

In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries. In essence, the seller firm in this case was exploiting a price difference between markets.

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QUESTION: 25

A firm ships its product to a foreign subsidiary and charges a price that may increase import duties but lower the income taxes paid by the subsidiary. The most likely reason for these effects is that the:

Price is an arm's-length price.
Price is a cost-plus price.
Transfer price is too low.
Transfer price is too high.

Answer(s): D

Explanation:

A transfer price is the price charged by one subunit of a firm to another. When the subsidiarybuyer is in a foreign country, the higher the transfer, the higher the potential tariffs.However, the tax levied on a subsequent sale by the subsidiary will be lower because of its higher acquisition cost.

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IIA IIA-CIA-PART4 Exam (page: 5) IIA Certified Internal Auditor - Part 4, Business Management Skills Updated on: 12-Feb-2026

QUESTION: 21

Explanation:

QUESTION: 22

Explanation:

QUESTION: 23

Explanation:

QUESTION: 24

Explanation:

QUESTION: 25

Explanation:

IIA IIA-CIA-PART4 Exam (page: 5)
IIA Certified Internal Auditor - Part 4, Business Management Skills
Updated on: 12-Feb-2026