Responses to Assessed Risk - Gleim Chapter 8

Question 1

The major purpose of the auditor’s study and evaluation of the company’s computer processing operations is to

Answer 1

Evaluate the reliability and integrity of financial information.

Question 2

As the acceptable level of detection risk increases for a given audit risk, an auditor may change the

Answer 2

Timing of substantive procedures from year end to an interim date.

Question 3

In performing tests of controls, the auditor will normally find that

Answer 3

The rate of deviations in the sample exceeds the rate of error in the accounting records.

Question 4

What action should the auditor take in response to discovering a deviation from the prescribed control?

Answer 4

Make inquiries to understand the potential consequence of the deviation.

Question 5

True or False: ITF reprocesses only actual, not fictitious, transactions.

Answer 5

False

Question 6

The auditor should perform tests of controls when the auditor’s risk assessment includes an expectation

Answer 6

Of the operating effectiveness of internal control.

Question 7

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: The primary advantage of this approach is that it directly tests specific controls

Answer 7

Test data approach

Question 8

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: When using this approach, the auditor prepares a set of dummy transactions specifically designed to test the control activities that management claims to have incorporated into the processing programs.

Answer 8

Test Data Approach

Question 9

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: The primary disadvantage of this approach are the cost of obtaining the program and the coordination effort required to obtain transactions to reprocess.

Answer 9

Parallel Simulation

Question 10

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: This approach is an integral part of an application system that is designed to identify and report actual transactions and other information that meet criteria having audit significance.

Answer 10

Embedded Audit Module

Question 11

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: The primary disadvantages of this approach are that it requires considerable coordination and the dummy transactions must be purged prior to internal and external reporting.

Answer 11

Integrated Test Facility

Question 12

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: The primary disadvantage of this approach is that it tests processing at only one moment in time.

Answer 12

Test Data Approach

Question 13

Integrated Test Facility, Parallel Simulation, Embedded Audit Module or Test Data Approach: This approach tests the actual program in operation using dummy transactions

Answer 13

Integrated Test Facility