AUDITING IN A CIS ENVIRONMENT

Computer Assisted Audit Technique and COBIT Framework

1. Computer programs and data that an auditor may use as part of the audit procedures

to process data of audit significance contained in an entity's information systems are

called

a. Computer assisted audit technique

b. SCARF

c. Generalized audit software

d. Application programs

2. Auditing through the computer must be used when

a. Generalized audit software is not available

b. Processing is primarily online and updating in real-time

c. Input transactions are batched and system logic is straightforward

d. Processing primarily consists of sorting the input data and updating the

master file sequentially.

3. It is the vital resource for an organization and is the heart of CIS activities.

a. Audit software

b. Computer assisted audit technique

c. Database system

d. Data

4. An entity has recently converted its purchasing cycle from a manual process to an

online computer system. Which of the following is a probable result associated with

conversion to the new IT system?

a. Traditional duties are less separated

b. Increased processing time

c. Reduction in the entity's risk exposure

d. Increased processing error.

5. A redundant digit added to a code that enables the accuracy of other characters in

the code to be checked.

a. Validation check

b. Check digit

c. Redundancy check

d. Test data approach

6. Which of the following controls would most likely provide protection against

unauthorized changes in production programs?

a. Restricting programmer access to the computer room.

b. Requiring two operators to be present during equipment operation.

c. Limiting program access solely to operator

d. Implementing management review of daily run logs.

7. Which of the following best describe the process called authentication?

a. The system verifies the identity of the user

b. The user in identifies himself/herself to the system

c. The user indicates to the system that the transaction was processed

correctly.

d. The system verifies that the user is entitled to enter the transactions

requested.

8. Which of the following provides the most valuable information for detecting

unauthorized input from a terminal?

a. User error report

b. Transaction log

c. Error file

d. Console log printout

9. Many customer, managers, employees and suppliers blamed the computer for

making errors. In reality, computer make very few mechanical errors. Which f the

following is the most likely source of errors in a fully operational computer-based

system?

a. Systems analysis and programming

b. Operational error

c. Processing

d. Input

10. The following statements relate to the auditor's assessment of control risk in an

entity's computer environment. Which is correct?

a. The auditor usually can ignore the computer system if he/she obtain an

understanding of the control outside the computer information system.

b. If the general control is ineffective, the auditor ordinarily can assess control

risk at a low level if the application controls are effective

c. The auditor's objectives with respect to the assessment of control risk are the

same as in a manual system.

d. The auditor must obtain an understanding of the internal control and test

controls in computer environment.

11. The possibility of losing a large amount of information stored in computer files most

likely would be reduced by the use of

a. Back-up file

b. Check digits

c. Completeness test/ control

d. Conversion verification

12. Which statement is not correct? The goal of batch controls is to endure that during

processing

a. Transactions are not omitted

b. Transactions are processed more than once

c. Transactions are not added

d. An audit trial is created

13. This type of control attempt to ensure that no data is missing and that all processing

is carried through to its proper conclusion

a. Check digit

b. Validity check

c. Completeness control

d. Accuracy control

14. It is the transfer of electronic data from one organization computer system to

another's, the data being structured in a commonly agreed format so that it is directly

usable by the receiving organization computer system

a. Distribution data processing

b. Metropolitan area network

c. Local area network

d. Electronic data interchange

15. A computerized information system that allows non-experts to make decision

comparable to that of an expert.

a. Expert opinion

b. Expert system

c. Auditing around the computer

d. Decision support system

16. The software used to control input processing and output is called

a. Generalized audit software

b. Computer assisted audit technique

c. Service bureau

d. Data base management system

17. The following are the benefit of COBIT for internal stakeholders, except

a. Provides guidance on how best to build and structure the IT department,

manage performance of IT, run an efficient and effective IT operation, control

IT costs, align IT strategy to business priorities, etc.

b. Helps to ensure the enterprise is compliant with applicable rules and

regulations and has the right governance system in place to manage and

sustain compliance

c. Provides guidance on how to organize and monitor performance of I&T

across the enterprise

d. Helps to ensure the identification and management of all IT-related risk

18. These are the factors that can influence the design of an enterprise's governance

system and position it for success in the use of I&T.

a. Design factors

b. Computer factors

c. Enterprise goals

d. Enterprise strategy

19. An essential part of a governance and management system which is also refer to a

general term for all activities and methods.

a. Performance appraisal

b. Performance feedback

c. Performance management

d. Performance output

20. The following are the components of governance system, except

a. Organizational structure

b. Design factor

c. Information

d. Processes

ACCOUNTING FOR SPECIAL TRANSACTION

Home Office, Branch and Agency Accounting

1.In the separate statement of financial position of the home office, the investment in branch account shall be presented as

a. Income

b. Asset

c. Equity

d. Liability

2.In the separate statement of financial position of the branch, the home office account shall be presented as

a. Liaiblity

b. Equity

c. Income

d. Asset

3.In the combined statement of financial position prepared by the company, the inventory of the branch shall be measured and presented at

a. Fair value

b. Lower of cost or net realizable value

c. Billed price

d. Cost

4.The main difference between the net income reported in the separate income statement of the branch and the net income reported by the home office for the branch's operation is the

a. Overstatement of total goods available for sale reported by the branch

b. Overstatement of beginning and ending inventory reported by the branch

c. Overstatement of shipment from home office reported by the branch

d. Overstatement of cost of goods sold reported by the branch

5.If the home office receives debit memo from the branch, the home office shall record it in its separate statement of financial position by

a. Debiting the investment in branch account

b. Increasing the investment in branch account

c. Disclosure

d. Decreasing the investment in branch account

6.If the branch receives credit memo from the home office, the branch shall record it in its separate statement of financial position by

a. Increasing the home office account

b. Debiting the home office account

c. Disclosure

d. Crediting the home office account

7.Which of the following transactions will increase the home office account in the branch's separate statement of financial position?

a.Debit memo received from the home office

b.Net loss of the branch

c.Payment by the branch of home office's liability

d.Collection by the home office of branch's receivable

8.Which of the following transactions will decrease the investment in branch's account in the home office's separate statement of financial position?

a.Net income of the branch

b.Payment of branch's liability by the home office

c.Return by branch to home office of merchandise shipped

d.Credit memo received from the branch

9.Unlike for a "sales agency," a "branch" has its own separate books of accounts and prepares its own financial statements.

False

True

10.Transactions between a home office and its branch are accounted for in reciprocal accounts. The reciprocal account maintained in the branch books is called

a.Any of these

b.Home office

c.Investment in branch

d.Purchases from home office

Problem 1

Carmela Appliance Company operates a branch in Quezon City. The following are

transactions between the home office and branch for the current year.

a. The home office sends P200,000 cash to the branch.

b. Shipments to branch are billed at cost of P78,750.

c. The Home Office pays branch expense of P3,500.

d. Home office expense of 3,375 are paid by the branch.

e. The branch returned merchandise costing P10,000 to the home office.

f. Home office acquires branch furniture for P20,500 cash. The said fixed asset is carried on

Branch Books.

g. The annual depreciation on the branch furniture is 5%.

h. The branch sends a P15,000 cash remittance to home office.

Q1-What is the adjusted balance of Branch Current account in the Home Office Books?

Q2-What is the adjusted Home Office Current account in the Home Office Books?

Problem 2

ROLAND company maintains branches that market the products it produces. Merchandise is billed to the branches at cost, with the branches paying the freight charges from the Home office to the branch. On May 27, LANDERZ-branch ships a portion of its merchandise to ROBINSON-branch upon authorization by Home Office. ROBINSON-branch, upon receiving the merchandise, pays freight charges of P1,875 on the shipment from LANDERZ-branch. If the shipment had been made from the Home office directly to ROBINSON-branch, the freight cost to ROBINSON-branch would have been P4,000.

Q1-How much is the excess freight cost to be credited in the books of Home Office?

Q2-How much is the ROBINSON-branch current in the books of the Home Office?

Q3-Upon receipt of shipment by ROBINSON-branch, freight in is debited in the amount of?

Q4-Home office current is debited by LANDERZ-branch by how much?

Problem 3

The SAVE-Most home office ships merchandise to its Makati branch at 20 percent above cost. Makati branch's book shows a beginning inventory of P135,000 (50% from outside

purchase) and shipments from home office of P405,000. The ending inventory of the Makati branch amounted to P337,500 in which 60% is home office merchandise while the remaining balance is from outside purchases. The Makati branch purchased merchandise costing P317,500. The total sales and operating costs of the branch for the year amounted to P1,040,000 and P220,000 respectively.

Q1-What is the entry of the home office upon shipment of merchandise to the branch?

a. None of the choices.

b. Debit Ivnestment in branch-405,000; Credit Shipment to branch-337,500; Credit Allowance for overvaluation-67,500

c. Debit Shipment from home office-405,000; Credit Home office current account-405,000

d. Debit Branch current-405,000; Credit Shipment to branch-405,000

Q2-What is the pre-closing balance of the Allowance for Overvaluation of Branch inventory account?

Q3-What is the post-closing balance in the Unrealized Profit in Branch Inventory Account?

Q4-What is the amount of overvaluation of Cost of Goods Sold or undervaluation in income?

Q5-The Allowance for Overvaluation of Branch Inventory Account is adjusted to how much?

Q6-The Allowance for Overvaluation of Branch Inventory Account is adjusted by how much?

Q7-What is the Overvaluation of Branch Ending Inventory?

Q8-How much is the true ending inventory of the branch?

Q9-How much is the total Cost of goods sold of the branch?

Q10-How much is the true net income of the branch?

Problem 4

The Home Office in Global City bills its QC branch for shipments of goods at 25% above cost. At the close of the business on April 27, 2016, a fire gutted the branch warehouse and destroyed 70% of the merchandise stock stored therein. Thereafter, the following data were gathered:

January 1 Inventory P 672,000

Shipments from Home office, Jan. 1 through April 27 1,008,000

Net Sales, January 1 through April 27 1,428,000

Undamaged merchandise recovered are marked to sell for 378,000

Q1-What is the amount of inventory destroyed by fire per home office records at cost?

Q2-How much is the branch cost of goods sold?

Q3-How much is the overvaluation in branch Cost of Goods Sold?

Q4-How much is the branch net income as provided by GAAP?