Deck 9: Systems Work Basic Ideas 2

Question 1

Why have boundary controls become more important to companies in recent years?

A) Because company systems have become more distributed, allowing users to access them from distant locations.
B) Because companies have more valuable assets than in the past and therefore must increase physical security.
C) Because computer systems have higher inherent risk of internal errors not being detected.
D) Because employees have greater difficulty separating home and work life in a connected environment.

Answer 1

Because company systems have become more distributed, allowing users to access them from distant locations.

Question 2

Why would the auditor be interested to know that users of the information produced by computerized systems review the output for obvious errors?

A) This could be an effective control against systematic errors in the programmed instructions that produces unreliable or inaccurate information.
B) This could be an effective control against errors in inputting the data that produces unreliable or inaccurate information.
C) This could be an effective control against fraud that employees or external parties may be attempting to perpetrate against the company.
D) This could be an effective control against all the issues identified.

Answer 2

This could be an effective control against all the issues identified.

Question 3

An entity that carries on business over the internet raises some very specific issues that an Auditor needs to be aware of. Which of the following ISA Standards is particularly relevant in the context of selling over the internet?

A) ISA 520 Analytical Procedures
B) ISA 620 Using the Work of an Auditor's Expert
C) ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements
D) ISA 402 Audit Considerations Relating to an Entity Using a Service Organization

Answer 3

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements

Question 4

Which of the following is NOT an advantage of an auditor using an audit trail flow chart?

A) Flowcharts can be prepared by even inexperienced audit staff.
B) It is useful for explaining the strengths and weaknesses of an information trail.
C) It forces the auditor to really understand the system and entity controls.
D) It may identify unnecessary procedures and documents.

Question 5

What is the purpose of an internal control questionnaire?

A) To evaluate the internal control of an organization
B) To record the details of the internal control system
C) To identify staff that may have acted fraudulently
D) To test staff understanding of the control system

Question 6

An online business makes and then sells high-value, unique pieces of jewellery designed around Australian opals. Each opal has individual colour and pattern properties that make the pieces highly desirable. The website allows customers to place a selected piece of jewellery into a virtual shopping cart. Because of the high-value low-volume nature of the business, and as a unique selling point, at this point the item is removed from inventory and held for the customer. The customer has 72 hours to decide if they wish to proceed with the transaction. If the customer wishes to proceed, they must provide their payment details. Once funds are confirmed as transferred (this can take up to 48 hours) the item is shipped to the customer. Again because of the unique nature of each item, and as part of their commitment to customer service, the customer has a two-week, no questions asked, return window. A significant number of items is returned under this policy.
Which of the following is going to be the most significant risk the auditor is going to want to consider??

A) Agent versus principal considerations
B) The lack of credit checks of customers
C) Return of goods under warranty
D) When the transaction is deemed to have occurred