Question 1

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 2

Auditors often use their own software to test the client's IT controls.

Accepted Answer

A) True 
 B)False

Question 3

When using the test data approach:

Accepted Answer

A) test data should include data that the client's system should accept or reject. 
B) application programs tested must be virtually identical to those used by employees. 
C) select data may remain in the client system after testing. 
D) none of the above statements is correct.

Question 4

________ is not a risk specific to the IT environments.

Accepted Answer

A) Reliance on the functioning capabilities of hardware and software 
B) Increased human involvement 
C) Loss of data due to insufficient backup 
D) Unauthorized access

Question 5

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 6

Parallel testing is more expensive than pilot testing.

Accepted Answer

A) True 
 B)False

Question 7

A large portion of errors in IT systems result from data entry errors.

Accepted Answer

A) True 
 B)False

Question 8

Auditors:

Accepted Answer

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.

Question 9

Match between columns
                        Premises: Controls that apply to processing of transactions.
Controls such as proper authorization of documents, check digits, and adequate documentation, designed to assure that the information to be processed by the computer is authorized, complete, and accurate.
Involves the use of a computer program written by the auditor that replicates some part of a client's application system.
A new system is implemented in one part of the organization while other locations continue to rely on the old system.
A method of auditing IT systems which uses data created by the auditor to determine whether the client's computer program can correctly process valid and invalid transactions.
Controls such as review of data for reasonableness, designed to assure that data generated by the computer is valid, accurate, complete, and distributed only to authorized people.
Controls that relate to all parts of the IT system.
The new and old systems operate simultaneously in all locations.

Accepted Answer

The Answer of Parallel simulation and Generalized audit software and is...

Question 10

General controls include all of the following except:

Accepted Answer

A) systems development. 
B) online security. 
C) processing controls. 
D) hardware controls.

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is correct?

Accepted Answer

A) Auditors should evaluate application controls before evaluating general controls. 
B) Auditors should evaluate application controls and general controls simultaneously. 
C) Auditors should evaluate general controls before evaluating application controls. 
D) None of these statements is correct.

Question 13

Which of the following is not a benefit of using IT-based controls?

Accepted Answer

A) Ability to process large volumes of transactions 
B) Ability to replace manual controls with computer-based controls 
C) Reduction in misstatements due to consistent processing of transactions 
D) Reduction in internal control evaluation in setting control risk

Question 14

When the auditor is obtaining an understanding of the independent computer service center's internal controls the auditor should:

Accepted Answer

A) use the same criteria used to evaluate the client's internal controls. 
B) use different criteria because the service center resides outside the company. 
C) use the same criteria used to evaluate the client's internal controls but omit tests of transactions. 
D) use different criteria for the service center by including substantive tests of balances.

Question 15

Which of the following is not seen as an advantage to using generalized audit software (GAS)?

Accepted Answer

A) Auditors can learn the software in a short period of time. 
B) It can be applied to a variety of clients after detailed customizations. 
C) It can be applied to a variety of clients with minimal adjustments to the software. 
D) It greatly accelerates audit testing over manual procedures.

Question 16

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:

Accepted Answer

A) the test data approach. 
B) called auditing around the computer. 
C) the generalized audit software approach. 
D) the microcomputer-aided auditing approach.

Question 17

Which of the following is a component of general controls?

Accepted Answer

A) Processing controls 
B) Output controls 
C) Back-up and contingency planning 
D) Input controls

Question 18

Which of the following controls prevent and detect errors while transaction data are processed?

Accepted Answer

A) Software 
B) Application 
C) Processing 
D) Transaction

Question 19

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?

Accepted Answer

A) Auditors do not link IT controls to audit objectives. 
B) After identifying specific IT-based application controls that can be used to reduce control risk, auditors can reduce substantive testing. 
C) General controls affect audit objectives in only one cycle. 
D) The impact of general controls and application controls on audits does not vary depending on the level of complexity in the IT environment.

Question 20

Security controls should require that users enter a(n)________ before being allowed access to software and other related data files.

Accepted Answer

A) echo check 
B) parity check 
C) self-diagnosis test 
D) authorized password

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

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

Auditors often use their own software to test the client's IT controls.

When using the test data approach:

________ is not a risk specific to the IT environments.

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

Parallel testing is more expensive than pilot testing.

A large portion of errors in IT systems result from data entry errors.

Auditors:

Match eight of the terms (a-n)with the definitions provided below (1-8):

General controls include all of the following except:

Which of the following statements is correct?

Which of the following is not a benefit of using IT-based controls?

When the auditor is obtaining an understanding of the independent computer service center's internal controls the auditor should:

Which of the following is not seen as an advantage to using generalized audit software (GAS) ?

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:

Which of the following is a component of general controls?

Which of the following controls prevent and detect errors while transaction data are processed?

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?

Security controls should require that users enter a(n) ________ before being allowed access to software and other related data files.