EA Pop Quiz 1

What is the primary purpose of auditing?

• To provide recommendations for improving management strategies

• To systematically obtain and evaluate evidence regarding assertions about economic actions and events

• To ensure that an organization maximizes its profits

• To develop new financial reporting standards

Which of the following is true regarding the conceptual phases of auditing and IT auditing?

• IT auditing does not require audit planning.

• The phases of IT auditing are entirely different from general auditing.

• IT auditing is typically a subset of the overall audit, focusing on computer technology.

• There are no conceptual phases in IT auditing.

What is the primary assumption of the "auditing around the computer" approach?

• The computer processing is inherently flawed.

• The processing portion of the accounting system is the most critical.

• If the actual outputs match the expected results from the inputs, the computer processing is reliable.

• The input and output do not need to be compared.

Which of the following is true about the "auditing around the computer" approach?

• It focuses primarily on the processing portion of the accounting system.

• It allows auditors to see exactly how the computer processing programs handle edit and programmed checks.

• It is suitable only when the audit trail is complete and visible, and processing operations are straightforward.

• It is the most effective method for high-volume, complex processing operations.

Which type of applications is the "auditing around the computer" approach best suited for?

• Real-time transaction processing.

• High-volume and highly complex processing operations.

• Systems with no visible audit trail.

• Independent periodic processing applications like payroll processing and cash disbursements.

What does "auditing through the computer" primarily involve?

• Reviewing and evaluating internal controls in an electronic data processing system.

• Implementing new software applications.

• Developing information systems from scratch.

• Ensuring physical security of computer hardware.

All auditing-through-the-computer techniques provide evidence concerning the level of control risk.

• True

• False

Periodic direct and real-time processing applications with an impaired audit trail cannot use techniques such as Test Data or Parallel Simulation.

• True

• False

What is the primary function of a transaction file in a computerized accounting system?

• To store records of long-term financial data and account balances.

• To capture detailed transaction data related to events currently being processed, such as sales and receipts.

• To maintain historical records of the company's strategic decisions.

• To archive data that has been removed from the master file.

When determining whether to use Computer-Assisted Audit Techniques (CAATs) during an audit, which factor should be considered?

• The availability of manual testing resources.

• The audit team's computer knowledge, expertise, and experience.

• The company's preference for paper-based records.

• The overall size of the audit team.