AUDITING EDP CHAPTER 3: FLOWCHARTS AND DECISION LOGIC TABLES 5. 1.

They depict the interrelationships of sets of data records and can help the auditor locate the same information in different records or files or cross-checking. a. Grid charts b. Layout charts c. Program flowcharts d. Systems flowcharts A well prepared flowchart should make it easier for the auditor to a. Prepare audit procedure manuals. b. Prepare detailed job descriptions. c. Trace the origin and disposition of documents. d. Assess the degree of accuracy of financial data. Which of the following client EDP systems generally can be audited without examining or directly testing the EDP computer programs of the system? a. A system that performs relatively uncomplicated processes and produces detailed output. b. A system that affects a number of essential master files and produces a limited output. c. A system that updates a few essential master files and produces no printed output other than final balances. d. A system that performs relatively complicated processing and produces very little detailed output. Internal control is ineffective when computer department personnel a. Participate in computer software acquisition decisions. b. Design documentation for computerized systems. c. Originate changes in master files. d. Provide physical security for

program files. Which of the following is not a major reason for maintaining an audit trail for a computer system? a. Deterrent to irregularities b. Monitoring purposes c. Analytical procedures d. Query answering It portrays the processing of accounting data graphically within the computer a. Simple sequence pattern b. Program flowcharting c. Automatic flowcharting d. Decision logic table An auditor would least likely use computer software to a. Access client data files. b. Prepare spreadsheets. c. Assess EDP control risk. d. Construct parallel simulations. The following are parts of a decision logic table, except a. Rules b. Condition stub c. Action entries d. Action stub Using microcomputers in auditing may affect the methods used to review the work of staff assistants because a. Supervisory personnel may not have an understanding of the capabilities and limitations of microcomputers. b. Working paper documentation may not contain readily observable details of calculations c. The audit field work standards for supervision may differ. d. Documenting the supervisory review may require assistance of management services personnel.

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10. An advantage of using systems flowcharts

to document information about internal control instead of using internal control questionnaires is that systems flowcharts a. Identify internal control weaknesses more prominently. b. Provide a visual depiction of clients activities. c. Indicate whether control procedures are operating effectively. d. Reduce the need to observe clients employees performing routine tasks. 11. A flowchart is most frequently used by an auditor in connection with the a. Preparation of generalized computer audit programs. b. Review of the clients internal controls. c. Use of statistical sampling in performing an audit. d. Performance of analytical procedures of account balances. 12. The following are basic programming patterns, except a. Simple sequence pattern b. Loop pattern c. Trunk pattern d. Loop pattern 13. Which of the following activities would most likely be performed in the EDP department? a. Initiation of changes to master records. b. Conversion of information to machine-readable form. c. Correction of transactional errors. d. Initiation of changes to existing applications. 14. In a computerized system, procedure or problem-oriented language is converted to machine language through a(an) a. Interpreter b. Verifier

c. Compiler d. Converter 15. The following are examples of methods of testing of a system flowchart, except a. Inspection b. Walkthrough c. Cradle-to-grave test d. Sample of one 16. Which of the following statements is true? a. A flowchart documents both the accounting system in general and specific computer programs. b. One of the reasons for showing audit trail is that the auditor must be able to trace computer printouts to source documents only. c. Auditing task is less efficient when analytical tools are used to guide the auditor through the processing labyrinth. d. Testing of systems flowchart is done by following the program logic through the computer program. 17. The flowchart symbol shown is

a. Document b. Manual operations c. Decision d. Input/output 18. It is a graphic representation of a data processing application that depicts the interaction of all computer programs or a given system, rather than the logic for an individual computer program. a. Program flowchart b. Internal control flowchart c. Document flowchart d. System flowchart

19. The following flowcharting symbol provides additional description or information connected to symbol to which it annotates by a dotted line ----a. Flowline b. Communication link c. Magnetic tape d. Annotation 20. The following are analytical tools, except a. Decision logic table b. System flowchart c. Layout chart d. Balanced scorecard 21. They are general usage or customs which facilitates in the construction or interpretation of flowcharts. a. Convections b. Conductions c. Conductors d. Conventions 22. The following are the major advantages of flowcharting, except a. It is a unique medium requiring specific expertise. b. It is a graphic representation instead of verbal representation. c. It shows the steps required and the flow of the documents, thus minimizing a tendency to overlook controls. d. It helps avoid a detailed study of written descriptions and procedures. 23. They are graphic means of presenting the logic of a computer program and test the computer program. a. Program flowcharts b. Decision logic tables c. Gantt charts d. Boston Consulting Group Matrix

24. It is a part of a decision logic table which lists the processing calculations. a. Condition stub b. Action stub c. Condition entries d. Action entries 25. The flowcharting symbol shown below is a. Display b. Manual data entry c. On page connector d. Decision 26. It is a procedure to graphically show the sequential flows of data and/or operations. a. Documenting b. Planning c. Tracing d. Flowcharting 27. It is created by analyzing the source code a. Auditors program b. Automatic flowcharting c. Cradle-to-grave test d. Layout chart 28. It is a graphic representation of the flow of documents from one department to another, showing the source flow and final disposition of the various copies of all documents. a. Decision table b. Data flow diagram c. Internal control (audit) flowchart d. Data flowchart 29. It consists of the configuration of physical EDP equipment. a. Internal control b. Hardware c. Software d. Output devices 30. Is the written description of a system, application, or program designed to substantiate or to explain some aspect of

the system, application, or program. a. Document b. Documentation c. Process d. Processing 31. The following are advantages of using decision logic tables, except a. It avoids a detailed study of written descriptions and procedures. b. It is compact and easily understood. c. It provides systematic approach. d. It is easy to generate test data or a computer program using a decision logic table. 32. It is a part of a decision logic table which lists the decisions to be made. a. Condition stub b. Action stub c. Condition entries d. Action entries 33. It is a decision logic table wherein the redundant decision rules have been eliminated. a. Expected decision logic table b. Compacted decision logic table c. Expanded decision logic table d. Deflated decision logic table 34. In contrasting the flowchart with both narrative description of how the computer program is supposed to operate and how it actually functions a. Differences should not be brought to the clients attention but documented in working papers. b. Differences should be brought to the clients attention but need not be documented in working papers. c. Differences need not both be brought to the clients attention and documented in working papers. d. Differences should be brought to the clients attention and

documented in working papers. 35. It shows the contents of computer records. a. Layout chart b. Grid chart c. Gantt chart d. Pie chart 36. In decision logic tables, they are the different combinations of conditions and resulting actions. a. Conditions b. Actions c. Rules d. Decisions 37. This includes the infrastructures, software, people, procedures, and data. a. Information system b. Hardware c. Software d. Computer system 38. Which of the following is the set of risk assessment procedures? a. Inspection, inquiry, observation, confirmation b. Inspection, inquiry, observation, analytical procedures c. Inspection, inquiry, observation, walkthrough d. Inspection, inquiry, observation, testing 39. Internal control is expected to provide reasonable assurance of achieving the entitys objective because of the following inherent limitations, except a. The possibility that procedures may become inadequate due to changes in conditions, and compliance with procedures may deteriorate. b. Most internal controls tend to be directed at non-routine transactions rather than routine transactions.

c. Cost of internal control should not exceed its benefit. d. The possibility that a member of management overriding an internal control. 40. The normal sequence of documents and operations on a well-prepared systems flowchart is a. Top to bottom and left to right b. Top to bottom and right to left c. Bottom to top and left to right d. Bottom to top and right to left 41. Which o the following statements regarding auditors documentation of the clients internal control is correct? a. Documentation must include flowcharts. b. Documentation must include procedural write-ups. c. No documentation is necessary although it is desirable. d. No one particular form of documentation is necessary and the extent of documentation may vary. 42. Decision tables differ form program flowcharts in that decision tables emphasize a. Ease of manageability for complex programs. b. Logical relationships among conditions and actions. c. Cost-benefit factors justifying the program. d. The sequence in which operations are performed. 43. An auditor may compensate for a weakness in internal control by increasing the a. Level of detection risk b. Preliminary judgment about audit risk c. Extent of test of controls d. Extent of substantive procedures

44. Which of the following is true about the auditors consideration of internal control? a. The auditors must assess control risk at a level lower than the maximum. b. The auditors must prepare a flowchart description of internal control for their working papers. c. The auditors must obtain an understanding of the steps in processing major types of transactions. d. The auditors must perform tests of controls. 45. When obtaining an understanding of an entitys internal control an auditor should concentrate on the substance o controls rather than their form because a. The controls may be operating effectively but may not be documented. b. Management may establish appropriate controls but not enforce compliance with them. c. The controls may be so inappropriate that no reliance is contemplated by the auditor. d. Management may implement controls whose costs exceed their benefits. 46. In an audit of financial statements in accordance with PSAs, an auditor is required to a. Document his understanding of the entitys internal control system. b. Search for significant deficiencies in the operation of internal control. c. Perform tests of controls to evaluate the effectiveness of the entitys internal control. d. Determine whether controls are suitably designed to prevent or detect misstatements.

47. Which of the following controls most likely would assure that an entity can reconstruct its financial records? a. Hardware controls are built into the computer by the computer manufacturer. b. Backup diskettes or tapes of files are stored away from originals. c. Personnel who are independent of data input perform parallel simulations. d. System flowcharts provide accurate descriptions of input and output operations. 48. An auditor most likely would test for the presence of unauthorized EDP program changes by running a a. Program with test data. b. Check digit verification program. c. Source code comparison program. d. Program that computes control totals. 49. What type of EDP system is characterized by data that are assembled form more than one location and records that are updated immediately? a. Microcomputer system b. Minicomputer system c. Batch processing system d. Online real-time system 50. The primary purpose of the auditors study and evaluation of internal control is to provide a basis for a. Determining whether procedures and records that are concerned with safeguarding of assets are reliable. b. Constructive suggestions to clients concerning improvements in internal control. c. Determining the nature, extent and timing of audit procedures to be applied. d. The expression of an opinion.

Prepared by: Gladys D. Abud Marianne Lei C. Estur