Auditing Review Questions
Course Introduction
This course provides a comprehensive introduction to the principles, standards, and practices of auditing in the context of financial reporting. Students will examine the audit process from planning through completion, focusing on risk assessment, internal controls, audit evidence, and ethical responsibilities. The course covers generally accepted auditing standards (GAAS), audit documentation, legal liability, and the evolving role of auditors in corporate governance. Through case studies and practical exercises, students will develop critical thinking skills and gain insight into the auditors decision-making processes in both internal and external environments.
Recommended Textbook Accounting Information Systems 10th Edition by James A. Hall
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16 Chapters
1672 Verified Questions
1672 Flashcards
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Page 2
Chapter 1: The Information System: an Accountants Perspective
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Which of the following is not a business resource?
A)raw material
B)labor
C)information
D)all are business resources
Answer: D
Q2) Most of the inputs to the general ledger system come from the financial reporting system.
A)True
B)False
Answer: False
Q3) Which subsystem is not part of the accounting information system?
A)transaction processing system
B)expert system
C)general ledger/financial reporting system
D)management reporting system
Answer: B
Q4) The task of locating and transferring an existing record from the database for processing is called data ____________________.
Answer: retrieval
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Chapter 2: Introduction to Transaction Processing
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122 Flashcards
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Sample Questions
Q1) System flowcharts represent the input sources,programs,and output products of a computer system.
A)True
B)False
Answer: True
Q2) Which documentation technique depicts relationship between business entities in databases?
Answer: entity relationship diagram
Q3) Batch processing systems can store data on direct access storage devices.
A)True
B)False
Answer: True
Q4) A key feature of a database management system is that users are given access only to the information they need to perform their jobs.
A)True
B)False
Answer: True
Q5) What are the subsystems of the revenue cycle?
Answer: sales order processing,cash receipts
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Chapter 3: Ethics,fraud,and Internal Control
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) Which check is not an input control?
A)reasonableness check
B)validity check
C)spooling check
D)missing data check
Answer: C
Q2) The concept of reasonable assurance suggests that
A)the cost of an internal control should be less than the benefit it provides
B)a well-designed system of internal controls will detect all fraudulent activity
C)the objectives achieved by an internal control system vary depending on the data processing method
D)the effectiveness of internal controls is a function of the industry environment
Answer: A
Q3) The internal audit department recalculates payroll for several employees each pay period.This is an example of __________________________.
Answer: independent verification
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Chapter 4: The Revenue Cycle
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) How is EDI more than technology? What unique control problems may it pose?
Q2) Which document is not prepared by the sales department?
A)packing slip
B)shipping notice
C)bill of lading
D)stock release
Q3) For each of the following documents,describe its purpose,the functional area preparing it,and the key data included: remittance advice,remittance list,deposit slip.
Q4) Multilevel security employs programmed techniques that permit simultaneous access to a central system by many users with different access privileges but allows them to obtain information for which they lack authorization.
A)True
B)False
Q5) The credit department
A)prepares credit memos when goods are returned
B)approves credits to accounts receivable when payments are received
C)authorizes the granting of credit to customers
D)none of the above
Q6) What are the benefits and risks of making Internet sales?
Page 6
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Chapter 5: The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) What are the key authorization issues in purchasing and cash disbursements?
Q2) The receiving department is not responsible to
A)inspect shipments received
B)count items received from vendors
C)order goods from vendors
D)safeguard goods until they are transferred to the warehouse
Q3) In a merchandising firm,authorization for the purchase of inventory is the responsibility of
A)inventory control
B)purchasing
C)accounts payable
D)cash disbursements
Q4) The major risk exposures associated with the receiving department include all of the following except
A)goods are accepted without a physical count
B)there is no inspection for goods damaged in shipment
C)inventories are not secured on the receiving dock
D)the audit trail is destroyed
Q5) What is the purpose of the supplier's invoice?
Q6) Explain why supervision is so important in the receiving department. Page 7
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Page 8
Chapter 6: The Expenditure Cycle Part II: Payroll Processing and Fixed
Asset Procedures
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) Time cards capture the total time an individual worker spends on each production job.
A)True
B)False
Q2) Timekeeping is part of the personnel function.
A)True
B)False
Q3) What is a personnel action form?
Q4) Employee paychecks should be drawn against a special checking account.
A)True
B)False
Q5) The supervisor is the best person to determine the existence of a "phantom employee" and should distribute paychecks.
A)True
B)False
Q6) Which of the following is not a reasonable control for fixed assets?
A)Proper authorization is required for acquisition and disposal of fixed assets.
B)Fixed asset records show the location of each asset.
Page 9
C)Fully depreciated assets are immediately disposed of.
D)Depreciation policies are in writing.
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Page 10
Chapter 7: The Conversion Cycle
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102 Flashcards
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Sample Questions
Q1) Which process creates a homogeneous product through a continuous series of standard procedures?
A)batch process
B)make-to-order process
C)continuous process
D)none of the above
Q2) Name five documents associated with batch production systems.
Q3) Describe the primary goal of lean manufacturing.
Q4) When one of the following statements is true?
A)ERP evolved directly from MRP.
B)ERP evolved into MRP and MRP evolved into MRP II.
C)MRP II evolved from MRP and MRP II evolved into ERP.
D)None of the above is true.
Q5) Differentiate between essential and non-essential activities.
Q6) List one authorization control in the traditional manufacturing environment.
Q7) The inventory control function updates and maintains both raw materials and finished goods inventory subsidiary ledgers.
A)True
B)False
Q8) In activity-based costing,distinguish between activities and cost objects.
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Chapter 8: Financial Reporting,and Management Reporting Systems
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100 Flashcards
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Sample Questions
Q1) Firms use prescriptive analytics to recommend the best action to take in response to a specific question.
A)True
B)False
Q2) XBRL reporting:
A)must be used by banks to file required quarterly "call reports"
B)is used substantially both in the US and internationally
C)facilitates the fulfillment of legal requirements stipulated in SOX
D)all of the above
Q3) Which statement is not true? The manager's span of control
A)is narrow for routine and repetitive tasks
B)is related to the number of layers of management
C)affects the amount of detail provided to a manager
D)can affect employee morale and motivation
Q4) Describe at least three attributes of an effective report.
Q5) Strategic decisions are subordinate to tactical planning decisions.
A)True
B)False
Q6) Give an example of a management question that would require a verification model of data mining. Page 12
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Chapter 9: Database Management Systems
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Explain the basic results that come from the restrict,project,and join functions.
Q2) What typical features are provided by a database management system (DBMS)?
Q3) A table is in first normal form when it is
A)free of repeating group data
B)free of transitive dependencies
C)free of partial dependencies
D)free of update anomalies
Q4) A lockout is a software control that prevents multiple users from simultaneous access to data.
A)True
B)False
Q5) An ER diagram is a graphical representation of a data model.
A)True
B)False
Q6) Timestamping is a control that is used to ensure database partitioning.
A)True
B)False
Q7) Why are the hierarchical and network models called navigational databases?
Q8) How does the database approach solve the problem of data redundancy?
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Chapter 10: The Rea Approach to Business Process
Modeling
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75 Verified Questions
75 Flashcards
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Sample Questions
Q1) The 'R' in REA stands for A)ratios
B)relationships
C)resources
D)reserves
Q2) According to the REA philosophy,information systems should support only the needs of accounting professionals.
A)True
B)False
Q3) Which statement is not true? REA resources are:
A)assets
B)affected by support events
C)scarce
D)under the control of agents
Q4) Support events include control,planning,and management activities that directly effect a change in resources.
A)True
B)False
Q5) Define cardinality.
Q6) Explain the relationship between cardinality and association. Page 15
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Page 16
Chapter 11: Enterprise Resource Planning Systems
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95 Flashcards
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Sample Questions
Q1) Which of the following is not a risk associated with ERP implementation?
A)A drop in firm performance after implementation because the firm looks and works differently than it did while using a legacy system.
B)Implementing companies have found that staff members, employed by ERP consulting firms, do not have sufficient experience in implementing new systems.
C)The selected system does not adequately meet the adopting firm's economic growth.
D)ERPs are too large, complex, and generic for them to be well integrated into most company cultures.
Q2) What is the client-server model?
Q3) How are OLTP and OLAP different? Give examples of their use.
Q4) Core applications are also called OLAP.
A)True
B)False
Q5) The recommended data architecture for an ERP includes separate operational and data warehouse databases.
A)True
B)False
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Chapter 12: Electronic Commerce Systems
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109 Flashcards
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Sample Questions
Q1) IP spoofing
A)combines the messages of multiple users into a "spoofing packet" where the IP addresses are interchanged and the messages are then distributed randomly among the targeted users
B)is a form of masquerading to gain unauthorized access to a web server
C)is used to establish temporary connections between network devices with different IP addresses for the duration of a communication session
D)is a temporary phenomenon that disrupts transaction processing and resolves itself when the primary computer completes processing its transaction and releases the IP address needed by other users
Q2) What is packet switching?
Q3) In a star topology,when the central site fails
A)individual workstations can communicate with each other
B)individual workstations can function locally but cannot communicate with other workstations
C)individual workstations cannot function locally and cannot communicate with other workstations
D)the functions of the central site are taken over by a designated workstation
Q4) Describe one primary advantage of polling as a network control method.
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Chapter 13: Managing the Systems Development Life Cycle
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) Why does the conceptual design phase present several possible alternatives for the system?
Q2) List at least three one-time costs and three recurring costs in system development.
Q3) Intangible benefits
A)are easily measured
B)are of relatively little importance in making information system decisions
C)are sometimes estimated using customer satisfaction surveys
D)when measured, do not lend themselves to manipulation
Q4) What is meant by object-oriented design? What does it mean for systems design?
Q5) The detailed design report contains all of the following except
A)input screen formats
B)alternative conceptual designs
C)report layouts
D)process logic
Q6) Legal feasibility identifies conflicts between the proposed system and the company's ability to discharge its legal responsibilities.
A)True
B)False
Q7) What topics should be included in a systems analysis report?
19
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Chapter 14: Auditing It Controls Part I: Sarbanes-Oxley and It Governance
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Both the SEC and the PCAOB have expressed an opinion as to which internal control framework an organization should use to comply with SOX legislation.Explain.
Q2) What are the objectives of application controls?
Q3) What is scavenging?
Q4) Both the SEC and the PCAOB require management to use the COBIT framework for assessing internal control adequacy.
A)True
B)False
Q5) Supervision in a computerized environment is more complex than in a manual environment for all of the following reasons except
A)rapid turnover of systems professionals complicates management's task of assessing the competence and honesty of prospective employees
B)many systems professionals have direct and unrestricted access to the organization's programs and data
C)rapid changes in technology make staffing the systems environment challenging D)systems professionals and their supervisors work at the same physical location
Q6) What primary IT functions must be separated in a centralized firm?
Q7) What are commodity IT assets?
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Chapter 15: Auditing It Controls Part II: Security and Access
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Sample Questions
Q1) Transmitting numerous SYN packets to a targeted receiver,but not responding to an ACK,is
A)a smurf attack
B)IP spoofing
C)a ping attack
D)none of the above
Q2) Firewalls are
A)special materials used to insulate computer facilities
B)a system that enforces access control between two networks
C)special software used to screen Internet access
D)none of the above
Q3) The database attributes that individual users have permission to access are defined in the
A)operating system
B)user manual
C)database schema
D)user view
Q4) What is a virus?
Q5) Briefly define an operating system.
Q6) Explain how SYN flood attacks can be controlled.
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Chapter 16: Auditing It Controls Part III: Systems
Development, program Changes, and Application Auditing
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Sample Questions
Q1) Which control is not a part of the source program library management system?
A)using passwords to limit access to application programs
B)assigning a test name to all programs undergoing maintenance
C)combining access to the development and maintenance of test libraries
D)assigning version numbers to programs to record program modifications
Q2) What distinguishing a salami fraud?
Q3) The technical design activities translate a system's set of detailed technical specifications into user specifications.
A)True
B)False
Q4) Name two methods used to control the source program library.
Q5) The longest period in the SDLC is the maintenance phase.
A)True
B)False
Q6) What is GAS? Identify two examples of GAS products.
Q7) To verify the module's internal logic,the programmer compares the actual results obtained from the test with the predetermined results.
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A)True
B)False
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