AUDITING IN CIS

Midterm Examination
Instructions: Write the letter that best corresponds to your answer in the booklet that was given
to you. Do not write on the test questions and return it after use. Thank you and GODBLESS!

1. It is the use of standard forms, symbols, and conventions in flowcharts enhance the ability
of users, auditors, and others to visualize program logic.
a. Flowcharting conventions c. Decision tables
b. Coding conventions d. Standard routine

2. Computer memory which is used to store programs that must be accessed immediately
by the central processing unit is
a. Primary storage. c. Tertiary storage.
b. Secondary storage. d. Tape storage.

3. The most common output device is a(n)

a. Mouse. c. Expert system.
b. Printer. d. Keyboard.

4. The part of the computer that does most of the data processing is referred to as the
a. Analyzer. c. CPU.
b. Compiler. d. Printer.

5. Software that performs a variety of general technical computer-controlling operations is

a(n)
a. Integrated “suite.” c. Database.
b. Shareware. d. Operating system.

6. Which of the following is not a part of the central processing unit?

a. Control unit. c. Logic unit.
b. Arithmetic unit. d. Printer unit.

7. Which of the following characteristics distinguishes computer processing from manual

processing?
a. Computer processing virtually eliminates the occurrence of computational error
normally associated with manual processing.
b. Errors or fraud in computer processing will be detected soon after their occurrences.
c. The potential for systematic error is ordinarily greater in manual processing than in
computerized processing.
d. Most computer systems are designed so that transaction trails useful for audit
purposes do not exist.

8. Samco Inc. is in the process of designing a new customer relations system. In which
phase of the development life-cycle would a needs assessment most likely be
performed?
a. Analysis. c. Development.
b. Design. d. Testing.

9. Which computer application is most frequently used on mainframe computers?

a. Databases. c. Spreadsheets.
b. Graphics. d. Word processing.

10. Which computer application is most frequently used to analyze numbers and fi nancial
information?
a. Computer graphics programs. c. Spreadsheets.
b. WAN applications. d. Word processing programs.

11. In a spreadsheet, which of the following is correct concerning rows and columns?
Rows Columns
a. Numbered Numbered
b. Numbered Lettered
c. Lettered Numbered

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d. Lettered Lettered

12. Most current computers process data using which of the following formats?
a. Analog. c. Memory enhanced.
b. Digital. d. Organic.

13. What is the hierarchy of data organization, from smallest to largest unit, for a relational
database?
a. Bit, byte, field, record, table, database.
b. Byte, bit, record, field, table, database.
c. Byte, bit, table, field, record, database.
d. Database, table, field, record, byte, bit.

14. Client/server architecture may potentially involve a variety of hardware, systems

software, and application software from many vendors. The best way to protect a client/
server system from unauthorized access is through
a. A combination of application and general access control techniques.
b. Use of a commercially available authentication system.
c. Encryption of all network traffic.
d. Thorough testing and evaluation of remote procedure calls.

15. What technology is needed in order to convert a paper document into a computer file?
a. Optical character recognition.
b. Electronic data interchange.
c. Bar-coding scanning.
d. Joining and merging.

16. Unauthorized alteration of online records can be prevented by employing

a. Key verification.
b. Computer sequence checks.
c. Computer matching.
d. Database access controls.

17. Misstatements in a batch computer system caused by incorrect programs or data may
not be detected immediately because
a. Errors in some transactions may cause rejection of other transactions in the batch.
b. The identification of errors in input data typically is not part of the program.
c. There are time delays in processing transactions in a batch system.
d. The processing of transactions in a batch system is not uniform.

18. Which of the following is not a characteristic of a batch processed computer system?
a. The collection of like transactions which are sorted and processed sequentially
against a master fi le.
b. Keypunching of transactions, followed by machine processing.
c. The production of numerous printouts.
d. The posting of a transaction, as it occurs, to several files, without intermediate
printouts.

19. Able Co. uses an online sales order processing system to process its sales transactions.
Able’s sales data are electronically sorted and subjected to edit checks. A direct output
of the edit checks most likely would be a
a. Report of all missing sales invoices.
b. File of all rejected sales transactions.
c. Printout of all user code numbers and passwords.
d. List of all voided shipping documents.

20. First Federal S & L has an online real-time system, with terminals installed in all of its
branches. This system will not accept a customer’s cash withdrawal instructions in excess
of $1,000 without the use of a “terminal audit key.” After the transaction is authorized by
a supervisor, the bank teller then processes the transaction with the audit key. This control
can be strengthened by

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a. Online recording of the transaction on an audit override sheet.
b. Increasing the dollar amount to $1,500.
c. Requiring manual, rather than online, recording of all such transactions.
d. Using parallel simulation.

21. Mill Co. uses a batch processing method to process its sales transactions. Data on Mill’s
sales transaction tape are electronically sorted by customer number and are subjected
to programmed edit checks in preparing its invoices, sales journals, and updated
customer account balances. One of the direct outputs of the creation of this tape most
likely would be a
a. Report showing exceptions and control totals.
b. Printout of the updated inventory records.
c. Report showing overdue accounts receivable.
d. Printout of the sales price master file.

22. Where disk files are used, the grandfather-father-son updating backup concept is
relatively difficult to implement because the
a. Location of information points on disks is an extremely time-consuming task.
b. Magnetic fields and other environmental factors cause off-site storage to be
impractical.
c. Information must be dumped in the form of hard copy if it is to be reviewed before
used in updating.
d. Process of updating old records is destructive.

23. In a computerized system, procedure or problem-oriented language is converted to

machine language through a(n)
a. Interpreter. c. Compiler.
b. Verifier. d. Converter.

24. What type of computer system is characterized by data that is assembled from more
than one location and records that are updated immediately?
a. Microcomputer system. c. Batch processing system.
b. Minicomputer system. d. Online real-time system.

25. LAN is the abbreviation for

a. Large Area Network. c. Longitudinal Analogue Network.
b. Local Area Network. d. Low Analytical Nets.

26. The internal auditor is reviewing a new policy on electronic mail. Appropriate elements of
such a policy would include all of the following except:
a. Erasing all employees’ electronic mail immediately upon employment termination.
b. Encrypting electronic mail messages when transmitted over phone lines.
c. Limiting the number of electronic mail packages adopted by the organization.
d. Directing that personnel do not send highly sensitive or confidential messages using
electronic mail.

27. In traditional information systems, computer operators are generally responsible for
backing up software and data files on a regular basis. In distributed or cooperative
systems, ensuring that adequate backups are taken is the responsibility of
a. User management. c. Data entry clerks.
b. Systems programmers. d. Tape librarians.

28. An auditor is least likely to find that a client’s data is input through
a. Magnetic tape reader. c. Point-of-sale recorders.
b. Dynamic linking character reader. d. Touch sensitive screens.

29. Which of the following is considered a component of a local area network?

a. Program flowchart. c. Transmission media.
b. Loop verification. d. Input routine

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30. Which of the following is not considered an exposure involved with electronic data
processing (EDP) systems as compared to other systems?
a. Increased reliance upon computer systems.
b. Delayed transaction processing time.
c. Possible loss of confidentiality of information.
d. Increased reliance upon third parties.

31. Which of the following statements is correct concerning internal control when a client is
using an electronic data interchange system for its sales?
a. Controls should be established over determining that all suppliers are included in the
system.
b. Encryption controls may help to assure that messages are unreadable to
unauthorized persons.
c. A value-added-network (VAN) must be used to assure proper control.
d. Attention must be paid to both the electronic and “paper” versions of transactions.

32. Which of the following statements most likely represents a disadvantage for an entity that
keeps microcomputer prepared data fi les rather than manually prepared fi les?
a. Random error associated with processing similar transactions in different ways is
usually greater.
b. It is usually more difficult to compare recorded accountability with physical count of
assets.
c. Attention is focused on the accuracy of the programming process rather than errors
in individual transactions.
d. It is usually easier for unauthorized persons to access and alter the files.

33. Output controls ensure that the results of computer processing are accurate, complete,
and properly distributed. Which of the following is not a typical output control?
a. Reviewing the computer processing logs to determine that all of the correct
computer jobs executed properly.
b. Matching input data with information on master files and placing unmatched items in
a suspense file.
c. Periodically reconciling output reports to make sure that totals, formats, and critical
details are correct and agree with input.
d. Maintaining formal procedures and documentation specifying authorized recipients
of output reports, checks, or other critical documents.

34. Some companies have replaced mainframe computers with microcomputers and
networks because the smaller computers could do the same work at less cost. Assuming
that management of a company decided to launch a downsizing project, what should
be done with respect to mainframe applications such as the general ledger system?
a. Plan for rapid conversion of all mainframe applications to run on a microcomputer
network.
b. Consider the general ledger system as an initial candidate for conversion.
c. Defer any modification of the general ledger system until it is clearly inadequate.
d. Integrate downsized applications with stable mainframe applications.

35. A manufacturer is considering using bar-code identification for recording information on

parts used by the manufacturer. A reason to use bar codes rather than other means of
identification is to ensure that
a. The movement of all parts is recorded.
b. The movement of parts is easily and quickly recorded.
c. Vendors use the same part numbers.
d. Vendors use the same identification methods.

36. Which of the following statements is correct concerning internal control in an electronic
data processing (EDP) system?
a. Preventive controls generally are more important than detective controls in EDP
systems.
b. Control objectives for EDP systems generally are different from the objectives for other
information systems.

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c. Internal controls in EDP systems rarely permit control risk to be assessed at below the
maximum.
d. Internal controls related to the segregation of duties generally are the most important
controls in EDP systems.

37. Which of the following is an essential element of the audit trail in an electronic data
processing (EDP) system?
a. Disaster recovery plans that ensure proper backup of files.
b. Encrypted hash totals that authenticate messages.
c. Activity logs that indicate failed transactions.
d. Hardware security modules that store sensitive data.

38. To avoid invalid data input, a bank added an extra number at the end of each account
number and subjected the new number to an algorithm. This technique is known as
a. Optical character recognition.
b. A check digit.
c. A dependency check.
d. A format check.

39. An entity has the following invoices in a batch:

Invoice # Product Quantity Unit price
201 F10 150 $5.00
202 G15 200 $10.00
203 H20 250 $25.00
204 K35 300 $30.00
Which of the following most likely represents a hash total?
a. FGHK80
b. 4
c. 204
d. 810

40. A customer intended to order 100 units of product Z96014, but incorrectly ordered
nonexistent product Z96015. Which of the following controls most likely would detect this
error?
a. Check digit verification.
b. Record count.
c. Hash total.
d. Redundant data check.

41. In entering the billing address for a new client in Emil Company’s computerized
database, a clerk erroneously entered a nonexistent zip code. As a result, the first
month’s bill mailed to the new client was returned to Emil Company. Which one of the
following would most likely have led to discovery of the error at the time of entry into Emil
Company’s computerized database?
a. Limit test. c. Parity test.
b. Validity test. d. Record count test.

42. Which of the following controls is a processing control designed to ensure the reliability
and accuracy of data processing?
Limit test Validity check test
a. Yes Yes
b. No No
c. No Yes
d. Yes No

43. Which of the following activities would most likely be performed in the information
systems department?
a. Initiation of changes to master records.
b. Conversion of information to machine-readable form.
c. Correction of transactional errors.
d. Initiation of changes to existing applications.

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44. The use of a header label in conjunction with magnetic tape is most likely to prevent
errors by the
a. Computer operator. c. Computer programmer.
b. Keypunch operator. d. Maintenance technician.

45. For the accounting system of Acme Company, the amounts of cash disbursements
entered into a terminal are transmitted to the computer that immediately transmits the
amounts back to the terminal for display on the terminal screen. This display enables the
operator to
a. Establish the validity of the account number.
b. Verify the amount was entered accurately.
c. Verify the authorization of the disbursement.
d. Prevent the overpayment of the account.

46. When computer programs or fi les can be accessed from terminals, users should be
required to enter a(n)
a. Parity check. c. Self-diagnosis test.
b. Personal identification code. d. Echo check.

47. The possibility of erasing a large amount of information stored on magnetic tape most
likely would be reduced by the use of
a. File protection rings. c. Completeness tests.
b. Check digits. d. Conversion verification.

48. Which of the following controls most likely would assure that an entity can reconstruct its
financial records?
a. Hardware controls are built into the computer by the computer manufacturer.
b. Backup diskettes or tapes of fi les are stored away from originals.
c. Personnel who are independent of data input perform parallel simulations.
d. System flowcharts provide accurate descriptions of input and output operations.

49. Which of the following input controls is a numeric value computed to provide assurance
that the original value has not been altered in construction or transmission?
a. Hash total. c. Encryption.
b. Parity check. d. Check digit.

50. Which of the following is an example of a validity check?

a. The computer ensures that a numerical amount in a record does not exceed some
predetermined amount.
b. As the computer corrects errors and data are successfully resubmitted to the system,
the causes of the errors are printed out.
c. The computer flags any transmission for which the control field value did not match
that of an existing file record.
d. After data for a transaction are entered, the computer sends certain data back to
the terminal for comparison with data originally sent.

51. Which of the following is a computer test made to ascertain whether a given
characteristic belongs to the group?
a. Parity check. c. Echo check.
b. Validity check. d. Limit check.

52. Which of the following tools would best give a graphical representation of a sequence of
activities and decisions?
a. Flowchart. b. Control chart. c. Histogram. d. Run chart.

Items 53 and 54 are based on the following flowchart of a client’s revenue cycle:

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53. Symbol A most likely represents the

a. Remittance advice file.
b. Receiving report file.
c. Accounts receivable master file.
d. Cash disbursements transaction file.

54. Symbol B most likely represents

a. Customer orders.
b. Receiving reports.
c. Customer checks.
d. Sales invoices.

55. An auditor’s flowchart of a client’s accounting system is a diagrammatic representation

that depicts the auditor’s
a. Assessment of control risk.
b. Identification of weaknesses in the system.
c. Assessment of the control environment’s effectiveness.
d. Understanding of the system.

Item 56 is based on the following flowchart:

56. The above flowchart depicts

a. Program code checking.
b. Parallel simulation.
c. Integrated test facility.
d. Controlled reprocessing.

57. The representation of the flow of forms through an organization for a transaction is a
a. document flowchart
b. micro flowchart
c. system flowchart
d. program flowchart

58. The batch processing of business transactions can be the appropriate mode when
a. the sequence of master file records is not relevant
b. timeliness is a major issue
c. a single handling of the data is desired
d. economy of scale can be gained because of high volumes of transactions

59. An integrated group of programs that supervises and support the operations of a
computer system as it executes users application programs is called a(n)

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 AUDITING IN CIS
Midterm Examination
Instructions: Write the letter that best corresponds to your answer in the booklet that was given
to you. Do not write on the test questions and return it after use. Thank you and GODBLESS!

a. operating system
b. utility programs
c. data base management system
d. language program

60. A system flowchart

a. is synonymous with a program flowchart.
b. is necessary for only computer processes.
c. shows general flow and sequence but not processing details
d. is necessary for only manual processes.

61. The type of data processing in which remote terminals provide direct access to the
computer is
a. on-line processing
b. batch processing
c. remote processing
d. central processing

62. A systems program

a. manipulates application programs
b. employs complex mathematics algorithms
c. is written in a high level language
d. is used in systems analysis and design activities

63. An operating system is

a. the assembler program including the source and object program
b. all hardware and software needed to operate the computer system
c. the programs that manage the processing operations of the computer
d. only the hardware of the computer system

64. A computer system that allows for immediate updating of files is referred to as
a. on-line processing c. instantaneous processing
b. a mainframe processing d. batch processing

65. Which of the following comprises all of the data components of the data processing
cycle?
a. Batching, processing, output.
b. Collection, refinement, processing, maintenance, output.
c. Input, classifying, batching, verification, transmission
d. Collection, refinement, storing, output.

66. The main components of the central processing unit (CPU) of a computer include only
a. control, arithmetic/logic, and memory
b. input, processing, and output
c. software, register, and primary memory
d. memory, processing, and register

67. A compiler is
a. a procedure oriented language
b. a symbolic language
c. a machine that translates the assembler program to machine language
d. a program that converts procedure oriented language to machine language

68. A data base is

a. essential for storage of large data sets c. a real-time system
b. a collection of related files d. a network of computer terminals

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69. Reviewing data base authority tables is a(n)
a. access control c. data resource control
b. organizational access control d. operating resource control

70. Involves tracing a few transactions through the accounting system

a. Test of controls
b. Walk-through test
c. Analytical procedures
d. Substantive procedures

END OF EXAMINATION!

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