Auditing and Assurance Services
Final Exam Questions
Course Introduction
Auditing and Assurance Services introduces students to the principles and practices of auditing in both theoretical and applied contexts. The course covers the role of audits in enhancing the reliability of financial statements and explores the regulatory environment, ethics, and auditing standards. Topics include audit planning, evidence collection, internal control evaluation, risk assessment, and the use of technology in auditing. Students also learn about different types of assurance services, the auditors legal and professional responsibilities, and the preparation of audit reports, developing critical thinking and analytical skills necessary for success in the accounting profession.
Recommended Textbook Information Technology Auditing 3rd Edition by James A. Hall
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Chapter 1: Auditing and Internal Control
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Q1) All of the following are steps in an IT audit except
A) substantive testing
B) tests of controls
C) post-audit testing
D) audit planning
Answer: C
Q2) Why is an Independent Audit Committee important to a company?
Answer: The Sarbanes-Oxley Act requires all audit committee members to be independent and requires the audit committee to hire and oversee the external auditors.This provision is consistent with many investors who consider the board composition to be a critical investment factor.For example,Thompson Financial survey revealed that most institutional investors want corporate boards to be comprised of at least 75% of independent directors
Q3) Internal auditors assist external auditors with financial audits to
A) reduce audit fees
B) ensure independence
C) represent the interests of management
D) the statement is not true; internal auditors are not permitted to assist external auditors with financial audits
Answer: A
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Chapter 2: Auditing IT Governance Controls
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Q1) Adequate backups will protect against all of the following except
A) natural disasters such as fires
B) unauthorized access
C) data corruption caused by program errors
D) system crashes
Answer: B
Q2) What is a recovery operations center? What is its purpose?
Answer: A recovery operations center (ROC)or hot site is a fully equipped backup data center that many companies share.In addition to hardware and backup facilities,ROC service providers offer a range of technical services to their clients,who pay an annual fee for access rights.In the event of a major disaster,a subscriber can occupy the premises and,within a few hours,resume processing critical applications..
Q3) Which organizational structure is most likely to result in good documentation procedures?
A) separate systems development from systems maintenance
B) separate systems analysis from application programming
C) separate systems development from data processing
D) separate database administrator from data processing
Answer: A
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Chapter 3: Security Part I: Auditing Operating Systems and Networks
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Q1) In a star topology,when the central site fails
A) individual workstations can communicate with each other
B) individual workstations can function locally but cannot communicate with other workstations
C) individual workstations cannot function locally and cannot communicate with other workstations
D) the functions of the central site are taken over by a designated workstation
Answer: B
Q2) Audit trails cannot be used to
A) detect unauthorized access to systems
B) facilitate reconstruction of events
C) reduce the need for other forms of security
D) promote personal accountability
Answer: C
Q3) Firewalls are
A) special materials used to insulate computer facilities
B) a system that enforces access control between two networks
C) special software used to screen Internet access
D) none of the above
Answer: B
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Chapter 4: IT Security Part II: Auditing Database Systems
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Q1) What control maintains complete,current,and consistent data at all information processing units?
A) deadlock control
B) replication control
C) concurrency control
D) gateway control
Q2) The database approach to data management is sometimes called the flat file approach.
A)True
B)False
Q3) Explain the three views of a database.
Q4) Which backup technique is most appropriate for sequential batch systems?
A) grandparent-parent-child approach
B) staggered backup approach
C) direct backup
D) remote site, intermittent backup
Q5) The physical database is an abstract representation of the database.
A)True
B)False
Q6) What is a database authorization table?
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Chapter 5: Systems Development and Program Change
Activities
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Q1) The formal product of the systems evaluation and selection phase of the Systems Development Life Cycle is
A) the report of systems analysis
B) the systems selection report
C) the detailed system design
D) the systems plan
Q2) Which task is not essential during a data conversion procedure?
A) decomposing the system
B) validating the database
C) reconciliation of new and old databases
D) backing up the original files
Q3) Instead of implementing an application in a single big-bang release,modern systems are delivered in parts continuously and quickly
A)True
B)False
Q4) Contrast the source program library (SPL)management system to the database management system (DBMS).
Q5) Why is cost-benefit analysis more difficult for information systems than for many other types of investments organizations make?
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Chapter 6: Overview of Transaction Processing and Financial Reporting Systems
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Q1) The portion of the monthly bill from a credit card company is an example of a turn-around document.
A)True
B)False
Q2) Which accounting application is least suited to batch processing?
A) general ledger
B) vendor payments
C) sales order processing
D) payroll
Q3) The type of transaction most suitable for batch processing is
A) airline reservations
B) credit authorization
C) payroll processing
D) adjustments to perpetual inventory
Q4) Only four symbols are used in data flow diagrams.What are they?
Q5) Name four documentation techniques?
Q6) How may batch processing be used to improve operational efficiency?
Q8) Give one advantages of real-time data collection. Page 8
Q7) Comment on the following statement: "Legacy systems use flat file structures."
Q9) What are the major exposures in the general ledger/financial reporting system?
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Chapter 7: Computer-Assisted Audit Tools and Techniques
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Q1) Which of the following is not an input control?
A) Range check
B) Limit check
C) Spooling check
D) Validity check
E) They are all input controls
Q2) Explain input controls.
Q3) Risk exposures associated with creating an output file as an intermediate step in the printing process (spooling)include all of the following actions by a computer criminal except
A) gaining access to the output file and changing critical data values
B) using a remote printer and incurring operating inefficiencies
C) making a copy of the output file and using the copy to produce illegal output reports
D) printing an extra hardcopy of the output file
Q4) Describe two types of transposition error
Q5) What is the purpose of the auditor's review of SDLC documentation?
Q6) What are the five major components of a GDIS?
Q7) A __________________________ fraud affects a large number of victims but the harm to each appears to be very small.
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Chapter 8: Data Structures and CAATTs for Data Extraction
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Q1) What is the relationship between a database table and a user view?
Q2) When a large portion of the file is to be processed in one operation such as payroll,sequential data structures are an inefficient method of organizing a file.
A)True
B)False
Q3) The deletion anomaly in unnormalized databases
A) is easily detected by users
B) may result in the loss of important data
C) complicates adding records to the database
D) requires the user to perform excessive updates
Q4) The update anomaly in unnormalized databases
A) occurs because of data redundancy
B) complicates adding records to the database
C) may result in the loss of important data
D) often results in excessive record insertions
Q5) Explain how linkages between relational tables are accomplished.
Q6) How does the embedded audit module support the auditor?
Q7) What is an embedded audit module?
Q8) What is repeating group data?
Q9) Explain how a separate linking file works in a network model. Page 11
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Chapter 9: Auditing the Revenue Cycle
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Q1) The shipping notice
A) is mailed to the customer
B) is a formal contract between the seller and the shipping company
C) is always prepared by the shipping clerk
D) informs the billing department of the quantities shipped
Q2) What is the objective of re-engineering?
Q3) Goods are shipped to a customer,but the shipping department does not notify billing and the customer never receives an invoice.Describe a specific internal control procedure that would detect this error.
Q4) What is the role of the shipping notice?
Q5) The warehouse is responsible for updating the inventory subsidiary ledger. A)True
B)False
Q6) Customers should be billed for back-orders when
A) the customer purchase order is received
B) the backordered goods are shipped
C) the original goods are shipped
D) customers are not billed for backorders because a backorder is a lost sale
Q7) Describe the key tasks in the sales order process
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Q8) How is EDI more than technology? What unique control problems may it pose?
Chapter 10: Auditing the Expenditure Cycle
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Q1) Permitting warehouse staff to maintain the only inventory records violates separation of duties.
A)True
B)False
Q2) The purpose of the purchase order is to
A) order goods from vendors
B) record receipt of goods from vendors
C) authorize the purchasing department to order goods
D) approve payment for goods received
Q3) When a cash disbursement in payment of an accounts payable is recorded
A) the liability account is increased
B) the income statement is changed
C) the cash account is unchanged
D) the liability account is decreased
Q4) To maintain a good credit rating and to optimize cash management,cash disbursements should arrive at the vendor's place of business
A) as soon as possible
B) on the due date
C) on the discount date
D) by the end of the month.
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Chapter 12: Business Ethics, Fraud, and Fraud Detection
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Q1) What are the six broad classes of physical control activities defined by SAS 78?
Q2) The ethical principle of informed consent suggests that the decision should be implemented so as to minimize all of the risks and to avoid any unnecessary risks.
A)True
B)False
Q3) Describe the factors that constitute the fraud triangle.Why is it important to auditors?
Q4) The objective of SAS 99 is to seamlessly blend the auditor's consideration of fraud into all phases of the audit process.
A)True
B)False
Q5) Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.
Q6) The text discusses many questions about personal traits of executives which might help uncover fraudulent activity.What are three?
Q7) What is program fraud?
Q8) Explain the problems associated with lack of director independence
Q9) What is check tampering?
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Chapter 11: Enterprise Resource Planning Systems
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Q1) How can a firm acquire bolt-on software? What are the options?
Q2) Data warehousing processes does not include
A) modeling data
B) condensing data
C) extracting data
D) transforming data
Q3) What is meant by the OLAP term - Slicing and dicing?
Q4) What are the basic stages of the data warehousing process?
Q5) Extracting data for a data warehouse
A) cannot be done from flat files.
B) should only involve active files.
C) requires that the files be out of service.
D) follows the cleansing of data.
Q6) A closed database architecture shares data easily.
A)True
B)False
Q7) If a chosen ERP cannot handle a specific company process bolt-on software may be available.
A)True
B)False
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