Question 1

A company's labor distribution report requires extensive corrections each month because of labor hours charged to inactive jobs.Which of the following data processing input controls appears to be missing?
A)Completeness test.
B)Validity test.
C)Limit test.
D)Control total.

Accepted Answer

A validity test ensures that data entered into the system is of the correct format, type, or range. In this case, a validity test could be used to ensure that labor hours are only charged to active jobs. This would reduce the need for extensive corrections to the labor distribution report each month.

Question 2

The capability for computers to communicate with physically remote terminals is an important feature in the design of modern business information systems.Which of the following risks associated with the use of telecommunications systems is minimized through the use of a password control system?
A)Unauthorized access to system program and data files.
B)Unauthorized physical availability of remote terminals.
C)Physical destruction of system program and data files.
D)Physical destruction of remote terminals.

Accepted Answer

A password control system helps to ensure that only authorized users can access the system program and data files, thereby minimizing the risk of unauthorized access. It does not address the risks of unauthorized physical availability of remote terminals, physical destruction of system program and data files, or physical destruction of remote terminals.

Question 3

Which of the following computer system risks would be increased by the installation of a database system?
A)Programming errors.
B)Data entry errors.
C)Improper data access.
D)Loss of power.

Accepted Answer

The installation of a database system can increase the risk of improper data access, as multiple users may have access to sensitive information stored in the database. This can lead to unauthorized access and potential data breaches. However, it does not necessarily increase the risks of programming errors, data entry errors or loss of power.

Question 4

A control feature in a computer system requires the central processing unit (CPU)to send signals to the printer to activate the print mechanism for each character.The print mechanism,just prior to printing,sends a signal back to the CPU verifying that the proper print position has been activated.This type of data transmission is referred to as:
A)Echo control.
B)Validity control.
C)Signal control.
D)Check digit control.

Accepted Answer

Echo control is a type of data transmission where the receiving device sends back a message to the sending device to confirm that the message has been received correctly. In this scenario, the printer sends a signal back to the CPU to confirm that the proper print position has been activated, which is an example of echo control. Validity control verifies that data entered into a system is accurate and complete, and is not applicable in this scenario. Signal control is a general term and does not accurately describe the specific type of data transmission occurring in this scenario. Check digit control involves adding a digit to data to check for errors, which is not occurring in this scenario.

Question 5

Which of the following constitutes a weakness in the internal control of a computer system?
A)One generation of backup files is stored in an off-premises location.
B)Machine operators distribute error messages to the control group.
C)Machine operators do not have access to the complete systems manual.
D)Machine operators are supervised by the programmer.

Accepted Answer

The answer of Which of the following constitutes a weakness...

Question 6

An auditor may decide not to perform tests of controls related to the control activities within the computer portion of the client's internal control.Which of the following would not be a valid reason for choosing to omit such test?
A)The controls duplicate operative controls existing elsewhere.
B)There appear to be major weaknesses that would preclude reliance on the stated procedure.
C)The time and dollar costs of testing exceed the time and dollar savings in substantive testing if the tests show the controls to be operative.
D)The controls appear adequate.

Accepted Answer

If the controls appear adequate, there is no reason to omit tests of controls related to the control activities within the computer portion of the client's internal control. The auditor should still perform tests to confirm the adequacy of the controls. A, B, and C are all valid reasons for choosing to omit tests of controls.

Question 7

Parallel simulation programs used by the auditors for testing programs:
A)Must simulate all functions of the production computer-application system.
B)Cannot be developed with the aid of generalized audit software.
C)Can use live data or test data.
D)Is generally restricted to data base environments.

Accepted Answer

Parallel simulation programs used by auditors for testing programs can use live data or test data. The other options are incorrect as they do not accurately describe the requirements of parallel simulation programs.

Question 8

Consider the following computer applications:
At a catalog sales firm,as phone orders are entered into their computer,both inventory and credit are immediately checked.
(1)A manufacturer's computer sends the coming week's production schedule and parts orders to a supplier's computer.
Which statement below is true for these applications?
A)Both applications are examples of EDI.
B)Both applications are examples of on-line real-time processing.
C)The first application is an example of EDI and the second is an example of on-line real-time.
D)The first application is an example of on-line real-time and the second is an example of EDI.

Accepted Answer

The first application involves immediate checking of inventory and credit, which is on-line real-time processing. The second application involves the exchange of production schedules and orders between computers, which is an example of Electronic Data Interchange (EDI).

Question 9

In their consideration of a client's IT controls,the auditors will encounter general controls and application controls.Which of the following is an application control?
A)The operations manual.
B)Hash total.
C)Systems documentation.
D)Control over program changes.

Accepted Answer

A hash total is an application control that verifies the integrity of data by summing a numeric field in a group of records and comparing the total to a previously established value. The other options mentioned are examples of general controls.

Question 10

The completeness of computer-generated sales figures can be tested by comparing the number of items listed on the daily sales report with the number of items billed on the actual invoices.This process uses:
A)Self-checking numbers.
B)Control totals.
C)Validity tests.
D)Process tracing data.

Accepted Answer

Control totals involve comparing two sets of data to ensure their completeness and accuracy. In this case, the number of items listed on the daily sales report is being compared to the number of items billed on actual invoices to ensure that all sales are being recorded and reported accurately. Self-checking numbers, validity tests, and process tracing data are not explicitly relevant to this specific process.

Question 11

Which of the following is likely to be of least importance to an auditor in considering the internal control in a company with computer processing?
A)The segregation of duties within the computer center.
B)The control over source documents.
C)The documentation maintained for accounting applications.
D)The cost/benefit of data processing operations.

Accepted Answer

The cost/benefit of data processing operations may be important to management or the IT department, but it is not directly relevant to the auditor's assessment of internal control. The segregation of duties, control over source documents, and documentation maintained for accounting applications are all key considerations for the auditor in evaluating the effectiveness of internal control over financial reporting in a computerized system.

Question 12

Internal control is ineffective when computer department personnel:
A)Participate in computer software acquisition decisions.
B)Design documentation for computerized systems.
C)Originate changes in master files.
D)Provide physical security for program files.

Accepted Answer

The answer of Internal control is ineffective when computer department...

Question 13

In the weekly computer run to prepare payroll checks,a check was printed for an employee who had been terminated the previous week.Which of the following controls,if properly utilized,would have been most effective in preventing the error or ensuing its prompt detection?
A)A control total for hours worked, prepared from time cards collected by the timekeeping department.
B)Requiring the treasurer's office to account for the numbers of the prenumbered checks issued to the computer department for the processing of the payroll.
C)Use of a check digit for employee numbers.
D)Use of a header label for the payroll input sheet.

Accepted Answer

The answer of In the weekly computer run to prepare...

Question 14

When erroneous data are detected by computer program controls,such data may be excluded from processing and printed on an exception report.The exception report should most probably be reviewed and followed up on by the:
A)Supervisor of computer operations.
B)Systems analyst.
C)Data control group.
D)Computer programmer.

Accepted Answer

The data control group is responsible for ensuring the accuracy and integrity of data processed by the computer system. They are best equipped to review and follow up on exception reports and take appropriate action to correct any errors or inconsistencies in the data. The supervisor of computer operations may oversee the overall functioning of the computer system, but may not have the specific knowledge or expertise to address data-related issues. The systems analyst and computer programmer may be involved in designing or modifying the computer program controls, but are not typically responsible for reviewing exception reports.

Question 15

If a control total were to be computed on each of the following data items,which would best be identified as a hash total for a payroll computer application?
A)Net pay.
B)Department numbers.
C)Hours worked.
D)Total debits and total credits.

Accepted Answer

Department numbers would be the best choice for a hash total in a payroll computer application as it groups data based on a common field rather than summing or totaling data. This helps to ensure that all data in the group is included and accounted for, making it easier to detect any errors or omissions.

Question 16

Auditing by testing the input and output of a computer system instead of the computer program itself will:
A)Not detect program errors which do not show up in the output sampled.
B)Detect all program errors, regardless of the nature of the output.
C)Provide the auditors with the same type of evidence.
D)Not provide the auditors with the confidence in the results of the auditing procedures.

Accepted Answer

Testing only the input and output of a computer system may not detect program errors that do not affect the sampled output. Therefore, it may not provide complete assurance to the auditors.

Question 17

The purpose of using generalized computer programs is to test and analyze a client's computer:
A)Systems.
B)Equipment.
C)Records.
D)Processing logic.

Accepted Answer

The answer of The purpose of using generalized computer programs...

Question 18

Smith Corporation has numerous customers.A customer file is kept on disk storage.Each account in the customer file contains name,address,credit limit,and account balance.The auditor wishes to test this file to determine whether credit limits are being exceeded.The best procedure for the auditor to follow would be to:
A)Develop test data that would cause some account balance to exceed the credit limit and determine if the system properly detects such situations.
B)Develop a program to compare credit limits with account balances and print out the details of any account with a balance exceeding its credit limit.
C)Require a printout of all account balances so they can be manually checked against the credit limits.
D)Request a printout of a sample of account balances so they can be individually checked against the credit limits.

Accepted Answer

Option B is the best procedure for the auditor to follow as it involves developing a program that compares credit limits with account balances and prints out the details of any account with a balance exceeding its credit limit. This method is more efficient and reliable compared to manually checking each account or developing test data, which may not cover all possible scenarios. With the program, the auditor can easily identify accounts that exceed their credit limit and investigate them further.

Question 19

State whether each of the following statements is correct or incorrect.
A.Specialists with specialized skills in IT processing are seldom used on audits since each audit team member is expected to have the necessary skills.
B.The nature of the IT-based system may affect the specific procedures employed by the auditors in testing the controls.
C.Computer assisted audit techniques,while helpful for tests of controls,are seldom helpful for substantive procedures.
D.Parallel simulation involves the use of audit software to process functions essentially equivalent to those of the client's program and to determine whether auditor and client results are equivalent

Accepted Answer

The answer of State whether each of the following statements...

Question 20

Passwords for microcomputer software programs are designed to prevent:
A)Inaccurate processing of data.
B)Unauthorized access to the computer.
C)Incomplete updating of data files.
D)Unauthorized use of the software.

Accepted Answer

The answer of Passwords for microcomputer software programs are designed...

Quiz 8: Consideration of Internal Control in an Information Technology Environment

A company's labor distribution report requires extensive corrections each month because of labor hours charged to inactive jobs.Which of the following data processing input controls appears to be missing?

The capability for computers to communicate with physically remote terminals is an important feature in the design of modern business information systems.Which of the following risks associated with the use of telecommunications systems is minimized through the use of a password control system?

Which of the following computer system risks would be increased by the installation of a database system?

Which of the following constitutes a weakness in the internal control of a computer system?

An auditor may decide not to perform tests of controls related to the control activities within the computer portion of the client's internal control.Which of the following would not be a valid reason for choosing to omit such test?

Parallel simulation programs used by the auditors for testing programs:

In their consideration of a client's IT controls,the auditors will encounter general controls and application controls.Which of the following is an application control?

The completeness of computer-generated sales figures can be tested by comparing the number of items listed on the daily sales report with the number of items billed on the actual invoices.This process uses:

Which of the following is likely to be of least importance to an auditor in considering the internal control in a company with computer processing?

Internal control is ineffective when computer department personnel:

In the weekly computer run to prepare payroll checks,a check was printed for an employee who had been terminated the previous week.Which of the following controls,if properly utilized,would have been most effective in preventing the error or ensuing its prompt detection?

When erroneous data are detected by computer program controls,such data may be excluded from processing and printed on an exception report.The exception report should most probably be reviewed and followed up on by the:

If a control total were to be computed on each of the following data items,which would best be identified as a hash total for a payroll computer application?

Auditing by testing the input and output of a computer system instead of the computer program itself will:

The purpose of using generalized computer programs is to test and analyze a client's computer:

Passwords for microcomputer software programs are designed to prevent: