Information Systems Auditing Quiz
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Questions and Answers

Which element is NOT considered a primary focus of information systems auditing?

  • System efficiency
  • Market share analysis (correct)
  • Asset safeguarding
  • Data integrity

    • What does achieving 'Improved System Effectiveness' mean within the context of Information Systems Auditing?

  • Maximizing resource utilization by the system.
  • Ensuring the system processes data rapidly.
  • Matching system capabilities to user requirements. (correct)
  • Guaranteeing the system never fails.

    • Why is maintaining data integrity important for organizations?

  • It helps in avoiding loss of competitive advantages. (correct)
  • It only impacts the financial reporting of the company.
  • It solely helps in reducing storage costs.
  • It ensures data is consistently backed up.

    • An organization wants to ensure its data is accurate, complete, and consistent. Which objective of Information Systems Auditing does this most directly relate to?

    <p>Improved Data Integrity (B)</p> Signup and view all the answers

    Which aspect of system assets is NOT explicitly mentioned as needing protection in the context of Information Systems Auditing?

    <p>Employee training programs (A)</p> Signup and view all the answers

    What is the implication of a system's effectiveness in Information Systems Auditing?

    <p>It evaluates if the system provides useful reporting for decision-making. (B)</p> Signup and view all the answers

    What is the specific responsibility of external auditors regarding information systems?

    <p>To focus on safeguarding of assets and data integrity. (A)</p> Signup and view all the answers

    Which phrase best describes the lifecycle that requires data integrity maintenance?

    <p>From data capture to data destruction, as per organizational policy. (B)</p> Signup and view all the answers

    Which of the following is NOT a typical activity performed using generalized audit software?

    <p>Preparing bank reconciliations (A)</p> Signup and view all the answers

    What is the primary purpose of using Computer-Assisted Audit Techniques (CAATs) in the context of auditing claims within an insurance company, as described in the text?

    <p>To identify all claims processed after policy termination (C)</p> Signup and view all the answers

    Which audit technique involves the use of a fictitious entity within the system to test the processing of data?

    <p>Integrated Test Facility (ITF) (A)</p> Signup and view all the answers

    In an Integrated Test Facility (ITF) audit approach, what is a key consideration for auditors?

    <p>Determining the method to remove the effects of the ITF transactions. (B)</p> Signup and view all the answers

    Which of the following is a typical use for Computer Assisted Auditing Techniques (CAATs)?

    <p>Testing and documenting processes within an IT environment using flowcharts and data flow diagrams. (B)</p> Signup and view all the answers

    What is a significant advantage of using CAATs over traditional auditing techniques, as illustrated by the insurance claim example provided?

    <p>CAATs enables the examination of the entire population of data related to an event, not just a sample. (C)</p> Signup and view all the answers

    Which is an example of a specific risk that can be difficult to test using traditional audit techniques, but is more easily addressed using CAATs, as given in the text?

    <p>Identifying claims paid after a policy termination date. (D)</p> Signup and view all the answers

    If Integrated Test Facility (ITF) has been used throughout a financial period, what must happen regarding the test transactions at the end of the period?

    <p>The transactions and their effects should be isolated and removed. (A)</p> Signup and view all the answers

    What is a primary risk associated with embedding audit routines into an application system using SCARF?

    <p>Disruption of the application's normal data processing. (B)</p> Signup and view all the answers

    Which condition is required to be present for the SCARF technique to record a transaction in the example of the life insurance company?

    <p>A change in the customer's address and subsequent fund withdrawal within 7 days. (A)</p> Signup and view all the answers

    What type of function in an application can be used to verify the integrity of a transaction in Transaction Tagging?

    <p>A trace or debug function. (C)</p> Signup and view all the answers

    What is the expertise required in Transaction Tagging?

    <p>The ability to add special designation (or tag) to the transaction record. (C)</p> Signup and view all the answers

    In the context of SCARF, what is a chief concern that requires careful control design and implementation?

    <p>The necessity to remove the effects of audit routines from the application after they have been used. (A)</p> Signup and view all the answers

    Which element is NOT typically configured within an enterprise system?

    <p>Specific employee performance reviews (B)</p> Signup and view all the answers

    What does transaction tagging primarily focus on verifying?

    <p>The validity and reliability of the application's processes. (D)</p> Signup and view all the answers

    What is a key advantage of transaction tagging?

    <p>It allows auditors to track transactions from beginning to end. (D)</p> Signup and view all the answers

    How can master data within an enterprise system typically be characterized?

    <p>It’s defined per industry and business process (D)</p> Signup and view all the answers

    What is a significant risk when using transaction tagging?

    <p>The risk of disrupting client data while adding or removing tags from transactions. (C)</p> Signup and view all the answers

    What is the primary purpose of configuring an enterprise system?

    <p>To customize the software's functionality based on business needs (D)</p> Signup and view all the answers

    In the context of transactions within an enterprise system, which sequence correctly represents typical processing steps?

    <p>Initiation, authorization or approval, then processing (A)</p> Signup and view all the answers

    What is a defining characteristic of the Procure-to-Pay (P2P) process?

    <p>Encompasses data flow from order placement to payment (A)</p> Signup and view all the answers

    Which scenario best exemplifies master data in the context of sales transactions?

    <p>The list of customer details like name, address, and contact information (A)</p> Signup and view all the answers

    What is the primary function of the 'configuration' process in an enterprise system?

    <p>To set up initial parameters based on business needs (B)</p> Signup and view all the answers

    When are the master configurations of an enterprise system typically modified?

    <p>Whenever business process rules or parameters change (B)</p> Signup and view all the answers

    In the scenario involving the interior designer, what key insight was gained through transaction tagging?

    <p>Clients from Mr. Monty pay more on average. (D)</p> Signup and view all the answers

    According to the material, what is the primary way transaction tagging enhances business strategy?

    <p>By identifying the most financially beneficial relationships, and areas of greater profit (D)</p> Signup and view all the answers

    What is the core function of Continuous and Intermittent Simulation (CIS) as an auditing technique?

    <p>Trapping exceptions during application processing by simulating instruction execution. (D)</p> Signup and view all the answers

    Which of the following is NOT a disadvantage of using Continuous Audit Techniques according to the information provided?

    <p>Requires modifications to the application system. (A)</p> Signup and view all the answers

    What does 'simulation' refer to within the context of Continuous and Intermittent Simulation (CIS)?

    <p>Mimicking application instruction execution to detect exceptions during live transactions. (A)</p> Signup and view all the answers

    What is a key aspect of shared access in a Continuous and Intermittent Simulation (CIS) setup?

    <p>The simulation has full access to all data, inputs and notifications of transactions to the application. (D)</p> Signup and view all the answers

    How does Continuous and Intermittent Simulation (CIS) differ from other auditing techniques in terms of its execution on the audited system?

    <p>CIS operates without requiring any modifications to the existing application. (D)</p> Signup and view all the answers

    What is a main prerequisite for auditors to use continuous audit techniques effectively?

    <p>Knowledge and experience working with computer systems. (A)</p> Signup and view all the answers

    Which of the following is a control objective related to access for general ledger entries?

    <p>Confirming that access to the general ledger is restricted to authorized personnel. (B)</p> Signup and view all the answers

    What is a key control objective regarding reconciliation of balance sheet and income statement accounts?

    <p>That these accounts have automated reconciliations (D)</p> Signup and view all the answers

    What control supports the accurate recording of journal entries by management?

    <p>That reports of all recurring and non-recurring journal entries are generated for management review. (D)</p> Signup and view all the answers

    How are non-standard journal entries addressed according to the text provided?

    <p>They are tracked to ensure appropriateness. (C)</p> Signup and view all the answers

    Which of these is most important for minimizing errors from out of balance entries?

    <p>To prohibit out-of-balance entries at the point of entry (C)</p> Signup and view all the answers

    How should inter-company eliminations be handled in an enterprise-wide consolidation?

    <p>They should be automated and performed as part of the consolidation. (C)</p> Signup and view all the answers

    What control can help to identify potential posting errors or out-of-balance conditions?

    <p>Generating variance reports. (C)</p> Signup and view all the answers

    How should write-offs be handled?

    <p>They should be appropriately approved before being processed. (C)</p> Signup and view all the answers

    Study Notes

    Learning Outcomes

    • Students will be able to distinguish between Information Systems and Information Technology.
    • Students will understand the factors influencing Information systems Audit and its objectives.
    • Students will understand all steps involved in an Information Systems Audit (ISA).
    • Students will gain an overview of Information Technology Tools.
    • Students will comprehend the workings of various Information Technology Tools.
    • Students will understand various risks and controls via illustrations in business processes.
    • Students will comprehend risks and controls in business processes like Procure to Pay (P2P), Order to Cash (O2C), Current Account and Savings Account (CASA) of Core Banking Systems (CBS).

    Chapter Overview

    • Information Systems: Factors influencing audit control, audit objectives, steps in audit, audit tools, procure to pay (P2P), order to cash (O2C), inventory cycle, human resources, fixed assets, and general ledger.
    • Digital Ecosystem and Controls: Computer Assisted Audit Techniques (CAAT), Integrated Test Facility (ITF), Test Data, Parallel Simulation, Embedded Audit Module (EAM), System Control Audit Review File (SCARF), Transaction Tagging, Continuous and intermittent Simulation (CIS).

    Introduction

    • Information Technology (IT) has improved its control and influence in every area of business.
    • IT has enhanced the skill to store, process, and analyze information, increasing business decision-making power.
    • IT impacts the control process of the business environment.
    • IT influences the conduct of the Chartered Accountancy profession, such as how audit samples are drawn, system reports generated, verification of internal controls, efficiency, effectiveness, and integrity of the audit report.
    • Today, many organizations use computerized systems more than paper-based documents.
    • Auditors who use computerized tools and techniques will be at a high advantage.
    • Information System vs. Information Technology: Information System comprises of people, process, and technology, while Information Technology is the hardware, software, communication, and other components used to generate, process, and transfer data.

    Information Systems Auditing

    • Information systems are crucial to any organization.
    • Auditing information systems is important in asset safeguarding, data safety, and management effectiveness.
    • Information System Auditing (ISA) enables organizations to achieve crucial objectives.

    Auditing Around the Computer vs. Through the Computer

    • Auditing around the computer involves reconciling source documents with output results.
    • Auditing through the computer involves assessing application and embedded controls in response to varying transactions.
    • Integrated Testing Facility (ITF), Test Data, Parallel Simulation, Embedded Audit Module (EAM), Systems Control Audit Review File (SCARF), and transaction tagging are used in the auditing through the computer approach.

    Information Technology Tools

    • CAAT tools, like Audit Command Language (ACL) and Interactive Data Extraction and Analysis (IDEA), allow auditors to sample data, analyze characteristics, and review data file integrity.
    • Generalized audit software helps evaluate spreadsheet logic, calculations, data, and logic flowcharts.
    • Software packages like Audit Analytics (Arbutus Software), CaseWare Analytics IDEA Data Analysis, Easy2Analyse, and TeamMate Analytics are important tools.

    Business Processes

    • Operational Processes: Critical business activities like ordering, production, and delivery.
    • Supporting Processes: Roles like accounting, human resources (HR), and workplace safety that support core functions.
    • Management Processes: Overseeing business activities like communications, governance, strategic planning, budgeting, and infrastructure administration.

    Specific Business Processes

    • Procure to Pay (P2P): Obtaining and managing materials required for production or services.
    • Order to Cash (O2C): Receiving customer orders and fulfilling them, including delivery, processing invoices, and payment.
    • Inventory Cycle: Tracking inventory levels and processing transactions like orders, production, and deliveries.
    • Human Resources (HR): Management of employees, including recruiting, orientation, career development, and termination.
    • Fixed Assets: Management of assets like machinery, buildings, land, etc.
    • General Ledger (GL): Recording financial transactions and generating critical reports.
    • Current Account and Savings Account (CASA): Process flow, risks, and controls related to customer accounts in banks.

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    Description

    Test your understanding of key concepts in Information Systems Auditing. This quiz covers important elements such as data integrity, system effectiveness, and the role of auditors. Challenge yourself with questions that highlight the principles guiding effective auditing practices.

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