Aud 7 8 - hakdog PDF

Preview

Summary

Multiple Choice Questions: The characteristics that distinguish computer processing from manual processing include the following: (1) Computer processing uniformly subjects like transactions to the instructions. (2) Computer systems always ensure that complete transaction trails useful for audit pur...

Description

Multiple Choice Questions: The characteristics that distinguish computer processing from manual processing include the following: (1) Computer processing uniformly subjects like transactions to the instructions. (2) Computer systems always ensure that complete transaction trails useful for audit purposes are preserved for indefinite periods. (3) Computer processing virtually eliminates the occurrence of clerical errors normally associated with manual processing. (4) Control procedures as to segregation of functions may no longer be necessary in computer environment. a. All of the above statements are true. b. Only statements (2) and (4) are true. c. Only statements (1) and (3) are true d. All of the above statements are false. 2. Which of the following statements is not correct? a. The overall objective and scope of an audit do not change in a CIS environment. b. When computers or AIS are introduced, the basic concept of evidence accumulation remains the same. c. Most CIS rely extensively on the same type of procedures for control that are used in manual processing system. d. The specific methods appropriate for implementing the basic auditing concepts do not change, as systems become more complex. 3. The use of CIS will least likely affect the a. The procedures followed by the auditor in obtaining a sufficient understanding of the accounting and internal control systems. b. The auditor's specific audit objectives. C. The consideration of inherent risk and control risk through which the auditor arrives at the risk assessment. d. The auditor's design and performance of tests of control and substantive procedures appropriate to meet the audit objective. 4. Which of the following is unique to CIS a.Error listing b. Flowchart c.Questionnaires d. Pre-numbered documents 5. Where computer processing is used in significant accounting applications, internal control procedures may be defined by classifying control procedures in two types: general and a. Administrative c. Application d. Authorization b. Specific

6. A control which relates to all parts of the CIS is called a(n) a. Systems control b. General control c. Applications control d. Universal control 7. Controls which apply to a specific use of the system are called a. Systems controls b. General controls. c. Applications controls d. User controls 8. Some as control procedures relate to all as activities (general controls) and some relate to specific tasks (application controls). General controls include a. Controls designed to ascertain that all data submitted to as for processing have been properly authorized. b. Controls that relate to the correction and resubmission of data that were initially incorrect C. Controls for documenting and approving programs and changes to programs d. Controls designed to assure the accuracy of the processing results. 9.An auditor anticipates assessing control risk at a low level in a CIS environment. Under these circumstances, on which of the following procedures would the auditor initially focus? á. Programmed control procedures b. Application control procedures c. Output control procedures d. General control procedures 10. Which of the following is not a general control? a. The plan of organization and operation of CIS activity. b. Procedures for documenting, reviewing, and approving systems and programs. c. Processing controls. d. Hardware controls. 11. Which of the following activities would most likely be performed in the CIS department? a. Initiation of changes to master records b. Conversion of information to machine-readable form. c. Correction of transactional errors. d. Initiation of changes to existing applications. 12. For control purposes, which of the following should be organizationally segregated from the computer operations functions? a. Data conversion b. Systems development c. Minor maintenance according to a schedule d. Processing of data

13. Where computers are used, the effectiveness of internal control depends, in part, upon whether the organizational structure includes any incompatible combinations. Such a combination would exist when there is no separation of the duties between a. Documentation librarian and manager of programming B. Programming and computer operator C. Systems analyst and programmer d. Processing control clerk and keypunch supervisor 14. Which of the following is a general control that would most likely assist an entity whose system analyst left the entity in the middle of a major project? a. Grandfather-father-son record retention. b. Data encryption c Systems documentation. d. Check digit verification. 15. Internal control is ineffective when computer department personnel a. Participate in computer software acquisition decision. b. Design documentation for computerized systems. c. Originate changes in master files. d. Provide physical security for program files. 16. Access control in an on-line CIS can best be provided in most circumstances by a. An adequate librarianship function controlling access to files. b. A label affixed to the outside of a file medium holder that identifies the contents. c. Batch processing of all input through a centralized, well-guarded facility. d. User and terminal identification controls, such as passwords. 17. Adequate control over access to data processing is required to a. Deter improper use or manipulation of data files and programs, b. Ensure that only console operators have access to program documentation. c. Minimize the need for backup data files. d. Ensure that hardware controls are operating effectively and as designed by the computer manufacturer. 18. The management of ABC Co. suspects that someone is tampering with pay rates by entering changes through the Co.'s remote terminals located in the factory. The method ABC Co. should implement to protect the system from these unauthorized alterations to the system's files is a. Batch totals b. Checkpoint recovery c. Passwords d. Record count 19. The possibility of losing a large amount of information stored in computer files most likely would be reduced by the use of a. Back-up files c. Completeness tests b. Check digits d. Conversion verification.

20. Which of the following controls most likely would assure that an entity can reconstruct its financial records? a. Hardware controls are built into the computer by the manufacturer, computer b. Backup diskettes or tapes of files are stored away from originals. c. Personnel who are independent of data input perform parallel simulations. d. System flowcharts provide accurate descriptions of input and output operations. 21. Unauthorized alteration of on-line records can be prevented by employing: a. Key verification b. Computer sequence checks c. Computer matching d. Data base access controls 22. A Co. updates its accounts receivable master file weekly and retains the master files and corresponding update transactions for the most recent 2-week period. The purpose of this practice is to a. Verify run-to-run control totals for receivables. b. Match internal labels to avoid writing on the wrong volume. c. Permit reconstruction of the master file if needed. d. Validate groups of update transactions for each 23. Which of the following is not an example of an application control? a. An equipment failure causes an error message on the monitor. b. There is a preprocessing authorization of the sales transactions. c. There are reasonableness tests for the unit-selling price of a sale. d. After processing, all sales transactions are reviewed by the sales department. 24. Which of the following is not a processing control? a. Control risk b. reasonable test c. Check digits d. Control total 25. When CIS programs or files can be accessed from terminals, users should be required to enter a(n) a. Parity check c. Self-diagnosis test. b. Personal identification code d. Echo check 26. Which of the following is an example of a check digit? a. An agreement of the total number of employees to the total number of checks printed by the computer. b. An algebraically determined number produced by the other digits of the employee number. c. A logic test that ensures all employee numbers are nine digits. d. A limit check that an employee's hours do not exceed 50 hours per work week

27. The completeness of computer-generated sales figures can be tested by comparing the number of items listed on the daily sales with the number of items billed on the actual invoices. This process uses a. Check digits c. Validity tests. b, Control totals d. Process tracing data. 28. Which of the following is correct? a Check digits should be used for all data codes. b. Check digits are always placed at the end of a data code. c. Check digits do not affect processing efficiency. d. Check digits are designed to detect transcription errors. 29. A clerk inadvertently entered an account number 12368 rather than account number 12638. In processing this transaction, the error would be detected with which of the following controls? a. Batch total c. Self-checking digit b. Key verifying d. An internal consistency check 30. Totals of amounts in computer-record data fields, which are NOT usually added but are used only for data processing control are called purposes a. Records totals b. Hash totals c. Processing data totals d. Field totals. 31. If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll CIS application? a. Net pay. b. Hours worked. C. Department numbers d. Total debits and total credits. 32. In updating a computerized accounts receivable file, which one of the following would be used as a batch control to verify the accuracy of the posting of cash receipts remittances? a. The sum of the cash deposits plus the discounts less the sales returns. b. The sum of the cash deposits. c. The sum of the cash deposits less the discounts taken by customers. d. The sum of the cash deposits plus the discounts taken by customers. 33. Which statement is NOT correct? The goal of batch controls is ensure that during processing a. transactions are not omitted. c. transactions are processed more than once. b. transactions are not added d. an audit trail is created.

34. An example of a hash total is a. total payroll checks - P12,315. b. total number of employees - 10. c. sum of the social security numbers - 12,555,437,251. d. none of the above. 35. The employee entered "40" in the "hours worked per day field. Which check would detect this unintentional error? a. numeric/alphabetic check c. limit check b. sign check d. missing data check 36. An unauthorized employee took computer printouts from output bins accessible to all employees. A control which would have prevented this occurrence is a. A storage/retention control. c. An output review control. b. A spooler file control. d. A report distribution control. 37. It involves application of auditing procedures using the computer as an audit tool. This includes computer programs and data the auditor uses as part of the audit procedures to process data of audit significance contained in an entity's information systems. a. test data approach b. computer assisted audit techniques c. generalized audit software d. auditing around the computer 38. When auditing “around” the computer, the independent auditor focuses solely upon the source documents and a. Test data C. Compliance techniques b. CIS processing d. CIS output 39. Which of the following AIS generally can be audited without examining, or directly testing the computer programs of the system? A. A system that performs relatively uncomplicated processes and produces detail output b. A system that affects a number of essential master files and produces no a limited output C. A system that updates a few essential master files and produces no printed output other than final balances d. A system that uses an on-line real-time processing feature.

40. Which of the following procedures is an example of auditing "around" the computer? a. The auditor traces adding machine tapes of sales order batch totals to a computer printout of the sales journal b. The auditor develops a set of hypothetical sales transactions and,using the client's computer program, enters the transactions into the system and observes the processing flow. c. The auditor enters hypothetical transactions into the client's processing system during client processing of live" data. d. The auditor observes client personnel as they process the biweekly payroll. The auditor is primarily concemed with computer rejection of data that fails to meet reasonableness limits. 41. A disadvantage of auditing around the computer is that it a. Permits no direct assessment of actual processing. B. Requires highly skilled auditors c. Demands intensive use of machine resources. d. Interacts actively with auditee applications. 42. Auditing by testing the input and output of an IT system instead of the computer program itself will a. Not detect program errors which do not show up in the output sampled. b. Detect all program errors, regardless of the nature of the output c. Provide the auditor with the same type of evidence. d. Not provide the auditor with confidence in the results of the auditing procedures. 43. Which of the following is NOT a common type of white box approach? a. test data, c. auditing around the computer b. integrated test facility d. parallel simulation 44. Compliance testing of an advanced CIS a. Can be performed using only actual transactions since testing of simulated transactions is of no consequence b.Can be performed using actual transactions or simulated transactions c. Is impractical since many procedures within the AIS activity leave no visible evidence of having been performed d.Is inadvisable because it may distort the evidence in master files 45. Creating simulated transactions that are processed through a system to generate results that are compared with predetermined results, is an auditing procedure referred to as a. Program checking c. Completing outstanding jobs. b. Use of test data. d. Parallel simulation.

46. An auditor estimates that 10,000 checks were issued during the accounting period. If a computer application control which performs a limit check for each check request is to be subjected to the auditor's test data approach, the sample should include a. Approximately 1,000 test items b. A number of test items determined by the auditor to be sufficient under the circumtances. c. A number of test items determined by the auditor's reference to the appropriate sampling tables d. One transaction 47. An integrated test facility (ITF) would be appropriate when the auditor needs to a Trace a complex logic path through an application system. b Verify processing accuracy concurrently with processing. Ć Monitor transactions in an application system continuously. d. Verify load module integrity for production programs. 48. The auditor's objective to determine whether the client's computer programs can correctly handle valid and invalid transactions as they arise is accomplished through the a. Test data approach. b. Generalized audit software approach. c. Microcomputer-aided auditing approach. d. Generally accepted auditing standards. 49. When an auditor tests a computerized accounting system, which of the following is true of the test data approach? a. Several transactions of each type must be tested only one b. Test data must consist of all possible valid and invalid conditions C. The program tested is different from the program used throughout the year by the client d. Test data are processed by the client's computer programs under the auditor's control 50. Which of the following statements is not true to the test data approach when testing a computerized accounting system? a. The test needs to consist of only those valid and invalid conditions which interest the auditor b. Only one transaction of each type need be tested c. The test data must consist of all possible valid and invalid condition's d. Test data are processed by the client's computed programs under the auditor's control 51. In auditing through a computer, the test data method is used by auditors to test the a. Accuracy of input data. b. Validity of the output. c. Procedures contained within the program d. Normalcy of distribution of test data. 52. Which of the following computer-assisted auditing techniques allows fictitious and real transactions to be processed together without client operating personnel being aware of the testing process? a. Parallel simulation. b. Generalized audit software programming. c. Integrated test facility. d. Test data approach.

53. A primary reason auditors are reluctant to use an ITF is that it requires them to a. Reserve specific master file records and process them at regular intervals b. Collect transaction and master file records in a separate file c. Notify user personnel so they can make manual adjustments to output d. Identify and reverse the fictitious entries to avoid contamination of the master file 54. Which of the following is a disadvantage of the integrated test facility approach? a. In establishing fictitious entities, the auditor be compromising audit independence. b. Removing the fictitious transactions from the system is somewhat difficult and, if not done carefully, may contaminate the client's files. c. ITF is simply an automated version of auditing "around" the computer. d. The auditor may not always have a current copy of the authorized version of the client's program. 55. The audit approach in which the auditor runs his/her own program on a machine language is controlled basis in order to verify the client's data recorded in a a. The test data approach.' b. The generalized audit software approach. c. The microcomputer-aided auditing approach. d. Called auditing around the computer. 56. This question is based on the following flowchart: a. Program code checking b. Parallel simulation c. Integrated test facility d. Controlled reprocessing 57. Which of the following methods of testing application controls utilizes a generalized audit software package prepared by the auditors? a. Parallel simulation b. Integrated testing facility approach c. Test data approach d. Exception report tests 58. Parallel simulation is an audit technique employed to verify processing by making use of audit test programs. These audit test programs “simulate the processing logic of an application program or progress under review. Which statement indicates the use of parallel simulation audit techniques? a. Live transactions are processed using live programs b. Live transactions are processed with test master file c. Test transactions are processed using test programs d. Live transactions are processed using test programs

CHAPTER 8 PERFORMING SUBSTANTIVE TESTS Multiple Choice Questions Substantive Tests 1. In the context of an audit of financial statements, substantive tests are audit procedures that a. May be eliminated under certain conditions. b. Are designed to discover significant subsequent events. c. May be either tests of transactions, direct tests of financial balances, or analytical tests. d. Will increase proportionately with the auditor's assessment of control risk. 2. Which of the following statements concerning analytical procedures is correct? a. Analytical review may be omitted entirely for some financial statement audits. b. Analytical procedures used in planning an audit should not use non- financial information. c. Analytical procedures are usually effective and efficient for tests of controls d. Analytical procedures alone may provide the appropriate level of assurance for some assertions. 3. Of the following procedures, which does not produce analytical evidence? a. Compare revenue, cost of sales, and gross profit with the prior year and investigate significant variations. b. Examine monthly performance reports and investigate significant revenue and expense variances. c. Confirm customers' accounts receivable and clear all material exceptions. d. Compare sales trends and profit margins with industry averages and investigate significant differences. 4. Which of the following comparisons is most useful to an auditor in evaluating the results of an entity's operations? a. Prior year accounts payable to current year accounts...