Auditing Test Questions
Course Introduction
Auditing is a comprehensive course that introduces students to the principles, procedures, and practices of auditing within both public and private sector organizations. The course covers the objectives of auditing, the ethical and legal responsibilities of auditors, and the risk-based approach to auditing financial statements. Students will explore key topics such as audit planning, evidence collection, internal controls, sampling techniques, and the preparation of audit reports. Emphasis is placed on understanding the audit process as a systematic examination of financial information to provide assurance on its accuracy and reliability. Through case studies and practical examples, students learn to apply auditing standards and procedures to real-world scenarios, preparing them for professional roles in accounting and audit firms.
Recommended Textbook
Accounting Information Systems 13th Global Edition by Marshall B. Romney
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Page 2
Chapter 1: Accounting Information Systems: an Overview
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Sample Questions
Q1) Identify the party below that is not internal to the firm.
A)customer
B)management
C)employees
D)CEO Answer: A
Q2) True or False: Corporate strategy should affect the way a firm deploys an accounting information system.
A)True
B)False Answer: True
Q3) In which transaction cycle would information for inventory purchases be most likely to pass between internal and external accounting information systems?
A)the revenue cycle
B)the expenditure cycle
C)the human resources / payroll cycle
D)the financing cycle
Answer: B
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3
Chapter 2: Overview of Transaction Processing and Enterprise Resource Planning Systems
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Sample Questions
Q1) ERP stands for
A)enterprise resource planning.
B)enterprise resource program.
C)enterprise reporting program.
D)none of the above
Answer: A
Q2) A delivery of inventory from a vendor,with whom a credit line is already established,would be initially recorded in which type of accounting record and as part of what transaction cycle?
A)purchases journal; expenditure cycle
B)general journal; expenditure cycle
C)general ledger; expenditure cycle
D)cash disbursements journal; production cycle
Answer: A
Q3) Which of the following is an example of source data automation?
A)a utility bill
B)POS (point-of-sale)scanners in retail stores
C)a bill of lading
D)a subsidiary ledger
Answer: B
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Chapter 3: Systems Documentation Techniques
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Sample Questions
Q1) In a data flow diagram of the vendor payment process,what symbol would most appropriately reflect an update of the payables account?
A)a square
B)a circle
C)two horizontal lines
D)none of the above
Answer: B
Q2) Describe a system flowchart.Describe a program flowchart.How are the two interrelated?
Answer: Systems flowcharts depict the relationships among the input,processing,and output of an AIS.The program flowchart illustrates the sequence of logical operations performed by a computer in executing a program.System flowcharts identify processing areas but do not show how the processing is done.The detailed logic used by the computer to perform the processing is shown on a separate program flowchart.
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Chapter 4: Relational Databases
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Sample Questions
Q1) Which of the following is false regarding a well-structured relational database?
A)A foreign key cannot be null.
B)A primary key cannot be null.
C)Every column in a row must be single valued.
D)All nonkey attributes in a table must describe a characteristic of the object identified by the primary key.
Q2) Cornelia Cassidy is a telecom equipment sales representative.Her company has provided her with a laptop computer that uses wireless connectivity to access the accounting information system from virtually anywhere in the country.She has access to view customer and product information.She also has access that allows her to enter and cancel customer orders.The permissions for Cornelia (and other sales reps)define a ________ in the company's database management system.
A)conceptual-level schema
B)data dictionary
C)external-level schema
D)physical view
Q3) What is the difference in logical view and physical view?
Q4) Discuss redundancy as it applies to database design.
Q5) Describe a data dictionary.
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Chapter 5: Computer Fraud
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Sample Questions
Q1) Describe at least four ways a company can make fraud less likely to occur.
Q2) Which fraud scheme involves stealing customer receipts and applying subsequent customer cash payments to cover the theft?
A)kiting
B)laundering
C)lapping
D)bogus expense
Q3) The most efficient way to conceal asset misappropriation is to
A)write-off a customer receivable as bad debt.
B)alter monthly bank statements before reconciliation.
C)alter monthly physical inventory counts to reconcile to perpetual inventory records.
D)record phony payments to vendors.
Q4) The simplest and most common way to commit a computer fraud is to
A)alter computer input.
B)alter computer output.
C)modify the processing.
D)corrupt the database.
Q5) Describe two kinds of fraud.
Q6) Why is computer fraud on the rise?
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Chapter 6: Computer Fraud and Abuse Techniques
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Sample Questions
Q1) Which of the following is not an example of social engineering?
A)obtaining and using another person's Social Security number,credit card,or other confidential information
B)creating phony websites with names and URL addresses very similar to legitimate websites in order to obtain confidential information or to distribute malware or viruses
C)using e-mail to lure victims into revealing passwords or user IDs
D)setting up a computer in a way that allows the user to use a neighbors unsecured wireless network
Q2) A fraud technique that allows a perpetrator to bypass normal system controls and enter a secured system is called
A)superzapping.
B)data diddling.
C)using a trap door.
D)piggybacking.
Q3) Describe at least four social engineering techniques.
Q4) Describe the differences between a worm and a virus?
Q5) How can a system be protected from viruses?
Q6) Describe at least six computer attacks and abuse techniques.
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Chapter 7: Control and Accounting Information Systems
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Sample Questions
Q1) Which of the following measures can protect a company from AIS threats?
A)Take a proactive approach to eliminate threats.
B)Detect threats that do occur.
C)Correct and recover from threats that do occur.
D)All of the above are proper measures for the accountant to take.
Q2) Applying the COBIT5 framework,governance is the responsibility of
A)internal audit.
B)external audit.
C)management.
D)the board of directors.
Q3) A document that shows all projects that must be completed and the related IT needs in order to achieve long-range company goals is known as a
A)performance evaluation.
B)project development plan.
C)data processing schedule.
D)strategic master plan.
Q4) Explain why management's philosophy and operating style are considered to be the most important element of the internal environment.
Q5) Describe the differences between general and specific authorization.
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Chapter 8: Controls for Information Security
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Sample Questions
Q1) Identify the primary means of protecting data stored in a cloud from unauthorized access.
A)authentication
B)authorization
C)virtualization
D)securitization
Q2) ________ is/are an example of a preventive control.
A)Emergency response teams
B)Encryption
C)Log analysis
D)Intrusion detection
Q3) The ________ disseminates information about fraud,errors,breaches and other improper system uses and their consequences.
A)chief information officer
B)chief operations officer
C)chief security officer
D)computer emergency response team
Q4) Describe four requirements of effective passwords .
Q5) Identify six physical access controls.
Q6) Describe what a man-trap is and how it contributes to information security.
Page 10
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Chapter 9: Confidentiality and Privacy Controls
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Sample Questions
Q1) After the information that needs to be protected has been identified,what step should be completed next?
A)The information needs to be placed in a secure,central area.
B)The information needs to be encrypted.
C)The information needs to be classified in terms of its value to the organization.
D)The information needs to be depreciated.
Q2) It is impossible to encrypt information
A)transmitted over the Internet.
B)stored on a hard drive.
C)printed on a report.
D)None of the above
Q3) Classification of confidential information is the responsibility of whom,according to COBIT5?
A)external auditor
B)information owner
C)IT security professionals
D)management
Q4) Describe symmetric encryption and identify three limitations.
Q5) Describe some steps you can take to minimize your risk of identity theft.
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Chapter 10: Processing Integrity and Availability Controls
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Sample Questions
Q1) This control protects records from errors that occur when two or more users attempt to update the same record simultaneously.
A)concurrent update controls
B)cross-footing balance test
C)data conversion controls
D)recalculation of batch totals
Q2) This data entry control compares the ID number in transaction data to a master file to verify that the ID number exists.
A)reasonableness test
B)user review
C)data matching
D)validity check
Q3) This tests a numerical amount to ensure that it does not exceed a predetermined value.
A)completeness check
B)limit check
C)range check
D)sign check
Q4) Define and contrast a recovery point objective and a recovery time objective.
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Chapter 11: Auditing Computer-Based Information Systems
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Sample Questions
Q1) When a control deficiency is identified,the auditor should inquire about A)tests of controls.
B)compensating controls.
C)the feasibility of a systems review.
D)materiality and inherent risk factors.
Q2) Explain the differences between each type of audit risk.
Q3) With regards to an accounting information system,a financial audit is most concerned with
A)the system's output.
B)the system's input.
C)the system's processing.
D)the system's storage.
Q4) a)What is test data processing? b)How is it done? c)What are the sources that an auditor can use to generate test data?
Q5) The ________ audit examines the reliability and integrity of accounting records.
A)financial
B)informational
C)information systems
D)operational
Q6) Define and give examples of embedded audit modules.
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Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Sample Questions
Q1) In a revenue cycle with proper controls,the ________ who reports to the ________,is not involved in any cash handling activities.
A)accounts receivable clerk; treasurer
B)accounts receivable clerk; controller
C)cashier; controller
D)cashier; treasurer
Q2) Describe the basic revenue cycle activities.
Q3) Internal file labels can be used to prevent the loss of data in the revenue cycle since they
A)record off-site storage locations.
B)keep competitors from accessing files.
C)organize the on-site physical storage site.
D)reduce the possibility of erasing important files.
Q4) Which of the following is not a key decision that needs to be made in the revenue cycle?
A)How should merchandise be delivered to customers?
B)Should credit be extended to customers?
C)How can customer payments be processed to maximize cash flow?
D)Which vendor should inventory be purchased from?
Q5) Explain how to effectively segregate duties in the sales order activity.
Page 14
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Chapter 13: The Expenditure Cycle: Purchasing to Cash Disbursements
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Sample Questions
Q1) Ngai Nhung is the sales manager at Hung Technologies.At lunch with the company CEO,Ngai proudly announced that he had negotiated a(n)________ with a client that represented the customer's long-term commitment to buy components from Hung.
A)purchase order
B)evaluated receipt settlement
C)voucher
D)blanket purchase order
Q2) The ________ specifies the point at which inventory is needed.
A)company inventory policies
B)reorder point
C)economic order quantity
D)stockout point
Q3) If available,a 1% discount for payment within 10 days instead of 30 days represents an approximate savings of ________% annually.
Q4) Identify ten threats and applicable control procedures in the expenditure cycle.
Page 15
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Chapter 14: The Production Cycle
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Sample Questions
Q1) The threat of loss of data exposes the company to A)the loss of assets.
B)ineffective decision making.
C)inefficient manufacturing.
D)All of the above are correct.
Q2) Which of the following organization controls should be implemented and maintained to counteract the general threat that the loss of production data will greatly slow or halt production activity?
A)Store key master inventory and production order files on-site only to prevent their theft.
B)Back up data files only after a production run has been physically completed.
C)Access controls should apply to all terminals within the organization.
D)Allow access to inventory records from any terminal within the organization to provide efficient data entry.
Q3) True or False: ERP systems make it easier for an organization to implement an activity based costing approach.
A)True
B)False
Q4) Identify and discuss the two common methods of production planning.
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Chapter 15: The Human Resources Management and Payroll Cycle
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Sample Questions
Q1) The sales department administrative assistant has been assigning phone order sales to her brother-in-law,a company sales person.Company policy is to pay commissions only on orders directly received by sales people,not on orders received over the phone.The resulting fraudulent commission payments might best have been prevented by requiring that
A)sales commission statements be supported by sales order forms signed by the customer and approved by the sales manager.
B)sales order forms be prenumbered and accounted for by the sales department manager.
C)sales orders and commission statements be approved by the accounting department.
D)disbursement vouchers for commission payments be reviewed by the internal audit department and compared to sales commission statements and sales orders.
Q2) Explain the functions of the payroll register,deduction register,and earnings statement.
Q3) Describe the basic activities in an HRM/payroll cycle.
Q4) Discuss the various types and sources of input into the HRM/payroll cycle.
Q5) Why are accurate cumulative earnings records important?
Q6) Describe benefits and threats of incentive and bonus programs.
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Chapter 16: General Ledger and Reporting System
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Sample Questions
Q1) At a minimum,a switch to IFRS from GAAP will affect companies' accounting information system by
A)requiring companies to increase the processing power of their existing accounting information systems.
B)requiring IT departments to hire programmers that are fluent in languages besides English.
C)requiring the creation of additional fields in research and development (R&D)records to capture information about the stage of research and development that costs are incurred in.
D)requiring firms to completely redesign their existing accounting information systems because current systems are not compatible with IFRS accounting principles.
Q2) Discuss the value and role of budgets as managerial reports.
Q3) The balanced scorecard attempts to solve what major issue associated with traditional accounting reports?
A)Traditional accounting reports focus too narrowly on financial performance.
B)Traditional accounting reports are not easily understood by non-accountants.
C)Traditional accounting reports are expensive to produce.
D)Traditional accounting reports are produced too slowly to provide value.
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Chapter 17: Database Design Using the Rea Data Model
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Sample Questions
Q1) Which of the following is not one of the rules in creating an REA data model?
A)Each event is linked to at least one resource that it affects.
B)Each event is linked to at least one other event.
C)Each event is linked to at least two participating agents.
D)All of the above are important rules.
Q2) In which stage(s)of the database design process is the completed data model used?
A)only in the systems analysis stage
B)only in the conceptual design stage
C)in both the systems analysis and design stages
D)neither the systems analysis nor the design stages
Q3) Describe the steps in developing an REA diagram.
Q4) Assume that you are looking at a REA diagram that depicts only one event.Which of the following must be on the REA diagram?
A)an external agent
B)an internal agent
C)both A and B
D)neither A nor B
Q5) Describe data modeling.
Q6) Describe the possible relationships between entities,in terms of cardinalities.
Page 19
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Chapter 18: Implementing an Rea Model in a Relational Database
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Sample Questions
Q1) What are the advantages of the REA data model over the traditional AIS model?
Q2) An integrated REA diagram could contain multiple copies of A)customers.
B)sales.
C)inventory.
D)sales-inventory.
Q3) Integrating separate REA diagrams into a single comprehensive enterprise-wide model of the organization requires understanding what the ________ in each separate diagram reveal about the organization's business policies and activities.
A)cardinalities
B)data
C)events
D)transactions
Q4) Nonfinancial information should be collected because A)it may indicate events that may affect resources.
B)it can be used to plan other activities.
C)it can be used in transaction processing.
D)both A and B
Q5) Explain a completeness check.
Q6) Explain the five rules for drawing integrated REA diagrams. Page 20
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Page 21
Chapter 19: Special Topics in Rea Modeling
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Sample Questions
Q1) Supplier number is most likely to be a foreign key in A)Inventory-Request_Inventory.
B)Receive Inventory.
C)Supplier.
D)Warehouse.
Q2) Explicitly identifying the different employees who participate in each event by their job functions is helpful when verifying
A)internal controls.
B)job descriptions.
C)proper supervision.
D)segregation of duties.
Q3) In a database created using an REA model,the Bill of Materials entity is most analogous to
A)the "bill" that can be sent to the customer who order the finished good(s).
B)the "recipe" needed to produce the finished good(s).
C)the "receipt" for the purchase of specific raw materials.
D)the "audit trail" that can be used to verify a finished good(s)was actually produced.
Q4) Give an example of an M:N Agent-Event relationship.
Q5) Why is cost information stored in several relational tables?
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Chapter 20: Introduction to Systems Development and Systems Analysis
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Sample Questions
Q1) The ________ method of gathering information helps to determine how a system actually works.
A)interview
B)observation
C)questionnaire
D)system documentation
Q2) ________ is a form of user resistance where data are erroneously entered into a system.
A)Acceptance
B)Aggression
C)Avoidance
D)Aggravation
Q3) In order to reduce resistance resulting from uncertainty,what guideline should be implemented and followed during the systems development process?
A)attempt to meet the users' needs
B)avoid emotionalism
C)keep communication lines open
D)keep the system simple
Q4) Describe the physical design stage of the systems development life cycle.
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Chapter 21: Ais Development Strategies
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Sample Questions
Q1) WorldWide Supermarket,a grocery store with 5,000 locations around the world surprised financial markets by announcing that it was selling all of its computers to CompuService and hiring the firm to operate and manage the supermarket's system.WorldWide Supermarket just engaged in which type of outsourcing agreement?
A)a locked-in agreement
B)a mainframe agreement
C)a client/server agreement
D)a cloud computing agreement
Q2) Firms should consider preparing a software prototype if the application
A)will be used for a critical function like inventory management.
B)automates a structured task.
C)can be produced using outside developers.
D)inputs and outputs are not clearly defined.
Q3) Discuss how an organization can develop custom software.
Q4) Which or the following does not typically cause outsourcing failures?
A)lukewarm company buy-in
B)blind imitation of competitors
C)ill-defined outsourcing agreements
D)downsizing
Q5) Describe the difficulties that could be encountered when developing an AIS.
Page 24
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Chapter 22: Systems Design,implementation,and Operation
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Sample Questions
Q1) Which of the following control considerations will help ensure that all cash disbursements are made only to legitimate vendors?
A)security
B)accuracy
C)authorization
D)validity
Q2) The ________ is responsible for identifying such risk factors in an implementation plan.
A)implementation team
B)steering committee
C)systems analysis team
D)systems development team
Q3) Describe the eight basic steps in program design.
Q4) Effective AIS training involves
A)instruction on new hardware and software.
B)orientation to new policies and operations.
C)planning and scheduling so it occurs before system testing and conversion.
D)All of the above are correct.
Q5) Describe structured programming.
Q6) What are the purposes of a conceptual systems design report? Page 25
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