The Ultimate Auditing Knowledge Quiz!

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The Ultimate Auditing Knowledge Quiz! - Quiz

One of the ways in which a business can keep track of its books of account is carrying out an audit and finding out if they reflect an accurate and fair view of the financial position. This is an ultimate auditing knowledge quiz below designed to see how well you understand the topic.


Questions and Answers
  • 1. 

    Which answer is not a approach to internal control evaluation.

    • A.

      Evaluates weaknesses

    • B.

      Modify files to improve system

    • C.

      Know what control procedures have been implemented

    • D.

      Find the threats

    Correct Answer
    B. Modify files to improve system
    Explanation
    The answer "Modify files to improve system" is not an approach to internal control evaluation because it refers to making changes to the system files rather than assessing or evaluating the existing control procedures. Internal control evaluation involves assessing weaknesses, understanding implemented control procedures, and identifying threats to the system. Modifying files to improve the system is a corrective action that may be taken after the evaluation process.

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  • 2. 

    The __________ Audit Approach provides a logical framework for carrying out a audit.

    Correct Answer
    Risk-Based
    Explanation
    The Risk-Based Audit Approach provides a logical framework for carrying out an audit by focusing on identifying and assessing risks that could impact the organization's objectives. This approach involves understanding the organization's risk profile, determining the areas of highest risk, and allocating audit resources accordingly. By prioritizing high-risk areas, the audit can provide assurance on the effectiveness of controls and the management of risks that are most critical to the organization's success. This approach ensures that the audit is targeted and efficient, providing valuable insights to stakeholders.

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  • 3. 

    Which of these are types of risk when conducting an Audit?

    • A.

      Confirmation

    • B.

      Inherent

    • C.

      Control

    • D.

      Detection

    • E.

      Vouching

    Correct Answer(s)
    B. Inherent
    C. Control
    D. Detection
    Explanation
    Confirmation, Vouching

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  • 4. 

    Which of these is part of the process of conducting an audit?

    • A.

      Evaluating evidence

    • B.

      Conducting training

    • C.

      Planning

    • D.

      Communicating results

    • E.

      Collecting evidence

    Correct Answer(s)
    A. Evaluating evidence
    C. Planning
    D. Communicating results
    E. Collecting evidence
    Explanation
    The process of conducting an audit involves several steps. Evaluating evidence is an essential part of the audit process as it involves examining and assessing the supporting documentation and information to determine its accuracy and reliability. Planning is another crucial step as it involves outlining the objectives, scope, and approach of the audit. Communicating results is necessary to convey the findings and recommendations to the relevant stakeholders. Lastly, collecting evidence is a fundamental step as it involves gathering the necessary information and documentation to support the audit findings.

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  • 5. 

    Which of the following is a characteristic of auditing?

    • A.

      Auditing is a systematic, step-by-step process

    • B.

      Auditing involves the collection and review of evidence

    • C.

      Auditing involves the use of established criteria to evaluate the evidence

    • D.

      All of the above are characteristics of auditing

    Correct Answer
    D. All of the above are characteristics of auditing
    Explanation
    Auditing is a systematic, step-by-step process that involves the collection and review of evidence. This evidence is evaluated using established criteria. Therefore, all of the given statements are characteristics of auditing.

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  • 6. 

    Which of the following is not a reason an internal auditor should participate in internal control reviews during the design of a new system?

    • A.

      It is more economical to design controls during the design stage than to do so later.

    • B.

      It eliminates the need for testing control during regular audits

    • C.

      It minimizes the need for expensive post system implementation modification

    • D.

      It permits the design of audit trail while they are economical

    Correct Answer
    B. It eliminates the need for testing control during regular audits
    Explanation
    Participating in internal control reviews during the design of a new system does not eliminate the need for testing control during regular audits. Internal control reviews during the design stage help to ensure that effective controls are built into the system from the beginning, which can minimize the need for costly modifications after implementation. It also allows for the design of an audit trail while it is still economical. However, regular audits are still necessary to test the effectiveness of the controls in place and identify any potential weaknesses or areas for improvement.

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  • 7. 

    Which type of audit involves a review of general and application controls, with a focus on determining if there is compliance with policies and adequate safe-gaurding assets.

    • A.

      Information systems audit

    • B.

      Financial audit

    • C.

      Operational audit

    • D.

      Compliance audit

    Correct Answer
    A. Information systems audit
    Explanation
    An information systems audit involves reviewing both general and application controls to ensure compliance with policies and adequate safeguarding of assets. This type of audit specifically focuses on evaluating the effectiveness and efficiency of an organization's information systems, including the security and integrity of data, the reliability of information processing, and the overall control environment. It aims to identify any weaknesses or vulnerabilities in the systems and make recommendations for improvement to ensure the confidentiality, availability, and integrity of information.

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  • 8. 

    What risk is best defined as the risk that auditors and their audit procedures will not detect a material error or misstatement?

    • A.

      Control Risk

    • B.

      Inherent Risk

    • C.

      Detection Risk

    • D.

      Material Risk

    Correct Answer
    C. Detection Risk
    Explanation
    Detection risk is best defined as the risk that auditors and their audit procedures will not detect a material error or misstatement. This risk arises from the possibility that the audit procedures performed by the auditors may fail to identify significant errors or misstatements in the financial statements. It is an important concept in auditing as it directly affects the reliability and accuracy of the audit process. By understanding and assessing detection risk, auditors can design appropriate procedures to mitigate this risk and enhance the overall effectiveness of the audit.

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  • 9. 

    What risk is best defined as the susceptibility to material risk in the absences of controls?

    • A.

      Back up Risk

    • B.

      Control Risk

    • C.

      Inherent Risk

    • D.

      Detection Risk

    Correct Answer
    C. Inherent Risk
    Explanation
    Inherent Risk is the best definition for the given question. Inherent Risk refers to the level of risk that exists in an organization's operations or activities without considering the effectiveness of controls. It represents the susceptibility to material risk in the absence of controls. In other words, it is the risk that remains even if all control measures are in place. By understanding and assessing inherent risk, organizations can determine the potential impact of risks on their objectives and develop appropriate control measures to mitigate them.

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  • 10. 

    What risk is best defined as the risk that a material misstatement will get through the internal control structure and into the financial statements?

    • A.

      Control Risk

    • B.

      Detection Risk

    • C.

      Financial Risk

    • D.

      Inherent Risk

    Correct Answer
    A. Control Risk
    Explanation
    Control risk is the risk that a material misstatement will not be prevented or detected by the internal control structure of an organization and will therefore make its way into the financial statements. It is the risk that the internal controls in place are not effective in ensuring the accuracy and reliability of the financial statements.

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  • 11. 

    A audit that is concerned with the economical and efficient use of resources and the accomplishment of established goals objectives. 

    • A.

      Information systems Audit

    • B.

      Financial Audit

    • C.

      IIA Audit

    • D.

      Operational Audit

    Correct Answer
    D. Operational Audit
    Explanation
    Operational Audit is the correct answer because it focuses on evaluating the efficiency and effectiveness of an organization's operations, including the use of resources and the achievement of goals and objectives. It assesses whether processes and procedures are being followed correctly and identifies areas for improvement to enhance overall performance. This type of audit is particularly concerned with identifying potential risks and ensuring that controls are in place to mitigate them.

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  • 12. 

    An audit that reviews the controls of an AIS to asses its compliance with internal control policies and procedures and its effectiveness in safeguarding assets is a:

    • A.

      Operational audit

    • B.

      Finance audit

    • C.

      Compliance audit

    • D.

      Information systems audit

    Correct Answer
    D. Information systems audit
    Explanation
    An audit that reviews the controls of an AIS (Accounting Information System) to assess its compliance with internal control policies and procedures and its effectiveness in safeguarding assets is an information systems audit. This type of audit specifically focuses on evaluating the security, reliability, and integrity of the information systems and technology infrastructure in place within an organization. It ensures that the AIS is operating effectively and in accordance with established controls, policies, and regulations.

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  • 13. 

    A audit the examines the reliability and integrity of accounting records and correlates with the first of the five scope standards is a:

    • A.

      Financial audit

    • B.

      Compliance audit

    • C.

      Information system audit

    • D.

      Operations audit

    Correct Answer
    A. Financial audit
    Explanation
    A financial audit is an examination of the reliability and integrity of accounting records. It focuses on assessing the accuracy and completeness of financial statements, ensuring compliance with applicable laws and regulations, and detecting any potential fraud or misrepresentation. This aligns with the first scope standard of auditing, which is to evaluate the financial information and internal controls of an organization. Therefore, a financial audit is the correct answer in this case.

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  • 14. 

    According to the Institute of Internal Auditors (IIA), the purpose of an internal audit is to evaluate the adequacy and effectiveness of a company's internal control system. Which of these is part of an auditors responsibilities?

    • A.

      Review the reliability and integrity of operation and financial information and how it is identified, measured, classified, and reported

    • B.

      Determine if the systems designed to comply with operating and reporting policies, plans, procedures, laws and regulations are actually being followed

    • C.

      Review how assets are safegaurded, and verify the existence of assets as appropriate.

    • D.

      Examine company resources to determine how effectively land efficiently they are used

    • E.

      Review company operations and programs to determine if they are being carried out as planned and if they are meeting their objectives

    • F.

      All of the above

    Correct Answer
    F. All of the above
    Explanation
    The responsibilities of an auditor include reviewing the reliability and integrity of operation and financial information, determining if systems designed to comply with policies and regulations are being followed, reviewing how assets are safeguarded and verifying their existence, examining company resources for efficiency, and reviewing company operations and programs to ensure they are meeting objectives. Therefore, the correct answer is "all of the above."

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  • 15. 

    Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic action and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The given statement is true. Auditing is indeed a systematic process that involves obtaining and evaluating evidence to determine the accuracy and reliability of assertions made about economic actions and events. The purpose of auditing is to assess the degree of correspondence between these assertions and established criteria. The results of the audit are then communicated to interested users, such as stakeholders and management, to provide them with an objective evaluation of the financial statements and other relevant information.

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  • 16. 

    At what step in the audit process do the concepts of reasonable assurance and materiality enter into the auditors decision process?

    • A.

      Planning

    • B.

      Evidence collection

    • C.

      Evidence evaluation

    • D.

      They are important in all three steps

    Correct Answer
    D. They are important in all three steps
    Explanation
    The concepts of reasonable assurance and materiality enter into the auditors decision process at all three steps of the audit process: planning, evidence collection, and evidence evaluation. Reasonable assurance is the level of confidence that the auditor can obtain that the financial statements are free from material misstatement, while materiality refers to the significance of an item or an error in the financial statements. These concepts guide the auditor in determining the appropriate audit procedures to be performed, the extent of evidence to be collected, and the evaluation of the evidence obtained.

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  • 17. 

    What is the four step approach to internal control evalutaion that provides a logical framework for carrying out an audit called?

    • A.

      Inherent risk analysis

    • B.

      Systems review

    • C.

      Tests of controls

    • D.

      Risk based approach to auditing

    Correct Answer
    D. Risk based approach to auditing
    Explanation
    The four-step approach to internal control evaluation that provides a logical framework for carrying out an audit is called the risk-based approach to auditing. This approach involves identifying and assessing risks, designing and implementing controls to mitigate those risks, testing the effectiveness of those controls, and finally, reporting the findings and recommendations to management. It focuses on identifying and prioritizing the areas of highest risk in order to allocate audit resources effectively and efficiently.

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  • 18. 

    Which of the following procedures is not used to detect unauthorized program changes?

    • A.

      Source code comparison

    • B.

      Parallel simulation

    • C.

      Reprocessing

    • D.

      Reprogramming code

    Correct Answer
    D. Reprogramming code
    Explanation
    Reprogramming code is not used to detect unauthorized program changes. Reprogramming code refers to making changes or modifications to the existing code, which can be done intentionally or unintentionally. However, it is not a procedure specifically used for detecting unauthorized program changes. Other options such as source code comparison, parallel simulation, and reprocessing are commonly used methods to identify unauthorized program changes.

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  • 19. 

    Which of the following procedures is used when testing a newly developed program and keeping a copy of its source code?

    • A.

      Reprogramming code

    • B.

      Parallel simulation

    • C.

      Reprocessing

    • D.

      Source code comparison

    Correct Answer
    D. Source code comparison
    Explanation
    Source code comparison is the procedure used when testing a newly developed program and keeping a copy of its source code. This involves comparing the new version of the source code with the previous version to identify any differences or discrepancies. By performing this comparison, developers can ensure that the changes made to the code during the development process have not introduced any errors or bugs. This process helps in maintaining the integrity and quality of the program.

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  • 20. 

    Which of the following is a concurrent audit technique that monitors all transactions and collects data on those that meet certain characteristics affecting real data?

    • A.

      Integrated test facility

    • B.

      Snapshot

    • C.

      Scarf

    • D.

      Audit hooks

    Correct Answer
    C. Scarf
    Explanation
    Scarf is a concurrent audit technique that monitors all transactions and collects data on those that meet certain characteristics affecting real data. This technique allows auditors to identify and analyze specific transactions that may be of interest or concern. It helps in detecting any anomalies or irregularities in the data and ensures the accuracy and integrity of the information being audited.

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  • 21. 

    Which of the following is a technique that records the content of both a transaction record and a related master file record before each processing step?

    • A.

      SCARF

    • B.

      Audit hook

    • C.

      Snapshot

    • D.

      Integrated test facility

    Correct Answer
    C. Snapshot
    Explanation
    Snapshot is a technique that records the content of both a transaction record and a related master file record before each processing step. This allows for a comparison of the records before and after the processing step to identify any discrepancies or errors. This technique is commonly used in data processing to ensure the accuracy and integrity of the data.

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  • 22. 

    Which of the following is a concurrent audit technique that embeds audit routines into application software to flag certain kinds of transactions that might be indicative of fraud?

    • A.

      SCARF

    • B.

      Snapshots

    • C.

      Integrated test facility

    • D.

      Audit hooks

    Correct Answer
    D. Audit hooks
    Explanation
    Audit hooks is a concurrent audit technique that embeds audit routines into application software to flag certain kinds of transactions that might be indicative of fraud. This technique allows auditors to monitor transactions in real-time and identify any suspicious activities or irregularities. By embedding these audit routines into the software, the system can automatically detect and flag potential fraud, enhancing the effectiveness and efficiency of the audit process.

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  • 23. 

    Which of these  inserts a dummy company or division into a computer system to test transaction data without affect real data?

    • A.

      Snapshot

    • B.

      Scarf

    • C.

      Integrated test facility

    • D.

      Audit hooks

    Correct Answer
    C. Integrated test facility
    Explanation
    The correct answer is integrated test facility. An integrated test facility is a feature in a computer system that allows for the insertion of dummy company or division data. This feature is used to test transaction data without impacting real data. It provides a safe environment for testing and ensures that any errors or issues can be identified and resolved before implementing changes to the actual system.

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  • 24. 

    Which of the following is a computer technique that assists an auditor in understanding program logic by identifying all occurrences of specific variables?

    • A.

      Mapping program

    • B.

      Program tracing

    • C.

      Automated flowcharting

    • D.

      Scanning routine

    Correct Answer
    D. Scanning routine
    Explanation
    A scanning routine is a computer technique that helps an auditor understand program logic by identifying all occurrences of specific variables. It involves analyzing the code to locate and track the usage of particular variables throughout the program. This technique allows auditors to gain a comprehensive understanding of how variables are used, which can be helpful in identifying errors or potential issues within the program.

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  • 25. 

    Which of the following is a computer program written especially for audit use?

    • A.

      GAS

    • B.

      CAAT

    • C.

      ITF

    • D.

      CIS

    Correct Answer
    A. GAS
    Explanation
    GAS stands for Generalized Audit Software, which is a computer program specifically designed for audit purposes. It helps auditors in performing various tasks such as data analysis, testing controls, and identifying anomalies or errors in financial data. GAS allows auditors to automate repetitive tasks, analyze large volumes of data efficiently, and provide accurate and reliable audit evidence. It is widely used in the auditing profession to enhance productivity, effectiveness, and accuracy in the audit process.

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  • 26. 

    The focus of an operational audit is on which of the following?

    • A.

      Reliability and integrity of financial information

    • B.

      All aspects of information systems management

    • C.

      Internal controls

    • D.

      Safeguarding assets

    Correct Answer
    B. All aspects of information systems management
    Explanation
    An operational audit focuses on evaluating and improving the effectiveness and efficiency of an organization's operations. This includes examining all aspects of information systems management, such as the design, implementation, and maintenance of systems, as well as the controls and safeguards in place to protect the organization's assets. By assessing the reliability and integrity of financial information, internal controls, and safeguarding assets, an operational audit ensures that the organization's information systems are functioning properly and meeting the organization's objectives.

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