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Gleim CIA Review
Updates to Part III
14th Edition, 1st Printing
NOTE: Text that should be deleted from the outline is displayed as struck through with a red
background. New text is shown in courier font with a green background.
Introduction
Middle of page 11: This corrects the suggested task times.
1.
(25-30 minutes, plus 10 minutes for review) In the CIA Gleim Online course, complete
Multiple-Choice Quiz #1 in 20-25 minutes (excluding the review session). It is expected that your
scores will be low on the first quiz.
a.
Immediately following the quiz, you will be prompted to review the questions you
marked and/or answered incorrectly. For each question, analyze and understand
why you marked it or answered it incorrectly. This step is an essential learning
activity.
2.
(15-30 minutes) Use the audiovisual presentation for an overview of the study unit. The
Gleim CIA Review Audio CDs can be substituted for audiovisual presentations and can be
used while driving to work, exercising, etc.
3.
(30-45 minutes) Complete the 30-question True/False quiz. It is interactive and most
effective if used prior to studying the Knowledge Transfer Outline.
4.
(60 minutes) Study the Knowledge Transfer Outline, specifically the troublesome areas
identified from the multiple-choice questions in the Gleim Online course. The Knowledge
Transfer Outlines can be studied either online or from the books.
5.
(25-30 minutes, plus 10 minutes for review) Complete Multiple-Choice Quiz #2 in the
Gleim Online course.
a.
6.
Immediately following the quiz, you will be prompted to review the questions you
marked and/or answered incorrectly. For each question, analyze and understand
why you marked it or answered it incorrectly. This step is an essential learning
activity.
(40-50 60 minutes) Complete two 20-question quizzes while in Test Mode from the CIA Test
Prep CD-Rom or Test Prep for Pocket PC.
When following these steps, you will complete all 10 units in about 30-50 45 hours. Then spend
about 5-10 hours using the CIA Test Prep CD-Rom or Test Prep for Pocket PC to create
customized tests for the problem areas that you identified. To review the entire part before the
exam, use the CIA Test Prep CD-Rom or Test Prep for Pocket PC to create 20-question quizzes
that draw questions from all 10 study units. Continue taking 20-question quizzes until you
approach your desired proficiency level, e.g., 75%+.
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Top of page 12: This corrects the suggested task times.
CIA Gleim Online
CIA Gleim Online is a versatile, interactive, self-study review program delivered via the Internet.
With CIA Gleim Online, Gleim guarantees that you will pass the CIA exam on your first sitting. It is
divided into four courses (one for each part of the CIA exam) and emulates the CIA CBT exam.
Each course is broken down into 10 individual, manageable study units. Completion time per study
unit will vary from 3-5 4 hours. Each study unit in the course contains an audiovisual presentation, 30
true/false study questions, 10-20 pages of Knowledge Transfer Outlines, and two 20-question
multiple-choice quizzes.
CIA Gleim Online provides you with a Personal Counselor, who will provide support to ensure your
competitive edge. Gleim Online is a great way to get confidence as you prepare with Gleim. This
confidence will continue during and after the exam.
Middle of page 19: A second sentence has been added.
6.
Your fingerprint will be captured, and a digital photograph of your face will be made. According
to The IIA, the fingerprint is optional but the photograph is mandatory.
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11. If you leave the testing room for any reason, you will be required to sign the test center log and
show your identification. You may also be required to provide a fingerprint when leaving or reentering the testing room.
Copyright © 2010 Gleim Publications, Inc. and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited.
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Study Unit 2 -- Managing Resources and Pricing
Middle of page 69: This clarifies the example of economic order quantity.
4)
EXAMPLE (adapted from CMA 1288 5-22): Annual demand is 50,000 units, and
the optimal lot size is 6,250 units. Per-unit carrying costs and stockout costs are
US $13 and US $3, respectively. The following data relate to the appropriate
safety stock level:
Units Short During
the Lead Time
200
300
400
Number of Shortages in
Last 40 Reorder Cycles
6
12
6
The annual cost of establishing a 200-unit safety stock is expected to be US
$5,200.
The annual cost is the carrying cost of safety stock (200 units × US $13 =
US $2,600), plus the stockout costs incurred. Excess demand has been
100 units (300 – 200) greater than the safety stock 30% of the time (12 ÷ 40).
The cost per stockout was US $300 (100 × $3). Demand has exceeded the
safety stock by 200 units (400 – 200) 15% of the time (6 ÷ 40). The cost per
stockout was US $600 (200 × $3). Thus, the expected stockout cost is US $180
per reorder cycle [($300 × 30%) + ($600 × 15%)]. Given 8 cycles (50,000 units ÷
6,250 EOQ), the annual cost is therefore US $4,040 [$2,600 + (8 × $180)].
Study Unit 3 -- Financial Accounting I
Extensive changes have been made to Subunit 3.5. The new subunit can be viewed at the following link:
http://www.gleim.com/public/support/updates/cia3_03_outline_062910.pdf
Copyright © 2010 Gleim Publications, Inc. and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited.
www.gleim.com
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Study Unit 4 -- Financial Accounting II
Middle of page 196: This corrects the explanations for self-correcting financial statement errors.
26. Which of the following errors is not
self-correcting over two accounting periods?
A. Failure to record accrued wages.
B. Failure to record depreciation.
C. Overstatement of inventory.
D. Failure to record prepaid expenses.
Answer (B) is correct. (CIA, adapted)
REQUIRED: The error not self-correcting over two
accounting periods.
DISCUSSION: A failure to record depreciation must be
corrected because the effects of the error do not automatically
reverse in future periods. Expenses are understated in the year
of the error, but no corresponding overstatement of expenses
occurs in later years.
Answer (A) is incorrect. Understatement of accrued wages
is a self-correcting error. Future wage expense will be overstated,
future cost of goods sold will be overstated, and future expenses
liabilities will be understated, respectively. Answer (C) is
incorrect. Overstatement of inventory and the consequent
understatement of cost of goods sold is a self-correcting error.
Future wage expense will be overstated, future cost of goods sold
will be overstated, and future expenses will be understated,
respectively. Answer (D) is incorrect. Understatement of prepaid
expenses (overstatement of expenses) is a self-correcting error.
Future wage expense will be overstated, future cost of goods sold
will be overstated, assets will be understated, and future
expenses will be understated, respectively.
Study Unit 5 -- Finance
Bottom of page 199: This corrects a minor typo.
●
Standard financial theory states thant an optimal capital structure exists.
Middle of page 220: This clarifies the circumstances for exercise of a call option.
c)
The call option will not be exercised unless the market price is greater than the
exercise price. The seller profits only when
i)
The option is not exercised, or
ii)
The price received for the option exceeds the product of (a) the
number of shares optioned and (b) the excess of the market price
over the exercise price.
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Middle of page 221: This clarifies the circumstances for exercise of a put option.
c)
The put option will not be exercised unless the exercise price is greater than
the market price. The seller profits only when
i)
The option is not exercised, or
ii)
The price received for the option exceeds the product of (a) the
number of shares optioned and (b) the excess of the exercise
price over the market price.
Middle of page 224: This corrects a definition.
f.
The current ratio (working capital ratio) is the most common measure of near-term
solvency liquidity.
1)
2)
Current assets
Current liabilities
a)
EXAMPLE: Current year: $760,000 ÷ $390,000 = 1.949
Prior year:
$635,000 ÷ $275,000 = 2.309
b)
Although working capital increased in absolute terms (US $10,000),
current assets now provide less proportional coverage of current
liabilities than in the prior year.
A low ratio indicates a possible solvency liquidity problem. An overly high
ratio indicates that management may not be investing idle assets productively.
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Top of page 227: This corrects the numbers used in the liquidity ratios.
4)
5)
Selling of inventory and incurrence of a receivable.
Collection of the receivable and acquisition of more inventory.
Operating cycle = Days sales in receivables + Days sales in inventory
b.
c.
EXAMPLE:
1)
Current year: 23.9 days + 15.5 17.6 days = 39.4 41.5 days
Prior year:
28.7 days + 13.7 15.6 days = 42.4 44.3 days
2)
The entity has managed to slightly reduce its operating cycle, even while
increasing sales and inventories.
The cash cycle, also called the cash conversion cycle, is that portion of the
operating cycle that is not days purchases in accounts payable. The cash cycle is
the portion of the operating cycle when the entity does not have cash, that is, when
cash is converted to inventory or accounts receivable.
Cash cycle = Operating cycle - Days purchases in payables
1)
EXAMPLE:
a)
Current Year: 39.4 41.5 days – 23.4 days = 16.0 18.1 days
Prior Year: 42.4 44.3 days – 17.7 days = 24.7 26.6 days
b)
Of the entity’s total operating cycle of 39.4 41.5 days, cash is held for the
23.4 days that payables are outstanding. The 16.0 18.1 days of the cash
cycle represent the period when cash is converted to other forms of
current assets.
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Study Unit 9 -- Information Technology II
Middle of page 380. This corrects a reference to an IT term.
d)
Protocols commonly used for coding and decoding functions on the Internet
are SSL (Secure Sockets Layer) and S-HTTPS (Secure Hypertext Transport
Protocol Secure).
e)
Digital time stamping services verify the time (and possibly the place) of a
transaction. For example, a document may be sent to a service, which applies
its digital stamp and then forwards the document.
Bottom of page 387: This clarifies a reference to certain software products.
c.
The leading comprehensive product in the field is SAP R/3. Other ERP products are
marketed by Oracle, PeopleSoft, and J. D. Edwards. The leading products in the
field are R/3, distributed by SAP, and JD Edwards EnterpriseOne and
PeopleSoft Enterprise, both distributed by Oracle.
Copyright © 2010 Gleim Publications, Inc. and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited.
www.gleim.com