Question 1

One potential disadvantage of IT systems is the increased risk of destruction of entire data files.

Accepted Answer

A) True 
 B)False

Question 2

Pre- designed formats for audit working papers and letters can be created and saved using both electronic spreadsheets and word processors. These are called:

Accepted Answer

A)   audit software.
B)   macros.
C)   templates.
D)   desktop publishing.E) B) and D)
F) B) and C)

Question 3

One common use of generalised audit software is to help the auditor identify weaknesses in the client's IT control procedures.

Accepted Answer

A) True 
 B)False

Question 4

A control which relates to all parts of the IT system is called:

Accepted Answer

A)   a systems control.
B)   an applications control.
C)   a universal control.
D)   a general control.E) C) and D)
F) A) and D)

Question 5

Assume you are using generalised audit software (GAS) during your audit of accounts receivable. Discuss four kinds of tests or audit procedures you can perform with the GAS if the client's data are in machine- readable form.

Accepted Answer

Examples of the types of tests that can ...

Question 6

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 in order to audit around the computer?

Accepted Answer

A)   Computer programs must be available in English.
B)   User controls include comparison of computer- produced records with source documents.
C)   The accounting software can display or print ledger balances and transaction details that allow the auditor to trace individual transactions through the accounting records.
D)   The source documents are available in a readable form and can be traced easily through the accounting system to output.E) A) and B)
F) None of the above

Question 7

There are three concerns or difficulties that must be overcome before the test data approach can be used by the auditor. Discuss each of these concerns.

Accepted Answer

Three concerns to be addressed before th...

Question 8

The objective of understanding internal control and assessing control risk in an IT system is:

Accepted Answer

A)   to gain an understanding of the computer hardware and software.
B)   to evaluate management's efficiency in designing and using the IT system.
C)   to determine if the audit firm must have an IT auditor on the team.
D)   to aid in determining the audit evidence that should be accumulated.E) A) and B)
F) All of the above

Question 9

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

Accepted Answer

The responsibilities for IT management, ...

Question 10

Application controls vary with each application in the IT system. In attempting to review and gain an understanding of the internal control system, the auditor must evaluate the application controls for:

Accepted Answer

A)   every audit area.
B)   every material audit area.
C)   every audit area in which the client uses the computer.
D)   every audit area where the auditor plans to reduce assessed control risk.E) A) and B)
F) None of the above

Question 11

Which of the following is NOT a general control?

Accepted Answer

A)   Post processing reviews
B)   Preparation of backup plans
C)   Access to hardware is restricted
D)   Equipment error causes error messages to appear on the computer monitorE) A) and B)
F) All of the above

Question 12

Should the auditor feel, after obtaining an understanding of IT internal control, that control risk cannot be reduced, he or she will:

Accepted Answer

A)   issue an adverse opinion.
B)   increase the sample size for tests of controls.
C)   issue a disclaimer.
D)   expand the substantive testing portion of the audit.E) B) and D)
F) All of the above

Question 13

The use of 'encryption' techniques protect the security of electronic communication during the:

Accepted Answer

A)   recording process.
B)   transmission process.
C)   data backup process.
D)   data output process.E) All of the above
F) C) and D)

Question 14

Which of the following is NOT a general control?

Accepted Answer

A)   Processing controls
B)   Procedures for documenting, reviewing and approving systems and payments
C)   Hardware controls
D)   The plan of organisation and operation of IT activityE) A) and B)
F) B) and C)

Question 15

Which of the following is NOT an application control?

Accepted Answer

A)   Reasonableness test for unit selling price of sale
B)   Preprocessing authorisation of sales transactions
C)   Separation of duties between computer programmer and operators
D)   Post- processing review of sales transactions by the sales departmentE) A) and B)
F) B) and D)

Question 16

When auditing a computerised system, an auditor may use the test data approach as an audit tool. This technique:

Accepted Answer

A)   involves introducing simulated transactions into the client's actual application program(s) .
B)   should not involve the actual application programs the client uses throughout the year, since use of the actual programs would contaminate the client's accounting data.
C)   is more applicable to independent audits than internal audits.
D)   is a commonly used audit technique for auditing around the computer.E) None of the above
F) A) and B)

Question 17

Encryption techniques protect the security of electronic communication during transmission.

Accepted Answer

A) True 
 B)False

Question 18

Oversight of the IT function to ensure that all activities are carried out consistently with the IT strategic plan is the responsibility of the:

Accepted Answer

A)   librarian.
B)   chief information officer.
C)   data control group.
D)   computer operators.E) A) and B)
F) B) and D)

Question 19

Control risk is often affected by a complex IT system even if it enhances internal controls.

Accepted Answer

A) True 
 B)False

Question 20

Parallel testing involves:

Accepted Answer

A)   requiring the user to re- input critical fields to verify accuracy of input.
B)   operating the old and the new system simultaneously.
C)   implementing a new system in one part of the organisation while other locations continue to rely on the old system.
D)   processing test data against a copy of the client's application program.E) None of the above
F) A) and B)

Exam 10: The Impact of Information Technology on the Audit Process

Should the auditor feel, after obtaining an understanding of IT internal control, that control risk cannot be reduced, he or she will:

Correct AnswerverifiedShow Answer

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 in order to audit around the computer?

Correct AnswerverifiedShow Answer

The objective of understanding internal control and assessing control risk in an IT system is:

Correct AnswerverifiedShow Answer

Oversight of the IT function to ensure that all activities are carried out consistently with the IT strategic plan is the responsibility of the:

Correct AnswerverifiedShow Answer

When auditing a computerised system, an auditor may use the test data approach as an audit tool. This technique:

Correct AnswerverifiedShow Answer

Which of the following is NOT a general control?

Correct AnswerverifiedShow Answer

One potential disadvantage of IT systems is the increased risk of destruction of entire data files.

Correct AnswerverifiedShow Answer

Parallel testing involves:

Correct AnswerverifiedShow Answer

The use of 'encryption' techniques protect the security of electronic communication during the:

Correct AnswerverifiedShow Answer

There are three concerns or difficulties that must be overcome before the test data approach can be used by the auditor. Discuss each of these concerns.

Correct AnswerverifiedThree concerns to be addressed before th...View AnswerShow Answer

Pre- designed formats for audit working papers and letters can be created and saved using both electronic spreadsheets and word processors. These are called:

Correct AnswerverifiedShow Answer

Encryption techniques protect the security of electronic communication during transmission.

Correct AnswerverifiedShow Answer

A control which relates to all parts of the IT system is called:

Correct AnswerverifiedShow Answer

Application controls vary with each application in the IT system. In attempting to review and gain an understanding of the internal control system, the auditor must evaluate the application controls for:

Correct AnswerverifiedShow Answer

Control risk is often affected by a complex IT system even if it enhances internal controls.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe responsibilities for IT management, ...View AnswerShow Answer

Which of the following is NOT an application control?

Correct AnswerverifiedShow Answer

Which of the following is NOT a general control?

Correct AnswerverifiedShow Answer

Assume you are using generalised audit software (GAS) during your audit of accounts receivable. Discuss four kinds of tests or audit procedures you can perform with the GAS if the client's data are in machine- readable form.

Correct AnswerverifiedExamples of the types of tests that can ...View AnswerShow Answer

One common use of generalised audit software is to help the auditor identify weaknesses in the client's IT control procedures.

Correct AnswerverifiedShow Answer

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Three concerns to be addressed before th...
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The responsibilities for IT management, ...
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Examples of the types of tests that can ...
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