Auditing in a Computerized Environment

Which statement is incorrect when auditing in a CIS environment?

• A CIS environment exists when a computer of any type or size is involved in the processing by the entity of financial information of significance to the audit, whether that computer is operated by the entity or by a third party.

• The auditor should consider how a CIS environment affects the audit.

• The use of a computer changes the processing, storage and communication of financial information and may affect the accounting and internal control systems employed by the entity.

• A CIS environment changes the overall objective and scope of an audit.

Which of the following standards or group of standards is mostly affected by a computerized information system environment?

• General standards

• Reporting standards

• Second standard of field work

• Standards of fieldwork

Which of the following is least considered if the auditor has to determine whether specialized CIS skills are needed in an audit?

• The auditor needs to obtain a sufficient understanding of the accounting and internal control system affected by the CIS environment.

• The auditor needs to determine the effect of the CIS environment on the assessment of overall risk and of risk at the account balance and class of transactions level.

• Design and perform appropriate tests of controls and substantive procedures.

• The need of the auditor to make analytical procedures during the completion stage of audit.

It relates to materiality of the financial statement assertions affected by the computer processing.

• Threshold

• Relevance

• Complexity

• Significance

Which of the following least likely indicates a complexity of computer processing?

• Transactions are exchanged electronically with other organizations without manual review of their propriety.

• The volume of the transactions is such that users would find it difficult to identify and correct errors in processing.

• The computer automatically generates material transactions or entries directly to another applications.

• The system generates a daily exception report

The nature of the risks and the internal characteristics in CIS environment that the auditors are mostly concerned include the following except:

• Lack of segregation of functions.

• Lack of transaction trails.

• Dependence of other control over computer processing.

• Cost-benefit ratio.

Which of the following is least likely a risk characteristic associated with CIS environment?

• Errors embedded in an application’s program logic maybe difficult to manually detect on a timely basis.

• Many control procedures that would ordinarily be performed by separate individuals in manual system maybe concentrated in CIS.

• The potential unauthorized access to data or to alter them without visible evidence maybe greater.

• Initiation of changes in the master file is exclusively handled by respective users.

Which of the following significance and complexity of the CIS activities should an auditor least understand?

• The organizational structure of the client’s CIS activities.

• Lack of transaction trails.

• The significance and complexity of computer processing in each significant accounting application.

• The use of software packages instead of customized software.

Which statement is correct regarding personal computer systems?

• Personal computers or PCs are economical yet powerful self-contained general purpose computers consisting typically of a central processing unit (CPU), memory, monitor, disk drives, printer cables and modems.

• Programs and data are stored only on non-removable storage media.

• Personal computers cannot be used to process accounting transactions and produce reports that are essential to the preparation of financial statements.

• Generally, CIS environments in which personal computers are used are the same with other CIS environments.

A personal computer can be used in various configurations, including

• A stand-alone workstation operated by a single user or a number of users at different times.

• A workstation which is part of a local area network of personal computers.

• A workstation connected to a server.

• All of the above.