IT (Computer) Auditing

Question 1

List the types of physical safeguards used to protect the data files.

Answer 1

1. File labels
2. File protection rings
3. File protection plans

Question 2

List some controls that can be put in place/built in hardware and systems software.

Answer 2

1. Parity check
2. Echo check
3. Diagnostic routines
4. Boundary protection

Question 3

List the IT duties that should be segregated (in connection with “organization and operation”).

Answer 3

1. Systems analyst
2. Programmer
3. Operator
4. Librarian
5. Security

Question 4

List the five categories of general controls.

Answer 4

1. Organization and operation
2. Systems development and documentation
3. Hardware and systems software
4. Access
5. Data and procedures

Question 5

Define “general controls.”

Answer 5

Controls that have pervasive effects on all the specific computer processing applications.

Question 6

List some internal control implications associated with an IT environment.

Answer 6

1. Segregation of duties may be undermined (a disadvantage)
2. Audit trail may be lacking (a disadvantage)
3. Computer processing is uniform (an advantage)

Question 7

What is the purpose of output application controls?

Answer 7

To ensure the output data (and the distribution of any related reports) is accurate and as authorized.

Question 8

Define “application controls.”

Answer 8

Information processing controls that apply to the processing of specific computer applications (controls around input, processing, and output).

Question 9

What is the objective of input application controls?

Answer 9

To ensure that the input of data is accurate and as authorized.

Question 10

List the three types of control totals.

Answer 10

1. Batch totals
2. Hash totals
3. Record count

Question 11

Define “batch totals.”

Answer 11

The sum of a particular field in a collection of items used as a control total to ensure that all data has been entered into a system.

Question 12

Define “hash totals.”

Answer 12

An arbitrary total that has no meaningful interpretation outside the context in which it was created. It is used only to validate the integrity of that data that is being examined.

Question 13

Define “record count.”

Answer 13

A counting mechanism in an IT system that keeps track of the number of records processed to determine that the appropriate number was accounted for.

Question 14

List some examples of logic checks.

Answer 14

1. Limit tests
2. Validity checks
3. Missing data checks
4. Check digits

Question 15

What is the purpose of limit tests?

Answer 15

To determine whether the data under review are all within some predetermined range.

Question 16

What is the purpose of validity checks?

Answer 16

To determine whether the data under review are recognized as legitimate possibilities.

Question 17

What is the purpose of missing data checks?

Answer 17

To determine whether there are any omissions from fields in which data should have been present.

Question 18

Define “check digit.”

Answer 18

An arithmetic manipulation of a numeric field that captures the information content of that field and then gets “tacked” onto the end of that numeric field.

Question 19

What is the purpose of processing application controls?

Answer 19

To ensure the processing of data is accurate and as authorized.

Question 20

Define “generalized audit software.”

Answer 20

Audit software designed to access and test data files of many audit clients. Such audit software is not unique to a specific audit client.The cost is usually expensive to develop, but that cost can be spread over many audit clients. The cost per client may justify that large initial cost of development.

Question 21

Define “customized audit software.”

Answer 21

Programs specifically written to access the files of a particular client. The cost might be modest, but the benefits are limited to the specific client for whom the software was written.

Question 22

What is the purpose of test data procedures?

Answer 22

To process known errors to see if the client’s system catches them. The auditor only needs to include those errors that are important to the auditor (that is, the auditor need not include every possible type of error). There may be a danger of contaminating the client’s database with the test data.

Question 23

Define “Integrated Test Facility (ITF).”

Answer 23

A fictitious division or department within the client created for the purpose of processing the “dummy” (test) data along with the client’s “live” data.

Question 24

Define “parallel simulation.”

Answer 24

The processing of the client’s actual data using the auditor’s software and then comparing the auditor’s output to the client’s output for agreement.

Question 25

Define “tagging transactions.”

Answer 25

The process of adding an electronic tagging to specific client transactions and tracing them through the client’s system.

Question 26

What is Data Mining Software?

Answer 26

Commercially available software (such as ACL or Idea) used to access a client’s electronic data and perform a broad range of audit tasks (such as performing analytical procedures and sampling for confirmation work, etc.).

Question 27

Define “Electronic Data Interchange (EDI).”

Answer 27

Direct computer-to-computer communication between a buyer and seller designed to achieve greater efficiency and less paperwork (a paper audit trail may not even exist).

Question 28

Define “Value Added Network (VAN).”

Answer 28

A network maintained by an independent company that facilitates Electronic Data Interchange (EDI) transactions between the buying and selling companies.

Question 29

Define “local area network (LAN).”

Answer 29

A network of hardware and software interconnected throughout a building or campus.

Question 30

Define “On-line Processing.”

Answer 30

The processing of data whereby the user is in direct communication with the computer’s central processing unit.

Question 31

Define “Real Time Processing.”

Answer 31

The processing of data whereby the data files are immediately updated.

Question 32

Define “database system.”

Answer 32

A set of interconnected files that eliminates the redundancy associated with maintaining separate files for different subsets of the organization.

Question 33

Define “Service Organization.”

Answer 33

Independent organizations to whom an entity may outsource the processing of its transactional data.

Question 34

Define “Distributed Systems.”

Answer 34

A network of remote computers connected to the main system, allowing simple processing functions to be delegated to the employees at the remote sites.