AUD Sample CPA Exam Questions

Weekly Review Quiz #358 - AUD: Other IT Considerations

Thank you for taking our Auditing and Attestation (AUD) review quiz. Check back again for five new sample AUD CPA questions to help you prepare for the exam.

_____________________________________________________________________________________________________________________

Question 1

Which of the following statements most likely represents a disadvantage for an entity that keeps microcomputer-prepared data files rather than manually prepared files?

  1. Random error associated with processing similar transactions in different ways is usually greater.
  2. It is usually more difficult to compare recorded accountability with physical count of assets.
  3. Attention is focused on the accuracy of the programming process, rather than on errors in individual transactions.
  4. It is usually easier for unauthorized persons to access and alter the files.

The correct answer is: D.

A. Incorrect… An advantage of microcomputer-prepared data files is that random error associated with processing similar transactions in different ways is usually less common.

B. Incorrect… An advantage of microcomputer-prepared data files is that it can be easier to compare recorded accountability with the physical count of assets, as it is easier to maintain perpetual inventory records.

C. Incorrect… An advantage of microcomputer-prepared data files is that attention is focused on the accuracy of the programming process, rather than on errors in individual transactions.

D. Correct! A disadvantage of microcomputer-prepared data files is that it is usually easier for unauthorized persons to access and alter the files.

_____________________________________________________________________________________________________________________

Question 2

Which of the following are essential elements of the audit trail in an electronic data interchange (EDI) system?

  1. Network and sender/recipient acknowledgments.
  2. Message directories and header segments.
  3. Contingency and disaster recovery plans.
  4. Trading partner security and mailbox codes.

The correct answer is: A.

A. Correct! Network and sender/recipient acknowledgments document the trail of accounting data (and transactions) through the system. In doing so, they serve as essential elements of the audit trail in an EDI system.

B. Incorrect… Message directories and header segments identify file contents. They do not necessarily serve as essential elements of the audit trail.

C. Incorrect… Contingency and disaster recovery plans address a company's ability to maintain an operating information system in the event of a disaster. They do not provide documentation of accounting transactions and are not essential elements of the audit trail.

D. Incorrect… Trading partner security and mailbox codes help to ensure that messages and data are viewed only by authorized parties. They do not aid in documenting the trail of an accounting transaction through the system.

_____________________________________________________________________________________________________________________

Question 3

Which of the following is usually a benefit of using electronic funds transfer for international cash transactions?

  1. Improvement of the audit trail for cash receipts and disbursements.
  2. Creation of self-monitoring access controls.
  3. Reduction of the frequency of data entry errors.
  4. Off-site storage of source documents for cash transactions.

The correct answer is: C.

A. Incorrect… In an electronic environment, the audit trail is often reduced, rather than improved. The audit trail is the path followed by a transaction through the accounting records. Fewer paper documents and temporary electronic data transaction files can greatly reduce an audit trail.

B. Incorrect… The creation of self-monitoring access controls with regard to international cash transfers would not be a benefit. Instead, if such controls were actually used, they would represent a limitation of an electronic system.

C. Correct! Using electronic funds transfer for international cash transactions reduces the manual handling and data entry related to such transfers. As a result, the frequency of data entry errors is reduced. As a general rule, whenever the data must be "touched" by human hands, the opportunity for error is introduced. The less the data are touched, the fewer the opportunities for error.

D. Incorrect… In an electronic environment, source documents are eliminated. Thus, off-site storage of source documents for cash transactions would not occur.

_____________________________________________________________________________________________________________________

Question 4

Which of the following is an engagement attribute for an audit of an entity that processes most of its financial data in electronic form, without any paper documentation?

  1. Discrete phases of planning, interim, and year-end field work.
  2. Increased effort to search for evidence of management fraud.
  3. Performance of audit tests on a continuous basis.
  4. Increased emphasis on the completeness assertion.

The correct answer is: C.

A. Incorrect… Discrete phases of planning, interim, and year-end field work would imply the testing of controls at a single time. The transitory nature of transactions and/or accounting records would require continuous auditing, rather than one-time testing.

B. Incorrect… The risk of management fraud is not necessarily increased by electronic data processing. Instead, the risk of management fraud would be increased by factors such as inadequate monitoring by management of significant controls over electronic data processing or the continued employment of ineffective information technology staff.

C. Correct! An audit of an entity with primarily electronic data systems would be more likely to include continuous audit testing because in such environments transactions or accounting records may be available on a temporary basis and in machine-readable form only. As a result, testing would need to be performed continuously, rather than at one time.

D. Incorrect… Electronic data processing does not necessarily result in a loss of transactions (thus requiring increased emphasis on the completeness assertion). A failure to maintain adequate input, processing, and storage controls over electronic data resulting in loss of data would result in increased emphasis on completeness.

_____________________________________________________________________________________________________________________

Question 5

Which of the following characteristics distinguishes electronic data interchange (EDI) from other forms of electronic commerce?

  1. EDI transactions are formatted using standards that are uniform worldwide.
  2. EDI transactions need not comply with generally accepted accounting principles.
  3. EDI transactions are ordinarily processed without the Internet.
  4. EDI transactions are usually recorded without security or privacy concerns.

The correct answer is: A.

A. Correct! Electronic data interchange (EDI) utilizes standardized formats for electronically transferring information. By adopting EDI, a company can electronically transfer information from one system into another. The elimination of manual re-entry of data and paperwork reduces costs and increases accuracy.

B. Incorrect… EDI refers to the electronic transfer of data, not the reporting of accounting information. Generally accepted accounting principles (GAAP) govern the reporting of accounting information.

C. Incorrect… EDI transactions are more likely to use the Internet, although Internet use is not required. The use of EDI enables the transfer of information from one company to another; a logical route would be via the Internet.

D. Incorrect… Security and privacy concerns would be paramount in an EDI system. For example, transferring data via the Internet would not be feasible unless security and privacy were assured.

_____________________________________________________________________________________________________________________

End of Quiz

We hope you found this week's quiz helpful. These questions are just a small sample of what you will find in Wiley CPAexcel. Visit our Weekly Review Quiz Archive to view past quizzes with answers and rationales. If you haven't already done so, Sign Up to receive our free review quizzes every week via email.

Our courseware contains over 2,600 pages of electronic study text, over 5,400 proficiency questions, over 5,100 past exam questions, over 4,100 electronic flashcards, over 460 task-based simulations and personalized progress reports to manage and track your mastery of the material. Learn more about Wiley CPAexcel.

Video Gold Medal Course - This course is your complete solution for CPA Exam success. Learn more.