Harvard University

AUDIT 111

Chapter 7-Computer-Assisted Audit Tools and Techniques

TRUE/FALSE

1)The three groups of application controls are batch controls, run-to-run controls, and audit trail controls.

2. A reasonableness check determines if a value in one field is reasonable when considered along with data in other fields of the record

3. A truncation error is a form of transcription error.

4. A check digit is a method of detecting data coding errors.

5. Input controls are intended to detect errors in transaction data after processing.

6. The black box approach to testing computer applications allows the auditor to explicitly review program logic.

7. The black box approach to testing computer applications require a detailed knowledge of the the program logic being tested.

8. A run-to-run control is an example of an output control.

9. Shredding computer printouts is an example of an output control.

10. In a computerized environment, all input controls are implemented after data is input.

11. Achieving batch control objectives requires grouping similar types of input transac- tions (such as sales orders) together in batches and then controlling the batches throughout data processing.

12. The white box tests of program controls are also known as auditing through the computer.

13. Incorrectly recording sales order number 123456 as 124356 is an example of a transcription error

14. When using the test data method, the presence of multiple error messages indicates a flaw in the preparation of test transactions.

15. The base case system evaluation is a variation of the test data method.

16. Tracing is a method used to verify the logical operations executed by a computer application.

18. The results of a parallel simulation are compared to the results of a production run in order to judge the quality of the application processes and controls.

19. Input controls are programmed procedures that perform tests on master file data to ensure they are free from errors.

20. The integrated test facility (ITF) is an automated approach that permits auditors to test an application's logic and controls during its normal operation.

21. Use of the integrated test facility poses no threat to organizational data files.

22. Spooling is a form of processing control.               
23. A salami fraud affects a large number of victims, but the harm to each appears to be very small.

ANS:                   T           

24. An input control that tests time card records to verify than no employee has worked more 50 hours in a pay period is an example of a range test.

ANS:                   F           

25. The black box approach to testing computer program controls is also known as auditing around the computer.

ANS:                   T           

MULTIPLE CHOICE

1. Which statement is not correct? The audit trail in a computerized environment

2. All of the following concepts are associated with the black box approach to auditing computer applications except

3. Which test is not an example of a white box test?

4. When analyzing the results of the test data method, the auditor would spend the least amount of time reviewing

5. All of the following are advantages of the test data technique except

6. All of the following are disadvantages of the test data technique except

7. Program testing

8. The correct purchase order number,is123456. All of the following are transcription errors except

9. Which of the following is correct?

10. Which statement is not correct? The goal of batch controls is to ensure that during processing

11. An example of a hash total is

12. Which statement is not true? A batch control record

13. Which of the following is not an example of a processing control?

14. Which of the following is an example of input control test?

15. Which input control check would detect a payment made to a nonexistent vendor?

16. Which input control check would detect a posting to the wrong customer account?

17. The employee entered "40" in the "hours worked per day" field. Which check would detect this unintentional error?

18. An inventory record indicates that 12 items of a specific product are on hand. A customer purchased two of the items, but when recording the order, the data entry clerk mistakenly entered 20 items sold. Which check could detect this error?

19. Which check is not an input control?

20. A computer operator was in a hurry and accidentally used the wrong master file to process a transaction file. As a result, the accounts receivable master file was erased. Which control would prevent this from happening?

21. Run-to-run control totals can be used for all of the following except

22. Methods used to maintain an audit trail in a computerized environment include all of the following except

23. 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

24. Which statement is not correct?

25. Input controls include all of the following except

26. Which of the following is an example of an input error correction technique?

27. All of the following statements are true about the integrated test facility (ITF) except

28. Which of the following is an input control?

29. Which of the following is not an input control?

30. When auditors do not rely on a detailed knowledge of the application's internal logic, they are performing

SHORT ANSWER

1. The firm allows no more than 10 hours of overtime a week. An employee entered “15” in the field. Which control will detect this error?

2. The password was “CANARY”; the employee entered “CAANARY.” Which control will detect this error?

3. The order entry system will allow a 10 percent variation in list price. For example, an item with a list price of $1 could be sold for 90 cents or $1.10 without any system interference. The cost of the item is $3, but the cashier entered $2. Which control would detect this error?

4. What are the three broad categories of application controls?

5. How does privacy relate to output control?

6. What are the three categories of processing control?

7. What control issue is related to reentering corrected error records into a batch processing system? What are the two methods for doing this?

8. Output controls ensure that output is not lost, misdirected, or corrupted and that privacy is not violated. What are some output exposures or situations where output is at risk?
9. Name four input controls and describe what they test

1. 10. A                                                                 fraud affects a large number of victims but the harm to each appears to be very small.

1. 11. Give one example of an error that is detected by a check digit control.

1. 12. Auditors do not rely on detailed knowledge of the application's internal logic when they use the                                                                                 approach to auditing computer applications.

1. 13. Describe parallel simulation.

1. 14. What is meant by auditing around the computer versus auditing through the computer? Why is this so important?

1. 15. Classify each of the following as a field, record, or file interrogation:
       1. Limit check
       2. Validity check
       3. Version check
       4. Missing data check
       5. Sign checks
       6. Expiration date check
       7. Numeric-alphabetic data check
       8. Sequence check
       1. Zero-value check
       10. Header label check
       11. Range check
       50. Reasonableness check

1. 16. What are the five major components of a GDIS?

1. 17. If all of the inputs have been validated before processing, then what purpose do run-to-run controls serve?

1. 18. Explain input controls.

1. 19. Name three types of transcription error.

20.          Describe two types of transposition error

ESSAY

1. 1. Various techniques can be used to control the input effort. Write a one-page essay

discussing three techniques.

1. 1. 1. .

1. 2. Explain the three methods used to correct errors in data entry.

1. 3. The presence of an audit trail is critical to the integrity of the accounting information system. Discuss three of the techniques used to preserve the audit trail.

1. 4. Define each of the following input controls and give an example of how they may be

1. Missing data check
2. Numeric/alphabetic data check
3. Limit check
4. Range check
5. Reasonableness check
6. Validity check

1. 5. After data is entered into the system, it is processed. Processing control exists to make sure that the correct things happen during processing. Discuss processing controls.

1. 6. If input and processing controls are adequate, why are output controls needed?

1. 7. Describe and contrast the test data method with the integrated test facility.

1. 8. Contrast the black box approach to IT auditing and the white box approach. Which is preferred?