AIS exam 1

T/F: An accounting system (AIS) records and maintains transaction data only

false

Goods Receipt records incorrect Total $ Amount Due.

total value is automatically calculated. for each line item: quantity received * purchase price

Purchase Contract specifies incorrect Fiscal Year

.

Catalog-Category Discount % is incorrect.

ITD

Customer credit limit is incorrect.

ITD

Failure to approve Goods Receipt for payment

System retrieves all Receipt of Goods quantity details. Matches on the corresponding PO quantity and price details and calculates a total amount due for each receipt and ok's it for payment ('OK to Pay').

Purchase Inventory Items at too high/inflated negotiated price on Purchase Contract

The system requires any negotiated unit purchase price for an item on a Contract to be no greater than the maximum amount for that specific item from the inventory master data

Control: System adds the Sale Order $ Amount to the assigned customer's current AR balance and checks to see if the total exceeds the customer's assigned credit limit. If it does exceed, the Sale Order is not processed. What additional controls testing would be required to support this control (select all that are correct): -Approved credit limit for a customer is incorrect -Customers that have not gone through through the credit approval process are in the system -Sale Order date is incorrect -Invalid inventory items are in system

-Approved credit limit for a customer is incorrect -Customers that have not gone through through the credit approval process are in the system

Goods received, but not recorded in the AIS

-Auto control: Electronically scanning bar codes on the goods received to record quantity by the receiving department automatically. -ITD Control -Pre-numbered Receiving Reports used. -Receiving personnel counts received goods and fills out pre-numbered Receiving Report form. -Receiving personnel use form to input Goods Receipt data in system. -Identify form numbers not in system.

Purchase Order created for items not needed

-Automated Control: computer generated based upon current inventory levels and future needs

Failure to pay for Goods Received in a timely manner

-Automatic payment based upon due date. -ITD: Weekly Goods Receipt Not Paid report is run.

Configurable controls that are identified to be in scope for a financial statement audit; will be: -Inspected to see the current configuration setting -Not inspected since configurable controls are programmed into the system -Tested in the same manner as an ITD control due to their configurable nature -Not inspected as configurable controls can only be on or off

-Inspected to see the current configuration setting

Which of the following is not data contained within the data created for adelivery to a customer: 1. Customer's current credit limit 2. Sale Order being delivered 3. Quantity delivered 4. Date delivered 5. Customer

1. Customer's current credit limit

Given the following REA model snippet: Purchase Order (0,1) - (1,1) Goods Receipt - which of the following are WCGWs that the company needs to mitigate (circle all that are correct): 1. Failure to receive goods that were ordered 2. Goods received that were not ordered 3. Purchase Order recorded before the Goods Receipt 4. Failure to record a Goods Receipt

1. Failure to receive goods that were ordered 2. Goods received that were not ordered 4. Failure to record a Goods Receipt

The General Ledger and Reporting System does which of the following: 1. Creates a journal entry for every transaction entered in the AIS. 2. Does not rely upon transaction data entered in the AIS since they containno debits and credits. 3. Records master data as a Journal Entry. 4. Creates a journal entry for some transactions entered in the AIS

4. Creates a journal entry for some transactions entered in the AIS

Sale Order recorded that exceeds a Customer's credit limit.

AUTO -Control: System adds the Sale Order Total Amount Due $ to the assigned customer's current AR balance and checks to see if the total exceeds the customer's assigned credit limit. If it exceed, the Sale Order is rejected by the system. -Test (test of one): Internal control systems must be documented. -Relevant application controls must be identified and tested. -With the assistance of a Sales Rep, enter test Sale Order within the system using test data (data entered that exceeds the credit limit). -Confirm that the system: Rejects (does not process the Sale Order)

Purchase Order fails to specify/match/order against open Purchase Contract for the appropriate fiscal year

Automated application control

Purchase Order specifies vendor not approved to provide the item(s) on the order

Automated application control using data from the Vendor-Item master data.

Purchase Order entered by Agent with a Conflict of Interest with the Vendor

Automated application control using data in the system from the Purchase Agent - Vendor conflict of interest relationship data. Additional Controls Testing Required for this control: 1. Vendor-Purchase Agent conflict of interest restrictions are incorrect. (Purchase Agents do not have restrictions with the correct vendors) 2. Vendor - Agent COI list is NOT system restricted to appropriate roles/personnel.

Shipment specifies wrong inventory item

Delivery must specify an un-fulfilled (open) Sale Order to match against and the system validates. -prevent

Failure to approve Goods Receipt for payment.

Each evening the system retrieves all unpaid Receipt of Goods quantity details. It then matches on the corresponding PO quantity and price details and calculates a total amount due for each receipt and ok's it for payment.

T/F: All terminated or transferred employee access control accounts/role assignments are updated as a group once every 4 months.

F

T/F: Any certified programmer can implement a program change and place them into production.

F

T/F: Programmers are assigned WRITE access to the Production environment through the Change Management Tool.

F

Sales Order has an incorrect quantity ordered for an item.

ITD: Order copy sent to customer.

Standard Part Inventory purchased at inflated prices on PO.

Standard purchase price from vendor-inventory master is used.

Purchase Order specifies a quantity ordered greater than the amount allowed on the matched Purchasing Contract

System copies data from matched Contract and compares item quantity ordered on PO to Maximum Total Order Quantity on matched Contract for the item

Purchase Order specifies items not found on the matched Purchase Contract

System copies data from matched Contract and limits items on the PO to those on the matched Contract

T/F: Roles assigned to individuals are reviewed and evaluated monthly and any corrections made and documented.

T

T/F: Separation of duties for the Purchase process activities is accomplished through the assigning of appropriate roles to Purchase process personnel in the system.

T

Cash disbursed more than once for the same Goods Receipt

The Approval (ok to pay) is closed out by the system after the payments are sent.

Given the following REA model snippet; Purchase Order (0,1) - (1,1) Goods Receipt; which of the following are WCGWs that the company needs to mitigate (circle all that are correct) : a. Failure to receive goods that were ordered b. Goods received that were not ordered c. Purchase Order recorded before the Goods Receipt d. Purchase Order in system for items that are not needed e. Failure to record a Goods Receipt

a. Failure to receive goods that were ordered d. Purchase Order in system for items that are not needed e. Failure to record a Goods Receipt

Given the following REA model snippet; Purchase Order (0,N) - (1,1) Goods Receipt; which of the following are true: a. Every item on a Purchase Order must be received on the same Goods Receipt b. Some items on a Purchase Order can be received one day, and the rest on another Goods Receipt c. This company allows goods to be received that were not ordered in order to expedite manufacturing runs d. This company expects all goods ordered to be received that same day

b. Some items on a Purchase Order can be received one day, and the rest on another Goods Receipt

Goods Receipt specifies wrong inventory item

goods receipt are automatically checked and matched against purchase orders

Cash Disbursement data entry/update is NOT system

restricted to CD personnel.

Inventory Material Maximum Purchase Price is incorrect

standard purchase price for inventory item Would be like the Standard Sale Price for inventory item is incorrect (ITD control)

W/S: Company runs monthly log file reports that identifies allconfiguration control changes made in the AIS and comparesthat to a change management approval form that authorizes thechange

strength

W/S: Logical access control is used to determine if a logged in usercan change a control's configuration

strength

Inventory Standard Purchase Price in the Vendor - Item master data is inaccurate.

system copies standard purchase price from vendor-parts list and uses as actual price for Purchase order (ITD control)

Failure to record cash disbursement

-ITD: Bank reconciliations performed monthly by someone not associated with AP and cash recording process. -Auto: Computer generated and Pre-numbered checks followed by the ITD control from above.

Fiscal Year

Changes are properly authorized/valid

Goods Receipt not matched against an open Purchase Order.(Goods received that were not ordered)

Receipt of Goods must specify an un-fulfilled Purchase Order to match against and data is copied to Goods Receipt (items, qty, prices. Vendor, etc). (Goods Receipt is based upon the open Purchase Order selected and a Goods Receipt cannot be created without a matching PO.)

Given the following REA model snippet: Sale Order (0,N) - (1,N) Shipment - which of the following are true (circle all that are correct): 1. Every item on a Sale Order must be shipped on the same Shipment 2. Some items on a Sale Order can be shipped one day, and the rest on another Shipment 3. Shipments can be recorded without a Sale Order to expedite them 4. Shipments require a Sale Order 5. Sale Orders can be accepted but the shipment happens at a later date

2. Some items on a Sale Order can be shipped one day, and the rest on another Shipment 4. Shipments require a Sale Order 5. Sale Orders can be accepted but the shipment happens at a later date

Sale Order has an incorrect actual unit sales price for an item.

Auto: system pulls the appropriate standard unit price from inventory master data Auto: system applies appropriate seasonal discount percent to the item standard price for the item's assigned product category to calculate the actual sale priceLAC: can't be changed by a sales rep -prevent -AR / Revenue Additional Controls Testing Required for this control: -Inventory master list Standard Price is incorrect. -Inventory master list is NOT system restricted to appropriate roles/personnel.

Failure to ship open Sale Orders

Daily Overdue Shipment report is run. -Identifies Sale Orders not yet Shipped against and Expected Shipment Date is past. -Someone in a role different than the role responsible for Shipping goods should review; signs off on review and documents the results; follows up on any sale orders past due with Shipping personnel and/or customers; and documents the corrective action taken. -detect -ITD -AR / revenue / inventory

Purchase Contract data entry/update is NOT system-restricted to Purchase Agents

LAC/SOD control, purchase agents must login and only purchase agents have access to the Enter Purchase Order screen

Inventory QOH is inaccurate (found in a Purchasing Process)

periodic physical checks of inventory (automatically create purchase orders when the actual QOH becomes less than the minimum QOH)

Purchase Order/Blanket Purchase Contract approved by Agent with a Conflict of Interest with the Vendor

-Automated application control using data in the system from the Purchase Agent - Vendor relationship.

Master Data

-Changes to master data are properly authorized/valid. -Changes made to master data are complete. -Changes made to master data are accurate.

Purchase Order has incorrect purchase price for Inventory Item(s) ordered

-Copy data from matched Contract -Unit Purchase Price for a material on a Contract becomes the Actual Unit Purchase Price for a material on a PO

Financial statements could have material misstatements because(selectall that are correct): 1. An automated application control was tested and it correctly mitigated akey WCGW. 2. Master data is incorrect. 3. Master data is invalid. 4. Transaction data is incomplete. 5. An ITD control was tested and it was found to detect errors in data but noprocedures were in place to correct the data containing the errors

2. Master data is incorrect. 3. Master data is invalid. 4. Transaction data is incomplete. 5. An ITD control was tested and it was found to detect errors in data but noprocedures were in place to correct the data containing the errors

Inventory data entry/update is NOT system-restricted to Inventory Management Analyst.

AUTO

Cash Receipt $ Value received incorrect.

ITD

Cash received but not recorded in AIS.

ITD

Customer assigned the wrong Standard Discount category

ITD

Customer credit limit incorrect.

Pre-Numbered Customer Credit Limit Adjustment Approval forms used to update existing customer's Credit Limit. -Credit Department fills out/signs form. -Credit Department uses form to input updated Credit Limit in system. Customer Credit Change Report runs monthly that identifies/lists all Customers with changed Credit Limits since end of previous month with their current credit limit. Each customer's new Credit Limit listed is validated against Customer Credit Limit Adjustment Approval documentation. Someone in a role different than the role responsible for setting customer's Credit Limit in the system should review; signs off on review and documents the results; follows up on any problem credit limit; and documents the corrections. -detect -ITD -AR / revenue / inventory

cash disbursement recorded incorrect dollar amount (cash disbursed for more than the receipt of goods total dollar amount due)

cash disbursement should be automatically checked against a receipt of goods for goods received * price dollar amount is calculated by the system and can't be overridden

Cash Receipt applied to incorrect customer or shipment.

AUTO

Cash Receipt deposited in invalid Bank Account.

AUTO

Cash Receipt is matched against a Shipment already fully paid.

AUTO

Category data entry/update is NOT system-restricted to Inventory Management Analyst

AUTO

Customer data entry/update is NOT system-restricted to Credit Department.

AUTO

Discount Category data entry/update is NOT system-restricted to appropriate personnel.

AUTO

Invoice amount is incorrect.

AUTO

Which of the following could lead an auditor to conclude that an ITD control cannot be relied upon in a financial statement audit (select all that are correct): -Reports used for the ITD control analysis can be altered after running them in the system and exporting them to Excel -The ITD control reports can be reconfigured and changed at anytime by the person running the report and also doing the ITD analysis -The auditor runs the Billing Rate Report from the test/training environment and confirms that all data required for the ITD control is displayed on thereport appropriately -A sample of previous month's ITD control analysis found that the person doing the analysis on the control missed several exceptions on the report usedfor the analysis

-Reports used for the ITD control analysis can be altered after running them in the system and exporting them to Excel -The ITD control reports can be reconfigured and changed at anytime by the person running the report and also doing the ITD analysis -A sample of previous month's ITD control analysis found that the person doing the analysis on the control missed several exceptions on the report usedfor the analysis

Which of the following would be an example of a configurable application control (select all that are correct): -System administrator can turn off the requirement that all customers must have a credit limit set prior to ordering from our company -Commerce sales manager can change the setting in the e-commerce system so that all online orders are a certain percentage off by selecting one ofthese pre-approved parameters from the system: 0% off, 10% off, 20% off, 30% off, or 40% off -System is programmed to not allow a sale order to be entered that exceeds the customer's credit limit and this can only be changed by updating thesystem's computer code -ITD control reports are used on a regular basis -E-Commerce manager requests a change to the system to remove an automated application control by updating the code

-System administrator can turn off the requirement that all customers must have a credit limit set prior to ordering from our company -Commerce sales manager can change the setting in the e-commerce system so that all online orders are a certain percentage off by selecting one ofthese pre-approved parameters from the system: 0% off, 10% off, 20% off, 30% off, or 40% off

If an auditor finds aweakness while testing aspecific automated or ITDcontrol, it could: -generate more testing of the control or analysis of the AIS log files -generate less substantive testing -generate less ITD controls testing -automatically lead to an unsatisfactory opinion on the company's financial statement

-generate more testing of the control or analysis of the AIS log files

The Standard Price per Session will be placed where on the model developed for the narrative: 1) Standard Consulting Type (0,N) - (0,N) Consulting Engagement Relationship 2) Consulting Engagement (1,1) - (0,N) Standard Discount Category Relationship 3) Customer Entity 4) Standard Discount Category Entity 5) Standard Consulting Type (0,N) - (1,1) Consulting Engagement Relationship 6) Standard Consulting Type Entity

6) Standard Consulting Type Entity

Which of the following would be WCGWs from the narrative that would need to be and best be mitigated by an ITD control. (Select all that are correct) Do not select if it is easily mitigated by an automated application control. 1) Total amount due is incorrect 2) Member assigned wrong Standard Discount Category 3) Discount % for a Standard Discount Category is incorrect 4) Standard Engagement Type Standard Price Per Session is incorrect

2) Member assigned wrong Standard Discount Category 3) Discount % for a Standard Discount Category is incorrect 4) Standard Engagement Type Standard Price Per Session is incorrect

Which of the following would be correct parts of the REA process model built to represent the given narrative. (Select all that are correct) 1) Standard Consulting Type (0,N) - (0,N) Consulting Engagement 2) Consulting Engagement (1,1) - (0,N) Standard Discount Category 3) Customer (0,1) - (0,N) Standard Discount Category 4) Standard Consulting Type (0,N) - (1,1) Standard Discount Category 5) Standard Consulting Type (0,N) - (1,1) Customer 6) Customer (1,1) - (0,N) Standard Discount Category 7) Standard Consulting Type (0,N) - (1,1) Consulting Engagement

3) Customer (0,1) - (0,N) Standard Discount Category 7) Standard Consulting Type (0,N) - (1,1) Consulting Engagement

Sale Order recorded that exceeds a Customer's credit limit. (ITGC: Change Management)

AUTO -Control: System adds the Sale Order Total Amount Due $ to the assigned customer's current AR balance and checks to see if the total exceeds the customer's assigned credit limit. If it does exceed, the Sale Order is rejected by the system. -Ensure a formal change management process exists: Approve Change; Test Change (May adversely affect the automated application controls or ITD Control Reports) -Ensure code modification/development is performed in a segregated, controlled environment (separate from production) (Who can modify code and move it into the 'production' system( (Modification/development of code may adversely affect the automated application controls or ITD Control Reports)

Sale Order recorded/approved by someone other than a Sales Rep. Control (ITGC: Logical Access Control)

AUTO -Control: System automatically restricts access for the entering/approval of Sale Orders to Sales Reps. -SOD: Role-Based access control (Only people that actually are Sales Reps should be assigned the Sales Rep Role) (The Sales Rep Role should only be able to do things within the system on a Need-To-Know basis) -User Accounts are properly managed (Ensure that terminated employees' credentials are removed or disabled) (User profiles (accounts) have been appropriately approved)

Sale Order recorded/approved by someone other than a Sales Rep

AUTO -Control: System automatically restricts access for the entering/approval of Sale Orders to Sales Reps. -Test (test of one): Confirm that the system: -Only allows Sales Reps access to Sale Order entering/approval screens.

Failure to invoice for Shipments.

AUTO / ITD

Shipment records invalid/incorrect quantity shipped

AUTO / ITD

Customer current A/R balance is incorrect

AUTO/ITD

Shipment not matched against an open Sales Order.

AUTO: Qtyshipped <= QtyOrdered -prevent -AR / inventory / revenue

Sale Order data entry/update is NOT system-restricted to Sales Representatives.

AUTO: logical Access Control: Sales Reps must login and only Sales Reps have access to the Enter Sale Order screen. -prevent -AR / Inventory / Revenue

Shipment data entry/update is NOT system-restricted to Delivery personnel.

AUTO:Logical Access Control: Shipment data entry/update is system-restricted to Delivery Clerk. -prevent -AR / Revenue / Inventory

Cash disbursed for goods not received.

All cash disbursements recorded must be matched against a Goods Receipt ok'd for payment.

Goods Receipt records receipt of wrong inventory item.

All of the data from the matched Purchase Order is copied into the Goods Receipt screen.

Shipment records invalid/incorrect quantity shipped.

All of the data from the matched Sale Order is copied into the Delivery screen. (Inventory items, prices, address, customer, terms, etc) -prevent

Sale Order Total $ Value incorrect. (needs to apply appropriate standard discount category %)

Auto: Totals all line items on Order (QtyOrdered * Actual Unit Price) Multiplies by the customers assigned Standard Discount Category Discount % to calculate total $ value.

W/S: A sales rep can turn on/off a configuration control requiring acredit limit check for a customer and enter a sales ordertransaction for the same customer

weakness

Sale Order recorded that exceeded customer's credit limit.

Auto: Total Order $ Amount + Current A/R must be <= Credit Limit or the order is rejected. -prevent -AR / Revenue / Inventory

Sale Order recorded for Customer with Customer Status assigned that should not allow an Order in system.

Automated application control using data in the system from the selected Customer's assigned Customer Status Category. System automatically rejects Order if Customer selected for Order is not assigned Status 2. Additional Controls Testing Required for this control: -Customers are assigned incorrect Customer Status Category in the system. -Customer master list is NOT system restricted to appropriate roles/personnel. -Invalid Customer Status Category in the system. -Customer Status Category master data is NOT system restricted to appropriate roles/personnel.

Sale Order recorded that exceeded customer's credit limit.

Automated application control: Total Order $ Amount + Current A/R must be <= Credit Limit or the order is rejected. Additional Controls Testing Required for this control: -Customer credit limit is incorrect -Customer current AR balance is incorrect. -Customer master list is NOT system restricted to appropriate roles/personnel.

Purchase Order created for items not needed.

Computer generated based upon current inventory levels and future needs.

T/F: Configurable automated application controls are not tested as part of a financial statement auditsince they do not lead to an actual journal entry.

F

T/F: For code that contains ITD controls, changes are made in the Production environment prior to testing the change; to ensure that good production quality data is available for the test.

F

T/F: System testing and validation is done after the system change is placed in the production environment to ensure data test accuracy for the Financial Statement audit.

F

T/F: User accounts are created in the system by the manager of each department.

F

T/F: User identities (accounts) for Logical Access Control are assigned a Role within the system that determines their access rights; and this Role assignment is determined and implemented by the IT Applications System Administrator.

F

T/F: User identities for Logical Access Control are often shared by various employees for efficiency purposes

F

T/F: User identities for Logical Access Control are often shared by various employees for efficiency purposes.

F

Receipt of Goods specifies incorrect inventory item received.

Goods Receipt is based upon the open Purchase Order selected.

Cash disbursed more than once for the same Goods Receipt.

Goods Receipts are 'closedout' once fully paid for.

Approved customers not in system.

ITD

Customer in system that has not been pre-qualified

ITD

Discount Category Discount % is incorrect.

ITD

Delivery Due Tickler report is used.

ITD -Report runs nightly from data in the AIS. -Lists all Sale Orders where quantity delivered < quantity ordered for any line item and the delivery due date was the day before or earlier (this will include all back ordered line items and entire orders not delivered). -Sales Manager reviews report each morning and follows up on each undelivered order with Delivery Manager. -Sales Manager and Delivery Manager sign off on review and document the results; and document follow up on problem orders not delivered.

W/S: Business process owners can change the configurationsettings in a part of the system that they do not use as long asthey are at the VP level

weakness

Goods Receipt data entry/update is NOT system-restricted to Receiving personnel

LAC/SOD governs who can create Goods Receipt; system-restricted to personnel who do not control/count inventory or pay for goods.

Vendor data entry/update is NOT system-restricted to appropriate Department

LAC/SOD governs who can update data; system-restricted to personnel who do not purchase or pay for goods

Cash disbursed for goods not received or ordered

PO/RR match required before payments are issued by the system.

Goods Receipt records quantity received greater than quantity ordered

Quantity received (counted) and recorded must be equal to or < than the quantity ordered on the matching PO.

T/F: Change Management staff are assigned WRITE access to the Production environment through a Change Management Tool to promote changes after testing.

T

T/F: Code is checked-out from the Production environment into the Development environment and an audit trail is established.

T

T/F: Logs are generated by the change management tool to trace program moves and changes in production and are reviewed monthly by

T

T/F: Logs are generated by the change management tool to trace program moves and changes in production and are reviewed monthly by management.

T

T/F: The IT Systems Administrator is responsible for maintaining and implementing system and application access roles and functionality assignments based upon requests received from business process owners.

T

Invalid Vendors in system.

Vendor Approval form is signed and reconciled in system.

Failure to receive all goods ordered.

Weekly Goods Not Received report is run and analyzed.

Failure to receive all goods ordered.

Weekly POs Not Received Tickler file is used.

A change management process weakness could likely lead to: (circle all that apply) (Each correct answer: 1 point. Each incorrectly selected answer: -1 point.) a. Inaccurate data in the system b. Increased audit testing c. Reduction in the automated application controls testing d. Reduction in the Logical Access Control testing

a. Inaccurate data in the system b. Increased audit testing

Which of the following conditions could lead an auditor to conclude that an ITD control that monitors the correctness of the Standard Purchase Price for an item on the item-vendor master is not reliable for audit purposes: a. Multiple re-performances of the control found that source to report comparison of data was not done completely or correctly b. AR calculation automated application control is incorrectly designed. c. Report design validation test found issues with the report. d. Customer data entry and updates have logical access control problems. e. 2 of the above are correct.

a. Multiple re-performances of the control found that source to report comparison of data was not done completely or correctly c. Report design validation test found issues with the report. e. 2 of the above are correct.

Which of the following WCGWs would need to and best be mitigated by an ITD control to support this PO Entry process? (circle all that apply) a. Vendor in system that has not been pre-qualified. b. Inventory Item standard purchase price is incorrect. c. Purchase Order recorded that exceeded vendor's credit limit. d. Purchase Order has an incorrect actual unit purchase price for an item. e. Purchase Order data entry/update is NOT system-restricted to Purchase Agents.

a. Vendor in system that has not been pre-qualified. b. Inventory Item standard purchase price is incorrect.

A company has the following control in place; the IT System Administrator disables all user accounts based upon a list of employee terminations received from HR. Your sample for testing this control should come from: a. A list of all current employees received from HR b. A list of terminated employees from HR c. A list of all newly hired employees from HR d. A list of all employee accounts that were disabled

b. A list of terminated employees from HR

Which of the following WCGWs are successfully mitigated by automated application controls in the PO Entry process activity diagram? (circle all that apply) a. Vendor in system that has not been pre-qualified. b. Purchase Order has an incorrect actual unit purchase price for an item. c. Purchase Order has an incorrect quantity ordered for an item. d. Failure to receive open Purchase Orders. e. Purchase Order entered by Agent with a Conflict of Interest with the Vendor. f. Vendor credit limit is incorrect.g. Inventory Item standard purchase price is incorrect. h. Purchase Order data entry/update is NOT system-restricted to Purchase Agents. i. Purchase Order specifies vendor not approved to provide the item(s) on the order.

b. Purchase Order has an incorrect actual unit purchase price for an item. h. Purchase Order data entry/update is NOT system-restricted to Purchase Agents.

Given the following REA model snippet; Sale Order (0,N) - (1,N) Shipment; which of the following are true (circle all that are correct) : a. Every item on a Sale Order must be shipped on the same Shipment b. Some items on a Sale Order can be shipped one day, and the rest on another Shipment c. Shipments can be recorded without a Sale Order to expedite them d. Shipments require a Sale Order e. Sale Orders can be accepted but the shipment happens at a later date

b. Some items on a Sale Order can be shipped one day, and the rest on another Shipment d. Shipments require a Sale Order e. Sale Orders can be accepted but the shipment happens at a later date

ITGCs are tested by financial statement auditors for which of the following reasons: (circle all that apply)(Each correct answer: 1 point. Each incorrectly selected answer: -1 point.) a. To eliminate the need for ITD controls testing in an audit b. To help provide reasonable assurance that automated application controls operated correctly during the entire audit period c. To help determine if ITD controls can be relied upon to help produce accurate data in the financial statements d. To help determine which processes and systems are financially significant to the financial statements and therefore need to be tested

b. To help provide reasonable assurance that automated application controls operated correctly during the entire audit period c. To help determine if ITD controls can be relied upon to help produce accurate data in the financial statements

cash disbursed for goods not received

cash disbursement should be automatically matched against a receipt of goods

A company has the following control in place; all program changes must be tested and the test results documented, reviewed, and approved by appropriate personnel prior to the implementation of the change into production. Your sample for testing this control should come from: a. All change requests submitted to the Change Approval Board b. All change requests approved by the Change Approval Board c. All testing results documentation d. All changes implemented into production

d. All changes implemented into production

cash disbursement applied to incorrect vendor or Goods Receipt

data from Receive Goods event is copied to cash disbursement data including matching Vendor

T/F: Most accounting information systems do not contain ITD controls sincethey rely upon the human element and auditors require only automated application controls.

false

T/F: The maintenance of master data in an AIS does not require automated orITD controls since it is not transaction data.

false

Purchase Order data are completely and accurately transferred to the Goods Receipt activity:

-Does the system match goods received to open line items on an open Purchase Order and close each line item as the goods are received, thereby preventing further Receipts for those line items? -Match on quantity?-Match on items? -Match on vendor?

Sale Order data are completely and accurately transferred to the Shipping activity:

-Does the system match goods shipped to open line items on an open sales order and close each line item as the goods are shipped, thereby preventing further shipments for those line items? -Match on quantity? -Match on items? Shipments are accurate with accurate items, quantities, etc.

Sale orders are processed with valid prices and terms:

-Has the system been configured to limit the overwriting of prices compared to the price master data? -Discounts? -Too low? -Others? -Sale orders are properly authorized/valid.

Sale Order not initiated by Customer.

-ITD: Order copy sent to customer. -When a Sales Order is recorded in the system, one customer from the pre-approved listing of customers is selected, validated by the system, and assigned to the Sales Order. Additional Controls Testing Required for this control: -Invalid Customers in system. -Customer master list is NOT system restricted to appropriate roles/personnel.

Invalid Vendors in system

-Vendors are qualified by the credit department through D&B review / background check / by the QC department for quality concerns -Vendor Approval form is signed -Vendor addition report run monthly (ITD) -Each vendor listed is validated against approval documentation -Someone in a role different than the role responsible for adding /approving vendors to the system should review and sign off on.

Vendor-Purchase Agent conflict of interest restrictions are incorrect (Purchase Agents do not have restrictions with the correct vendors)

-automated application control: using data in the system from the Purchase Agent - Vendor relationship -ITD Control: Like Invalid Vendor

Purchase Contract created for items not needed

.

Which of the following could lead to an overstatement of Accounts Payable if not mitigated: 1. Invalid vendor in system. 2. Vendor credit limit is incorrect. 3. Invalid customer in system. 4. Sale Order specifies incorrect sales price..

1. Invalid vendor in system

Given the following REA model snippet: Purchase Order (0,N) - (1,1) Goods Receipt - which of the following are true: 1. Every item on a Purchase Order must be received on the same Goods Receipt 2. Some items on a Purchase Order can be received one day, and the rest on another Goods Receipt 3. This company allows goods to be received that were not ordered in order to expedite manufacturing runs 4. This company expects all goods ordered to be received that same day

2. Some items on a Purchase Order can be received one day, and the rest on another Goods Receipt

We have a WCGW as follows: Customer credit limit is incorrect. A creditanalyst maintains the credit limit data in the system. A sales rep entersthe sale orders. Which of the following conditions could lead an ITDcontrol that should mitigate the WCGW to not work properly: 1. ITD controls cannot ever be relied upon to work properly since they containa human element. 2. The ITD control runs every day. 3. An internal audit team member reconciles the customer credit limit data toan approval form looking for incorrect data. 4. A credit analyst reconciles the customer credit limit data to an approvalform looking for incorrect data.

4. A credit analyst reconciles the customer credit limit data to an approvalform looking for incorrect data.

The GL system that creates journal entries will automatically create theproper journal entries if: 1. GL system contains an ITD control that requires an accountant to approveevery journal entry that is created. 2. The financial statements are tested for accuracy after they are issued, afterthat, the journal entries are created. 3. Accountants create and program the automated application controlsensuring accounting approvals for all transactions. 4. Appropriate controls are in place in a transaction processing cycle to makesure the transaction data is complete, accurate, and valid. 5. A GL system never creates automated journal entries, only accountantsshould create journal entries in an AIS.

4. Appropriate controls are in place in a transaction processing cycle to makesure the transaction data is complete, accurate, and valid.

Which of the following is an example of a prevent type application control: 1. A report runs at the end of the fiscal year to identify incorrect journalentries, a computer program then is run to correct the journal entries andprevent the data from being incorrect going forward. 2. The financial statements are tested for accuracy after they are issued, afterthat, it is assumed all data is correct and all errors have been prevented. 3. An employee reviews a report and identifies incorrect sale prices and thencorrects them 2 weeks later. 4. System copies standard purchase price from Vendor-Parts List and usesas the actual purchase price for the PO.

4. System copies standard purchase price from Vendor-Parts List and usesas the actual purchase price for the PO.

Ability to create or change Cash Receipts is restricted to authorized/appropriate personnel.

AUTO

Cash Receipt not matched against the correct and/or valid Shipment.

AUTO

Catalog data entry/update is NOT system-restricted to Inventory Management Analyst.

AUTO

Shipment specifies wrong inventory item.

AUTO

Shipment records incorrect Total Amount Due

Automated application control:Totals all line items on ShipmentoQtyDelivered * Actual Unit Price from Sale Order -prevent -AR/ revenue

Customer in system that has not been pre-qualified.

Customers are qualified by the Credit Department through a Credit Reporting Service. Credit Department Analysts then enter new customers in the system and establish the credit limit in system and a Customer Approval Form is signed. A New Customer Addition Report runs monthly that identifies/lists all new Customers added since the end of previous month with their current credit limit. Each Customer listed is validated against the signed Customer Approval Form and the credit limit is checked for accuracy. Someone in a role different than the role responsible for adding /approving Customers to the system should review; signs off on review and documents the results; follows up on any problem Customer and/or credit limit; and documents the corrections. -detect -AR / revenue / inventory -ITD

Failure to bill/invoice customers.

ITD -detect

Failure to record shipments.

ITD -detect

Failure to ship open Sale Orders.

ITD / AUTO

Ordered Goods are NOT received by due date

ITD Control (use delivery ticker)

Failure to receive all cash required for a Shipment.

ITD

Invalid Catalog in system.

ITD

Invalid Category in system

ITD

Invalid Standard Discount Category in system

ITD

Inventory Standard Sale Price is incorrect.

ITD

Inventory assigned the wrong Product Category

ITD

Seasonal Price Catalog assigned to the wrong Product Category(s). (wrong one(s) or missing one(s))

ITD

Purchase Order data entry/update is NOT system-restricted to Purchase Agents.

LAC/SOD, purchase agents must login and only purchase agents have access to the Enter Purchase Order screen

Standard Sale Price for inventory item is incorrect.

Inventory Sales Price Analysts update the Standard Sales Price for some items on a monthly basis. Analyst receives a monthly Inventory Standard Sales Price Update spreadsheet from Marketing Department Management.The system is then updated to reflect the new Standard Sales Price data for an item. At the beginning of each month; after the Standard Sales Price updates are entered from the past month; an Item Standard Sales Price Report runs listing all changed (Add/Update/Delete) item prices and the current Standard Sales Price for that item. Someone in a role different than Inventory Sales Price Analysts and Marketing Department Management should review. IA reviews report and compares data to Part Inventory Sales Price Update spreadsheet. IA signs off on review and follows up on problem prices; and documents the corrections. -ITD -detect -AR / revenue

Inventory data entry/update is NOT system-restricted to appropriate Department

LAC/SOD governs who can update material data; system-restricted to personnel who do not control/count inventory, purchase, or pay for goods

Goods Receipt records invalid/incorrect quantity received.(Goods Receipt records quantity received greater than quantity ordered.)

received/counted and recorded should be equal to or less than the quantity ordered on the matching PO. system rejects the receipt of goods if the quantities do not match within tolerance limits

Inventory Items are assigned incorrect Vendor(s) in the Vendor - Item master data.

system only allows the purchasing of an item from specified vendors (vendor-parts list)

Purchase Inventory Items at inflated prices on Purchase Order (found in a Purchasing Process)

the system requires any negotiated unit purchase price for an item on a contract to be no greater than the maximum amount for that specific item from the inventory master data