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Questions and Answers
Error correction involves checking for errors during ______ and on source documents.
entry
Processing controls involve checking for ______ program and file.
correct
Computer control totals and ______ are important processing controls.
reports
Output controls include ______ controls to output and control over distribution.
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When receiving output, one control is to ______ input to output.
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Master file changes require ______ for making changes and separate approval.
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A master file amendment request requires a ______ form that is approved.
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Exception reports are used to identify transactions that are out of the ______ and may indicate control failures.
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Error reports are used to identify transactions that ______ processing and were not processed.
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The generation of exception and error reports is only considered a proper control if these reports are ______.
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Study Notes
Application Controls
- Application controls are related to computerized processing of business transactions
- Objective: define and explain application controls, and apply them during the stages of a transaction (input, processing, output)
Types of Application Controls
- Independent manual controls: not dependent on the IT system (e.g. authorization of a hard copy PO)
- IT-dependent manual controls: dependent on the output of the IT system (e.g. review of a report of all customers exceeding their credit limit)
- Programmed controls (automated controls): dependent on and performed by the IT system (e.g. input validation tests)
Input Controls
- User-related controls: user ID, password, and access rights
- Documentation: design of the source document
- Screen aids: layout, user-friendly, minimum entry (drop-down menus, calendars, etc.), confirmations/echo test, computer dialogue, compulsory fields
- Programmed controls: validity test, limit test or range check, related data/matching, field size test, mandatory fields, alpha/numeric or alpha-numeric test, reasonableness test, sign test, check digit (algorithm)
Batch Controls
- Document or record count: total number of records or documents
- Financial or other total: total amount or value of the batch
- Hash total: calculated value from primary fields to ensure correct allocation
Error Correction
- Error during entry: identify and correct errors during data entry
- Error on source document: correct errors on the original document
- Error when batch totals don’t agree: identify and correct discrepancies between batch totals
Processing Controls
- Correct program and file: ensure correct program and file are used
- Computer control totals and reports: batch controls, file balancing and run-to-run totals, console log for processing
- Controls during processing: sequence testing, completeness testing, other validation tests (INVALID ERROR MESSAGES)
Output Controls
- Access controls to output: physical and logical access controls
- Control over distribution: control who receives the output
- Controls when receiving output: recon input to output, check sequence, page numbers, content match description of file, end of report indicators
Master File Changes
- Authorization for making changes and separate approval
- Specific access rights to file and computer to make changes
- Request form: master file amendment request with approval
- Input: capturing the amendment request form
- Review and reporting: logs and registers, master file amendments request register, register of completed requests
Exception and Error Reports
- Exception reports: reports of transactions that are out of the ordinary, outside set parameters
- Error reports: list of transactions that failed processing and were not processed
- Review of these reports is crucial for proper control
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Description
This quiz covers application controls in business transactions, including input, processing, and output stages, as well as master file controls. Based on Auditing Fundamentals 2nd Edition, Chapter 5.
