Internal Controls and Audit Exam Solutions
Course Introduction
This course provides a comprehensive introduction to the principles and practices of internal controls and auditing within organizations. Students will explore the framework, design, and implementation of internal control systems to safeguard assets, ensure accuracy of financial records, and promote operational efficiency. The course also covers the audit process, including risk assessment, planning, evidence gathering, and reporting, as well as ethical considerations and current regulatory requirements. By examining real-world cases and industry standards, students will develop the skills necessary to evaluate internal control environments and effectively participate in internal and external audit activities.
Recommended Textbook
Accounting Information Systems 13th Global Edition by Marshall B. Romney
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22 Chapters
1883 Verified Questions
1883 Flashcards
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Page 2
Chapter 1: Accounting Information Systems: an Overview
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) In Chapter 1,Figure 1-4 shows the factors that influence the design of AIS.The diagram shows a bi-directional arrow between the organizational culture and the AIS.The reason for this two-way interchange between organizational culture and AIS is A)that the AIS should not influence the values of the organizational culture. B)because the organization's culture influences the AIS,and likewise the AIS influences the organization's culture by controlling the flow of information within the organization. C)due to the transfer of managers between the two corporate elements.
D)the AIS impacts the organization's key strategies.
Answer: B
Q2) Which of the following statements below shows the contrast between data and information?
A)Data is the output of an AIS.
B)Information is the primary output of an AIS.
C)Data is more useful in decision making than information.
D)Data and information are the same.
Answer: B
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3
Chapter 2: Overview of Transaction Processing and Enterprise Resource Planning Systems
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Sample Questions
Q1) Which statement below regarding the AIS is false?
A)The AIS must be able to provide managers with detailed and operational information about the organization's performance.
B)Both traditional financial measures and operational data are required for proper and complete evaluation of performance.
C)The AIS was often just one of the information systems used by an organization to collect and process financial and nonfinancial data.
D)Traditionally,most AIS have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.
Answer: D
Q2) When displayed on a monitor,data output is referred to as A)reports.
B)hard copy.
C)soft copy.
D)financials.
Answer: C
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Page 4
Chapter 3: Systems Documentation Techniques
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) Which symbol would be used in a flowchart to represent a decision?
A)#10
B)#16
C)#9
D)#6
Answer: A
Q2) Which symbol would be used in a flowchart to represent a customer sales order?
A)#2
B)#1
C)#5
D)#15
Answer: B
Q3) Which symbol would be used in a flowchart to represent employee time cards sent by department managers to the payroll department?
A)#1
B)#4
C)#11
D)#16
Answer: A
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Page 5
Chapter 4: Relational Databases
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98 Flashcards
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Sample Questions
Q1) A ________ is an abstract representation of a database's contents.
A)schema
B)logical data model
C)physical view
D)data dictionary
Q2) The logical structure of a database is described by the
A)data dictionary.
B)schema.
C)database management system.
D)context diagram.
Q3) Ama Afolayan is chair of the National Owl Society,which maintains a database of all rare owls within the United States.One table will store the name,birth date,and other characteristics of all of the owls that have been registered.Each owl is uniquely identified by a registration number.A second table will contain data that link each owl to its male and female parents by means of their registration numbers.The primary key in the second table is
A)name.
B)birth date.
C)the same as the primary key in the first table.
D)a combination of primary keys in the first table.
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Chapter 5: Computer Fraud
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Seble wants to open a floral shop in a downtown business district.She doesn't have funds enough to purchase inventory and pay six months'' rent up front.Seble approaches a good friend,Zhou,to discuss the possibility of Zhou investing funds and becoming a 25% partner in the business.After a lengthy discussion Zhou agrees to invest.Eight months later,Zhou and Seble have a major argument.In order for Zhou to sue Seble for fraud,all the following must be true except
A)Zhou's decision to invest was primarily based on Seble's assertion that she had prior floral retail experience.
B)Seble told Zhou she had worked at a floral shop for several years,when in fact she did not have any prior experience in floral retail.
C)before Zhou invested,Seble prepared a detailed business plan and sales forecasts,and provided Zhou with copies.
D)Zhou's 25% share of the business is worth substantially less than her initial investment.
Q2) Why is computer fraud on the rise?
Q3) What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?
Q4) Describe at least four ways a company can make fraud less likely to occur.
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Chapter 6: Computer Fraud and Abuse Techniques
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Sample Questions
Q1) Rina Misra,a first-time computer user,purchased a brand new PC two months ago and it was now operating much more slowly and sluggishly.Since purchasing the computer,she had been accessing the Internet and had installed a variety of free software.The problem is mostly likely to be A)a zero-day attack.
B)a virus.
C)a spoof.
D)Bluesnarfing.
Q2) A set of unauthorized computer instructions in an otherwise properly functioning program is known as a A)logic bomb. B)spyware.
C)trap door.
D)Trojan horse.
Q3) Individuals who use telephone lines to commit fraud and other illegal acts are typically called A)phreakers.
B)crackers.
C)phishers. D)hackers.
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Chapter 7: Control and Accounting Information Systems
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Sample Questions
Q1) Which of the following measures can protect a company from AIS threats?
A)Take a proactive approach to eliminate threats.
B)Detect threats that do occur.
C)Correct and recover from threats that do occur.
D)All of the above are proper measures for the accountant to take.
Q2) Identify the statement below that is not true of the 2013 COSO Internal Control updated framework.
A)It more efficiently deals with control implementation and documentation issues.
B)It more effectively deals with control implementation and documentation issues.
C)It provides users with more precise guidance.
D)It adds many new examples to clarify the framework concepts.
Q3) According to the COSO Enterprise Risk Management Framework,the risk assessment process incorporates all of the following components except
A)reporting potential risks to auditors.
B)identifying events that could impact the enterprise.
C)evaluating the impact of potential events on achievement of objectives.
D)establishing objectives for the enterprise.
Q4) Explain why the Foreign Corrupt Practices Act was important to accountants.
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Page 9
Chapter 8: Controls for Information Security
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Sample Questions
Q1) This is used to identify rogue modems (or by hackers to identify targets).
A)war chalking
B)war dialing
C)war driving
D)none of the above
Q2) The Trust Services Framework reliability principle that states personal information should be protected from unauthorized disclosure is known as
A)availability.
B)security.
C)privacy.
D)integrity.
Q3) In recent years,many of the attacks carried out by hackers have relied on this type of vulnerability in computer software.
A)code mastication
B)boot sector corruption
C)weak authentication
D)buffer overflow
Q4) Identify three ways users can be authenticated and give an example of each.
Q5) Explain social engineering.
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Chapter 9: Confidentiality and Privacy Controls
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Sample Questions
Q1) On June 17,2013,a laptop computer belonging to Thea Technologies was stolen from the trunk of Jamie Marcia's car while she was attending a conference.After reporting the theft,Jamie considered the implications for the company's network security and concluded there was little to worry about because
A)the computer was insured against theft.
B)the computer was protected by a password.
C)the data stored on the computer was encrypted.
D)it was unlikely that the thief would know how to access the company data stored on the computer.
Q2) Janus Corporation uses a tool that embeds a code into all of its digital documents.It then scours the internet,searching for codes that it has embedded into its files.When Janus finds an embedded code on the internet,it knows that confidential information has been leaked.Janus then begins identifying how the information was leaked and who was involved with the leak.Janus is using
A)data loss prevention software.
B)a keylogger.
C)a digital watermark.
D)a spybot.
Q3) Describe some steps you can take to minimize your risk of identity theft.
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Page 11
Chapter 10: Processing Integrity and Availability Controls
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Sample Questions
Q1) Loreen Tina is the chief lawyer for Tamara Incorporated.The CEO of Tamara Incorporated asks Loreen whether the company should periodically delete all company e-mail.If Loreen is well-versed in AIS best practices,she would mostly likely respond,
A)Yes,if we are ever sued,the other attorney will not be able to comb through our e-mail for evidence.
B)Yes,since e-mail requires a lot of storage space,deleting it periodically will reduce the amount of information we need to store.
C)No,deleting an organization's e-mail is against the law.
D)No,if we are ever sued we will not be able to draw upon our e-mail records to defend ourselves.
Q2) A batch total is an example of which control below?
A)data entry control
B)data transmission control
C)processing control
D)output control
Q3) Discuss how cloud computing could both positively and negatively affect system availability.
Q4) Define and contrast a recovery point objective and a recovery time objective.
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Page 12
Chapter 11: Auditing Computer-Based Information Systems
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93 Verified Questions
93 Flashcards
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Sample Questions
Q1) How could auditors determine if unauthorized program changes have been made?
A)by interviewing and making inquiries of the programming staff
B)by examining the systems design and programming documentation
C)by using a source code comparison program
D)by interviewing and making inquiries of recently terminated programming staff
Q2) In the ________ stage of an operational audit,the auditor measures the actual system against an ideal standard.
A)evidence collection
B)evidence evaluation
C)testing
D)internal control
Q3) Assessing the quality of internal controls,the reliability of information,and operating performance are all part of
A)audit planning.
B)collection of audit evidence.
C)communication of audit results.
D)evaluation of audit evidence.
Q4) Describe the disadvantages of test data processing.
Q5) How is a financial audit different from an information systems audit?
Q6) Describe the risk-based audit approach.
Page 13
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Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Sample Questions
Q1) True or False: A credit sale should always be denied if it exceeds the customer's credit limit.
A)True
B)False
Q2) Checking the quantity of inventory available before accepting a sales order is a good practice for all of the reasons except to
A)determine which items may need to be back ordered.
B)verify the accuracy of the perpetual inventory records.
C)inform the customer about availability and delivery times.
D)update inventory records to reduce the quantity available by the number of items ordered.
Q3) Key differences exist when an integrated Enterprise Resource Planning system (ERP)replaces an existing AIS or legacy system.For example,________ are more accurate and timely,enabling sales order entry staff to provide customers more accurate information about delivery dates.
A)inventory records
B)cash receipts
C)credit approval decisions
D)exception reports
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Page 14
Chapter 13: The Expenditure Cycle: Purchasing to Cash
Disbursements
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Sample Questions
Q1) The disbursement voucher and supporting documents are sent to the ________ for payment prior to the due date.
A)cashier
B)treasurer
C)controller
D)accounts payable department
Q2) Identify ten threats and applicable control procedures in the expenditure cycle.
Q3) A reverse auction would likely be best suited to the purchase of
A)central processing units (CPUs).
B)soybeans.
C)designer clothing.
D)automobiles.
Q4) An important control that can be used to reduce the risk of employee kickbacks is A)surveillance cameras.
B)job rotation.
C)off-site restrooms.
D)use of ID badges.
Q5) Under what conditions is MRP more suitable than JIT and vice versa?
Q6) Define and describe the EOQ approach to inventory management.
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Chapter 14: The Production Cycle
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Sample Questions
Q1) What are the two major types of cost accounting systems and what are the differences between the two?
Q2) The expenses associated with disposal of defective products are ________ costs.
A)prevention
B)inspection
C)internal failure
D)external failure
Q3) In activity-based costing,the expenses associated with planning and design of new products are ________ overhead.
A)batch-related
B)product-related
C)company wide
D)expenditure-based
Q4) What is the main difference between MRP-II and JIT manufacturing systems?
A)The length of the planning horizon
B)JIT uses long-term customer demand for planning purposes,but MRP-II uses short-term customer demand for planning purposes.
C)MRP-II relies on EDI,but JIT does not.
D)There are no significant differences between MRP-II and JIT.
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Chapter 15: The Human Resources Management and Payroll Cycle
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Sample Questions
Q1) The most vital control in preventing unauthorized changes to the payroll master file is
A)hiring totally honest people to access and make changes to this file.
B)segregation of duties between the preparation of paychecks and their distribution.
C)segregation of duties between the authorization of changes and the physical handling of paychecks.
D)having the controller closely review and then approve any changes to the master file.
Q2) Form 941
A)is filed each quarter to reconcile monthly tax payments with total tax liability for the quarter.
B)is used in preparing labor-related reports for government agencies.
C)is used for employee information and annual payroll reports.
D)is used to document compliance with applicable regulations.
Q3) Identify the two types of payroll deductions and give two examples of each type.
Q4) What controls are available to address the threat of payroll errors?
Q5) Discuss the various types and sources of input into the HRM/payroll cycle.
Q6) Explain benefits to companies and to employees of using electronic direct deposit for payroll.
Page 17
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Chapter 16: General Ledger and Reporting System
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Sample Questions
Q1) Which of the following tasks are facilitated by maintaining a strong and secure audit trail?
A)tracing a transaction from original source document to the general ledger to a report
B)tracing an item in a report back through the general ledger to the original source document
C)tracing changes in general ledger accounts from beginning to ending balances
D)All of the above are facilitated by the audit trail.
Q2) A type of data entry control that would ensure that adjusting entries are posted to existing general ledger accounts is called a(n)________ check.
A)validity
B)existence
C)closed loop verification
D)reasonableness
Q3) XBRL stands for
A)extensible business reporting language.
B)extreme business reporting ledgers.
C)external business reporting language.
D)extensive business report logic.
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18
Chapter 17: Database Design Using the Rea Data Model
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Sample Questions
Q1) Data modeling is an element of A)systems analysis.
B)conceptual design.
C)both A and B
D)neither A nor B
Q2) Which of the following statements about REA modeling and REA diagrams is false?
A)REA is an acronym for Resources,Entities,and Agents.
B)REA data modeling does not include traditional accounting elements such as ledgers,chart of accounts,debits and credits.
C)REA data modeling could be referred to as an events-based model.
D)REA diagrams must include at least two activities,which together represent a give-get economic exchange.
Q3) Assume that you are looking at a REA diagram that depicts only one event.Which of the following must be on the REA diagram?
A)an external agent
B)an internal agent
C)both A and B
D)neither A nor B
Q4) Describe data modeling.
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Chapter 18: Implementing an Rea Model in a Relational Database
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Sample Questions
Q1) In an integrated REA diagram,every resource must be must be linked to
A)at least two events.
B)at least two agents.
C)at least one other resource.
D)at least two other resources.
Q2) When integrating separate REA diagrams,
A)common resources are placed between the events that affect them.
B)each resource is connected to two agents.
C)resources are duplicated to show the give and get of economic duality relationships.
D)resources are merged if both events in the stockflow relationship are modeled.
Q3) An integrated REA diagram merges multiple copies of ________ and ________ entities but retains multiple copies of ________ entities.
A)resource; event; agent
B)event; agent; resource
C)resource; agent; event
D)None of the above.An integrated REA diagram merges multiple copies of all entities.
Q4) Explain the five rules for drawing integrated REA diagrams.
Q5) Explain a completeness check.
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Chapter 19: Special Topics in Rea Modeling
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Sample Questions
Q1) A groups entity is used to depict the following relationship.
A)is-a-kind-of
B)is-a-member-of
C)is-a-piece-of
D)is-a-group-of
Q2) In the table called Perform Machine Operations,which is the most likely primary key?
A)Equipment Number
B)Job Operation Number
C)Machine Operation Number
D)Machine Operations List Number
Q3) The relationship between the Rent Item and Return Item events is most likely 1:1 for all except which of the following reasons?
A)A return must be for a rented item.
B)A rented item can only be returned once.
C)Rented items are accounted for separately.
D)All rented items must be returned.
Q4) What are the benefits of an integrated enterprise-wide data model?
Q5) Why is the event Issue Debt often modeled as a separate event entity?
Q6) Why might an REA diagram show relationships between resources and agents?
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Chapter 20: Introduction to Systems Development and Systems Analysis
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Sample Questions
Q1) For each of the following items,discuss which of the four data gathering methods would be most appropriate and why.
a.Eliciting 300 employees' opinions on a new incentive program to replace the current bonus program.
b.Identifying how the credit approval process for new customers is supposed to be conducted and by whom.
Q2) Describe economic feasibility analysis.What techniques are used in economic feasibility analysis?
Q3) Which of the following about planning for systems development is false?
A)Project plans are developed for each new system and each system modification.Then,these project plans are combined together to form the master plan.
B)A project development plan includes an economic feasibility analysis and a schedule of activities.
C)The master plan identifies system goals,who will develop the system,and the resources that will be needed.
D)The master plan includes details about organizational goals,existing systems and resources,projects being conducted,and predictions of future needs and requirements.
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Page 22
Chapter 21: Ais Development Strategies
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Sample Questions
Q1) Describe outsourcing and identify the two types of outsourcing agreements.
Q2) Which statement below regarding prototyping is false?
A)Prototypes are considered "first drafts," which are quickly built and intended to be discarded when the real system is finished.
B)Developers who use prototyping still go through the systems development life cycle.
C)Prototypes help developers and end users make conceptual and physical design decisions.
D)Prototyping allows developers to condense and speed up parts of the analysis and design phases.
Q3) Moneka Jones is the CIO for Noela Incorporated.Moneka wants to replace the firm's existing system.However,she wants to spend as little time as possible preparing and evaluating RFPs.When preparing an RFP,Moneka should probably
A)disclose exact hardware and software specifications.
B)disclose specific performance objectives and requirements.
C)disclose general software requirements.
D)disclose general performance objectives and requirements.
Q4) Describe end-user computing and the advantages and risks involved.
Q5) Explain the concept of an application service provider.
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Chapter 22: Systems Design,implementation,and Operation
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Sample Questions
Q1) Yasin,a professional in information technology services,received an e-mail from Adil in the Sales Department.The e-mail read: "Yasin,I need you to run that inventory report you prepared for me last month again.Please send it to me by e-mail.Thank you,Adil." What type of report is Adil asking Yasin to provide?
A)scheduled report
B)special-purpose analysis report
C)triggered exception report
D)demand report
Q2) The project committee for ALDI corporation is attempting to evaluate design alternatives proposed for a new,organization-wide accounting information system.However,there is a great deal of debate regarding whether the system should interface via telephone,internet,cable,or satellite.Which design consideration is most appropriately associated with these alternatives?
A)communication channels
B)data storage structure
C)file organization and access
D)input medium
Q3) Describe the conceptual systems design phase and identify the elements of conceptual design specifications.
Page 24
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