Information Technology

Question 1

System Flowchart

Answer 1

A graphic representation of a data processing application that depicts the interaction of all the computer programs for a given system, rather than the logic for an individual computer program

Question 2

Program Flowchart

Answer 2

A graphic representation of the logic (processing steps) of a computer program

Question 3

Internal Control Flowchart/Document Flowchart

Answer 3

A graphic representation of the flow of documents from one department to another, showing the source flow and final disposition of the various copies of all documents

Question 4

Decision Table

Answer 4

Decision Tables use a matrix format that lists set of conditions, and the actions that result from various combinations of these decisions

Question 5

Data Flow Diagram (DFD)

Answer 5

Presents logical flows of data and functions in a system. For example, a data flow diagram for the delivery of goods to a customer would include a symbol for the warehouse from which the goods are shipped and a symbol representing the customer. It would not emphasize details such as computer processing and paper outputs.

Question 6

T/F

If a transaction is incorrectly processed, the auditor should suggest a way to fix the control, and re-process the transaction.

Answer 6

FALSE

Suggesting fixes is out of the scope of an audit and is dangerously close to consulting services.

The auditor should consider the effect that the issue will have on control risk. The auditor also should obtain an understanding of how the incorrect processing of transactions is resolved.

Question 7

Ineffective general controls by themselves ____ (always/never/could) ____ (cause/allow) misstatements

Answer 7

Ineffective general controls by themselves never cause misstatements but they could allow misstatements.

Question 8

What represents a disadvantage for an entity that keeps microcomputer-prepared data files rather than manually prepared files?

Answer 8

It is usually easier for unauthorized persons to access and alter the files. Manual files only need to be physically secure; but computer data needs to be both physically and logically secure.

Question 9

When reviewing the extent and nature of the risks to internal controls associated with IT, an auditor should consider what?

Answer 9

1) Whether the entity has responded adequately to the risks arising from IT by establishing effective controls
2) Whether controls over IT systems are effective when they maintain the integrity of information and the security of the data such systems process

Question 10

Describe a Completeness Test and how it is useful

Answer 10

A completeness check is a verification that all data required to process a given type of transaction has been entered in the required data fields. If missing data is detected, the operator is generally prompted to enter or complete the submission before it will be accepted for processing. This is a control that prevents errors.

Question 11

How are Application Controls Classified?

Answer 11

Input Controls
Processing Controls
Output Controls

Question 12

The extent and nature of the risk to internal control associated with IT are dependent on the nature and characteristics related to the entity’s

Answer 12

information system

Question 13

Application controls pertain to

Answer 13

processing of individual applications in an IT environment

Question 14

Input controls relate most appropriately to (3 items)

Answer 14

rejection, correction, and resubmission of data that was initially incorrect

Question 15

There are four basic categories of input to be controlled

Answer 15

1) transaction entries
2) file maintenance transactions
3) inquiry transaction entries
4) error correction transactions.

Question 16

An advantage of using parallel simulation, instead of performing tests of controls without a computer, is that

Answer 16

the size of the sample can be greatly expanded at relatively little additional cost.

Question 17

What factors related to control activities impact an auditor’s consideration of the effect of IT on internal control (3 items)

Answer 17

1) Information Processing
2) Segregation of Duties
3) Physical Controls

Question 18

Application Controls pertain to

Answer 18

processing of individual applications in an IT environment.

Question 19

Application Controls are designed to

Answer 19

achieve specific control objectives related to specific accounting tasks.

Question 20

Application Controls can be performed by…

Answer 20

automated IT and/or user-based controls.

Question 21

T/F

Application controls can be performed by IT (automated) or by individuals.

Answer 21

True

When application controls are performed by people interacting with IT, they may be referred to as user controls.