Deck 8: Internal Controls II

Question 1

The comparison of actual and budgeted figures and the conduct of variance analysis to determine the source of the variance is a type of:

A)General control
B)Information processing control
C)Performance review
D)Application control

Answer 1

C

Question 2

In terms of proper recording of transactions,accuracy is concerned with making sure that: (i)all data that enter the system are in the correct format (ii)all data that enter the system are of the right type (iii)all data are stored in a secured place to prevent unauthorised manipulation (iv)the data gathered accurately reflect the reality of the underlying transaction or event.

A)(i)(ii)
B)(i)(ii)(iii)
C)(i)(ii)(iv)
D)(i)(ii)(iii)(iv)

Answer 2

C

Question 3

Which of the following is not a type of controls classified in the Australian Auditing Standard ASA 315?

A)Authorisation
B)Performance review
C)Risk control
D)Segregation of duties

Answer 3

C

Question 4

An antivirus program scans and monitors files in a computer continuously for viruses.This is an example of:

A)Preventive control
B)Detective control
C)Corrective control
D)Application control

Question 5

Which of the following is a risk to the financial statement of a company when it places a purchase order with a supplier?

A)the supplier delivers the goods with an invoice instead of a delivery note
B)the goods are not available
C)the supplier delivers the wrong goods or wrong quantity
D)the purchasing officer orders the wrong goods.

Question 6

With respect to the recording of transactions,which of the following statements is true?

A)Proper recording of transactions is essentially about completeness.
B)Proper recording of transactions is essentially about accuracy.
C)Proper recording of transactions is essentially about storing data in only one place.
D)None of the options are correct.

Question 7

Which of the following is NOT a major aim of a computerised accounting information system?

A)Proper authorisation.
B)Timeliness.
C)Proper recording.
D)User friendly.

Question 8

Segregation of duties is a principle that applies to which sections of an organisation?

A)throughout the organisation including office staff,accountants and IT workers
B)accountants
C)office staff who have to deal with money matters
D)programmers and computer support staff who could interfere with the accounting information system

Question 9

Information processing controls are those that are put in place within the organisation to work towards the _______ of transactions.

A)efficiency,effectiveness,and accuracy
B)timeliness,efficiency,and completeness
C)accuracy,completeness,and authorisation
D)authorisation,processing,accuracy

Question 10

Authorisation in a computerised information system can be established through: (i)user privileges (ii)user access rights (iii)restrictions on what different users are able to do within the system.

A)(i)(iii)
B)(ii)(iii)
C)(i)(ii)
D)(i)(ii)(iii)

Question 11

Which aspect of document collection are pre-numbered documents used to establish?

A)input data is accurate
B)data from source documents is recorded in a timely manner
C)all source documents are accounted for
D)all source documents have been authorised

Question 12

Control of access to the server for the company database is an example of which type of control?

A)input
B)general
C)processing
D)performance

Question 13

A computer virus is found in a file in the computer system.Because a solution for recovering the file is not yet available,the infected file is quarantine by the antivirus software.Quarantining the infected file is an example of:

A)Preventive control
B)Detective control
C)Corrective control
D)None of the options are correct.

Question 14

Checking customer details before finalising a sales order is an example of a ________ control.

A)input
B)general
C)processing
D)performance

Question 15

Internal controls are necessary in all businesses because …

A)business processes do not always go to plan
B)employees are basically corrupt
C)financial statements only contain assertions
D)external auditors insist on them

Question 16

Purchasing goods over the Internet would fit into which of the following categories of processing?

A)Batch
B)online real-time
C)online data collection batched for later processing
D)Shopping basket

Question 17

How does a computer system know that a sales manager has authorised a credit transaction over $1000?

A)The input terminal has bio-security check eg retina scanning.
B)A combination of checks on the size of the credit required and the access rights of the manager when she logged in with her username and password
C)The system must insist on the sales manager entering the transaction
D)The control comes from the work practices outside the computer

Question 18

After identifying risks,management will decide on appropriate policies and procedures to address the risks.These policies and procedures are called:

A)control policies
B)control activities
C)control procedures
D)control processes

Question 19

Checking for accuracy is performed by ____________ checks.

A)edit
B)range
C)reasonableness
D)all of the above

Question 20

Which of the following is an example of a turnaround document?

A)balance sheet
B)sales order
C)remittance advice
D)payslip

Question 21

In terms of disaster recovery,organisations' reaction to the threat of disaster can be:

A)detective or preventive
B)preventive or corrective
C)detective or corrective
D)preventive,detective and corrective.

Question 22

Which control would best help achieve the aim of correct valuation for purchase transactions entered into a system?

A)Range checks - checking the quantity ordered against acceptable ranges.
B)Validity checks - checking the supplier is listed in our supplier master file.
C)Sequence check - ensuring the purchase order number is the next number in the sequence.
D)Authorisation - getting a manager to approve all purchases.

Question 23

A cash disbursement clerk issues a cheque that has been approved by the treasurer.This is an example of:

A)Separating record-keeping from asset custody
B)Separating transaction processing to transaction authorisation
C)Separating asset custody from transaction processing.
D)Separating transaction authorisation from record-keeping.

Question 24

An example of an output control in a payroll system may be that:

A)Only the HR manager can change an employee's rate of pay.
B)Only an employee with a valid employee number and password can request a summary of wages received over the past month.
C)Only the payroll clerk can enter payroll details each month.
D)Only the payroll clerk can process payments made to employees.

Question 25

What should happen if a valid username is supplied but the password is incorrect?

A)the user is allowed to retry
B)the user's account is frozen
C)nothing happens,not even a message to say the login failed
D)security guards appear and interrogate the user

Question 26

Which of the following is an example of poor segregation of duties?

A)Inventory control department is allowed to receive incoming goods.
B)Warehouse personnel are allowed to ship goods to customers.
C)The purchasing department is allowed to generate purchase requisitions.
D)All of the options are correct.

Question 27

The first that financial giant Morgan Stanley knew about the 9/11 bombings were that their business started running from their ________________ several kilometres away from Wall St.

A)cold site
B)hot site
C)off-site backup
D)hosted site

Question 28

Which of the following statements concerning passwords is true?

A)Strong passwords are not required to be changed periodically.
B)As long as a strong password is devised,it can be as the password to multiple accounts of a single user.
C)A good control system should force the users to change their password periodically.
D)For the sake of convenience and efficiency,users should select simple easy to remember passwords.

Question 29

Which of the following is NOT one of the main aims for an organisation in the event of a natural disaster that disrupts business operations?

A)Limit the time the business is out of operation.
B)Minimise the extent of loss to existing business resources.
C)Limit the extended harm done to business partners.
D)Minimise the loss of data and information.

Question 30

A purchase order is entered into a computer purchasing system.The purchase is for $25 000 and has been entered by the purchase clerk.Company policy dictates that purchases over $2000 must be entered by the purchasing manager.This is an example of a breach of controls relating to:

A)Timeliness
B)Input accuracy
C)Input validity
D)Authorisation

Question 31

A "hot site" is:

A)A separate facility located close to the organisation's usual premises but does not contain offices and the necessary equipment.
B)A separate facility located away from the organisation's usual premises but does not contain offices and the necessary equipment.
C)A separate facility located close to the organisation's usual premises and contains offices and the necessary equipment to get the business back up and running in the minimal amount of time after a disaster occurs.
D)A separate facility located away from the organisation's usual premises and contains offices and the necessary equipment to get the business back up and running in the minimal amount of time after a disaster occurs.

Question 32

Which of the following is NOT a form of physical control?

A)Servers are placed in a locked room.
B)A username and a password are needed to log into a computer.
C)Security cameras are put in place.
D)A swipe card system for controlling access to computer labs.

Question 33

Disadvantages of manual controls include all of the following except:

A)Manual controls are prone to human errors.
B)Manual controls are prone to inconsistent application.
C)Manual controls used up too many human resources.
D)Manual controls are easier to avoid and work around.

Question 34

In general,disaster recovery plans include all of the following except:

A)Temporary sites
B)Staffing
C)Employee evacuation procedures
D)Business relationships restoration

Question 35

Which of the following is the strongest password?

A)ah@123re$d
B)Nik890102336757099924PoT
C)A_d33erZb#4G
D)Qwertyuiopasdfghjklzxcvbnm1234567890

Question 36

A reasonableness check that is used when processing fortnightly employee wage payments would best be used to:

A)avoid the entry of false employee names
B)detect any employees who have their payments entered twice
C)detect any potentially incorrect employee numbers
D)detect potentially high values for hours worked

Question 37

Which of the following controls will best help detect inventory input accuracy concerns when entering credit sales into a system?

A)A batch total of the number of sales invoices in the batch.
B)A hash total of the number of inventory items ordered across all invoices.
C)A hash total of customer numbers from all sales invoices.
D)A sequence check on sales invoice numbers.

Question 38

Which of the following would enable an organisation to detect that an unauthorised person has entered a secure area?

A)Swipe card access
B)Physical lock of the door
C)Security camera
D)Biometric access control

Question 39

The pre-numbering of cheques helps to achieve completeness because it:

A)provides control over cheques
B)prevents the issue of false cheques
C)allows us to account for all cheques through a sequence check
D)allows us to ensure all cheque payments are properly authorised

Question 40

Which of the following is an example of good segregation of duties?

A)The sales department is allowed to bill customers.
B)The accounts receivable department is allowed to prepare bills.
C)The warehouse personnel are allowed to maintain the inventory record.
D)None of the options are correct.

Question 41

Why unexpected transactions can contribute the ineffectiveness of an internal control system? How can an organisation minimise the impact brought about by unexpected transactions?

Question 42

Provide at least five examples of processing controls.

Question 43

Advantages of computer-based controls include all of the following except:

A)Consistent application
B)Timely execution
C)Greater degree of difficulty in working around or avoiding the control
D)Handling one-off events

Question 44

CPA Australia identifies five reasons an internal control system does not provide 100 per cent assurance that an organisation's objectives will be achieved.These reasons do NOT include:

A)Judgement error
B)Unexpected transactions
C)Weak internal controls
D)Natural disasters

Question 45

The system documentation tool that is most useful for documenting controls is …

A)process map
B)structured narrative
C)logical data flow diagram
D)system flowchart

Question 46

A company wants all sales orders over $1000 to be authorised by the sales manager.Are the procedures covering this an example of computer or human controls?

A)human
B)computer
C)human followed by computer
D)computer followed by human

Question 47

Briefly describe and compare general controls and application controls.

Question 48

Which of the follow is also considered threats to internal controls?

A)Management incompetence.
B)Employee turnover.
C)Complexity of organisational structure.
D)All of the options are correct.

Question 49

What are the advantages and disadvantages of computer-based controls?

Question 50

Briefly describe and compare preventive control,detective control,and corrective control.

Question 51

Information processing controls are those that are put in place within the organisation to work towards the ____________ of transactions.

A)efficiency,effectiveness,and accuracy
B)timeliness,efficiency,and completeness
C)accuracy,completeness,and authorisation
D)authorisation,processing,accuracy

Question 52

The control matrix does NOT tell us:

A)the control objectives of a control system
B)how control objectives would ideally be attained
C)whether control objectives actually exist within a system
D)the effectiveness of the control objectives

Question 53

What are the advantages and disadvantages of manual controls?

Question 54

Briefly describe and compare input control,processing control,and output control.

Question 55

To minimise the possible negative impact brought about by unexpected transactions,an organisation should:

A)Ask designers of a control system to predict every possible outcome and every future event.
B)Place a strong emphasis on ethical and responsible behaviour.
C)Ask external auditors to audit their internal control system.
D)Refuse carrying out unexpected transactions.

Question 56

Computer-based controls are extremely dependent on: (i)a sound control environment (ii)sound general controls (iii)the COBIT framework

A)(i)(ii)
B)(i)(iii)
C)(ii)(iii)
D)(i)(ii)(iii)

Question 57

Describe the checks that can be performed during data entry.

Question 58

What are the two types of temporary sites? What are the differences between the two?

Question 59

Describe the advantages and disadvantages of batch processing.