Gathering Procedures

Question 1

What is the drawback in electronic data processing and what can be used to solve it?

Answer 1

it is only available in electronic format and can be used at one time or whenever available hence it is important to use test data for continuous audit testing. however test data cannot test physical controls such as unclaimed checks.

Question 2

Test Data

Answer 2

Test data are fictitious transactions that are processed (under the auditor’s control) through the client’s system utilizing the client’s computer programs. Auditor only check for relevant items that concern the financial statements where only one transaction of each type needs to be tested. Results are compared to the auditor’s predetermined results to check the accuracy of the computer processing of transactions.

Question 3

what should an auditor do when there are significant deficiencies in a control report?

Answer 3

The auditor would increase the control risk assessment and increase substantive testing

Question 4

what is the primary advantage of generalized audit software packages?

Answer 4

they perform common audit tasks (footing a file, sorting, extracting, and summarizing) hence they allow an auditor to access info stored on comp files even wit only minimal understanding of the clients’ hardware/software

Question 5

Parallel simulation

Answer 5

a program created by the auditor to process data and then be compared to the same data processed by the clients program which allows the auditor to test controls in the computer system

Question 6

Embedded Audit Module

Answer 6

“audit hooks”- built in points where an audit module can be added later

Systems that don’t have a permanent audit trail require that any “auditing” occurs while processing take place.

it is a program which is inserted in a client system to capture designated transactions such as large and unusual ones so that the auditor can review it later; this allows the auditor to continuously test the clients computer information system and to be involved

the audit hook is the exit point when an audit module can be added

Question 7

Integrated Test Facility

Answer 7

checks operative effectiveness

concurrent audit technique that processes data through the use of simulated files so it basically creates a dummy company where transactions are inputted concurrently with actual live transactions hence the auditor will be able to determine if the controls are working properly and whether the processing is correct; this happens without the client being aware; ficitious and real transactions are being processed together

Question 8

What is an auditors primary role in reviewing perpetual inventory files?

Answer 8

to verify financial assertions related to inventory at year-end

thus warehouse location, date of last purchase, and quantity sold would be important; economic order quantity would not be important

Question 9

Assessing EDP control risk is a matter of judgement

Answer 9

true

Question 10

Generalized software vs customized software

Answer 10

generalized is expensive but can be spread over many clients

customized is less expensive but cannot be spread over many clients

Question 11

Test Controls While Processessing

Answer 11

Tagging

Embedded Audit Modules

Question 12

Tests Controls After knowing Fact

Answer 12

Integrated Test Facility
Test Data
Parallel Simulation

Question 13

Tagging

Answer 13

electronic tags that are attached to data and can be tracked throughout the system

Question 14

Three Types of Softwares

Answer 14

general
customization
data mining

Question 15

Data Mining Software

Answer 15

commercially available software that can be easily used to access a clients electronic data and perform a broad range of tasks (such as sampling and performing analytical procedures)