Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 111
Which of the following best describes the use of predictive analytics?
Answer options
- A. A supplier of electrical parts analyzed all instances where different types of spare parts were out of stock prior to scheduled deliveries of those parts.
- B. A supplier of electrical parts analyzed sales, applied assumptions related to weather conditions, and identified locations where stock levels would decrease more quickly.
- C. A supplier of electrical parts analyzed all instances of a part being out of stock prior to its scheduled delivery date and discovered that increases in sales of that part consistently correlated with stormy weather.
- D. A supplier of electrical parts analyzed sales and stock information and modelled different scenarios for making decisions on stock reordering and delivery.
Correct answer: D
Explanation
The correct answer, D, reflects the essence of predictive analytics by using historical sales and stock data to model potential future scenarios for effective decision-making. Options A and C focus on past occurrences without forecasting future trends, while option B discusses weather assumptions but does not involve scenario modeling.