Information Systems Control Activities Quiz

22 Questions | Total Attempts: 149

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Midterm Quizzes & Trivia

Don’t let the name information systems control activities quiz fool you to thinking that this quiz is easy or hard, you might just be surprised. If you love things to do with Information Systems, try it out and see for yourself.


Questions and Answers
  • 1. 
    An auditor should obtain sufficient knowledge of an entity's information system relevant to financial reporting to understand the
    • A. 

      Safeguards used to limit access to computer facilties

    • B. 

      Process used to prepare significant accounting estimates

    • C. 

      Procedures used to assure the proper supervision of staff

    • D. 

      Programs and controls intended to address the risks of fraud

  • 2. 
    Control activities constitute one of the five components of internal control. Control activities do not encompass.
    • A. 

      Performance reviews

    • B. 

      Information processing

    • C. 

      Physical controls

    • D. 

      An internal auditing function

  • 3. 
    Transaction authorization within an organization may be either specific or general. An example of specific transaction authorization is the
    • A. 

      Setting of automatic reorder points for material or merchandise

    • B. 

      Approval of a detailed construction budget for a warehouse

    • C. 

      Establishment of requirements to be met in determining a customer’s credit limit

    • D. 

      Establishment of sales prices for products to be sold to any customer

  • 4. 
    Monitoring is an important component of internal control. Which of the following items is not an example of monitoring?
    • A. 

      Management regularly compares divisional performance with budgets for the division

    • B. 

      Data processing management regularly generates exception reports for unusual transactions or volumes of transactions and follows up with investigation as to cause

    • C. 

      Data processing management regularly reconciles batch control for items processed with batch controls for items submitted

    • D. 

      Management has asked internal auditing to perform regular audits of the controls over cash processing

  • 5. 
    The Sarbanes-Oxley Act of 2002 requires management of issuers to do all of the following except
    • A. 

      Establish and document internal control procedures and to include in their annual reports a report on the company's internal control over financial reporting

    • B. 

      Provide a report to include a statement of management's responsibility for and assessment of internal control

    • C. 

      Provide an identification of the framework used to evaluate the effectiveness of internal control

    • D. 

      Provide a statement that the board approves changes in internal control procedures

  • 6. 
    Management's aggressive attitude toward financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when
    • A. 

      The audit committee is active in overseeing the entity's financial reporting policies

    • B. 

      External policies established by parties outside the entity affect its accounting practices

    • C. 

      Management is dominated by one individual who is also a shareholder

    • D. 

      Internal auditors have direct access to the board of directors and entity management

  • 7. 
    Proper segregation of duties reduces the opportunities for persons to be in positions to both
    • A. 

      Journalize entries and prepare financial statements

    • B. 

      Record cash receipts and cash disbursements

    • C. 

      Establish internal control and authorize transactions

    • D. 

      Perpetrate and conceal errors or fraud

  • 8. 
    Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entitiy's internal control?
    • A. 

      Incompatible duties

    • B. 

      Management override

    • C. 

      Mistakes in judgment

    • D. 

      Collusion among employees

  • 9. 
    A reason to establish internal control is to 
    • A. 

      Safeguard the resources of the organization

    • B. 

      Provide reasonable assurance that the objectives of the organization are achieved

    • C. 

      Encourage compliance with organizational objectives

    • D. 

      Ensure the accuracy, reliability, and timeliness of information

  • 10. 
    Control activities include procedures that pertain to physical controls over access to and use of assets and records. A departure from the purpose of such procedures is that
    • A. 

      Access to the safe-deposit box requires two officers

    • B. 

      Only storeroom personnel and line supervisors have access to the raw materials storeroom

    • C. 

      The mail clerk compiles a list of the checks received in the incoming mail

    • D. 

      Only salespersons and sales supervisors use sales department vehicles

  • 11. 
    Who is ultimately responsible for the implementation of cost-effective controls in an automated system?
    • A. 

      The director of internal auditing

    • B. 

      Operating management

    • C. 

      The computer processing audit manager

    • D. 

      The control group in the computer processing department

  • 12. 
    A proper segregation of duties requires
    • A. 

      That an individual authorizing a transaction records it

    • B. 

      That an individual authorizing a transaction maintain custody of the asset that resulted from the transaction

    • C. 

      That an individual maintaining custody of an asset be entitled to access the accounting records for the asset

    • D. 

      That an individual recording a transaction not compare the accounting record of the asset with the asset itself

  • 13. 
    In gaining an understanding of internal control, the auditor may trace several transactions through the control process, including how the transactions interface with any service organizations whose services are part of the information system. The primary purpose of this task is to
    • A. 

      Replace substantive tests

    • B. 

      Determine whether the controls have been implemented

    • C. 

      Determine the effectiveness of the control procedures

    • D. 

      Detect fraud

  • 14. 
    Audit evidence concerning segregation of duties ordinarily is best obtained by
    • A. 

      Performing tests of transactions that corroborate management’s financial statement assertions

    • B. 

      Observing the employees as they apply specific controls

    • C. 

      Obtaining a flowchart of activities performed by available personnel

    • D. 

      Developing audit objectives that reduce control risk

  • 15. 
    Management activites can be classified in three levels: strategic planning, management control, and operational control. Information requirements vary with the level of management activity. Which of the following best describes the information requirements for strategic planning?
    • A. 

      Frequent use, external, aggregate information

    • B. 

      Future-oriented, outdated, detailed information

    • C. 

      Highly current, accurate, largely internal information

    • D. 

      Wide scope, aggregate, future-oriented information

  • 16. 
    If internal control is properly designed, the same employee may be permitted to 
    • A. 

      Receive and deposit checks and also approve write-offs of customer accounts

    • B. 

      Approve vouchers for payment and also sign checks

    • C. 

      Reconcile the bank statements and also receive and deposit cash

    • D. 

      Sign checks and also cancel supporting documents

  • 17. 
    Which of the following risks are greater in computerized systems than in manual systems? I               Erroneous data conversion II             Erroneous source document preparation III            Repetition of erros IV            Concentration of data
    • A. 

      I and II

    • B. 

      II and III

    • C. 

      I, III, and IV

    • D. 

      I, II, III, and IV

  • 18. 
    The most common computer-related problem confronting organizations is
    • A. 

      Hardware malfunction

    • B. 

      Input errors and omissions

    • C. 

      Disruption to computer processing caused by natural disasters

    • D. 

      Fraud

  • 19. 
    Which of the following statements most likely represents a disadvantage for an entity that keeps data files on a server rather than on a manual system?
    • A. 

      Attention is focused on the accuracy of the programming process rather than errors in individual transactions

    • B. 

      It is usually easier for unauthorized personas to access and alter the files

    • C. 

      Random error associated with processing similar transactions in different ways is usually greater

    • D. 

      It is usually more difficult to compare recorded accountability with the physical count of assets

  • 20. 
    Regardless of the nature of the client’s information processing system, the auditor must consider internal control. In a computer environment, the auditor must at a minimum, have
    • A. 

      A basic familiarity with the computer’s operating systems

    • B. 

      A sufficient understanding of the entire computer system

    • C. 

      An expertise in computer systems analysis

    • D. 

      A background in programming procedures

  • 21. 
    Which one of the following statements about an accounting information system (AIS) is false?
    • A. 

      An AIS supports day-to-day operations by collecting and sorting data about an organization’s transactions

    • B. 

      The information produced by an AIS is made available to all levels of management for use in planning and controlling and organization’s activates

    • C. 

      An AIS is best suited to solve problems where there is great uncertainty and ill-defined reporting requirements

    • D. 

      An AIS is often referred to as a transaction processing system

  • 22. 
    The two broad groupings of information systems control activities are general controls and application controls. General controls include controls
    • A. 

      Designed to assure that only authorized users receive output from processing

    • B. 

      For developing, modifying and maintaining computer programs

    • C. 

      Relating to the correction and resubmission of faulty data

    • D. 

      Designed to ensure that all data submitted for processing have been properly authorized