AUD1207 Internal Auditing Review Courses Problem Sets PDF

Page 1 of 20 FAR EASTERN UNIVERSITY INSTITUTE OF ACCOUNTS, BUSINESS AND FINANCE DEPARTMENT OF ACCOUNTANCY AND INTERNAL AUDITING AUD1207 – INTEGRATED INTERNAL AUDITING REVIEW COURSE...

Page 1 of 20 FAR EASTERN UNIVERSITY INSTITUTE OF ACCOUNTS, BUSINESS AND FINANCE DEPARTMENT OF ACCOUNTANCY AND INTERNAL AUDITING AUD1207 – INTEGRATED INTERNAL AUDITING REVIEW COURSES PART 1 – SPECIAL TOPICS IN INTERNAL AUDITING PROBLEM SETS SECTIONS A TO E CHRISTIAN ANDREI G. UTANES, CPA, CMA, MBA units ANTHONY LOUIS GATCHALIAN, CPA, CISA NOTE TO STUDENTS: These handouts are of property of the reviewers. Unnecessary sharing and uploading of these materials are not allowed. These problem sets are intended to supplement the students as their last-minute review material. SECTION A – BUSINESS ACUMEN (15 ITEMS) 1. LACOSTE STYLE AND PLAY uses the latest technology in the production of its products, lead time is reduced, and waste is managed for the company. LACOST STYLE AND PLAY was able to secure its ISO certification for the current year. What support activity in the value chain is being described? a. Inbound Logistics b. Outbound Logistics c. Technological Development d. Marketing 2. Which of the following is NOT part of the Porter’s Five (5) Forces Model? a. Threat of Substitutes b. Bargaining power of suppliers c. Threat of Competition d. Threat of New Entrants 3. In the following items, which of the following comes last in the data life cycle? a. Results b. Insights c. Data d. Discussions  Page 2 of 20 4. Which of the following is/are TRUE relating to data analytics? Statement 1: A time series plot is a graphical presentation of the relationship between time and the time series variable Statement 2: A horizontal pattern exists when the data fluctuate randomly around a constant mean over time. a. Only Statement 1 is true b. Only Statement 2 is true c. Both Statements are correct d. Both Statements are incorrect 5. Which of the following implements a Radical Improvement Strategy? a. ENRIQUEZ CO. performed an overhaul of operations in the production department, leading to the retooling of Standard Operating Procedures (SOP). b. GOYO INC. adopts the “Toyota Production Systems” philosophy in the manufacture of its products c. TONIO COMPANY implements a “demand-pull” inventory system, ensuring waste is avoided as well as reorder time d. LUNA CO. analyzes employee performance and offering retooling and upskilling to those lagging workers 6. You are asked to evaluate the following statements: Statement 1 – A company must have a vision to derive business strategies, but missions are not necessarily essential in place for strategy implementation. FALSE Statement 2 – A combination of a comprehensive strategy mechanism coupled with effective resource allocation guarantees success in the business industry. FALSE A. Only Statement 1 is correct B. Only Statement 2 is correct C. Both statements are correct D. Both statements are incorrect 7. You are asked to evaluate the following statements: Statement 1 – When PUREGOLD CO. resells goods from manufacturers at a low-cost, disregarding market sector brackets is an application of Cost Leadership strategy. TRUE Statement 2 – WALMART INC. replenishes inventory daily for perishable goods in an effective application of Lean Management Strategy. FALSE Statement 3 – MCDONALDS COMPANY released “Flavors of Japan” viand on its menu, thus, implementing Kaizen approach. FALSE Statement 4 – JOLLIBEE FOODS CORPORATION’s crew staff circulates across the branch, asking for comments from diners as to the palatability of food. This is an application of a primary activity of the value chain. FALSE A. Only one statement is correct B. Only two statements are correct C. Only three statements are correct D. All statements are incorrect 8. MOIRA INDUSTRIES purchased SAP S4 HANA software to serve as its accounting system where transactions are entered and financial reports are ought to be generated for submission to regulatory agencies. Which BI software or tool is being described?  Page 3 of 20 A. Reporting Software B. Power BI Dashboard C. Spreadsheets D. Data Mining Tool 9. STATESIDE INC. plans an internal audit engagement within a span of 45 days. STATESIDE plotted activities on its dashboard, laying the groundwork for priority activities, less priority activities and least priority activities. Each activity is named as “A”, “B”, “C” and the like, representing timeframes on a per phase basis. What project management tool was used? A. PERT-CPM B. WBS C. Gantt Chart D. None of the above 10. You are asked to evaluate the following statements: Statement 1 – Business Intelligence (BI) collects and analyzing internal data and external data to provide new insights that were not apparent before. TRUE Statement 2 – Online analytical processing (OLAP): OLAP tools allow users to analyze datasets from a wide variety of angles based on different business perspectives. TRUE Statement 3 – The presence of hierarchy in an organization creates various levels of authority arranged in the order of delegated powers in the organization. TRUE Statement 4 – A catalyst of change is someone in the organization who is afraid to take a leap of faith for organizational growth. FALSE A. Only one statement is correct B. Only two statements are correct C. Only three statements are correct D. All statements are incorrect 11. Which of the following is a characteristic of a Traditional Inventory System? a. Materials are then on backflushed from Raw Materials to Finished Goods b. Materials are ordered in advance to take advantage of sales discounts c. Materials are processed directly to finished products on time and are shelved as inventory d. All statements are characteristics of a JIT system 12. The “Toyota Way” or “Toyota Production Systems” is an example of an application of which strategy? a. Kaizen b. Business Process Reengineering c. Lean Management Systems d. Value Chain Analysis 13. Which of the following activities is considered as “non-value adding”? a. Purchasing b. Production c. Inspection d. Packaging  Page 4 of 20 14. SONY invented PLAYSTATION FIVE (PS 5), coupling sensors and gaming wares, enabling consumers to experience virtual effects in real time. SONY implemented the “two-fold pricing model”, charging customers double – the console and the gaming software on a per game basis. Retailers ordered multiple copies of PS5 and sells to end consumers at 45% discount for the first batch of purchase. What strategy was implemented by the retailers? a. Cost Leadership b. Differentiation c. Niche d. None of the above 15. CORNERSTONE ENTERTAINMENT produced “SARILI NATING MUNDO” at the Araneta Coliseum. Concert-goers received lighting bracelets across the dome from general admissions to SVIP seats. CORNERSTONE decided to pursue this tactic to elevate concert experience for the first time. What change management principle was implemented by CORNERSTONE? a. Select few + diverse many b. Have to + want to c. Head + heart d. Management + leadership SECTION B – FINANCIAL ACCOUNTING AND REPORTING (15 ITEMS) 16. An unadjusted trial balance a. Provides information helpful when making adjusting entries b. Proves that no errors have been made c. Usually contains the account balances that should appear in the income statement d. Is a summary taken directly from the general journal 17. A chart of accounts is a. A flowchart of all transactions b. An accounting manual c. A journal d. A list of all account titles in the general ledger 18. Temporary accounts are known as a. Real accounts b. Nominal accounts c. Mixed accounts d. Contra accounts  Page 5 of 20 19. When an entity has started placing its quarterly financial statements on its website, thereby reducing ample time to get information to users, the qualitative concept involved is a. Comparability b. Understandability c. Verifiability d. Timeliness 20. Which is done first in the accounting process considering the following? a. Financial statements are prepared. b. Nominal accounts are closed c. Adjusting entries are recorded. d. A postclosing trial balance is prepared. 21. Which is done last in the accounting process considering the following? a. Journalize and post-closing entries b. Analyze transactions from source documents. c. Prepare reversing entries d. Record the transactions in a journal 22. The double entry accounting system means a. Each transaction is recorded with two journal entries. b. Each item is recorded in a journal entry and then in a general ledger. c. The dual effect of each transaction is recorded with a debit and a credit. d. All of these are choices regarding double entry system. 23. Which of the following accounts is reversible? A. Depreciation B. Prepayments under the Expense Method C. Deferrals under the Liability Method D. Allowance for Bad Debts 24. KAAYO COMPANY would like to know the amount to be recorded as “Repairs and Maintenance Expense” for the month of July 2025. It is a company policy to accrue its repair and maintenance expense by referring to the prior month actual data. Records showed the following: MONTH RECORDED ACCRUED EXPENSE ACTUAL PAYMENT January 10,000 10,500 February 12,000 12,500 March 13,500 14,000 April 12,000 12,500 May 10,750 11,250 June 15,000 15,500 You were then asked to evaluate the following statements: Statement 1 – KAAYO COMPANY cannot close the “Repairs and Maintenance Expense” balance at year-end. FALSE Statement 2 – KAAYO COMPANY should accrue “Repairs and Maintenance Expense” in the amount of P10,000 for July 2025. FALSE A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect  Page 6 of 20 25. Which of the following is NOT a classification of employee benefits according to IAS? a. Short-term employee benefits b. Government-mandated benefits c. Post-employment benefits d. Termination benefits 26. ISIDRO leased a photocopier machine for P10,000 for one year. The fair value of the photocopier machine is P100,000. Lease agreements call for ISIDRO to purchase the leased machinery at the end of the lease term for 1% of the fair value of the machinery from the moment of acquisition. The lessor made commemorative changes on the machine. ISIDRO is not certain to exercise this privilege. How should this lease be classified? A. Finance Lease B. Operating Lease C. Either finance or operating lease depending on the company policy D. None, the transaction qualifies for as sale 27. RIVERBANK issued bonds at a face value of P10,000,000 at 10% for 10 years on January 1, 2025. Upon calculating the present value of the bonds at a 9% market rate, the present value amount is P10,500,000. Principal payments occur periodically for P1,000,000 every year. You were then asked to evaluate the following statements: Statement 1 – RIVERBANK bonds were issued as debentures. FALSE Statement 2 – RIVERBANK bonds were issued at a premium. TRUE Statement 3 – At the end of the bond term, the carrying value of the bond is at P10,000,000 FALSE Statement 4 – The Interest Expense for 2025 amounts to P432,000 FALSE A. Only one statement is correct B. Only two statements are correct C. Only three statements are correct D. All statements are correct E. All statements are incorrect 28. Which of the following is/are TRUE relating to Intangible Assets under PAS 38? a. If an entity cannot distinguish its expenses as then on being with research or development, such expense is classified as a research cost on the principle of conservatism. b. Development costs are capitalized as Intangible Assets c. Research costs are generally classified as expenses d. All of the above 29. Which of the following is true about sustainability reporting? a. Sustainability reporting is the non-disclosure but a straight communication of environmental, social, and governance (ESG) goals—as well as a company’s progress towards them. b. The only benefit of sustainability reporting is to have improved corporate reputation.  Page 7 of 20 c. A sustainability performance is the main tool available to an organisation or company to voluntarily communicate its performance and impact — positive or negative — in environmental, social and governance (ESG) matters. d. Sustainability reporting plays a role in accountability relationships as it is a means by which organizations communicate with a range of stakeholders and such information in the report should be relevant to the stakeholders as well. 30. Which of the following best describes the characteristic of “Materiality”? a. Absolute b. Relative c. Subjective d. None of the above SECTION C – MANAGEMENT SERVICES (15 ITEMS) 31. Horizontal analysis evaluates financial statement data a. within a period of time. b. over a period of time. c. on a certain date. d. as it may appear in the future. 32. Vertical analysis is also known as a. perpendicular analysis. b. common size analysis. c. trend analysis. d. straight-line analysis. 33.In analyzing financial statements, horizontal analysis is a a. requirement. b. tool. c. principle. d. theory. 34. In performing a vertical analysis, the base for cost of goods sold is a. total selling expenses. b. net sales. c. total revenues. d. total expenses. 35. The current assets of KZ Company are $150,000. The current liabilities are $120,000. The current ratio is? a. 125%. b. 1.25 : 1 c..80 : 1 d. $150,000 ÷ $120,000. 36. The current ratio may also be referred to as the a. short run ratio. b. acid-test ratio. c. working capital ratio.  Page 8 of 20 d. contemporary ratio 37.Which of the following is considered as a Direct Cost? A. Utilities expense in a factory used to directly manufacture the product B. Ordering costs incurred in the shipment of raw materials C. Cloth used in the manufacture of jeans D. Depreciation expense on the factory machine that processes direct materials 38.Which of the following is TRUE relating to Cost Estimation and Cost Behavior? STATEMENT 1: A cost, when estimated is true in respect of all activity levels STATEMENT 2: High-low method is the most accurate method in splitting mixed costs STATEMENT 3: In the Least Square Regression Equation, y = a + bx, Variable cost, denoted by (b) is a cost that changes in various levels of activity. STATEMENT 4: When graphed, a fixed cost starts with 0 on the intersection of the x and y-axes and this remains constant within the relevant range of activity. A. All statements are correct B. Statements 1, 2 and 4 are correct C. Statements 2, 3 and 4 are correct D. All statements are incorrect 39.PALAGI MANUFACTURING COMPANY is a manufacturer of “IKAW BRACELETS” and it is facing a problem in allocating overhead variances. The sales for the month amounted to P10,000,000 for all products as it sells each. bracelet at a standard price of P1,000. Cost of sales amounted to 60% of total sales for the month. Based on the production data, it was noted that the Actual Overhead for the period amounted to P350,000 and the Budgeted Overhead amounted to P250,000. Based on PALAGI’s internal policy, any overhead, is estimated to be within normal production limits if it does not exceed 3% of the monthly sales, if it was able to sell 100,000 units for the month. Otherwise, the variance is unfavorable for PALAGI if the sales drop down to 75% of the expected sales. As a cost accountant of PALAGI, you were asked to provide the management an information for decision making. You talked to your plant manager and have come up with the following arguments: ARGUMENT 1: PALAGI’s Overhead variance for the month is P100,000 and this variance shall be disposed accordingly. ARGUMENT 2: PALAGI’s Overhead variance for the month should be closed to Cost of Goods Sold (COGS) for the month. ARGUMENT 3: As a result of the disposition of the variance, the net income of PALAGI is expected to decrease. ARGUMENT 4: Based on analysis, PALAGI is considered to be efficient in its production processes. Management, in its option may choose to implement “Management By Exception” in order to pinpoint production problems A. All statements are correct B. Arguments 1, 2 and 4 are correct C. Arguments 2, 3 and 4 are correct D. All statements are incorrect  Page 9 of 20 40. Which of the following is / are TRUE in the preparation of Statement of Cost of Goods Manufactured and Sold? STATEMENT 1: Direct Materials, when Manufacturing Overhead is added, the result will be Conversion Costs STATEMENT 2: Work-In Process Beginning Inventories denote inventories that were started this month and completed next month STATEMENT 3: Total cost of goods put into process = Total Manufacturing Costs + Work in process, Beg STATEMENT 4: The calculated Cost of Goods Sold in the Statement of Cost of Goods Manufactured and Sold is the adjusted cost of goods sold and to be reported in the Statement of Comprehensive Income. A. All statements are correct B. Statements 1, 2 and 4 are incorrect C. Statements 2 and 3 are incorrect D. All statements are incorrect 41.Which of the following cost is used in a Job Order Costing system? A. Direct Materials available for use B. Manufacturing overhead - control C. Direct labor cost D. Pre-determined overhead rate 42.Which is/are TRUE in relation to Cost Behavior? STATEMENT 1: Fixed costs are considered to be constant in all ranges of activity STATEMENT 2: Variable cost per unit varies in total at each level of activity STATEMENT 3: Mixed costs are considered to be an indirect cost depending on the convenience and traceability of costs STATEMENT 4: Rent expense is an example of a fixed cost A. All statements are incorrect B. Statements 1 and 2 are incorrect C. Statements 3 and 4 are incorrect D. All statements are correct 43.Which of the following is considered as a product cost? A. Cost of tarpaulin used to endorse a product B. Camera lens in a smartphone C. Depreciation expense of a delivery vehicle D. Cost of spoiled milk and unused stocks of raw materials 44. The fixed costs per unit are $10 when a company produces 10,000 units of product. What are the fixed costs per unit when 12,500 units are produced? A. $4. B. $6. C. $8. D. $10. 45. Given the following information for GARY V GRAVY, calculate the company's manufacturing overhead: Work in process, ending $8,000 Work in process, beginning $11,000  Page 10 of 20 Cost of goods manufactured $70,000 Direct labor $25,000 Direct materials $20,000 The manufacturing overhead is: A. $22,000 B. $25,000 C. $28,000 D. $36,000 SECTION D – OPERATIONS AUDITING (30 ITEMS) 46. Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity’s internal control? a. Incompatible duties. b. Management override. c. Mistakes in judgment. d. Collusion among employees. 47. An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors’ invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all a. Cash disbursements. b. Approved vouchers. c. Receiving reports. d. Vendors’ invoices. 48. Tracing shipping documents to pre-numbered sales invoices provides evidence that a. No duplicate shipments or billings occurred. b. Shipments to customers were properly invoiced. c. All goods ordered by customers were shipped. d. All prenumbered sales invoices were accounted for. 49. Which of the following controls most likely would reduce the risk of diversion of customer receipts by an entity’s employees? a. A bank lockbox system.  Page 11 of 20 b. Prenumbered remittance advices. c. Monthly bank reconciliations. d. Daily deposit of cash receipts. 50. An auditor suspects that a client’s cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditor most likely would compare the a. Dates checks are deposited per bank statements with the dates remittance credits are recorded. b. Daily cash summaries with the sums of the cash receipts journal entries. c. Individual bank deposit slips with the details of the monthly bank statements. d. Dates uncollectible accounts are authorized to be written off with the dates the write-offs are recorded. 51. Which of the following controls most likely would assure that all billed sales are correctly posted to the accounts receivable ledger? a. Daily sales summaries are compared to daily postings to the accounts receivable ledger. b. Each sales invoice is supported by a prenumbered shipping document. c. The accounts receivable ledger is reconciled daily to the control account in the general ledger. d. Each shipment on credit is supported by a prenumbered sales invoice. 52. Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments? a. Accounts receivable. b. Credit. c. Accounts payable. d. Treasurer 53. Upon receipt of customers’ checks in the mailroom, an employee responsible should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the a. Internal auditor to investigate the listing for unusual transactions. b. Treasurer to compare the listing with the monthly bank statement. c. Accounts receivable bookkeeper to update the subsidiary accounts receivable records. d. Entity’s bank to compare the listing with the cashier’s deposit slip. 54. To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is  Page 12 of 20 a. Supported by a vendor’s invoice. b. Stamped “paid” by the check signer. c. Prenumbered and accounted for. d. Approved for authorized purchases 55. Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the a. Department that initiated the requisition. b. Receiving department. c. Purchasing agent. d. Accounts payable department 56. Sound internal control dictates that defective merchandise returned by customers should be presented initially to the a. Salesclerk. b. Purchasing clerk. c. Receiving clerk. d. Inventory control clerk. 57. Which of the following is not one of the major differences between financial and operational auditing? a. The financial audit is oriented to the past, but an operational audit concerns performance for the future. b. The financial audit report is distributed to many readers, but the operational audit report goes to a few managers. c. Financial audits deal with the information on the financial statements, but operational audits are concerned with the information in the ledgers. d. Financial audits are limited to matters that directly affect the financial statements, but operational audits cover any aspect of efficiency and effectiveness. 58. An auditor most likely would assess control risk at a high level if the payroll department supervisor is responsible for a. Examining authorization forms for new employees. b. Comparing payroll registers with original batch transmittal data. c. Authorizing payroll rate changes for all employees. d. Hiring all subordinate payroll department employees.  Page 13 of 20 59. To minimize the opportunities for fraud, unclaimed cash payroll should be a. Deposited in a safe-deposit box. b. Held by the payroll custodian. c. Deposited in a special bank account. d. Held by the controller 60. Which of the following is not a control that is designed to protect investment securities? a. Custody over securities should be limited to individuals who have recordkeeping responsibility over the securities. b. Securities should be properly controlled physically in order to prevent unauthorized usage. c. Access to securities should be vested in more than one individual. d. Securities should be registered in the name of the owner. 61. Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries? a. Personnel. b. Treasurer. c. Controller. d. Payroll. 62. An auditor vouched data for a sample of employees in a payroll register to approved clock card data to provide assurance that a. Payments to employees are computed at authorized rates. b. Employees work the number of hours for which they are paid. c. Segregation of duties exist between the preparation and distribution of the payroll. d. Controls relating to unclaimed payroll checks are operating effectively. 63. Proper internal control over the cash payroll function would mandate which of the following? a. The payroll clerk should fill the envelopes with cash and a computation of the net wages. b. Unclaimed pay envelopes should be retained by the paymaster. c. Each employee should be asked to sign a receipt. d. A separate checking account for payroll be maintained. 64. In general, material fraud perpetrated by which of the following are most difficult to detect? a. Cashier  Page 14 of 20 b. Keypunch operator. c. Internal auditor. d. Controller 65. Which of the following controls would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments? a. Senior management verifies that securities in the bank safe-deposit box are registered in the entity’s name. b. The internal auditor compares the securities in the bank safe-deposit box with recorded investments. c. The treasurer vouches the acquisition of securities by comparing brokers’ advice with canceled checks. d. The controller compares the current market prices of recorded investments with the brokers’ advice on file. 66. Which of the following representations should not be included in a report on internal control- related matters noted in an audit? a. Significant deficiencies related to internal control exist. b. There are no significant deficiencies in the design or operation of internal control. c. Corrective follow-up action is recommended due to the relative significance of material weaknesses discovered during the audit. d. The auditor’s consideration of internal control would not necessarily disclose all significant deficiencies that exist. 67. Which of the following statements concerning material weaknesses and significant deficiencies is correct? a. An auditor should not identify and communicate material weaknesses separately from significant deficiencies. b. Compensating controls may limit the severity of a material weakness or significant deficiency. c. Upon discovery an auditor should immediately report all material weaknesses and significant deficiencies identified during an audit. d. All significant deficiencies are material weaknesses. 68. In assessing the objectivity of internal auditors, an independent auditor should a. Evaluate the quality control program in effect for the internal auditors. b. Examine documentary evidence of the work performed by the internal auditors. c. Test a sample of the transactions and balances that the internal auditors examined. d. Determine the organizational level to which the internal auditors report.  Page 15 of 20 69. Which of the following types of audit evidence is the least persuasive? a. Prenumbered purchase order forms. b. Bank statements obtained from the client. c. Test counts of inventory performed by the auditor. d. Correspondence from the client’s attorney about litigation. 70. An auditor should trace bank transfers for the last part of the audit period and first part of the subsequent period to detect whether a. The cash receipts journal was held open for a few days after the year-end. b. The last checks recorded before the year-end were actually mailed by the year-end. c. Cash balances were overstated because of kiting. d. Any unusual payments to or receipts from related parties occurred. 71. While observing a client’s annual physical inventory, an auditor recorded test counts for several items and noticed that certain test counts were higher than the recorded quantities in the client’s perpetual records. This situation could be the result of the client’s failure to record a. Purchase discounts. b. Purchase returns. c. Sales. d. Sales returns 72. An auditor usually examines receiving reports to support entries in the a. Voucher register and sales returns journal. b. Sales journal and sales returns journal. c. Voucher register and sales journal. d. Check register and sales journal 73. Analysis of which account is least likely to reveal evidence relating to recorded retirement of equipment? a. Accumulated depreciation. b. Insurance expense. c. Property, plant, and equipment. d. Purchase returns and allowances. 74. In auditing long-term bonds payable, an auditor most likely would  Page 16 of 20 a. Perform analytical procedures on the bond premium and discount accounts. b. Examine documentation of assets purchased with bond proceeds for liens. c. Compare interest expense with the bond payable amount for reasonableness. d. Confirm the existence of individual bond holders at year-end. 75. When an internal auditor observes that the recorded interest expense seems to be excessive in relation to the balance in the bonds payable account, the internal auditor might suspect that a. Discount on bonds payable is understated. b. Bonds payable is understated. c. Bonds payable is overstated. d. Premium on bonds payable is overstated. SECTION E – INFORMATION SYSTEMS AND CONTROL (25 ITEMS) 76. A collection of data items is called a ___ a. Database b. Data field c. File d. Record 77. Of the approaches listed below, which of the following allows auditors making database queries to combine several tables to get the information they want? a. Extraction b. Joining c. Sorting d. Summarization 78. Which of the following is not considered a smart device? a. Apple Iphone b. Samsung TV c. Lenovo Laptop d. LG Refrigerator 79. Who has the primary monitoring role over information security (and other assets)? a. Board of Directors b. Internal Audit  Page 17 of 20 c. Senior Management d. Information Security Officer 80. Which of the following can a company should use to reduce security exposure when transmitting proprietary data over communication lines? a. Authentication techniques b. Local area network (LAN) c. Value added network (VAN) d. Cryptographic devices 81. Batch processing a. Is not used by most businesses because it reduces the audit trail. b. Allows users to inquire about groups of information contained in the system. c. Accumulates transaction records into groups for processing against the master file on a delayed basis. d. Can only be performed on a centralized basis. 82. This is a type of computer processing wherein data are assembled from more than one location and records are updated immediately? a. Personal computer systems. b. Data compression systems. c. Batch processing systems. d. Online, real-time systems. 83. Which of the following is an advantage of real-time over batch processing? a. Ease of auditing. b. Ease of implementation. c. Timeliness of information. d. Efficiency of processing. 84. Timeliness of data availability is relevant to a. Computerized systems. b. Payroll systems. c. Manual systems. d. Online systems.  Page 18 of 20 85. Which of the following input controls is most likely to detect data input error in the customer account number field? a. Limit check b. Validity check c. Control total d. Hash total 86. What is the broad term for software that covers viruses, worms, Trojan horses, etc.? a. Spyware. b. Phishing. c. Malware. d. Ransomware. 87. Which of the following would describe a worm: a. Is able to travel independently through computer systems. b. Self-replicates and attaches itself to files during execution. c. Uses backdoors to access system resources. d. Can be dormant until triggered by a particular date or time. 88. Which of the following is not a strategy to restrict data access? a. Something you remember. b. Something you know. c. Something you are. d. Something you have. 89. This is not considered as a physical security control? a. Manned guard posts. b. A biometric access system. c. Alarm systems. d. Guard dogs. 90. A Proxy server’s purpose: a. Process and filter requests for Web pages. b. Provide a suite of communication protocols used to connect network devices on the internet. c. Provide defense against port scans.  Page 19 of 20 d. Process client requests for database access. 91. This type of software pretends to offer useful or desirable features but actually contains damaging code? a. Trojan horse. b. Virus. c. Worm. d. Spyware. 92. Which system conversion method has the least risk? a. Phased or modular conversion. b. Parallel conversion. c. Plunge or direct conversion. d. Pilot conversion. 93. Minimizing the likelihood of unauthorized editing of software can best be accomplished:: a. Database access reviews. b. Compliance reviews. c. Good change-control procedures. d. Effective network security software. 94. If a database has integrity this pertains to a. Software was implemented after extensive acceptance testing. b. Database has only consistent data. c. Database is secure from accidental entry. d. Database and the system have been reviewed by an external auditor. 95. This operating procedure increase the company’s risk of viruses? a. Encrypting data files. b. Conducting frequent backup of files. c. Downloading public-domain software from websites. d. Installing original copies of purchased software. 96. Public Key Encryption is the same as Symmetric Encryption. a. True  Page 20 of 20 b. False c. Maybe d. None of the above. 97. What does BIA stand for in Business Continuity Planning? a. Business Impact Analysis b. Business Intrusion Analysis c. Business Impact and Availability d. Business Impact Awareness 98. Recovery Point Objective and Recovery Time Objective are both functions of time. a. True b. False c. Maybe d. None of the above 99. It is a large amount of constantly streaming digital information, massive increase in the capacity to store large amounts of data and the amount of data processing power required to manage, interpret and analyze the large volumes of digital information. a. MetaData b. Big Data c. Giga Data d. Database 100. In binary code, 1 represents “on” and 0 represents “off”. a. True b. False c. Maybe d. None of the above GOODLUCK, FEUture CIAs! ---END---