Question 1

Which of the following is not a risk in an IT system?
A)Need for IT experienced staff
B)Separation of IT duties from accounting functions
C)Improved audit trail
D)Hardware and data vulnerability

Accepted Answer

Improved audit trail is not a risk in an IT system, it is actually a benefit as it allows for better tracking and monitoring of system activities. A, B, and D are all potential risks in an IT system as they involve issues related to staffing, internal controls, and security.

Question 2

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

Accepted Answer

Enhancements to internal control resulting from the integration of IT into accounting systems include:
•Computer controls replace manual controls.Replacing manual procedures with programmed controls that apply checks and balances to each processed transaction and that process information consistently can reduce human error that is likely to occur in traditional manual environments.
•Higher quality information is available.IT systems typically provide management with more and higher quality information faster than most manual systems.

Question 3

Which of the following describes the process of implementing a new system in one part of the organization, while other locations continue to use the current system?
A)Parallel testing
B)Online testing
C)Pilot testing
D)Control testing

Accepted Answer

Pilot testing involves implementing a new system in a specific part of the organization to evaluate its performance before a full-scale implementation.

Question 4

One of the unique risks of protecting hardware and data is:
A)lack of traditional authorization.
B)the decreased risk of loss or destruction of data files if data is stored in a centralized location.
C)the ease at which the IT system can be installed and maintained.
D)the unauthorized access to the IT system resulting in improper changes in software programs and master files.

Accepted Answer

Unauthorized access to the IT system can lead to improper changes in software programs and master files, which can result in significant damage to hardware and data. This risk emphasizes the need for proper security controls and access management to prevent unauthorized access to the system. The other options do not reflect unique risks associated with protecting hardware and data.

Question 5

Since IT systems can often initiate transactions automatically, proper authorization depends on software procedures and accurate master files used to make the authorization decision.

Accepted Answer

Proper authorization for IT systems depends on software procedures and accurate master files.

Question 6

What are three specific risks to IT systems?

Accepted Answer

The answer of What are three specific risks to IT...

Question 7

A ________ is responsible for controlling the use of computer programs, transaction files and other computer records and documentation and releases them to the operators only when authorized.
A)software engineer
B)chief computer operator
C)librarian
D)data control operator

Accepted Answer

A librarian in the context of computer operations is responsible for managing the access and use of software, transaction files, and documentation, ensuring that they are only released to operators when proper authorization is given. This role is akin to a traditional librarian who manages the circulation of books and materials, but in a computing context, it involves digital assets.

Question 8

________ is not a risk specific to the IT environments.
A)Reliance on the functioning capabilities of hardware and software
B)Increased human involvement
C)Loss of data due to insufficient backup
D)Unauthorized access

Accepted Answer

Increased human involvement is a general risk that can occur in any environment, not just IT environments. The other options listed are all specific to IT environments.

Question 9

Control risk may be reduced for a company with a complex IT system when compared to a company that relies primarily on manual controls.

Accepted Answer

A complex IT system has several built-in controls that can help reduce the risk of errors and fraud, such as access controls, audit trails, and automated monitoring. In contrast, relying primarily on manual controls could lead to more errors, inconsistencies, and increased likelihood of fraud due to human error, lack of segregation of duties, and limited visibility across processes. Therefore, a company with a complex IT system is more likely to have better control over their risks compared to a company that primarily relies on manual controls.

Question 10

Which of the following statements related to application controls is correct?
A)Application controls relate to various aspects of the IT function including software acquisition and the processing of transactions.
B)Application controls relate to various aspects of the IT function including physical security and the processing of transactions in various cycles.
C)Application controls relate to all aspects of the IT function.
D)Application controls relate to the processing of individual transactions.

Accepted Answer

Application controls are designed to ensure the accuracy, completeness, and validity of data processing. They relate specifically to the processing of individual transactions within an application. Other aspects of the IT function, such as software acquisition and physical security, are covered by general IT controls.

Question 11

Computers process information consistently for all transactions.This creates a risk that:
A)auditors will not be able to access data quickly.
B)auditors will not be able to determine if data is processed consistently.
C)erroneous processing can result in the accumulation of a great number of misstatements in a short period of time.
D)all of the above.

Accepted Answer

Computers process information consistently, which means any errors or mistakes in processing will also be consistent and repeated across all transactions. This can lead to the accumulation of a large number of misstatements in a short period of time. Auditors must be aware of this risk and take appropriate measures to ensure accurate processing of data. Option A is incorrect because computers can actually store and retrieve data faster than manual methods, so auditors can access data quickly. Option B is incorrect because auditors can use various audit techniques to test for consistent processing, such as reviewing system controls and performing data analysis.

Question 12

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

Accepted Answer

With the increased use of IT systems, many transactions are now conducted electronically and original source documents are either eliminated or reduced. This can reduce the visibility of the audit trail, making it difficult to trace the transaction history and verify the accuracy of the data. This can be a disadvantage for auditors who rely on source documents as evidence to support their findings.

Question 13

Old and new systems operating simultaneously in all locations is a test approach known as:
A)pilot testing.
B)horizontal testing.
C)integrative testing.
D)parallel testing.

Accepted Answer

Parallel testing involves running both old and new systems simultaneously in all locations to ensure that the new system performs as expected and does not negatively impact operations. This approach allows for a smooth transition between the two systems and helps to identify any potential issues before fully transitioning to the new system.

Question 14

Typical controls developed for manual systems which are still important in IT systems include:
A)management's authorization of transactions.
B)competent personnel.
C)adequate preparation of input source documents.
D)all of the above.

Accepted Answer

All of the above controls (management's authorization, competent personnel, and adequate preparation of input source documents) are important in both manual and IT systems to ensure the accuracy, completeness, and validity of transactions. Management's authorization ensures that transactions are approved and within the scope of the company's policies and goals. Competent personnel ensure that transactions are recorded accurately and timely. Adequate preparation of input source documents ensures that the information entered into the system is complete and accurate. These controls help to minimize errors, fraud, and inconsistencies in the system.

Question 15

Misstatements in the financial statement may not be detected with the increased use of IT due to: I.the loss of a visible audit trail.
II)reduced human involvement.
A)I only
B)II only
C)both I and II
D)neither I or II

Accepted Answer

The answer of Misstatements in the financial statement may not...

Question 16

General controls include all of the following except:
A)systems development.
B)online security.
C)processing controls.
D)hardware controls.

Accepted Answer

General controls refer to the framework and policies put in place to manage and oversee IT environments, ensuring the integrity, security, and efficiency of systems and data. These include systems development, online security, and hardware controls. Processing controls, however, are specific to individual applications or systems, focusing on the accuracy, completeness, and authorization of transactions and data during processing. Therefore, processing controls are not considered general controls but rather application controls.

Question 17

The continued integration of IT in accounting systems can impact a company by:
A)increasing the costs of handling a large amount of data.
B)increasing the number of manual controls needed.
C)giving management higher-quality information more quickly than a manual system, thus helping management in their decision making process.
D)decreasing the segregation of duties.

Accepted Answer

The integration of IT in accounting systems can improve the speed and accuracy of processing large amounts of data, providing management with higher-quality information faster than a manual system. This can aid in decision-making processes. However, it may also increase the need for manual controls and segregation of duties to ensure the accuracy and security of the data. Increased costs may also be a factor, but this is not necessarily the most significant impact. Option D, decreasing the segregation of duties, is incorrect because IT systems can actually enhance segregation of duties by allowing different users access to different parts of the system based on their roles and responsibilities.

Question 18

Security controls should require that users enter a(n)________ before being allowed access to software and other related data files.
A)echo check
B)parity check
C)self-diagnosis test
D)authorized password

Accepted Answer

The most appropriate security control for restricting access to software and data files is the use of passwords. Authorized passwords are provided to users by the system administrator or manager. Only those who know the correct password are allowed access to the system.

Question 19

Which of the following is a component of general controls?
A)Processing controls
B)Output controls
C)Back-up and contingency planning
D)Input controls

Accepted Answer

Back-up and contingency planning is a component of general controls. Processing controls, output controls, and input controls are components of application controls.

Question 20

Which of the following is not a benefit of using IT-based controls?
A)Ability to process large volumes of transactions
B)Ability to replace manual controls with computer-based controls
C)Reduction in misstatements due to consistent processing of transactions
D)Reduction in internal control evaluation in setting control risk

Accepted Answer

IT-based controls can reduce misstatements and provide consistency in processing transactions, as well as replace manual controls. However, they do not reduce the need for internal control evaluation in setting control risk. In fact, effective IT-based controls still require evaluation and monitoring to ensure they are functioning properly and providing adequate protection against risks.

Quiz 12: The Impact of Information Technology on the Audit Process

Which of the following is not a risk in an IT system?

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

Which of the following describes the process of implementing a new system in one part of the organization, while other locations continue to use the current system?

One of the unique risks of protecting hardware and data is:

Since IT systems can often initiate transactions automatically, proper authorization depends on software procedures and accurate master files used to make the authorization decision.

What are three specific risks to IT systems?

A ________ is responsible for controlling the use of computer programs, transaction files and other computer records and documentation and releases them to the operators only when authorized.

________ is not a risk specific to the IT environments.

Control risk may be reduced for a company with a complex IT system when compared to a company that relies primarily on manual controls.

Which of the following statements related to application controls is correct?

Computers process information consistently for all transactions.This creates a risk that:

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

Old and new systems operating simultaneously in all locations is a test approach known as:

Typical controls developed for manual systems which are still important in IT systems include:

Misstatements in the financial statement may not be detected with the increased use of IT due to: I.the loss of a visible audit trail. II) reduced human involvement.

General controls include all of the following except:

The continued integration of IT in accounting systems can impact a company by:

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

Which of the following is a component of general controls?

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