Mary the Queen College (Pampanga), Inc.

Quiz 2
Auditing in a Computerized Environment
2nd Semester, A.Y. 2023-2024

Name: ___________________________________ Date: ______________________________

Year, Section and Class Time: _______________ Name of Teacher: ___________________________
Instruction: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. STRICTLY NO ERASURES ALLOWED.

PLEASE USE THE ANSWER SHEET PROVIDED AT THE LAST PAGE OF THIS EXAM
1. A type of computer system whereby individual transactions are entered online and are added to a transaction file that contains other
transactions entered during the period. Later, this transaction file, on a periodic basis updates the master file.
a. Online, batch system.
b. Online, memo update system
c. Online, real time system.
d. Online, shadow update system

2. Which of the following methods of testing application controls utilizes a generalized audit software package prepared by the
auditors?
a. Parallel test data
b. Parallel simulation
c. Integrated testing facility approach
d. Controlled reprocessing

3. It is a type of system characterized by data that are assembled from more than one location and records that are updated
immediately?
a. Microcomputer system
b. Batch processing system
c. Minicomputer system
d. On-line, real-time system

4. Errors in data entry/input in a batch computer system caused by incorrect programs or data may not
be detected instantly because.
a. Errors in some transactions may cause rejection of other transactions in the batch.
b. The error identification in input data typically is not a part of the program.
c. The processing of transactions in a batch system is inconsistent.
d. There are time delays in processing transactions in a batch system.

5. End-user computing is most likely to occur on which of the following types of computers?
a. Mainframe
b. Personal computers
c. Minicomputers
d. Personal reference assistants

6. During the test of control phase. The auditor wants to gain a thorough understanding of the client’s program which was created by
the in-house programmer, which of the following CAAT is the best for this scenario:
a. Test Data
b. Audit Modules
c. Operating Systems Logs
d. Comparison Programs

7. At the beginning of the audit year, the auditor was tasked to audit the inventory of a client. Given this case, what would be the best
CAAT during the test of control phase.
a. Parallel Simulation
b. Audit Hooks
c. Library Management Software
d. Code review

8. Aside from considering the client’s program in processing transactions, it is also of equal importance to consider those systems from
other user departments, an example of this system is
a. Transaction tagging
b. Controlled Reprocessing
c. Security Software
d. Snapshots

9. The auditor wants to determine the number of occurrences where the input controls were lifted to process isolated valid transactions.
What audit module he would use in this scenario.
a. Access control and security software
b. Transaction Tagging
c. SCARF
d. Snapshot

10. The auditor tests client’s software by processing auditor-prepared test data that includes both valid and invalid conditions.
a. Integrated test facility
b. Test Data
c. Controlled Reprocessing
d. Parallel simulation

11. The auditor would want to assess the internal control of a client by processing the client’s data using a copy of the computer
software. In this case, the auditor used which of the following.
a. Program testing
b. Program analysis
c. Review of operating system and other system’s software
d. Testing of operating system and other software

12. Which of the following is a type of special terminal

a. Personal computer
b. Smartphones
c. MacBook Pro
d. POS devices

13. Out of the different CAAT under the program analysis category, which of the following is the best tool for multimillion companies
under the banking industry.
a. Blackbox approach
b. Controlled reprocessing
c. Operating systems logs
d. Code Review

14.A type of CAAT that provides assurance that the software tested is used to prepare financial reports.
a. Integrated test facility
b. Test data
c. Parallel Simulation
d. Integrated Simulation

15. A personal computer can be used in various configurations, including

a. A stand-alone workstation operated by a single user or several users at different times.
b. A workstation which is part of a local area network of personal computers.
c. A workstation connected to a server.
d. All the above.
A personal computer can be used in various configurations, including.
a. A stand-alone workstation operated by a single user or several users at different times.
b. A workstation which is part of a local area network of personal computers.
c. A workstation connected to a server.
d. All the above.
15. Which statement is correct regarding personal computer systems?
a. Personal computers or PCs are economical yet powerful self-contained general-purpose computers consisting typically of a central
processing unit (CPU), memory, monitor, disk drives, printer cables and modems.
b. Programs and data are stored only on non-removable storage media.
c. Personal computers cannot be used to process accounting transactions and produce reports that are essential to the preparation of
financial statements.
d. Generally, CIS environments in which personal computers are used are the same as other CIS environments.

16. A personal computer can be used in various configurations, including

a. A stand-alone workstation operated by a single user or several users at different times.
b. A workstation which is part of a local area network of personal computers.
c. A workstation connected to a server.
d. All the above.

17. Which statement is incorrect regarding personal computer configurations?

a. The stand-alone workstation can be operated by a single user or several users at different times accessing the same or different
programs.
b. A stand-alone workstation may be referred to as a distributed system.
c. A local area network is an arrangement where two or more personal computers are linked together using special software and
communication lines.
d. Personal computers can be linked to servers and used as part of such systems, for example, as an intelligent on-line workstation or
as part of a distributed accounting system.

18. Which of the following is an inherent characteristic of software package?

a. They are typically used without modifications of the programs.
b. The programs are tailored-made according to the specific needs of the user.
c. They are developed by the software manufacturer according to a particular user's specifications.
d. It takes a longer time of implementation.

19. Personal computers are susceptible to theft, physical damage, unauthorized access, or misuse of equipment. Which of the following
is least likely a physical security to restrict access to personal computers when not in use?
a. Using door locks or other security protection during non-business hours.
b. Fastening the personal computer to a table using security cables.
c. Locking the personal computer in a protective cabinet or shell.
d. Using anti-virus software programs.

20. It refers to plans made by the entity to obtain access to comparable hardware, software, and data in the event of their failure, loss,
or destruction.
a. Back-up
b. Encryption
c. Anti-virus
d. Wide Area Network (WAN)

21. Computer systems that enable users to access data and programs directly through workstations are referred to as
a. On-line computer systems
b. Database management systems (DBMS)
c. Personal computer systems
d. Database systems

22. It refers to plans made by the entity to obtain access to comparable hardware, software, and data in the event of their failure, loss,
or destruction.
a. Back-up or data recovery control
b. Encryption
c. Anti-virus
d. Wide Area Network (WAN)

23. Online systems allow users to initiate various functions directly. Such functions include:
I. Entering transactions.
II. Making inquiries.
III. Requesting reports.
IV. Updating master logs.
a. I, II, III and IV
b. I, II and III
c. I and II
d. I and IV

24. Types of workstations include General Purpose Terminals and Special Purpose Terminals. Special Purpose Terminals included.
a. Basic keyboard and monitor
b. Intelligent terminal
c. Point of sale devices
d. Personal computers

25. Which statement is incorrect regarding workstations?

a. Workstations may be located either locally or at remote sites.
b. Local workstations are connected directly to the computer through cables.
c. Remote workstations require the use of telecommunications to link them to the computer.
d. Workstations cannot be used by many users, for different purposes, in different locations, all at the same time.

26.A terminal used to initiate, validate, record, transmit and complete various banking transactions.
a. Automated teller machines
b. Point of sale devices
c. Intelligent terminal
d. Personal computers

27. In an on-line/real time processing system

a. Individual transactions are entered at workstations, validated, and used to update related computer files immediately.
b. Individual transactions are entered at a workstation, subjected to certain validation checks, and added to a transaction file that
contains other transactions entered during the period.
c. Individual transactions immediately update a memo file containing information which has been extracted from the most recent version
of the master file.
d. The master files are updated by other systems.

28. It combines on-line/real time processing and on-line/batch processing.

a. On-Line/Memo Update (and Subsequent Processing)
b. On-Line Downloading/Uploading Processing
c. On-Line/Inquiry
d. On-Line/Combined Processing

29. It is a communication system that enables computer users to share computer equipment, application software, data and voice and
video transmissions.
a. Network
b. File server
c. Host
d. Client

30. A type of network used by companies’ network that interconnects users with computer resources in a geographic area or region
larger than that covered by even a large local area network (LAN)
a. Local Area Network (LAN)
b. Wide Area Network (WAN)
c. Metropolitan Area Network (MAN)
d. World Wide Web (WWW)

31. A collection of data that is shared and used by several different users for different purposes.
a. Database
b. Information file
c. Master file
d. Transaction file

32. System characteristics that may result from the nature of CIS processing include, except
a. Absence of input documents.
b. Lack of visible transaction trail.
c. Lack of visible output.
d. Difficulty of access to data and computer programs.

33. The applications of auditing procedures using the computer as an audit tool refer to
a. Integrated test facility
b. Data-based management system
c. Auditing through the computer
d. Computer assisted audit techniques.

34. Which statement is incorrect regarding CAATs?

a. CAATs are often an efficient means of testing many transactions or controls over large populations.
b. To ensure appropriate control procedures, the presence of the auditor is not necessarily required at the computer facility during the
running of a CAAT.
c. The general principles outlined in PAPS 1009 apply in small entity IT environments.
d. Where smaller volumes of data are processed, the use of CAATs is more cost effective.

35. The use of generalized audit software package

a. Relieves an auditor of the typical tasks of investigating exceptions, verifying sources of information, and evaluating reports.
b. Is a major aid in retrieving information from computerized files.
c. Overcomes the need for an auditor to learn much about computers.
d. Is a form of auditing around the computer.

36. Which of the following statements is not true to the test data approach when testing a computerized accounting system?
a. The test needs consist of only those valid and invalid conditions which interest the auditor.
b. Only one transaction of each type of need be tested.
c. The test data must consist of all possible valid and invalid conditions.
d. Test data are processed by the client's computer programs under the auditor's control.

37. An auditor would most likely be concerned with which of the following controls in a distributed data processing system?
a. Hardware controls
b. Systems documentation controls
c. Access controls
d. Disaster recovery controls

38. This is a network that exists over a large-scale geographical area. This ensures that computers and users in one location can
communicate with computers and users in other locations.
a. Local Area Network (LAN)
b. Wide Area Network (WAN)
c. Metropolitan Area Network (MAN)
d. World Wide Web (WWW)

39. This is a dedicated computer containing all the infrastructure, technology, and program access needed to provide centralized
management.
a. Network
b. File server
c. Host
d. Client

40. GAS or Generalized audit software packages do all the tasks below except
a. precomputations data fields
b. compares files and identify differences.
c. stratifies statistical samples.
d. analyzes results and form opinions.

41. A type of embedded audit software where its data are being audited on a real time basis or as it is being processed in the system by
doing recalculation
a. Audit Module
b. Audit Hooks
c. Test Data
d. Transaction tagging

42. A continuous audit technique where a transaction record is "tagged" and then traced through critical points in the information
system.
a. Audit Modules
b. Systems control audit review files (SCARFs)
c. Audit Hooks
d. Transaction tagging

43. It is a special file or folder created by embedded audit software. This is where all application system errors, and system exceptions
are written or collected.
a. Audit Module
b. Scarf master file
c. Verification check master file
d. Tagged transactions folder.

44. A auditor wants to collect data all sales invoices above P50,000 for his immediate review. This technique is called.
a. Snapshot
b. SCARF
c. Audit Hooks
d. Audit Modules

45. A CAAT technique inserted in the systems and to produce a flowchart based on the logic of the program and is compared to the
flow chart of the CIS department.
a. Code Review
b. Program Tracing and Mapping
c. Flowcharting software
d. Snapshot

46. Consider this scenario: An auditor has an investment in a mutual fund that has an investment in an audit client. Which of the
following is/are true?
Statement I: The auditor has a direct financial interest in the audit client.
Statement II: The auditor has an indirect financial interest in the mutual fund.
a. Only Statement I is correct.
b. Only Statement II is correct.
c. Both Statements I and II are correct.
d. Both Statements I and II are incorrect.
47. Consider this scenario: An auditor has an investment in a mutual fund that has an investment in an audit client. Which of the
following statements is/are false?
Statement I: The auditor can have an immaterial indirect financial interest in the audit client.
Statement II: The auditor cannot have a material direct financial interest in the mutual fund. Nevertheless, the auditor can have an
immaterial direct financial interest in the mutual fund.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

48. Which of the following is needed during the performance of assurance engagements?
Statement I: Independence in fact
Statement II: Independence in appearance
a. I only
b. II only
c. Both I and II
d. Neither I nor II

49. Which of the following circumstances may disclosure of confidential information is allowed?
Circumstance I: Required by legal proceedings.
Circumstance II: Client data were transferred to the acquirer of the public firm’s practice.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

50. Which of the following data is/are covered by the confidentiality requirement?
Data I: Information obtained when understanding the business of a prospective client.
Data II: Information obtained while performing audit procedures in an audit client.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

51. Which of the following is/are source/s of self-interest threat?

Statement I: Professional fees from the prior year audit are not yet paid by the audit client.
Statement II: Possible employment of an audit client.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

52. Which of the following is/are source/s of self-review threat?

Statement I: Family relationships between a member of the audit team and entry-level of the audit client.
Statement II: Family relationships between a member of the audit team and officer of the audit client.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

53. Performance of non-assurance services to an assurance client may create all the following threats, except for
a. Self-interest threat
b. Advocacy threat
c. Intimidation threat
d. Self-review threat

54. In the Philippine setting, after how many years should an audit engagement be rotated to another engagement partner?
a. 8
b. 7
c. 6
d. 5

55. Which of the following scenarios may create intimidation threat?

Scenario I: Same engagement partner is involved in an audit engagement for a long period of time.
Scenario II: Same audit staff is involved in an audit engagement for a long period of time.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

56. Which of the following scenarios may create self-review threat?

Scenario I: The audit client threatens the auditor about possible legal proceedings.
Scenario II: The audit client improperly narrows the scope of audit to reduce the professional fees.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

57. A member of the audit team has recently acted as a director of the audit client. Which of the following threats will be least likely
created?
a. Intimidation threat
b. Self-interest
c. Self-review threat
d. Familiarity threat

58. Which of the following scenarios may create an advocacy threat?

Scenario I: Audit client which is a bank lent car loan to a member of the audit team not in the normal course of the audit client’s
business.
Scenario II: A member of the audit team maintains a deposit account in a bank audit client not under normal commercial terms.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

59. Which of the following terms and conditions in setting the amount professional fees is/are acceptable?
Term I: The audit fee is based on the level of auditor’s effort in performing the audit procedures.
Term II: The audit fee is based on the amount of audited client’s profit.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

60. Which of the following scenarios is/are violative of fundamental ethical principle of professional competence and due care?
Scenario I: In promoting its professional services, ABC Auditing Firm boasted that it is the “best auditing firm in the world”.
Scenario II: DEF Auditing Firm merely quantifies the number of listed companies which are currently audited by the firm out of the total
number of listed companies.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

61. Which of the following statements is false?

Statement I: In the case of an audit engagement, the engagement period includes the period covered by the financial statements
reported on by the firm.
Statement II: If the assurance engagement is expected to recur, the period of the assurance engagement ends with the notification by
either party that the professional relationship has terminated or the issuance of the final assurance report, whichever is later.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

62. If a member of the assurance team, or their immediate family member receives, by way of, for example, an inheritance, gift or,
because of a merger, a direct financial interest or a material indirect financial interest in the assurance client, a self-interest threat would
be created. The following safeguards should be applied to eliminate the threat or reduce it to acceptable level:
Safeguard I: Disposing of the financial interest at the earliest practical date.
Safeguard II: Removing the member of the assurance team from the assurance engagement.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

63. When a member of the assurance team knows that his or her close family member has a direct financial interest or a material
indirect financial interest in the assurance client, a self-interest threat may be created. Safeguards least likely include:
a. The close family member disposing of all or a sufficient portion of the financial interest at the earliest practical date.
b. Discussing the matter with those charged with governance, such as the audit committee.
c. Involving a professional accountant who took part in the assurance engagement to review the work done by the member of the
assurance team with the close family relationship or otherwise advice, as necessary.
d. Removing the individual from the assurance engagement.

64. According to the Code of Ethics, a member who has a financial interest in a trust fund that invests in a potential client is considered
to have:
a. An indirect financial interest in the client.
b. A direct financial interest in the client.
c. No financial interest in the client.
d. A partial financial interest in the client

65. In which of the following instances would the independence of the CPA not be impaired? The CPA has been retained as the
auditor of a brokerage firm.
a. Which owes the CPA audit fees for more than one year.
b. In which the CPA has a large active margin account.
c. In which the CPA's brother is the controller.
d. Which owes the CPA audit fees for services in the current year and has just filed a petition for bankruptcy.
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