To
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Auditing and Assurance Services, 14e (Arens)
Chapter 12 The Impact of Information Technology on the Audit
Process
Learning Objective 12-1
1)IT has several significant effects on an organization. Which of the following would not
be important from an auditing perspective?
A) organizational changes
B) the visibility of information
C) the potential for material misstatement
D) None of the above; i.e., they are all
important. Answer: D
Terms: IT effects on organization
Diff: Easy
Objective: LO 12-1
AACSB: Reflective thinking skills
2)Which of the following is not a benefit of using IT-based controls?
A) ability to process large volumes of transactions
B)ability to replace manual controls with computer-based controls
C) reduction in misstatements due to consistent processing of transactions
D) reduction in internal control evaluation in setting control risk
Answer: D
Terms: Not a benefit of using IT-based controls
Diff: Easy
Objective: LO 12-1
AACSB: Reflective thinking skills
3) Discuss how the integration of IT into accounting systems enhances internal control.
Answer: Enhancements to internal control resulting from the integration of IT into
accounting systems include:
• Computer controls replace manual controls. Replacing manual procedures with
programmed controls that apply checks and balances to each processed transaction and
that process information consistently can reduce human error that is likely to occur in
traditional manual environments.
• Higher quality information is available. IT systems typically provide management with
more and higher quality information faster than most manual systems.
Terms: Integration of IT into accounting systems enhances internal control
Diff: Moderate
Objective: LO 12-1
AACSB: Reflective thinking skills
, To
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4)Control risk may be reduced for a company with a complex IT system when compared
to a company that relies primarily on manual controls.
A) True
B) False
Answer:
A
Terms: Control risk reduced for company with complex IT system
Diff: Easy
Objective: LO 12-1
AACSB: Reflective thinking skills
Learning Objective 12-2
1)Which of the following is a significant risk to the auditor regarding an audit in a
highly automated information environment?
A) does not place enough reliance on the processed
information B) places too much reliance on the
processed information
C) processed information may not reveal the sources of the information
D) does not understand the processed information produced by the automated
environment Answer: B
Terms: Risk to auditor regarding audit in highly automated information environment
Diff: Easy
Objective: LO 12-2
AACSB: Reflective thinking skills
2)Which of the following is not a risk specific to IT environments?
A) reliance on the functioning capabilities of hardware and software
B)increased human involvement
C) loss of data due to insufficient backup
D) unauthorized access
Answer: B
Terms: Risks specific to IT environment
Diff: Easy
Objective: LO 12-2
AACSB: Reflective thinking skills
3)Which of the following is not an enhancement to internal control that will occur as a
consequence of increased reliance on IT?
A) computer controls replace manual controls
B) higher quality information is available
C) computer-based controls provide opportunities to improve
separation of duties D) manual controls replace automated controls
Answer: D
Terms: Enhancements to internal control which occur as consequence of increased reliance on IT
Diff: Easy
Objective: LO 12-2
AACSB: Reflective thinking skills
, To
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4)Which of the following is not a risk in an IT
system? A) need for IT experienced staff
B) separation of IT duties from accounting
functions C) improved audit trail
D) hardware and data
vulnerability Answer: C
Terms: Risks in an IT system
Diff: Easy
Objective: LO 12-2
AACSB: Reflective thinking skills
5)Which of the following may present itself as the biggest risk to centralizing information
responsibilities that were traditionally separate?
A) IT personnel with access to software and master files may misappropriate assets
B) IT personnel with access to software and master files may lack the accounting
skills necessary to provide useful information to management
C) IT personnel with access to software and master files may not understand the
linkages between general and application controls
D) IT personnel with access to software and master files may not be able to convert
the company's operational policies to an IT environment
Answer: A
Terms: Biggest risk to centralizing information responsibilities
Diff: Easy
Objective: LO 12-2
AACSB: Reflective thinking skills
6)An important characteristic of IT is uniformity of processing. Therefore, a risk exists that:
A) auditors will not be able to access data quickly.
B)auditors will not be able to determine if data is processed consistently.
C) erroneous processing can result in the accumulation of a great number of
misstatements in a short period of time.
D) all of the above.
Answer: C
Terms: Characteristics of IT and risk
Diff: Moderate
Objective: LO 12-2
AACSB: Reflective thinking skills
7) What are three specific risks to IT systems?
Answer: Three specific risks to IT systems include risks to hardware and data, a reduced
audit trail, and the need for IT experience and separation of IT duties.
Terms: Risks in an IT system
Diff: Easy
Objective: LO 12-2
AACSB: Reflective thinking skills
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