Question 1

A database management system:

Accepted Answer

A)  allows clients to create databases that include information that can be shared across multiple applications. 
B)  stores data on different files for different purposes, but always knows where they are and how to retrieve them. 
C)  allows quick retrieval of data, but at a cost of inefficient use of file space. 
D)  allows quick retrieval of data, but it needs to update files continually. 
A)  allows clients to create databases that include information that can be shared across multiple applications. 
B)  stores data on different files for different purposes, but always knows where they are and how to retrieve them. 
C)  allows quick retrieval of data, but at a cost of inefficient use of file space. 
D)  allows quick retrieval of data, but it needs to update files continually.

Question 2

Processing controls include the following tests:
Validation
Sequence
Data Reasonableness
Completeness
Describe what each control is designed to do:

Accepted Answer

Validation: ensure the use of the correc

Question 3

Knowledge of both general and application controls is crucial for auditors in understanding how accounting information is recorded and reported.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a characteristic associated with converting from a manual to an IT system?

Accepted Answer

A)  It usually centralizes data. 
B)  It permits higher quality and more consistent controls over operations. 
C)  It may eliminate the control provided by division of duties of independent persons who perform related functions and compare results. 
D)  It may take the recordkeeping function and the document preparation function away from those who have custody of assets and put those functions into the IT center. 
A)  It usually centralizes data. 
B)  It permits higher quality and more consistent controls over operations. 
C)  It may eliminate the control provided by division of duties of independent persons who perform related functions and compare results. 
D)  It may take the recordkeeping function and the document preparation function away from those who have custody of assets and put those functions into the IT center.

Question 6

When auditing a client that uses batch processing the problem with error detection is that:

Accepted Answer

A)  transaction trails in a batch system are available only for a limited period of time. 
B)  there are time delays in processing transactions in a batch system. 
C)  errors in some transactions cause rejection of other transactions in the batch. 
D)  random errors are more likely in a batch system than in an online system. 
A)  transaction trails in a batch system are available only for a limited period of time. 
B)  there are time delays in processing transactions in a batch system. 
C)  errors in some transactions cause rejection of other transactions in the batch. 
D)  random errors are more likely in a batch system than in an online system.

Question 7

LANs link equipment within a single or small cluster of buildings and are used only for intercompany purposes.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an application control?

Accepted Answer

A)  preprocessing authorization of sales transactions 
B)  reasonableness test for unit selling price of sale 
C)  post-processing review of sales transactions by the sales department 
D)  logging in to the company's information systems via a password 
A)  preprocessing authorization of sales transactions 
B)  reasonableness test for unit selling price of sale 
C)  post-processing review of sales transactions by the sales department 
D)  logging in to the company's information systems via a password

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

When the client uses a computer but the auditor chooses to use only the non-IT segment of internal control to assess control risk, it is referred to as auditing around the computer. Which one of the following conditions need not be present to audit around the computer?

Accepted Answer

A)  Application controls need to be integrated with general controls. 
B)  The source documents must be available in a non-machine language. 
C)  The documents must be filed in a manner that makes it possible to locate them. 
D)  The output must be listed in sufficient detail to enable the auditor to trace individual transactions. 
A)  Application controls need to be integrated with general controls. 
B)  The source documents must be available in a non-machine language. 
C)  The documents must be filed in a manner that makes it possible to locate them. 
D)  The output must be listed in sufficient detail to enable the auditor to trace individual transactions.

Question 11

Control risk may be reduced for a company with a complex IT system when compared to a company that relies primarily on manual controls.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  gain the permission of the service center to review their work. 
B)  find compatible programs that will analyze the service center's programs. 
C)  determine the adequacy of the service center's internal controls. 
D)  try to abide by the Code of Professional Conduct to maintain the security and confidentiality of client's data. 
A)  gain the permission of the service center to review their work. 
B)  find compatible programs that will analyze the service center's programs. 
C)  determine the adequacy of the service center's internal controls. 
D)  try to abide by the Code of Professional Conduct to maintain the security and confidentiality of client's data.

Question 13

Service auditors do not issue which of the following types of reports?

Accepted Answer

A)  report on implemented controls 
B)  report on controls that have been implemented and tested for design effectiveness 
C)  report on controls that have been implemented and tested for operating effectiveness 
D)  each of the above is issued 
A)  report on implemented controls 
B)  report on controls that have been implemented and tested for design effectiveness 
C)  report on controls that have been implemented and tested for operating effectiveness 
D)  each of the above is issued

Question 14

Describe three computer auditing techniques available to the auditor.

Accepted Answer

Computer auditing techniques available t

Question 15

Auditors normally link controls and deficiencies in general controls to specific transaction-related audit objectives.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best describes the test data approach?

Accepted Answer

A)  auditors process their own test data using the client's computer system and application program 
B)  auditors process their own test data using their own computers that simulate the client's computer system 
C)  auditors use auditor-controlled software to do the same operations that the client's software does, using the same data files 
D)  auditors use client-controlled software to do the same operations that the client's software does, using auditor created data files 
A)  auditors process their own test data using the client's computer system and application program 
B)  auditors process their own test data using their own computers that simulate the client's computer system 
C)  auditors use auditor-controlled software to do the same operations that the client's software does, using the same data files 
D)  auditors use client-controlled software to do the same operations that the client's software does, using auditor created data files

Question 17

Programmers should design the formatting for transactions data.

Accepted Answer

A) True 
 B)False

Question 18

An important characteristic of IT is uniformity of processing. Therefore, a risk exists that:

Accepted Answer

A)  auditors will not be able to access data quickly. 
B)  auditors will not be able to determine if data is processed consistently. 
C)  erroneous processing can result in the accumulation of a great number of misstatements in a short period of time. 
D)  all of the above. 
A)  auditors will not be able to access data quickly. 
B)  auditors will not be able to determine if data is processed consistently. 
C)  erroneous processing can result in the accumulation of a great number of misstatements in a short period of time. 
D)  all of the above.

Question 19

When auditing client's using database management systems the auditor is principally aware of elevated risk due to:

Accepted Answer

A)  multiple users can access and update accounting files. 
B)  the accounting information is only in one place. 
C)  the database administrator may lack appropriate accounting knowledge. 
D)  multiple users could all access the data simultaneously causing system shutdown. 
A)  multiple users can access and update accounting files. 
B)  the accounting information is only in one place. 
C)  the database administrator may lack appropriate accounting knowledge. 
D)  multiple users could all access the data simultaneously causing system shutdown.

Question 20

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

Accepted Answer

A)  examination of system documentation 
B)  inquiry of client personnel (e.g., key users) 
C)  walk through of a sales transaction 
D)  reviews of questionnaires completed by client IT personnel 
A)  examination of system documentation 
B)  inquiry of client personnel (e.g., key users) 
C)  walk through of a sales transaction 
D)  reviews of questionnaires completed by client IT personnel

Exam 12: The Impact of Information Technology on the Audit Process

A database management system:

Processing controls include the following tests: Validation Sequence Data Reasonableness Completeness Describe what each control is designed to do:

Knowledge of both general and application controls is crucial for auditors in understanding how accounting information is recorded and reported.

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

Which of the following is not a characteristic associated with converting from a manual to an IT system?

When auditing a client that uses batch processing the problem with error detection is that:

LANs link equipment within a single or small cluster of buildings and are used only for intercompany purposes.

Which of the following is not an application control?

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

When the client uses a computer but the auditor chooses to use only the non-IT segment of internal control to assess control risk, it is referred to as auditing around the computer. Which one of the following conditions need not be present to audit around the computer?

Control risk may be reduced for a company with a complex IT system when compared to a company that relies primarily on manual controls.

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

Service auditors do not issue which of the following types of reports?

Describe three computer auditing techniques available to the auditor.

Auditors normally link controls and deficiencies in general controls to specific transaction-related audit objectives.

Which of the following best describes the test data approach?

Programmers should design the formatting for transactions data.

An important characteristic of IT is uniformity of processing. Therefore, a risk exists that:

When auditing client's using database management systems the auditor is principally aware of elevated risk due to:

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

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

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 and Balances

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

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

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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