A) link controls and deficiencies in general controls to specific transaction-related audit objectives. B) can use a control risk matrix to help identify both manual and automated application controls and control deficiencies for each related audit objective. C) can rely on IT-based application controls for all cycles if general controls are ineffective. D) can use the IT staff to determine how much reliance they can place on general controls. A) link controls and deficiencies in general controls to specific transaction-related audit objectives. B) can use a control risk matrix to help identify both manual and automated application controls and control deficiencies for each related audit objective. C) can rely on IT-based application controls for all cycles if general controls are ineffective. D) can use the IT staff to determine how much reliance they can place on general controls.

Exam 12: Implications of Information Technology for the Audit Process

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Auditors often use Generalized Audit Software during their testing of a client's internal controls.For the following uses of the software provide a description and an example. Verify extensions and footings Print confirmation requests Compare data on separate files

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(Essay)

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Question 1

Correct Answer:

Verified

Verify extensions and footings: verify accuracy of the clients computations; foot any subsidiary ledger
Print confirmation requests: print data for sample items selected for testing; randomly select accounts receivable customer balances for testing
Compare data on separate files: determine that information contained in two or more files agrees; changes in accounts payable or accounts receivables accounts using purchases/sales journals and cash disbursement/cash receipts registers.

Many clients have outsourced their IT functions.The difficulty the independent auditor faces when a computer service center is used is to:

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

It is important for the auditor to understand both the general controls and the application controls a company has implemented.Which of the following statements is true about these controls?

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

The audit approach in which the auditor runs his or her own program on a controlled basis to verify the client's data recorded in a machine language is:

(Multiple Choice)

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Question 4

A database management system:

(Multiple Choice)

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Question 5

When auditing a client whose information is processed by an outside service provider,it is not acceptable for the auditor to rely on the audit report of another independent auditor who has previously tested the internal controls of the service provider,rather than testing the service provider's controls himself or herself.

(True/False)

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Question 6

________ is not a risk specific to the IT environments.

(Multiple Choice)

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Question 7

Discuss how the integration of IT into accounting systems enhances internal control.

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Question 8

When auditing a client who uses a database management system,the auditor is principally aware of elevated risk due to the fact that:

(Multiple Choice)

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Question 9

Discuss the four areas of responsibility under the IT function that should be segregated in large companies.

(Essay)

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Question 10

An internal control deficiency occurs when computer personnel:

(Multiple Choice)

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Question 11

Identify the six categories of general controls and give one example of each.

(Essay)

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Question 12

LANs link equipment within a single or small cluster of buildings and are used within a company .

(True/False)

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Question 13

IT controls are classified as either input controls or output controls.

(True/False)

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Question 14

Which of the following best explains the relationship between general controls and application controls?

(Multiple Choice)

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Question 15

One potential disadvantage of IT systems is the reduction or elimination of source documents,which reduces the visibility of the audit trail.

(True/False)

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Question 16

Auditors:

(Multiple Choice)

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Question 17

Parallel simulation is used primarily to test internal controls over the client's IT systems,whereas the test data approach is used primarily for substantive testing.

(True/False)

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Question 18

Which of the following is least likely to be used in obtaining an understanding of client general controls?

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Question 19

When the client changes the computer software:

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Question 20

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Exam 12: Implications of Information Technology for the Audit Process

Auditors often use Generalized Audit Software during their testing of a client's internal controls.For the following uses of the software provide a description and an example. Verify extensions and footings Print confirmation requests Compare data on separate files

Many clients have outsourced their IT functions.The difficulty the independent auditor faces when a computer service center is used is to:

It is important for the auditor to understand both the general controls and the application controls a company has implemented.Which of the following statements is true about these controls?

The audit approach in which the auditor runs his or her own program on a controlled basis to verify the client's data recorded in a machine language is:

A database management system:

________ is not a risk specific to the IT environments.

Discuss how the integration of IT into accounting systems enhances internal control.

When auditing a client who uses a database management system,the auditor is principally aware of elevated risk due to the fact that:

Discuss the four areas of responsibility under the IT function that should be segregated in large companies.

An internal control deficiency occurs when computer personnel:

Identify the six categories of general controls and give one example of each.

LANs link equipment within a single or small cluster of buildings and are used within a company .

IT controls are classified as either input controls or output controls.

Which of the following best explains the relationship between general controls and application controls?

One potential disadvantage of IT systems is the reduction or elimination of source documents,which reduces the visibility of the audit trail.

Auditors:

Parallel simulation is used primarily to test internal controls over the client's IT systems,whereas the test data approach is used primarily for substantive testing.

Which of the following is least likely to be used in obtaining an understanding of client general controls?

When the client changes the computer software:

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The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

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Internal and Governmental Financial Auditing and Operational Auditing

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