Name ANSWER KEY Date

Multiple Choice. Each question in the first section is a multiple-choice question with four answer choices. Read each
question and answer choice carefully and choose the ONE best answer. Write your answer on the table below. This is a
PDF Form – you may encode your answers in this file.

1 B 3 A 5 B 7 B 9 C
2 C 4 D 6 D 8 A 10 D

1. ABCD Company has changed from a manual system to a computerized payroll system in which employees record time
in and out with magnetic proximity cards. The computer system automatically updates all payroll records. Because of
this change
A. Integrated Test Facility must be used.
B. Part of the audit trail is altered.
C. The potential for payroll-related fraud is diminished.
D. Employee collusions are eliminated.

2. Benjamin, CPA used test data approach to test the computerized system of SB Company. Which of the following
statement correct regarding test data approach?
A. Test data must consist all possible valid and invalid conditions
B. The program tested is different from the program used throughout the year by the client.
C. Test data are processed by the client’s computer under the auditor’s control.
D. The dummy file should be permanent in the system of the client.

3. Caroline, CPA wants to test the control of the company of using passwords and user identification for access. Which of
the following procedures MOST LIKELY achieved Caroline’s objective?
A. Caroline should attempt to access in the computer using invalid password.
B. Caroline should use password hacking virus to see if it can access the system.
C. Review samples of transactions that were processed in the computer with a password.
D. Get written representations from employees that they do not use the password for malicious access.

4. Daniel, CPA, as part of the audit engagement, will be testing the general and application controls of Agustin Company
which uses a batch system. Which of the following is TRUE concerning batch processing of transactions?
A. Transactions are processed in chronological order, regardless of type.
B. It cannot be used for large network of systems.
C. It used only in non-database applications.
D. It is more likely to result in an easy-to-follow audit trail than is online transaction processing.

5. Elijah, CPA decided to test the computer information system by testing the input and output of the computer instead of
testing the computer program itself. Which of the following is a disadvantage of this kind of testing?
A. It will be able to detect fraud more effectively.
B. It will not detect program errors which do not show up in the output.
C. It will not give auditors evidence at all.
D. It will make the auditor’s opinion unqualified.

6. Which of the following controls ensure that the results of computer processing are accurate, complete, and properly
distributed?
A. General Controls C. Processing Controls
B. Input Controls D. Output Controls

7. Which of the following controls is a processing control that reconciles the input control totals with the totals of items that
have updated the file?
A. Sequence tests C. File and operator controls
B. Run-to-run totals D. Validity tests

8. These are controls that apply to all functions of computer information system and affect many different software
applications.
A. General Controls C. Processing Controls
B. Input Controls D. Output Controls

9. Which of the following is an example of general computer control?

A. Reasonableness Test C. Disaster recovery plan
B. Control total D. Limit Test

10. Which of the following is an access control?

A. Back-up recovery plan C. Use of power generator
B. Integrated test facility D. 6-digit passcode
Case Study. An auditor and his team were engaged to audit a company called Borderless Company. Borderless Company
business operations are heavily reliant on technology. The company even has a dedicated team of IT experts to ensure that
business operation is operating smoothly. Accordingly, the audit team designed their audit procedures with the fact that
they are auditing in CIS environment. The technique that the audit team decided to use for a certain program of Borderless
Company is the test data approach since according to Borderless Company the company system is at full capacity and
should not be interrupted. The following are matter related to the test data approach of the audit team:

A. Though the client allowed the audit team to obtain actual data, the audit team received a dummy file transaction
prepared by the programmers of Borderless company since they will be doing a test data approach. Accordingly,
Borderless programmers told the audit team that they should not modify the dummy file, or it may not be processed.
B. The dummy file will not be tested on the actual program that are being used by Borderless since all the system are
running at full capacity and cannot be stopped to accommodate for the audit test. Instead the auditor obtained a
copy of Borderless Company’s computer program in which the dummy file transaction will be tested.

Requirements: Your answers should be directly relevant to the question and concise.

1. Identify and explain issues or problems with the two enumerated matters (A and B) in regard to the test data
approach.
A. Test data approach requires that the auditor prepares or developed the duplicate file in reference from actual files or data being processed. In this case the dummy file is prepared
by the company and was not mention whether the file is a duplicate or an appropriate copy of actual files being processes in the system. Also, the file cannot be modified by the
auditor. Accordingly, dummy file is not independently prepared and may have been designed to ensure that the program control being tested will processed it normally or in favor of
the company.

B. Though auditors may need not test the actual computer or system being used, but since the approach is a test data approach it should have been better if it was tested on the
actual program. Accordingly, there is a risk the duplicate program may not have been totally identical in regards to the process and controls that the auditor intends to evaluate.

2. Aside from test data approach, enumerate and explain what are other program testing techniques that the auditor
may use.
Other techniques are:
A. Integrated test facility (ITF) – This approach is almost the same with test data approach except for the fact that test data
does not run dummy transactions simultaneously in the midst of live transactions. The testing of the dummy transaction is
usually accomplished in an integrated facility within the client’s accounting system or program which are usually setup by
creating dummy department or a branch.
B. Parallel Simulation – This approach processes actual data from the client in the auditor’s software or program.
C. Controlled reprocessing - This approach processes actual data from the client in a copy of client’s application program.

3. Among the techniques, which could have been the better approach of the auditor?

Since the auditor could only test through a copy of the client’s program, it could have been better if
the client performed a controlled reprocessing. Accordingly, the auditor could have used a actual
data or file transaction to perform the test.

Internet Activity. Look for the article written by Lee Reams entitled “Will Artificial Intelligence and Cloud Accounting Replace
The Accountants Of Tomorrow?” on Forbes website. Describe how will you, a CPA of tomorrow from Notre Dame University,
equipped yourself with the changes brought by advancements in technology?

Answer. Your answers should be directly relevant to the question and concise.

The following should have been highlighted in the answers:

1. NDU Values and unique characteristics
2. Human advantage over AI
3. AI as tool for human betterment