Question 1

Transactions which were erroneous and had been previously rejected by the computer system apparently were not being re-entered and reprocessed once they had been corrected.This erroneous condition is best controlled by:

Accepted Answer

The answer of Transactions which were erroneous and had been...

Question 2

The master inventory file, contained on a removable magnetic disk, was destroyed by a small fire next to the area where it was stored.The company had to take a special complete inventory in order to re-establish the file.The best control procedure would be:

Accepted Answer

The best control procedure would be to have remote storage of a copy of the disk and the transactions since the disk was copied. This would allow for a backup of the inventory file to be readily available in case of any disasters or accidents, such as the one that occurred with the fire. Having a copy of the disk on-hand would not have prevented the loss of data in this scenario, as the physical disk was destroyed. Fire insurance and data processing insurance may provide financial compensation for the losses incurred, but they do not address the issue of data loss directly.

Question 3

In preparing payroll cheques, the computer omitted 24 of a total of 2,408 cheques which should have been processed.The error was not detected until the supervisor distributed the cheques.The best control procedure would be:

Accepted Answer

Control totals involve summing up the total number of items (in this case, cheques) to be processed and comparing it with the number actually processed, which would help detect any discrepancies such as omitted cheques.

Question 4

In order to maintain good internal control within the computer de?partment:

Accepted Answer

The principle of segregation of duties suggests that programmers and computer operators should not have control over each other's tasks. It is important to have checks and balances in place to ensure that no single individual can carry out a harmful action without detection or approval from someone else. Therefore, separating programmers and computer operators into different departments would be the best way to maintain good internal control within the computer department.

Question 5

A CA reviews a client's payroll procedures.The CA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for:

Accepted Answer

Assigning the responsibility of distributing payroll cheques to a payroll department supervisor can lead to a conflict of interest and increase the risk of fraud or errors, as it combines record-keeping and custody functions.

Question 6

Due to an unusual program error which had never happened before, the accounts receivable updating run did not process three transactions.The error was not noted by the operator because he was busy working on another project.There were control totals for the file which were printed out.An examination of the printout would have disclosed the error.The best control procedure would be:

Accepted Answer

The best control procedure in this scenario would be reconciliation of the control total by a control clerk. This would involve comparing the control total printed out by the system to the actual total of transactions processed, which would reveal any discrepancies. Reconciliation by a control clerk provides an independent review of the process and helps to detect errors that may have been missed by the operator. An error message requiring operator response before processing continues and label checking by the next computer program may not be effective in this scenario as the error had already occurred and the operator did not notice it. Internal audit review of console log may not be the best option as it may not be able to detect errors in real-time as they occur.

Question 7

In an online, real-time system, which of the following would be most likely to be used as backup for an application's master file maintained on magnetic disk?

Accepted Answer

Option A is the most likely choice as it involves regularly backing up the disk files to magnetic tape along with the day's transactions. This ensures that in case of a system failure, the most recent data can be restored from the magnetic tape backup. Option B involves maintaining a duplicate disk file, but this may not protect against data loss due to hardware or software failure. Option C (grandfather-parent-child technique) involves retaining multiple versions of the file, but this may not be practical for real-time systems with frequent updates. Option D (retaining source documents) is a good practice for audit purposes, but does not provide a backup for the master file. Option E (copying disk files continuously to magnetic tape) may be too resource-intensive and may not be necessary for a real-time system.

Question 8

The magnetic tape containing accounts receivable transactions could not be located.A data processing supervisor said that it could have been put among the scratch tapes available for use in processing.The best control procedure would be aan):

Accepted Answer

The answer of The magnetic tape containing accounts receivable transactions...

Question 9

The master file for inventory did not seem right.The file was printed out and many errors were found.The best control procedure would be:

Accepted Answer

A periodic test against physical count would be the best control procedure for ensuring the accuracy of the inventory master file. This involves conducting physical counts of inventory on a regular basis and comparing them to the records in the master file to identify any discrepancies and correct them. This helps to ensure that the inventory records are accurate and up-to-date. Trailer label control totals and limit tests could also be useful control procedures, but they may not be as effective as conducting periodic physical counts. A parity check is not relevant for this situation.

Question 10

In designing a payroll system it is known that no individual's paycheque can amount to more than $300 for a single week.As a result, the payroll program has been written to bypass writing a cheque and printing out an error message if any payroll calculation results in more than $300.This type of control is called:

Accepted Answer

A limit or reasonableness test is used to ensure that data falls within a specified range, such as ensuring that a paycheque does not exceed $300.

Question 11

A sales transaction document was coded with an invalid customer account code 7 digits rather than 8).The error was not detected until the updating run when it was found that there was no such account to which the transaction could be posted.The best control procedure would be:

Accepted Answer

A check digit would be the best control procedure in this scenario as it would catch errors such as the one where the customer account code has an incorrect number of digits. The check digit is an extra digit added to a code to help detect errors in data entry or transmission. It is calculated from the other digits in the code in a way that allows errors to be detected but not corrected.

Question 12

It would be appropriate for the payroll accounting department to be responsible for which of the following functions?

Accepted Answer

The payroll accounting department is typically responsible for preparing periodic governmental reports related to employees' earnings and withholding taxes, as this is a financial reporting function.

Question 13

The operator, in mounting the magnetic tape containing the cash receipts for the processing run to update accounts receivable, mounted the receipts tape from the preceding rather than the current day.The error was not detected until after the processing run was completed.The best control procedure would be a:

Accepted Answer

A header label check would have caught the error before the processing run was completed. A header label contains information about the date and other identifying information at the beginning of the tape. By checking the header label, the operator would have realized that the receipts tape was for the wrong day and could have corrected the mistake before processing the data. Trailer label check, parity check, and hash total check would not have been effective in detecting this specific error.

Question 14

For a routine management report produced on the computer, which one of the following control duties is most likely to be the sole responsibility of the user department?

Accepted Answer

Determining that figures in the report are reasonable is a responsibility of the user department because they are the ones who have the most knowledge and experience with the data being reported. Scanning for garbled output, checking input and record count totals, and verifying operator procedures are technical control duties that are typically the responsibility of the IT department.

Question 15

A company uses the account code 669 for maintenance expense.However, one of the company's clerks often codes maintenance expense as 996.The highest account code in the system is 750.What would be the best internal control check to build into the company's computer program to detect this error?

Accepted Answer

A valid-code test would ensure that any account code entered is within the acceptable range (up to 750), thus detecting the incorrect entry of 996.

Question 16

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

Accepted Answer

The data control group is responsible for ensuring the accuracy and completeness of data processed by computer systems. Therefore, it is the most appropriate group to review and follow up on error reports. Supervisors of computer operations and computer programmers may have some involvement in addressing errors, but their primary responsibilities are related to the operation and maintenance of computer systems. Systems analysts may be involved in the development and implementation of new systems or changes to existing systems, but they do not necessarily have the expertise or responsibility to address errors in data processing.

Question 17

Which of the following policies or practices is most likely to rep?resent a weakness in internal controls pertaining to an automated data processing system?

Accepted Answer

Allowing computer programmers to operate the computer during processing runs involving programs they have written creates a potential conflict of interest and increases the risk of unauthorized access, program changes, and other security breaches. This policy represents a weakness in internal controls because it violates the principle of segregation of duties, which requires that different individuals be responsible for different stages of a transaction or process to ensure checks and balances and prevent fraud or errors. By allowing programmers to write, test, and run programs without adequate supervision or oversight, the organization exposes itself to various risks such as intentional or unintentional errors, fraudulent manipulation, data loss or corruption, and others. Therefore, this policy should be revised to require that programmers only write or modify programs under the guidance and approval of a separate team or individual responsible for testing and implementing changes. Moreover, system administrators or security personnel should be the only ones with access to critical system resources or sensitive data.

Question 18

A weekly payroll cheque was issued to an hourly employee based on 98 hours worked instead of 38 hours.The time card was slightly illegible and the number looked somewhat like 98.The best control procedure would be:

Accepted Answer

A limit test would prevent the error by flagging any hours worked that exceed a reasonable threshold, such as 40 hours per week, for further review.

Question 19

A transaction involving a charge to a non-existent customer account was entered into an accounts receivable and billing system that was batch processed.This error should be detected by the computer sys?tem and appear in:

Accepted Answer

The answer of A transaction involving a charge to a...

Question 20

Jonkers, Inc., a large retail chain, is installing a computerized accounts receivable system employing a batch mode of processing with sequential files.The program which will process receipts on account should include an input edit routine to assure:

Accepted Answer

The answer of Jonkers, Inc., a large retail chain, is...

Quiz 10: Computer Controls for Organizations and Accounting Information Systems