Question 1

The primary objective of compliance testing in a financial statement audit is to determine whether:

Accepted Answer

A)  Procedures have been updated regularly.
B)  Financial statement amounts are accurately stated.
C)  Internal controls are functioning as designed.
D)  Collusion is taking place. C

Question 2

The two broad categories of general controls that relate to IT systems include which of the following:

Accepted Answer

A)  IT systems documentation
B)  IT administration and the related operating systems development and maintenance processes
C)  Authenticity table
D)  Computer security and virus protection B

Question 3

Which of the following computer-assisted auditing techniques allows fictitious and real transactions to be processed together without client personnel being aware of the testing process?

Accepted Answer

A)  Test data method
B)  Embedded audit module
C)  Integrated test facility
D)  Parallel simulation C

Question 4

A large part of the work performed by an auditor in the audit planning process is the gathering of evidence about the company's internal controls.This can be completed in any of the following ways, except:

Accepted Answer

A)  Interviewing key members of the accounting and IT staff
B)  Observing policies and procedures
C)  Review IT user manuals and systems
D)  Preparing memos to summarize their findings

Question 5

Which management assertion determines that transactions and related asset accounts balances are actually owned and that liability account balances represent actual obligations?

Accepted Answer

A)  Valuation and Allocation
B)  Existence
C)  Rights and Obligations
D)  Classification and Presentation

Question 6

Which of the following types of audits is most likely to be conducted for the purpose of identifying areas for cost savings?

Accepted Answer

A)  Financial statement audits
B)  Operational audits
C)  Regulatory audits
D)  Compliance audits

Question 7

IT audit procedures typically include a combination of data accuracy tests where the data processed by computer applications are reviewed for correct dollar amounts or other numerical values.These procedures are referred to as:

Accepted Answer

A)  Security controls
B)  Processing controls
C)  Input controls
D)  Output controls

Question 8

Audit procedures designed to evaluate both general controls and application controls are referred to as:

Accepted Answer

A)  Substantive tests
B)  Audit planning
C)  IT auditing
D)  Test of controls

Question 9

Techniques used for gathering evidence include all of the following, except:

Accepted Answer

A)  Physical examination of assets or supporting documentation
B)  Observing activities
C)  Adequate planning and supervision
D)  Analyzing financial relationships

Question 10

In addition to testing system documentation, auditors should test the three main functions of computer applications.Which of the following is not one of these functions?

Accepted Answer

A)  Output
B)  Input
C)  Processing
D)  Data storage

Question 11

During substantive testing, if material misstatements have been found to exist, which of the following actions should be taken next?

Accepted Answer

A)  Proceed to the audit completion in the reporting phase
B)  Re-evaluate the audit risk in the planning phase
C)  Re-perform detailed tests of balances
D)  Re-perform an internal controls systems analysis

Question 12

The proof of the fairness of the financial information is:

Accepted Answer

A)  Tests of controls
B)  Substantive tests
C)  Audit completion
D)  Audit evidence

Question 13

This concept means that the auditors should not automatically assume that their clients are honest, but that they (the auditors) must have a questioning mind and a persistent approach to evaluating evidence for possible misstatements.

Accepted Answer

A)  Independence
B)  Integrity
C)  Due care
D)  Professional skepticism

Question 14

Which of the following is most likely to be an attribute unique to the financial statement audit work of CPAs, compared with work performed by attorneys or practitioners of other business professions?

Accepted Answer

A)  Due professional care
B)  Competence
C)  Independence
D)  A complex underlying body of professional knowledge

Question 15

Which of the following audit objectives relates to the management assertion of existence?

Accepted Answer

A)  A transaction is recorded in the proper period.
B)  A transaction actually occurred (i.e., it is real) .
C)  A transaction is properly presented in the financial statements.
D)  A transaction is supported by detailed evidence.

Question 16

Related audit tests to review the existence and communication of company policies regarding important aspects of IT administrative control include all of the following, except:

Accepted Answer

A)  Personal accountability and segregation of incompatible responsibilities 
B)  Job description and clear lines of authority
C)  Prevention of unauthorized access
D)  IT systems documentation

Question 17

The generally accepted auditing standards are divided into three groups.Which of the following is not one of those groups?

Accepted Answer

A)  General Standards
B)  Basic Standards
C)  Standards of Fieldwork
D)  Standards of Reporting

Question 18

Which of the following is the most effective way of auditing the internal controls of an IT system?

Accepted Answer

A)  Auditing with the computer
B)  Auditing through the computer
C)  Auditing around the computer
D)  Auditing in the computer

Question 19

Controls meant to prevent the destruction of information as the result of unauthorized access to the IT system are referred to as:

Accepted Answer

A)  IT administration
B)  System controls
C)  Information administration
D)  Security controls

Question 20

This type of processing control test involves a comparison of different items that are expected to have the same values, such as comparing two batches or comparing actual data against a predetermined control total.

Accepted Answer

A)  Validation checks
B)  Batch totals
C)  Run-to-Run totals
D)  Balancing tests

Exam 7: Auditing Information Technology-Based Processes