Accounting Information Systems
Mock Exam
Course Introduction
Accounting Information Systems (AIS) explores the integration of accounting principles with modern information technology systems used for collecting, storing, processing, and communicating financial data. This course covers the design, implementation, and control of computerized accounting systems, emphasizing their role in supporting business processes and decision-making. Topics include transaction cycles, internal controls, data security, audit trails, and current technologies such as enterprise resource planning (ERP) systems. Students will also examine the risks and ethical issues related to AIS, gaining practical skills in analysis and evaluation of real-world accounting systems.
Recommended Textbook
Principles of Auditing and Other Assurance Services 19th Edition by Ray Whittington
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Chapter 1: The Role of the Public Accountant in the American Economy
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Sample Questions
Q1) Operational auditing is primarily oriented toward:
A)Future improvements to accomplish the goals of management.
B)The accuracy of data reflected in management's financial records.
C)The verification that a company's financial statements are fairly presented.
D)Past protection provided by existing internal control.
Answer: A
Q2) The risk that information is misstated is referred to as:
A)Information risk.
B)Inherent risk.
C)Relative risk.
D)Business risk.
Answer: A
Q3) Which of the following attributes most clearly differentiates a CPA who audits management's financial statements as contrasted to management?
A)Integrity.
B)Competence.
C)Independence.
D)Keeping informed on current professional developments.
Answer: C
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Chapter 2: Professional Standards
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Sample Questions
Q1) An attestation engagement:
A)Has as its primary source of standards the assurance standards.
B)Includes a report on subject matter, or on an assertion about subject matter.
C)Includes search and verification procedures for all major accounts.
D)Is ordinarily an examination, review or compilation engagement.
Answer: B
Q2) The standard unmodified auditors' report for audits of nonpublic companies consists of three paragraphs.Identify the three paragraphs and describe the purpose of each.
Answer: Introductory paragraph--describes the financial statements being auditing and the responsibilities of management and the auditors.
Scope paragraph--describes the nature of an audit and indicates whether the audit was performed in accordance with generally accepted auditing standards.
Opinion paragraph--expresses the auditors' opinion on the financial statements.
Q3) A peer review is generally performed by employees of the AICPA.
A)True
B)False
Answer: False
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Chapter 3: Professional Ethics
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Q1) Which of the following forms of advertising would most likely to be considered to be a violation of Rule 502 of the AICPA Code of Professional Conduct?
A)Advertising including the types of services offered and the standard fees for the services.
B)Advertising including the experience of the firm's professional staff.
C)Advertising including an indication that the firm has a close relationship with several tax court judges.
D)Advertising including the percentage of the firm's staff that have CPA certificates.
Answer: C
Q2) A CPA firm may not designate itself as "members of the AICPA" unless:
A)All of its partners or shareholders are members of the Institute.
B)All of its professional staff are members of the Institute.
C)A majority of its professional staff are members of the Institute.
D)At least one partner or shareholder is a member of the Institute.
Answer: A
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Chapter 4: Legal Liability of CPAS
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Q1) A limited liability partnership form of organization:
A)Decreases liability of all partners of a CPA firm.
B)Has similar liability requirements to that of a professional corporation.
C)Eliminates personal liability for some, but not all, partners.
D)Eliminates personal liability for all partners.
Q2) The Securities Exchange Act of 1934 offers recourse against the auditors to a far greater number of investors than does the Securities Act of 1933.
A)True
B)False
Q3) A CPA's duty of due care to a client most likely will be breached when a CPA:
A)Gives a client an oral report instead of a written report.
B)Gives a client incorrect advice based on an honest error of judgment.
C)Fails to give tax advice that saves the client money.
D)Fails to follow generally accepted auditing standards.
Q4) The results of the Continental Vending Corporation case included the criminal prosecution of auditors for gross negligence.
A)True
B)False
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Page 6
Chapter 5: Audit Evidence and Documentation
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Q1) Assertions with high inherent risk are least likely to involve:
A)Complex calculations.
B)Difficult accounting issues.
C)Routine transactions.
D)Significant judgment by management.
Q2) The date on which no information may be deleted from audit documentation is the A)Client's year-end.
B)Documentation completion date.
C)Last date of significant fieldwork.
D)All of these are incorrect in that no information may ever be deleted from audit documentation.
Q3) Concerning retention of working papers,the Sarbanes-Oxley Act:
A)Has no provisions.
B)Requires permanent retention.
C)Requires retention for at least 7 years.
D)Requires retention for a period of 4 or less years.
Q4) The auditors should propose an adjusting journal entry for all material related-party transactions.
A)True
B)False
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Chapter 6: Audit Planning, understanding the Client, assessing
Risks, and Responding
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Q1) Which of the following procedures is not performed as a part of planning an audit engagement?
A)Reviewing the working papers of the prior year.
B)Developing an overall audit strategy.
C)Confirmation of all major accounts.
D)Designing an audit program.
Q2) PCAOB standards suggest which of the following when interpreting the federal securities laws relating to materiality?
A)A material amount would significantly alter the "total mix" of information made available to an investor.
B)Materiality cannot be used as a basis for interpreting federal securities laws.
C)A material amount is that at which an individual's decision would be changed.
D)Materiality is composed of quantitative and not qualitative aspects.
Q3) A form filed with the SEC when a company changes auditors is a:
A)Form 8-K.
B)Form 10-K.
C)Form S-1.
D)Form B-1.
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Chapter 7: Internal Control
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Sample Questions
Q1) Which of the following is not a component of the control environment?
A)Integrity and ethical values.
B)Risk assessment.
C)Commitment to competence.
D)Organizational structure.
Q2) Which of the following is not a primary procedure auditors use to obtain sufficient knowledge about the design of the relevant controls and to determine whether they have been implemented (placed in operation)?
A)Previous experience with the entity.
B)Inquiries of appropriate management personnel.
C)Performance of substantive procedures.
D)Inspection of document and records.
Q3) Which of the following would be least likely to be considered a benefit of effective internal control?
A)Eliminating all employee fraud.
B)Restricting access to assets.
C)Detecting ineffectiveness.
D)Ensuring authorization of transactions.
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Chapter 8: Consideration of Internal Control in an Information Technology Environment
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Sample Questions
Q1) Which of the following is most likely to include user group development and execution of certain computer applications?
A)Telecommunication transmission systems.
B)Database administration.
C)End user computing.
D)Electronic data interchange systems.
Q2) For good internal control,programmers should not be given access to complete program documentation for the programs they work on.
A)True
B)False
Q3) Which of the following personnel is responsible for the proper functioning of the security features built into the operating system?
A)The systems programmer.
B)The application programmer.
C)The computer operator.
D)The telecommunications specialist.
Q4) The operating system is an example of system software.
A)True
B)False
10
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Chapter 9: Audit Sampling
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Q1) In the past,the auditors have found that the book value of a receivable account has been related to the amount the account is misstated (i.e.,large accounts have large misstatements and small accounts have small misstatements).Which of the following techniques is most likely to be efficient?
A)Mean-per-unit estimation.
B)Ratio estimation.
C)Difference estimation.
D)Sequential sampling estimation.
Q2) Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book value of $700,000.After performing the sampling plan,the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point estimate of the population's total audited value to be $640,000.The projected misstatement based on this sample is:
A)$5,000
B)$45,000
C)$60,000
D)$70,000
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Chapter 10: Cash and Financial Investments
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Sample Questions
Q1) Internal control over marketable securities is enhanced when:
A)Securities are held by the cashier.
B)Securities are registered in the name of the custodian.
C)Detailed records of securities are maintained by the custodian of the securities.
D)Securities are held under joint control of two or more officials.
Q2) An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise.Which of the following procedures provides the best evidence on operating effectiveness?
A)Select and examine receiving reports and test whether the related canceled checks are dated no earlier than the receiving reports.
B)Select and examine receiving reports and test whether the related canceled checks are dated no later than the receiving reports.
C)Select and examine canceled checks and test whether the related receiving reports are dated no earlier than the checks.
D)Select and examine canceled checks and test whether the related receiving reports are dated no later than the checks.
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Chapter 11: Accounts Receivable, Notes Receivable, and Revenue
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Q1) It is sometimes impossible for the auditors to use normal accounts receivable confirmation procedures.In such situations the best alternative procedure the auditors might resort to would be:
A)Examining subsequent receipts of year-end accounts receivable.
B)Reviewing accounts receivable aging schedules prepared at the balance sheet date and at a subsequent date.
C)Requesting that management increase the allowance for uncollectible accounts by an amount equal to some percentage of the balance in those accounts that cannot be confirmed.
D)Applying analytical procedures to accounts receivable and sales on a year-to-year basis.
Q2) Which of the following is consistent with effective internal control over sales transactions?
A)The accounting department prepares a shipping report authorizing the shipment of goods.
B)The accounting department accounts for all receiving reports.
C)The billing department accounts for all shipping documents.
D)The accounts payable department annually approves the extension of credit to customers.
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Chapter 12: Inventories and Cost of Goods Sold
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Q1) Observation of a client's inventory is a presumptively mandatory audit procedure.
a.What part should the auditors play in planning the physical inventory?
b.Describe the procedures performed by the auditors during their observation of a client's physical inventory.
c.Why do the auditors document their inventory test counts in their working papers?
Q2) Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?
A)Supplies of relatively little value are expensed when purchased.
B)The cycle basis is used for physical counts.
C)The storekeeper is responsible for maintenance of perpetual inventory records.
D)Perpetual inventory records are maintained only for items of significant value.
Q3) For good internal control over purchase transactions,purchases should be made from approved vendors by the department needing the goods.
A)True
B)False
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Chapter 13: Property Plant and Equipment: Depreciation and Depletion
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Q1) When there are numerous property and equipment transactions during the year,an auditor who plans to assess control risk at a low level usually performs:
A)Tests of controls and extensive tests of property and equipment balances at the end of the year.
B)Analytical procedures for current year property and equipment transactions.
C)Tests of controls and limited tests of current year property and equipment transactions.
D)Analytical procedures for property and equipment balances at the end of the year.
Q2) A typical procedure in the audit of property is examination of public records to verify the ownership of the property.
A)True
B)False
Q3) Material purchases of assets from an affiliated company should be disclosed in the financial statements.
A)True
B)False
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Page 15
Chapter 14: Accounts Payable and Other Liabilities
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Q1) The auditors' search for unrecorded liabilities is completed:
A)During an interim period.
B)At the balance sheet date.
C)Subsequent to the balance sheet date.
D)At any time during the examination.
Q2) The form typically used to confirm accounts payable:
A)Does not require a response from the vendor.
B)Confirms the balance recorded by the client at year-end.
C)Requires the vendor to indicate the amount of the payable.
D)Is the same as the form used to confirm accounts receivable.
Q3) The assertion most directly addressed when performing the search for unrecorded liabilities is:
A)Completeness.
B)Existence.
C)Presentation.
D)Rights.
Q4) The confirmation of existing accounts payable does not prove the completeness of recorded accounts payable.
A)True
B)False
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Chapter 15: Debt and Equity Capital
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Q1) In auditing long-term debt,an auditor would be most likely to:
A)Perform analytical procedures on the bond prenumbered discount accounts.
B)Examine documentation of assets purchased with bond proceeds for liens.
C)Compare interest expense with the long-term debt amount for reasonableness.
D)Confirm the existence of individual long-term debt holders at year-end.
Q2) Which of the following is an auditor most likely to confirm from the transfer agent and registrar?
A)Total shares of stock issued.
B)Restrictions on the payment of dividends.
C)Total market value of outstanding shares of stock.
D)Gains from sale of treasury stock.
Q3) An auditor who is auditing for acquired treasury stock will normally expect to see an entry in which journal?
A)Cash disbursements.
B)Cash receipts
C)Purchases.
D)Sales.
Q4) Corporations maintain either a stock certificate book or a stockholders' ledger.
A)True
B)False
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Chapter 16: Auditing Operations and Completing the Audit
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Q1) In the audit of a nonpublic company,the auditors have a responsibility to report on all FASB-required supplementary information.
A)True
B)False
Q2) Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n):
A)Extrapolation difference.
B)Known misstatement.
C)Likely misstatement.
D)Projected misstatement.
Q3) Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation,claims,or assessments.The primary reason for this request is to provide the auditors with:
A)An estimate of the dollar amount of the probable loss.
B)An expert opinion as to whether a loss is possible, probable or remote.
C)Information concerning the progress of cases to date.
D)Corroborative audit evidence.
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18
Chapter 17: Auditors Report
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Q1) The auditors include an emphasis-of-matter paragraph in report with an unmodified opinion in order to emphasize that the entity being reported upon is a subsidiary of another business enterprise.The inclusion of this paragraph:
A)Is appropriate and would not negate the unmodified opinion.
B)Is considered a qualification of the opinion.
C)Is a violation of generally accepted reporting standards if this information is disclosed in notes to the financial statements.
D)Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."
Q2) If financial statements contain a material departure from generally accepted accounting principles,the auditors usually should issue a disclaimer of opinion.
A)True
B)False
Q3) A basis for modification paragraph is ordinarily placed:
A)Within the "Auditor's Responsibility" section of the audit report.
B)Preceding the opinion section.
C)After the opinion section.
D)Based on the auditor's judgment either before or after the opinion section.
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Chapter 18: Integrated Audits of Public Companies
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Q1) The "as of date" for internal control reporting is ordinarily the last day of the fiscal year.
A)True
B)False
Q2) According to PCAOB standards for reporting on internal control,calculating depreciation expense or adjusting for foreign currencies is referred to as:
A)Substantive transactions.
B)Routine transactions.
C)Nonroutine transactions.
D)Accounting Estimate transactions.
Q3) Assume that an auditor is focusing on two weaknesses in internal control.Although neither is by itself a material weakness,the two significant deficiencies in combination represent a material weakness.The client effectively remediates one of them prior to year-end but does not have time to remediate the other prior to year-end.What type of audit report on internal control is appropriate?
A)Adverse.
B)Qualified.
C)Unqualified.
D)Unqualified with explanatory language.
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Page 20
Chapter 19: Additional Assurance Services: Historical
Financial Information
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Q1) An auditor's report on financial statements prepared in accordance with a special purpose financial reporting framework of accounting other than generally accepted accounting principles should include all of the following except:
A)Reference to the note to the financial statements that describes the basis of preparation of the financial statements.
B)Disclosure that the audit was performed in accordance with generally accepted auditing standards.
C)An opinion as to whether the basis of accounting used is appropriate under the circumstances.
D)An opinion as to whether the financial statements are presented fairly in conformity with the basis of accounting described.
Q2) The balance sheet for an individual may be titled a Statement of Financial Condition. A)True B)False
Q3) Letters to underwriters should not contain negative assurances. A)True B)False
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Page 21
Chapter 20: Additional Assurance Services: Other Information
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Q1) Which of the following engagements is most likely to consider security,availability,processing integrity,confidentiality and privacy relating to a system?
A)Internal control over financial reporting.
B)Trust Services.
C)WebsiteAsssociate.
D)Financial statement audit.
Q2) Practitioners may report on either an assertion about the subject matter,or on the subject matter for most attestation engagements.
A)True
B)False
Q3) Trust Services are a part of the AICPA's vision that increased trust in annual historical financial statements is necessary.
A)True
B)False
Q4) The attestation standards prohibit the examination of prospective financial statements.
A)True
B)False
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Chapter 21: Internal, Operational, and Compliance Auditing
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Q1) A comprehensive examination of an operating unit or a complete organization to evaluate its systems,controls,and performance,as measured by management's objectives is called a(an):
A)Compilation.
B)Consultation.
C)Operational Audit.
D)"Yellow Book" audit.
Q2) The work of internal auditors is primarily for the benefit of management and the board of directors.
A)True
B)False
Q3) Which of the following is not one of the attribute standards of the IIA's Standards for the Professional Practice of Internal Auditing?
A)Independence and objectivity.
B)Outsourcing.
C)Proficiency and professional care.
D)Purpose, authority, and responsibility.
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Chapter 22: Probability-Proportion-To-Size Sampling
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Q1) Increasing the expected misstatement for a probability-proportional-to-size sample increases the required sample size.
A)True
B)False
Q2) Assume the following relating to a PPS sample:
Projected Misstatement = $20,000.
Basic Precision = $16,000.
Incremental Allowance = $4,500.
Tolerable Misstatement = $34,000.
The upper limit on misstatement equals.
A)$20,000.
B)$20,500
C)$40,500.
D)$74,500.
Q3) Probability-proportional-to-size sampling is especially efficient for populations with high misstatement rates.
A)True
B)False
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