Auditing and Information Systems
Question Bank
Course Introduction
This course explores the principles and practices of auditing within the context of modern information systems. Students will learn about the objectives and procedures of auditing, including risk assessment, internal controls, and evidence collection, with a special focus on computerized accounting environments. The course covers the influence of information technology on the audit process, examining tools and techniques for auditing in automated systems and addressing issues such as data integrity, security, and compliance. Through a combination of theoretical frameworks and practical case studies, students will develop the skills necessary to evaluate and ensure the reliability of financial information in complex digital landscapes.
Recommended Textbook
Accounting Information Systems A Practitioner Emphasis 7th Edition by Cynthia D. Heagy
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Chapter 1: Significance of Accounting Information Systems
and the Accountants Role
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Q1) For decision-making purposes, managers require data from which source(s) and in which terms?
A) Internal and external sources in only monetary terms
B) Internal sources in non-monetary terms and external sources in monetary terms.
C) Internal sources in non-monetary terms and external sources in monetary terms
D) Internal and external sources in both monetary and non-monetary terms
Answer: D
Q2) Which of the following statements about a manual accounting system is not correct?
A) Very little data beyond the basic elements are included.
B) Data are stored in only one location.
C) Errors and inconsistencies are common.
D) Data are processed for external reporting.
Answer: B
Q3) What are four possible categories for accounting software if based on the size of company it services?
Answer: Four possible categories are low end market, middle market, beginning ERP market, and tier 1 market.
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Chapter 2: Accounting Systems Documentation
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Q1) A systems flowchart identifies all existing control procedures for preventing or detecting errors and irregularities.
A)True
B)False
Answer: False
Q2) What is a disadvantage of a data flow diagram?
A) Inability to show relationships among subsystems
B) Poor communications tool
C) Difficulty of understanding for nontechnical personnel
D) Inability to represent points of detail
Answer: D
Q3) Which of the following issues should system narrative descriptions attempt to cover?
A) Relationship of every member in the organization as they pertain to the system
B) Cost of the system
C) The relationship between the current system documentation and any past documentation
D) System specifications
Answer: D
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Chapter 3: Essential Elements and Basic Activities of Accounting Systems
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Sample Questions
Q1) A bill of lading is a written contract between the shipper and the consignee.
A)True
B)False
Answer: False
Q2) List at least three of the six basic activities of a computerized accounting system.
Answer: Students may list any of the following:
1. Preclassifying transactions according to type.
2. Creating a transaction file for each class of like transactions for each data capturing period.
3. Updating, or posting to, the subsidiary ledger master files and open files.
4. Summarizing transaction files and transferring the summarized data to a general journal transaction file.
5. Updating, or posting to, the general ledger master file
6. Preparing documents and reports
Q3) A ledger lists transactions in chronological order and is considered "the book of original entry."
A)True
B)False
Answer: False
5
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Chapter 4: Data Flows, Activities, and Structure of Accounting Systems
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Q1) What are the major activities of an accounting information system?
Q2) What are the primary activities of an accounting information system?
A) Input (capture), store, process, output (communicate) data
B) Interface, communicate, store, process information
C) Input, store, post, process information
D) Classify, compare, summarize, calculate data
Q3) Which of the following is not true about input data?
A) Input data is an interface between the computer software and the accounting system.
B) Input data can be captured on source documents.
C) Input data can be prone to errors.
D) Input data can be verified by various activities.
Q4) The cash receipts transaction file is used to update the open customer invoice file and the
A)True
B)False
Q5) It is possible for a transaction to be initiated by programmed instructions in a computer program.
A)True
B)False
Page 6
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Chapter 5: Reporting Process, Coding Methods, and Audit Trails
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Q1) Which of the following statements is correct regarding extensible business reporting language (XBRL)?
A) XBRL avoids errors by eliminating the need to reenter data.
B) XBRL is equivalent to hypertext markup language (HTML).
C) XBRL does NOT require the use of tags.
D) XBRL was developed by a single company.
Q2) What are dictionaries of element names that represent financial report concepts?
A) Namespaces
B) Taxonomies
C) Elements
D) Instance documents
Q3) Which of the coding methods represents a logical association between the characters forming the code and the item being identified?
A) Block coding
B) Sequence code
C) Group code
D) Mnemonic code
Q4) What are the disadvantages of using mnemonic codes? Include at least two examples.
Q5) What is an audit trail?
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Chapter 6: Internal Control and Risk Assessment
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Q1) The Foreign Corrupt Practices Act was passed to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws.
A)True
B)False
Q2) Which of the following are required by the Sarbanes-Oxley Act of 2002?
A) Rotation of a company's external auditing firms every five years.
B) Limited loans under special circumstances to executive management.
C) Attestation as to the contents of the financial statements by the CEO and CFO.
D) All of the above.
Q3) What does (5) represent?
A) Total cost
B) Loss area
C) Cost of controls
D) Level of assurance
E) Optimal point of reasonable assurance D
Q4) The audit committee is composed of top managers of a company.
A)True
B)False
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Chapter 7: Control Activities
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Q1) To enable a user to access data and program files, what should the user be required to enter?
A) A parity check
B) A personal identification code
C) A self-diagnosis test
D) An echo check
Q2) The authority for establishing selling prices normally resides with which of the following?
A) Treasurer and upper management
B) Controller and upper management
C) Sales department and upper management
D) Credit department and upper management
Q3) Identify the general control activities that are desirable for information processing systems.
Q4) The authority for ordering goods and services normally resides with which of the following?
A) Treasurer
B) Originating department manager
C) Controller
D) Employee who initiates the order
Page 9
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Chapter 8: The Financial Process
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Q1) What types of entries are recorded in the financial process?
A) Data captured in and transferred from other processes
B) Reversing entries
C) End-of-period adjustments
D) All of the above are types of entries recorded in the financial process.
Q2) The internal audit department chooses the external auditor.
A)True
B)False
Q3) Which module composes the financial process in AIS software packages?
A) The customer module
B) The vendor module
C) The general ledger module
D) The inventory module
Q4) Accounting information system software packages use the term "normal accounts" for the equivalent subsidiary ledger conventionally used in accounting.
A)True
B)False
Q5) Closings for interim periods are known as hard closings.
A)True
B)False
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Chapter 9: The Revenue Process
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Q1) The discounts taken report is an output of the inventory process.
A)True
B)False
Q2) The most common report for the revenue process is an aging of accounts receivable.
A)True
B)False
Q3) Which of the following represents the proper segregation of duties in the revenue process?
A) The person who handles deposits also reconciles the cash account.
B) A clerk in the treasury office opens mail and posts cash receipts.
C) The inventory management and shipping functions are in different buildings.
D) Sales representatives can check on the status of shipments and make adjustments to the order.
Q4) Preparing an aging schedule for balance forward accounts is straightforward even though no detail may be available before the current period.
A)True
B)False
Q5) What is the difference between credit limit, credit rating, and credit hold?
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Chapter 10: The Purchasing Process
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Q1) Which of the following are the principal reports required for the effective management of the purchasing process?
A) Vendor performance.
B) Outstanding sales orders.
C) Discounts taken.
D) All of the above.
Q2) An organization is not under an obligation to pay a vendor until the organization receives the vendor's invoice.
A)True
B)False
Q3) When is a cash requirements forecast prepared?
A) After invoices have been approved for payment
B) After a schedule of aged accounts payable has been prepared
C) Before a schedule of aged accounts payable has been prepared
D) At regular intervals
Q4) What are the advantages of EDI over paper purchase orders?
Q5) Define and explain the purpose of retainages.
Q6) What are some of the key reports required for effective management of the purchasing process?
Q7) Describe some factors which may complicate competitive bidding.
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Chapter 11: The Inventory Process
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Q1) Most data entry relating to inventory occurs in the inventory process.
A)True
B)False
Q2) Discuss ways that an organization can minimize the risks associated with outsourcing.
Q3) Lead time stock is that quantity of inventory deemed necessary to avoid the loss of sales due to stockouts.
A)True
B)False
Q4) Which of the following represent risks associated with outsourcing?
A) Renegotiation risk.
B) Geopolitical risk.
C) Privacy of sensitive information.
D) All of the above are risks associated with outsourcing.
Q5) When is an order placed for additional products?
A) When the quantity available for sale reaches the stockout level
B) When quantity available for sale declines to the lead time stock level
C) When sales fall below the maximum stocking level
D) When inventory falls to the economic order quantity
Q6) What are the tasks that supply chain management software can perform?
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Chapter 12: Database Structure of Accounting Systems
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Q1) What is a data dictionary?
A) It is a special file, stored in an application program, that provides instructions for processing data.
B) It is a special file, stored in data definition language, that makes a data element in one schema correspond to an element in another schema.
C) It is a special file that is required to initiate the processing of data.
D) It is a special file, stored in the database itself, that provides metadata on the description, structure, and type of each data element stored in the database.
Q2) What are some of the advantages of an accounting system that uses a database?
Q3) What operation produces a new table with only the desired columns from a single source table?
A) Selection
B) Projection
C) Join
D) Union
Q4) List the advantages and disadvantages of a database system.
Q5) Compare the data hierarchy of a conventional file to that of a database.
Q6) Define the two database models discussed in the chapter.
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Chapter 13: Developing a Relational Database for an Accounting Information System
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Q1) A method for arranging data elements in a way that reduces anomalies is referred to as which of the following?
A) Internalization
B) Normalization
C) Visualization
D) Assimilation
Q2) Which of the following data elements are called repeating data elements in an invoicing application?
A) Product number, product description, invoice number, customer code
B) Product number, product description, unit sales price, quantity sold
C) Product number, unit sales price, invoice date, quantity sold
D) Product number, unit sales price, customer city, customer code
Q3) Which of the following would be the primary keys of the first three tables above?
A) CustCode, InvNo, ProdNo
B) InvNo, InvNo/ProdNo, ProdNo
C) InvNo/CustCode, ProdNo/Qty, ProdNo
D) InvDate/InvNo, ProdNo, Desc
Q4) What are the three steps that will normalize data with respect to the third normal form?
Page 15
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Chapter 14: Electronic Business
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Q1) What is the most significant benefit from EDI implementation?
A) Cost reduction from paper work elimination
B) The ability to capture and exercise a degree of control over customers
C) Increased speed in trading in merchandise
D) Increased bargaining ability with suppliers
Q2) What would Interleaved 2 of 5 most likely be used for?
A) Drug items
B) Multiple unit packages
C) Small items
D) Items sold by weight
E) Items sold by volume C
Q3) Which of the following EDI over the Internet approach uses templates to map the EDI messages from the way the data are stored in a database to the EDI standard message and processes the message on the client's side?
A) Internet EDI
B) Web-EDI
C) XML/EDI
Q4) Briefly explain the difference in point-to-point versus value-added-network EDI architecture.
Q5) Identify at least two benefits of EDI.
Page 16
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Chapter 15: Ais Selection and Implementation
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Q1) What is a common threat in AIS software selection?
A) The danger of adopting "cutting edge" technology that contains defects
B) Newer software products have a greater number of "bugs."
C) The language in licensing contracts
D) All of these are common threats in AIS software selection.
Q2) The development of accounting systems for microcomputers led to the concentration of accounting functions within the accounting department.
A)True
B)False
Q3) List the tasks required in a systems acquisition project.
Q4) What are four issues in system acquisition?
Q5) Many CPAs advise against any modifications of a commercial off-the-shelf AIS. A)True
B)False
Q6) Finding the best accounting package for an organization is easy. A)True B)False
Q7) Discuss what is meant by enterprise resource planning (ERP) packages and give some examples of the leading packages.
Page 17
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