Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 49

An organization that sells products to a foreign subsidiary wants to charge a price that will decrease import tariffs. Which of the following is the best course of action for the organization?

Answer options

• A. Decrease the transfer price.
• B. Increase the transfer price.
• C. Charge at the arm's length price.
• D. Charge at the optimal transfer price.

Correct answer: A

Explanation

The correct answer is to decrease the transfer price, as lower prices can help in reducing import tariffs. Increasing the transfer price would likely lead to higher tariffs, while charging at the arm's length price or the optimal transfer price may not necessarily decrease tariffs.