Chapter 9

Question 1

Batch Systems

Answer 1

store transactions in batches and process the entire batch at one time. used in legacy (older) systems

Question 2

Real-Time Systems

Answer 2

process each transaction as it occurs

Question 3

Revenue Cycle Procedures

Answer 3

1) record customer order (sales order)
2) approve credit (credit authorization)
3) process shipping order (picking ticket, packing slip, bill of lading)
4) billing (invoice)
5) cash collections (remittance advice)

Question 4

Batch Processing Automated Procedures

Answer 4

1) data entry - each batch should have batch control total
2) edit run - apply field checks, limit tests, range tests, and PxQ extensions
3) sort run (sequential files must be sorted)
4) AR update and billing run
5) sort and inventory update runs - sorts sales order file on inventory number

Question 5

Real-Time Systems Process

Answer 5

• sales orders are processed as received (online credit check, check inventory availability and transmit stock release)
• warehouse and shipping (shipping log record and sales invoice)
• cash receipts - assign remittance number and update receivables data

Question 6

Input Controls

Answer 6

• credit authorization
• data validation controls
• batch controls
• access controls
• physical controls

Question 7

Credit Authorization (audit test)

Answer 7

• input control

- AT - use test data or integrated test facility (ITF) to examine program decision rules for credit authorization

Question 8

Data Validation (audit test)

Answer 8

• input control
• missing data, alpha-numeric, range, limit, validity, and check digits
• AT - if system development and maintenance controls are good, less testing is needed; use test data to examine program logic

Question 9

Batch Controls (audit test)

Answer 9

• input control
• record counts, batch totals, and hash totals
• AT - reconcile transmittal records for batches (document with batch control figures) to the batch control log (text file summarizing batch run)

Question 10

Access Controls (audit test)

Answer 10

• input control
• guards, alarms, safes
• passwords, firewalls
• AT - verify existence of firewall, data encryption and password controls; test password controls by attempting to logon as an unauthorized user

Question 11

Physical Controls (audit test)

Answer 11

• input control
• segregation of duties (inventory custody from inventory receiving; cash receipts from AR recording and AR write-off and authorization)
• supervision and independent verification
• AT - review organizational structure; review systems development and maintenance controls

Question 12

Output Controls (audit test)

Answer 12

• AR change report (reconcile AR to sales and cash receipts)
• transaction log, transaction listing
• error listing
• AT - compare audit trail text files to output reports

Question 13

Revenue Cycle Concerns

Answer 13

• recording sales that didn’t occur
• missing sales that did occur
• incorrect billing amounts
• failure to receive payment for a sale
• theft of inventory
• understate allowance for doubtful accounts

Question 14

Substantive Tests - Completeness Assertion (invoice)

Answer 14

• review sales invoices for unusual trends and exceptions (scan data for unusual transactions or balances)
• review sales invoice and shipping log files for missing and duplicate items (looking for out-of-sequence, gaps in sequence, duplicates)

Question 15

Substantive Tests - Completeness Assertion (sales and inventory data)

Answer 15

• review sales and inventory data for sales price accuracy (merge sales data with inventory data and compare sales price between the two)
• test for unmatched records by identifying inventory items in the sales data that are not in the inventory file

Question 16

Substantive Tests - Existence Assertion

Answer 16

• AR confirmation (select customer accounts to confirm, consolidate invoices for selected customers, mail confirmation letters)