Question 1

Although IT can enhance a company's internal control, it can also affect a company's overall control risk. Identify any four of these new risks specific to IT environments.

Accepted Answer

The answer of Although IT can enhance a company's internal...

Question 2

An advantage of generalised audit software (GAS) is the ability to access and test client data independently.

Accepted Answer

GAS allows auditors to access and test client data independently, reducing the risk of errors or fraud. This feature also helps auditors to perform testing efficiently and effectively.

Question 3

An auditor who is testing IT controls in a payroll system would most likely use test data that contains conditions such as:
A) time tickets with invalid job numbers.
B) deductions not authorised by employees.
C) overtime not approved by supervisors.
D) payroll cheques with unauthorised signatures.

Accepted Answer

Test data with invalid job numbers helps the auditor assess whether the system correctly identifies and rejects invalid inputs, which is a key IT control in payroll systems.

Question 4

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

The answer of There are three concerns or difficulties that...

Question 5

General controls are normally evaluated earlier in the audit than application controls.

Accepted Answer

General controls are evaluated earlier in the audit process than application controls because they provide the foundation for effective application controls.

Question 6

The perceived importance of IT within an organisation is often dictated by the attitude of the audit committee.

Accepted Answer

The answer of The perceived importance of IT within an...

Question 7

In IT systems, if general controls are effective, it increases the auditor's ability to rely on application controls to reduce control risk.

Accepted Answer

General controls form the foundation for application controls. If general controls (such as access controls, change management, backup and recovery procedures) are effective, it increases the auditor's confidence in the overall IT system and the ability to rely on application controls to reduce control risk. However, if general controls are weak, it can increase the auditor's assessment of control risk and require more extensive testing of application controls.

Question 8

Provide five examples of different IT environments the auditor may encounter.

Accepted Answer

The answer of Provide five examples of different IT environments...

Question 9

Describe four common audit tasks that can be simplified by the use of microcomputers in practice.

Accepted Answer

The answer of Describe four common audit tasks that can...

Question 10

Using the test data approach, the auditor processes a set of the client's actual transaction data using the auditor's computer programs on the auditor's computer equipment to determine whether the client's computer programs and equipment are processing data correctly.

Accepted Answer

In the test data approach, the auditor uses their own or specially prepared data to test the client's computer programs and equipment, not the client's actual transaction data.

Question 11

When the auditor decides to audit around the computer, he or she is not required to test the client's IT controls.

Accepted Answer

Auditing around the computer means the auditor focuses on verifying the input data and the output results without assessing the internal workings or controls of the IT system.

Question 12

The objective of the computer audit technique known as the test data approach is to determine whether the client's computer programs can correctly process valid and invalid transactions.

Accepted Answer

The test data approach is used to test the client's computer programs by running test transactions that are designed to be both valid and invalid. The objective is to determine if the programs can correctly process these transactions and produce accurate results.

Question 13

Discuss what is meant by the term 'auditing through the computer'.

Accepted Answer

The answer of Discuss what is meant by the term...

Question 14

Data Corporation has just completely computerised its billing and accounts receivable record- keeping. Your firm has recently acquired IDEA software and you want to make maximum use of the computer in your audit of Data Corporation. Which of the following audit techniques could NOT be performed using generalised audit software?
A) Selecting a sample of accounts to be confirmed and printing confirmation requests
B) Comparing data on separate files
C) Resolving differences reported by customers on confirmation requests
D) Examining records for quality, completeness, consistency and correctness

Accepted Answer

While generalised audit software can perform many audit techniques, such as selecting a sample of accounts to be confirmed and printing confirmation requests, comparing data on separate files, and examining records for quality, completeness, consistency, and correctness, it cannot resolve differences reported by customers on confirmation requests. This requires a human element to investigate and communicate with customers to resolve any discrepancies.

Question 15

Systems development, operations and data control, and librarianship are separated in an IT system.

Accepted Answer

Systems development, operations and data control, and librarianship are often separated into different departments or functions within an IT system to ensure efficient and effective management of resources and responsibilities.

Question 16

One key to a backup and contingency plan is to make sure that all critical copies of software and data files are backed up and stored off- premises.

Accepted Answer

Storing backups off-premises helps ensure that they are protected from events that may damage or destroy on-site copies, such as fires, floods, or theft.

Question 17

Tests of controls are normally performed only if the auditor believes the client's internal control may be effective.

Accepted Answer

The answer of Tests of controls are normally performed only...

Question 18

Discuss how the integration of IT into accounting systems enhances internal control.

Accepted Answer

The answer of Discuss how the integration of IT into...

Question 19

A common assumption is that 'the information is because the computer produced it'.
A) relevant
B) dubious
C) substantive
D) correct

Accepted Answer

The answer of A common assumption is that 'the information...

Question 20

Identify the three categories of application controls and give one example of each.

Accepted Answer

The answer of Identify the three categories of application controls...

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