When an auditor tests a computerized accounting system, which of the following is true of the test data approach?

When an auditor tests a computerized accounting system, which of the following is true of the test data approach? 

A. Test data are processed by the entity's computer programs under the auditor's control.

B. Test data must consist of all possible valid and invalid conditions.

C. Testing a program at year end provides assurance that the entity's processing was accurate for the entire year.

D. Several transactions of each type must be tested.


Answer: Test data are processed by the entity's computer programs under the auditor's control

When testing a computerized accounting system, which of the following is false regarding the test data approach?

When testing a computerized accounting system, which of the following is false regarding the test data approach? 

A. The test data need to consist of only those valid and invalid conditions in which the auditor is interested.

B. Only one transaction of each type needs be tested.

C. Test data are processed by the entity's computer programs under the auditor's control.

D. The test data must consist of all possible valid and invalid conditions.


Answer: The test data must consist of all possible valid and invalid conditions

Which of the following is false?

Which of the following is false? 

A. Regardless of the achieved level of control risk in connection with the audit of the financial statements, auditing standards require the auditor to perform some substantive procedures for all significant accounts and disclosures.
B. The absence of misstatements in financial statements is considered convincing evidence that existing controls are effective.
C. The audit of internal control is intended to draw conclusions about the effectiveness of internal control over financial reporting as of a specific date.
D. The auditor is required by AS5 to evaluate the implications of the financial statement audit for the effectiveness of internal control over financial reporting.


Answer: The absence of misstatements in financial statements is considered convincing evidence that existing controls are effective

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date?

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date? 

A. Withdrawals from Federal Bank of more than $5 million must include a manager's signature.

B. At the end of each day at Federal Bank, the total cash in the vault is reconciled with daily registers of deposits and withdrawals.

C. Federal Bank has just started establishing trusts for its customers and it has only set up ten such trusts. Before making an investment for a trust, bank employees must verify that the investment is in accordance with stated investment policies.

D. On an annual basis, Federal Bank management performs credit checks on its loan customers before determining the value of loans it will not be able to collect on.


Answer: At the end of each day at Federal Bank, the total cash in the vault is reconciled with daily registers of deposits and withdrawals

Section 404 of the Sarbanes-Oxley Act includes which of the following?

Section 404 of the Sarbanes-Oxley Act includes which of the following? 

A. A requirement that management of a publicly traded company issues an assessment of internal control that covers the entire year.

B. Specific guidance on what constitutes adequate internal control.

C. A requirement that management of a publicly traded company accepts responsibility for establishing and maintaining adequate internal controls.

D. A requirement that management of a publicly traded company issues an assessment regarding the efficiency of internal control for the year.


Answer: A requirement that management of a publicly traded company accepts responsibility for establishing and maintaining adequate internal controls

The advantages of generalized audit software include all of the following except:

The advantages of generalized audit software include all of the following except: 

A. It involves auditing while the data are being processed (real-time).

B. It is easy to use.

C. The time to develop the application is usually short.

D. An entire population can be examined in some instances.


Answer: It involves auditing while the data are being processed (real-time)