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. 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.

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.

(True/False)

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Question 41

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

(True/False)

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Question 42

When using the test data approach:

(Multiple Choice)

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Question 43

________ is not a risk specific to the IT environments.

(Multiple Choice)

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Question 44

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

(True/False)

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Question 45

Parallel testing is more expensive than pilot testing.

(True/False)

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Question 46

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

(True/False)

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Question 47

Auditors:

(Multiple Choice)

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Question 48

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

Controls that apply to processing of transactions.

Parallel simulation

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.

Generalized audit software

Involves the use of a computer program written by the auditor that replicates some part of a client's application system.

Test data approach

Correct Answer:

Verified

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.

(Matching)

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Question 49

General controls include all of the following except:

(Multiple Choice)

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Question 50

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.

(True/False)

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Question 51

Which of the following statements is correct?

(Multiple Choice)

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Question 52

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

(Multiple Choice)

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Question 53

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

(Multiple Choice)

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Question 54

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

(Multiple Choice)

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Question 55

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:

(Multiple Choice)

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Question 56

Which of the following is a component of general controls?

(Multiple Choice)

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Question 57

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

(Multiple Choice)

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Question 58

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?

(Multiple Choice)

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Question 59

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

(Multiple Choice)

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Question 60

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:

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.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

Overall Audit Strategy 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 of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, 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 and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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