Information Technology

Question 1

What are the benefits of electronic data processing versus manual accounting systems?

Answer 1

Accuracy – reduces footing, extension, posting, and balancing errors.
Consistency – computers will process each transaction identically.
Motivation – computers do not have any dishonest or disloyal motivations.

Question 2

What risks are introduced by electronic data processing?

Answer 2

Concentration of responsibilities – most records are maintained by IT department
Concentration of data – important data may be accessed by unauthorized people
Less visible audit trail – few source documents, little physical evidence of processing
Less human supervision of transactions
Machines lack judgment
Electronic information is easy to copy or lose
Electronic information is easily edited

Question 3

How are general IT controls different from IT application controls?

Answer 3

General controls apply to all activities and data.

Application controls apply to one particular transaction or data set (e.g., payroll, sales).

Question 4

Within the IT department, what three responsibilities should be separated?

Answer 4

1. Systems planning and programming.
2. Computer operations.
3. Data and program maintenance.

Question 5

What are three examples of security controls?

Answer 5

1. Physical controls - locks, air conditioning, fire suppression equipment.
2. Access controls - passwords.
3. Backup and recovery procedures - backup disks, offsite storage.

Question 6

What are the three categories of application controls?

Answer 6

1. Input controls.
2. Processing controls.
3. Output controls.

Question 7

What are five examples of input controls?

Answer 7

1. Validity test.
2. Completeness test.
3. Limit test.
4. Control totals.
5. Self-checking digit

Question 8

What are five types of computer-assisted audit techniques (CAATs)?

Answer 8

1. Test data.
2. Integrated test facility.
3. Parallel simulation.
4. Embedded audit module.
5. Generalized audit software.

Question 9

What are the three types of general IT controls?

Answer 9

1. Organizational controls.
2. Systems development and programming controls (e.g., testing procedures, program change controls, .documentation)
3. Security controls (e.g., physical controls, access controls, backup and recovery procedures).