Accounting Information Systems Auditing Test
Bank
Course Introduction
Accounting Information Systems Auditing explores the principles and procedures of auditing within computerized accounting environments. The course covers the evaluation and testing of internal controls, risk assessment, and the collection of audit evidence specific to accounting information systems (AIS). Students learn how information technology impacts the audit process, including topics such as IT governance, data integrity, fraud prevention, and compliance with relevant standards and regulations. The curriculum emphasizes practical skills in auditing enterprise resource planning (ERP) systems, utilizing computer-assisted audit techniques (CAATs), and addressing cybersecurity challenges, preparing students for professional roles in both internal and external auditing of modern accounting systems.
Recommended Textbook
Auditing and Assurance Services 5th Edition by Timothy J. Louwers
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20 Chapters
2451 Verified Questions
2451 Flashcards
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Page 2
Chapter 1: Auditing and Assurance Services
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) _____________________________ refers to recognizing assets and liabilities as of proper date and accounting for revenue,expense,and other transactions in the proper period.
Answer: Cutoff
Q2) Independent auditors are employees of the client.
A)True
B)False
Answer: False
Q3) The purpose of obtaining and evaluating evidence is to ascertain the degree of correspondence between the assertions and established criteria.
A)True
B)False
Answer: True
Q4) Which of the following is an example of a regulatory auditor?
A) Internal auditors.
B) Big 4 auditors.
C) U.S. Internal Revenue Service auditors.
D) Operational auditors.
Answer: C
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Chapter 2: Professional Standards
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Sample Questions
Q1) Under generally accepted auditing standards,which of the following relates to the responsibilities principle?
A) The initial planning of the audit engagement.
B) The confirmation of accounts receivable.
C) The completion of an internal control questionnaire.
D) Maintaining professional skepticism and exercising professional judgment.
Answer: D
Q2) To properly plan the audit,auditors should be engaged before the client's fiscal year-end or date of the ______________________________.
Answer: financial statements
Q3) (Appendix)The attestation standards are a general set of standards intended to guide work in
A) Audits of financial statements.
B) Financial forecasts and prospective financial information.
C) Areas other than audits of financial statements.
D) Understanding internal control.
Answer: C
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4
Chapter 3: Engagement Planning
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Sample Questions
Q1) An engagement letter is used primarily to
A) Ensure a clear contractual understanding of the services to be provided by the CPA.
B) Express an opinion on the financial statements.
C) Provide management representations to be included in the audit evidence.
D) Disclaim liability.
Answer: A
Q2) In testing the completeness assertion for a liability account,an auditor ordinarily works from the
A) Financial statements to the potentially unrecorded items.
B) Potentially unrecorded items to the financial statements.
C) Accounting records to the supporting evidence.
D) Trial balance to the subsidiary ledger.
Answer: B
Q3) Control activities in computerized accounting systems may have characteristics that differ from manual control activities designed to accomplish the same control objectives.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Management Fraud and Audit Risk
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) When the auditors become aware of noncompliance with a law or regulation committed by client personnel,the primary reason that the auditors should obtain a better understanding of the nature of the act is to
A) Recommend remedial actions to the audit committee.
B) Evaluate the effect of the noncompliance on the financial statements.
C) Determine whether to contact law enforcement officials.
D) Determine whether other similar acts could have occurred.
Q2) _________________________________ refers to financial statement amounts expressed each year as proportions of a base.
Q3) The probability that audit procedures will fail to produce evidence of material misstatements is referred to as _____________________________________.
Q4) If fictitious credit sales were recorded and the fictitious accounts receivable were later directly written off as bad debt expense
A) Income would be overstated.
B) Income would be understated.
C) Income would not be misstated.
D) Accounts receivable would be understated.
Q5) Why is it important for auditors to understand their clients' business risks?
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Chapter 5: Risk Assessment: Internal Control Evaluation
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) List several elements of a company's control environment.
Q2) A(n)____________________________ is a single procedure that produces both control and substantive evidence.
Q3) The most efficient means of gathering evidence about the internal control is to conduct a formal interview with knowledgeable managers and
A) Write a narrative description of each important control.
B) Prepare a flowchart illustrating the internal control.
C) Prepare a well-indexed file of audit documentation.
D) Use an internal control questionnaire.
Q4) A report on internal control effectiveness by the management team of public companies is required by
A) The Sarbanes-Oxley Act of 2002.
B) The PCAOB.
C) The AICPA.
D) The ASB.
Q5) The primary reason to evaluate internal control is to formulate constructive suggestions for improvement.
A)True
B)False
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Chapter 6: Employee Fraud and the Audit of Cash
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104 Flashcards
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Sample Questions
Q1) Information about criminal rackets and cons and their operations and the reputations of local businesses can be found at the
A) Police and Drug Enforcement Agency.
B) Standard & Poor Registers.
C) Securities and Exchange Commission.
D) Better Business Bureau.
Q2) What kind of error or fraud could happen if the inventory warehouse manager also had responsibility for making the physical inventory count and reconciling discrepancies to the perpetual inventory records?
Q3) Observation of persons'_____________________________ in _____________________________ and _____________________________ may be red flags of employee fraud.
Q4) A set of telltale signs of erroneous accounting,missing or altered documents,or a "dangling debt" is referred to as a _____________________________.
Q5) Immediately upon receipt of cash,a responsible employee should
A) Record the amount in the cash receipts journal.
B) Prepare a remittance listing.
C) Update the subsidiary accounts receivable records.
D) Prepare a deposit slip in triplicate.
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Chapter 7: Revenue and Collection Cycle
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) The sum of customers' unpaid balances that is compared to the general ledger balance comes from
A) A total of sales invoices.
B) A total of shipping orders.
C) The sales journal.
D) The accounts receivable trial balance.
Q2) A client has a separate sales group for its largest "preferred" customers.This is a select group of customers that normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million.Which of the following audit procedures would the auditor most likely perform?
A) Prepare a schedule of purchases and payments for these customers.
B) Send out negative confirmations on a large sample of these customers.
C) Inquire of the sales manager regarding the accounts receivable terms.
D) Send out positive confirmations on a large sample of these customers.
Q3) In the audit of accounts receivable,the most important emphasis should be on the A) Completeness assertion.
B) Existence assertion.
C) Rights and obligations assertion.
D) Presentation and disclosure assertion.
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Page 9
Chapter 8: Acquisition and Expenditure Cycle
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) In a test of controls,auditors may trace receiving reports to vouchers recorded in the voucher register.This is a test for A) Occurrence.
B) Completeness.
C) Classification.
D) Cutoff.
Q2) An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal.The purpose of this substantive audit procedure most likely was to
A) Identify usually large purchases that should be investigated further.
B) Verify that cash disbursements were for goods actually received.
C) Determine that purchases were properly recorded.
D) Test whether payments were for goods actually ordered.
Q3) The emphasis is on the existence assertion because financial statement users tend to be more concerned about understated expenses and liabilities than overstated. A)True
B)False
Q4) The ____________________________________ is the primary original record for payroll accounting.
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10
Chapter 9: Production Cycle
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Sample Questions
Q1) To execute job production,a foreperson would typically not need
A) Sales orders.
B) Production orders.
C) Bills of materials.
D) Manpower needs.
Q2) Which of the following is not an acceptable method of determining inventory cost under GAAP?
A) FIFO.
B) LIFO.
C) Average cost.
D) All of the above are acceptable.
Q3) Tracing production cost accumulation forward into the production cost reports in the cost accounting department is a test for ____________________________.
Q4) Selecting a sample of cost accounting reports for labor and vouching it to time records is a procedure designed to test the ASB transaction assertion of A) Occurrence.
B) Valuation.
C) Completeness.
D) Presentation and disclosure.
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Chapter 10: Finance and Investment Cycle
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Which of the following audit procedures would not likely be performed for audits of investments?
A) Read board of directors' minutes for authorization of investment strategies.
B) Confirm investments with registrar.
C) Confirm investments with broker or trustee.
D) Compare valuation to published market prices.
Q2) The confirmation of notes payable to banks may use the _____________________________________ confirmation.
Q3) Reliance on controls normally reduces the extent of substantive audit procedures on finance and investment cycle accounts.
A)True
B)False
Q4) A related party is a person or entity that
A) Has a family tie to a management member.
B) Does business with the company.
C) Can exert significant influence over or be influenced by the company.
D) Is a member of the company's management.
Q5) What is a compensating control? Describe what type of compensating controls might be implemented in the finance and investment cycle.
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Chapter 11: Completing the Audit
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Subsequent events occur between which two dates?
A) Date of the financial statements and date of the auditors' report.
B) Date of the auditors' report and audit report release date.
C) Date of the financial statements and audit report release date.
D) Audit report release date and beginning of subsequent year's audit.
Q2) ______________________________________ are matters that come to the auditors' attention following the date of the auditors' report.
Q3) Which of the following is not ordinarily associated with the time period following the audit report release date?
A) Management letters.
B) Omitted audit procedures.
C) Roll-forward work.
D) Subsequently discovered facts.
Q4) Which of the following conditions or set of circumstances would not ordinarily raise questions about the entity's ability to continue as a going concern:
A) Default on a loan due in the previous year.
B) Failure to meet forecasted earnings per share.
C) Legal proceedings that may have a significant negative impact on the entity.
D) Negative cash flow from operations for each of the last three years.
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Chapter 12: Reports on Audited Financial Statements
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Sample Questions
Q1) Under which of the following circumstances would a disclaimer of opinion on the entity's financial statements not be appropriate?
A) The financial statements fail to contain adequate disclosure of related-party transactions.
B) The entity refuses to permit its attorney to furnish information requested in an attorney letter.
C) The auditors are engaged after the date of the financial statements and are unable to observe physical inventories or apply alternative procedures to verify their balances.
D) The auditors are unable to determine the amounts associated with illegal acts committed by the entity's management.
Q2) When there is a material departure from GAAP,auditors may issue either an adverse opinion or disclaimer of opinion on the entity's financial statements.
A)True
B)False
Q3) When reporting on _____________________________________,auditors should indicate that these statements have been derived from the complete set of financial statements,which have been audited.
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Chapter 13: Other Public Accounting Services
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114 Flashcards
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Sample Questions
Q1) Which of the following procedures should an accountant perform during an engagement to review the financial statements of a nonpublic entity?
A) Communicate reportable conditions discovered during the assessment of control risk.
B) Obtain a client representation letter from members of management.
C) Send bank confirmation letters to the entity's financial institutions.
D) Examine cash disbursements in the subsequent period for unrecorded liabilities.
Q2) Companies that are not subject to SEC regulations can choose to present financial information in accordance with a special purpose framework other than GAAP.
A)True
B)False
Q3) An accountant may report on interim information presented separately from audited financial statements.
A)True
B)False
Q4) Engagements to perform ______________ - ______________ procedures are not considered audits because they have a ______________________________.
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15
Chapter 14: Professional Ethics
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Sample Questions
Q1) The basic rationale for permitting CPAs to accept commissions is that
A) It does not affect independence in attest functions.
B) Professional liability insurance policies permit commission work.
C) State boards of accounting permit commissions and contingent fees.
D) Other professionals charge commissions in personal financial planning engagements.
Q2) The audit committee's responsibility for auditor independence concerns
A) Ensuring that partners of the public accounting firm are not stockholders in the company.
B) Ensuring that nonaudit services provided by the auditor do not impair independence.
C) Reporting on auditor independence to the PCAOB.
D) Ensuring that all nonaudit services are provided by auditors who do not perform the financial statement audit.
Q3) Under AICPA rules,independence will be considered impaired if a member had or was committed to acquire any ____________ or ________________________ financial interest in the enterprise.
Q4) Rule 102 is applicable to members employed in ___________________ and ________________.
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Page 16
Chapter 15: Legal Liability
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Sample Questions
Q1) Which of the following would third parties not need to demonstrate when bringing suit against auditors for losses sustained under the Securities Act of 1933?
A) Auditors were aware of the materially misstated financial statements.
B) Third-party purchasers suffered a loss.
C) The client's financial statements contained a material misstatement.
D) Purchasers would need to demonstrate all of the above.
Q2) A.Paula performed the audit of the financial statements of Abdul Company (a nonpublic entity currently not subject to filing requirements under the Securities Act of 1933 or Securities Exchange Act of 1934).Abdul is currently considering several alternatives for raising capital,including seeking financing from area banks or an initial public offering of its securities.Which of the following parties would have the lowest likelihood of successfully bringing suit for ordinary negligence against Paula?
A) Abdul Company.
B) Purchasers of Abdul's securities in an initial public offering.
C) First State Bank, a bank with which Abdul has not previously done business.
D) Simon Whitaker, a private investor who is considering acquiring Abdul.
Q3) What are the legal liabilities of auditors under common law?
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Page 17
Chapter 16: Internal Governmental and Fraud Audits
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Sample Questions
Q1) The ___________________ is the federal law that established uniform requirements for audits of federal financial assistance provided to _________ and _________ governments.
Q2) Governmental and internal auditors are more concerned with management controls because they directly affect economy,efficiency,and program results.
A)True
B)False
Q3) Internal audit reports are usually considered " ____________________ " until a _________________________ is performed.
Q4) In an internal auditor's report,audit findings would include all of the following except
A) The effect of the audit finding on the auditee or the company.
B) The cause of the audit finding.
C) The relevance of the audit finding on the audit.
D) The recommendation to correct the audit finding.
Q5) The GAO standards go beyond the AICPA's GAAS in a number of respects. A)True
B)False
Q6) What are the different types of government audits?
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Chapter 17: Overview of Sampling
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Sample Questions
Q1) The risk of assessing control risk too high causes a(n)________________________ loss for the auditor.
Q2) In performing variables sampling,the auditor will conclude that the account balance is not materially misstated if the _______________ is less than or equal to
A) upper limit on misstatement, tolerable misstatement.
B) expected error, tolerable misstatement.
C) tolerable misstatement, upper limit on misstatement.
D) tolerable misstatement, expected error.
Q3) Which of the following statements is not true with respect to nonstatistical sampling?
A) It cannot be used in an audit conducted in accordance with generally accepted auditing standards.
B) It considers a number of factors in determining the appropriate sample size.
C) When using it, an individual makes some estimate of the characteristic of interest.
D) It requires the use of judgment on the part of the individual performing the sampling application.
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Chapter 18: Attributes Sampling
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Sample Questions
Q1) To statistically evaluate an attributes sampling application,the auditor would not need to know
A) The acceptable risk of overreliance.
B) The actual deviations in the sample.
C) The actual population size.
D) The upper limit rate of deviation.
Q2) Which of the following is not true about using nonstatistical sampling?
A) It generally results in a smaller sample size.
B) It is allowed by auditing standards.
C) It is simple to use.
D) All of the above are true.
Q3) An auditor is testing control procedures that are evidenced on an entity's vouchers by matching random numbers with voucher numbers.If a random number matches the number of a voided voucher,that voucher ordinarily should be replaced by another voucher in the random sample if the voucher
A) Constitutes a deviation.
B) Has been properly voided.
C) Cannot be located.
D) Represents an immaterial dollar amount.
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Page 20
Chapter 19: Variables Sampling
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Sample Questions
Q1) The basic allowance for sampling risk is determined by multiplying the __________________________ by the reliability factor for the acceptable risk of incorrect acceptance.
Q2) The amount by which a projected misstatement in an account balance or class of transactions differs from an actual misstatement as a result of the sample not being representative of the population would typically arise from
A) A misunderstanding of accounting principles.
B) Sampling risk.
C) Management override of an internal control policy or procedure.
D) Risk of incorrect acceptance.
Q3) Which of the following components of the upper limit on misstatement is determined by multiplying the sampling interval by the reliability factor for the acceptable risk of incorrect acceptance?
A) Basic allowance for sampling risk.
B) Incremental allowance for sampling risk.
C) Projected misstatement.
D) Sampling interval.
Q4) Two methods of variables sampling are _______________________ sampling and classical variables sampling.
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Chapter 20: Auditing in a Computerized Environment
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Sample Questions
Q1) To obtain evidence that controls over access to computer programs are properly functioning,audit teams most likely would
A) Create checkpoints at periodic intervals after data processing to test for unauthorized use of the system.
B) Examine the transaction log to discover whether any transactions were lost or entered twice due to a system malfunction.
C) Enter invalid identification numbers or passwords to ascertain whether the system rejects them.
D) Vouch a random sample of processed transactions to ensure proper authorization.
Q2) Match each of the following categories of general controls (letters A-E)to the description of a computer control (numbers 1-10).A category of general controls can be used more than once.
A. Hardware controls
B. Program development controls
C. Program change controls
D. Computer operations controls
E. Access to programs and data controls
Q3) What is the difference between the use of test data and parallel simulation?
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