Question 1

In database management systems, many applications share files, whereas in non-database environments each application manages its own data file.

Accepted Answer

In database management systems, multiple applications can access and modify the same database file, whereas in non-database environments each application typically manages its own data file.

Question 2

Encryption techniques protect the security of electronic communication during transmission.

Accepted Answer

Encryption techniques are used to mathematically transform plaintext into ciphertext, making it unreadable to anyone who does not possess the proper key. This helps protect the security of electronic communication during transmission.

Question 3

The use of 'encryption' techniques protects the security of electronic communication during the data:

Accepted Answer

Encryption is used to protect electronic communication during the transmission process. It scrambles the data being transmitted so that it can only be read by authorized parties with the proper decryption key. Encryption is not typically used during the backup, output, or recording processes.

Question 4

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 5

A database management system:

Accepted Answer

A database management system (DBMS) is designed to minimize data redundancy, which means that it eliminates duplicate data and minimizes the amount of space required to store the same data. DBMS also provides quick retrieval of data, but it does not necessarily come at the cost of inefficient use of file space. DBMS uses complex algorithms to manage and optimize file storage, which means it can efficiently store and retrieve data. Also, DBMS continuously updates files, but the update process is automated and controlled, making it efficient and reliable. Finally, DBMS stores data in tables or files but organizes them in a way that allows easy retrieval and manipulation.

Question 6

The effect of ITF transactions should be removed:

Accepted Answer

The most appropriate method for removing the effect of ITF transactions is by inputting adjustment transactions. This can be done through a systematic process of correcting the discrepancies identified. This method ensures that the financial statements are accurate and free from any misstatement due to the inclusion of ITF transactions. The other options, such as removing the effect on a surprise basis or through the internal audit group, may not be as effective or reliable. After the conclusion of the audit, the auditor would not make any adjustments to remove the effect of ITF transactions since it is their duty to report on the financial statements as they are presented to them.

Question 7

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 8

Many clients have their data processed at an independent computer service centre (IT outsourcing).The difficulty the independent auditor faces when a computer service centre is used lies in:

Accepted Answer

The difficulty faced by independent auditors when a computer service centre is used is determining the adequacy of the service centre's internal controls. This is because the service centre may have its own internal controls that are not transparent to the auditor, and the auditor must ensure that the controls in place are adequate to protect the client's data.

Question 9

Discuss the advantages and benefits of using generalised audit software.

Accepted Answer

The answer of Discuss the advantages and benefits of using...

Question 10

A computer service centre processes, for an auditor's client, financial data that has a material effect on that client's financial statements.The independent auditor need NOT consider a review of the service centre controls if:

Accepted Answer

The auditor need not consider a review of the service centre controls if he/she can rely on a special report on internal controls issued by the service centre's independent auditor to the extent desired. This means that if the service centre's independent auditor has issued a reliable report on internal controls, the auditor need not duplicate the work and can rely on that report. Therefore, option A is the correct choice. The other options are not relevant for determining whether the auditor should consider a review of the service centre controls.

Question 11

Pre-designed formats for audit working papers and letters can be created and saved using both electronic spreadsheets and word processors.These are called:

Accepted Answer

Pre-designed formats for audit working papers and letters that can be created and saved using electronic spreadsheets and word processors are called templates. These templates can be customized by the auditor to suit their specific needs, which saves time and effort in creating documents from scratch.

Question 12

When auditing a client whose information is processed by an outside computer service company, it is acceptable for the auditor to rely on the audit report of another independent auditor who has previously tested the internal controls of the computer service centre rather than testing the service centre's controls himself or herself.

Accepted Answer

It is acceptable for the auditor to rely on the audit report of another independent auditor who has previously tested the internal controls of the computer service centre as long as the auditor is satisfied with the other auditor's work and the level of reliance to be placed on that work. This is outlined in the auditing standards. However, the auditor must also obtain sufficient and appropriate evidence to support the conclusion reached in the audit report.

Question 13

In database management systems, each application contains its own data file, whereas in non-database environments, many applications share files.

Accepted Answer

In non-database environments, many applications may share the same data file or files.

Question 14

When auditing a computerised system, an auditor may use the test data approach as an audit tool.This technique:

Accepted Answer

The test data approach involves introducing simulated transactions into the client's actual application program(s). This allows the auditor to test the accuracy and completeness of the system's processing capabilities. It is a commonly used audit technique for auditing through the computer, as opposed to auditing around the computer. It can be used in both independent and internal audits. The actual application programs used by the client throughout the year should be used to ensure that the test data accurately reflects the system's processing capabilities.

Question 15

Assume you are using generalised audit software (GAS)during your audit of accounts receivable.Discuss four kinds of tests or audit procedures you can perform with the GAS if the client's data are in machine-readable form.

Accepted Answer

The answer of Assume you are using generalised audit software...

Question 16

Companies decide whether to outsource IT based on auditor judgement.

Accepted Answer

While an auditor may provide recommendations or insights into the potential risks and benefits of outsourcing IT, the decision to outsource ultimately rests with the company's management and stakeholders. Other factors, such as cost savings and availability of skilled labor, are typically major considerations in the decision-making process.

Question 17

A site is allowed to retain the Webtrust seal if the auditor monitors compliance at least every:

Accepted Answer

According to the Webtrust program, the auditor must monitor compliance at least every 90 days to allow the site to retain the Webtrust seal.

Question 18

To obtain evidence that all external users in an e-commerce system are authorised, a 'firewall' channels all network connections through a:

Accepted Answer

A control gateway is a security device that monitors and controls incoming and outgoing network traffic based on predetermined security rules. It acts as a filter between the Internet and the private network, allowing only authorized traffic to pass through while blocking unauthorized traffic. Therefore, using a control gateway is the best way to ensure that all external users in an e-commerce system are authorized.

Question 19

Which one of the following statements is incorrect about network environments?

Accepted Answer

Responsibility for purchasing equipment can be decentralised in some network environments, especially those with a distributed or federated model. The decision-making responsibilities can be shared or delegated to different departments, divisions or even individual users. This can lead to a lack of standardisation and difficulties in managing the network environment as a whole. However, it also allows for a greater degree of flexibility, adaptation and innovation, as well as a more efficient use of resources.

Question 20

A firewall is a system of hardware and software that monitors and controls the flow of e-commerce communications by channelling all network connections through a control gateway.

Accepted Answer

A firewall is indeed a system of hardware and software that monitors and controls the flow of communications on a network by channeling all network connections through a control gateway. This helps to protect the network from unauthorized access and potential security threats.

Quiz 10: The impact of information technology on the audit process