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Study Resources (Accounting)

11.The most frequent victims of program viruses are microcomputers. 12.Access controls protect databases against destruction, loss or misuse through unauthorized access. 13.Operating system integrity is not of concern to accountants because only hardware risks are involved. 14.Audit trails in computerized systems are comprised of two types of audit logs: detailed logs of individual.
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MULTIPLE CHOICE 1. Account Investor Investee Sales $500,000 $300,000 Cost of Goods Sold   230,000   170,000 Gross Profit $270,000 $130,000 Selling & Admin. Expenses   120,000   100,000 Net Income $150,000 $  30,000 Dividends paid 50,000 10,000 Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the Controlling Interest? a. $164,000 b. $171,000 c. $178,000 d. $180,000 2.Consolidated financial statements are designed to provide: a. informative information to all shareholders. b. the results of operations, cash.
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21.Electronic data interchange customers may be given access to the vendor's data files. 22.The audit trail for electronic data interchange transactions is stored on magnetic media. 23.A firewall is a hardware partition designed to protect networks from power surges. 24.To preserve audit trails in a CBIS environment, transaction logs are permanent records of.
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18.Explain the relationship between internal controls and substantive testing. 19.Discuss the interrelationship of tests of controls, audit objectives, exposures, and existing controls. 20.Distinguish between errors and irregularities. Which do you think concern the auditors the most? 21.Describe two tests that an auditor would perform to ensure that the disaster recovery plan is adequate. 22.Distinguish.
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12.What is a mirrored data center? 13.Why is supervisory control more elaborate in the CBIS environment than in the manual environment? 14.What are some control implications of the distributed data processing model? 15.What is program fraud? 16.The distributed data processing approach carries some control implications of which accountants should be aware. Discuss two. 17.__________________________ are.
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ESSAY 1.What are the three security objectives of audit trails? Explain. 2.What is an operating system? What does it do? What are operating system control objectives? An operating system carries out three primary functions: translating high level languages into machine language using modules called compilers and interpreters; allocating computer resources to users, workgroups,.
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11.When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees.
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23.Contrast internal and external auditing. 24.What are the components of audit risk? 25.How do the tests of controls affect substantive tests? 26.What is an auditor looking for when testing computer center controls? 27.Define and contrast attestation services and assurance services. .
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16.Which control will not reduce the likelihood of data loss due to a line error? a.echo check b.encryption c.vertical parity bit d.horizontal parity bit 17.Which method will render useless data captured by unauthorized receivers? a.echo check b.parity bit c.public key encryption d.message sequencing 18.Which method is most likely to detect unauthorized access to the system? a.message transaction log b.data encryption standard c.vertical parity.
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6.Explain the concept of discretionary access privileges. 7.One purpose of a database system is the easy sharing of data. But this ease of sharing can also jeopardize security. Discuss at least three forms of access control designed to reduce this risk. 8.Explain how the one-time password approach works. 9.Network communication poses some special.
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6.Which backup technique is most appropriate for sequential batch systems? a.grandfather-father-son approach b.staggered backup approach c.direct backup d.remote site, intermittent backup 7.When creating and controlling backups for a sequential batch system, a.the number of backup versions retained depends on the amount of data in the file b.off-site backups are not required c.backup files can never be used for.
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6.The PCAOB’s standard No. 2 specifically requires auditors to understand transaction flows in designing their test of controls. What steps does this entail? 1. Selecting the financial accounts that have material implications for financial reporting. 2. Identify the application controls related to those accounts. As previously noted, the 3. Identify the.
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PROBLEM 1.Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet: Homepage Corporation Balance Sheet December 31, 20X5 Assets Liabilities and Equity Current assets $  40,000 Current Liabilities $  60,000 Land 20,000 Capital Stock (50,000 Buildings (net) 80,000      shares, $1 par value) 50,000 Equipment (net) 60,000 Other Paid-in Capital 20,000 Retained Earnings     70,000 $200,000 $200,000 Internet also acquired the following fair.
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ESSAY 1.Outline the six controllable activities that relate to new systems development 2.Explain the three methods used to correct errors in data entry. 3.The presence of an audit trail is critical to the integrity of the accounting information system. Discuss three of the techniques used to preserve the audit trail. .
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4.Define each of the following input controls and give an example of how they may be used: 5.After data is entered into the system, it is processed. Processing control exists to make sure that the correct things happen during processing. Discuss processing controls. 6.If input and processing controls are adequate, why are.
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14.Describe a risk associated with the phased cutover procedure for data conversion. 15.List the attributes of output views. 16.What are embedded instructions? Why do they matter? 17.What are the two methods of electronic input? How do they differ? 18.Describe the Cold Turkey (or Big Bang) approach to system cutover. 19.Discuss the advantage of the parallel.
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MULTIPLE CHOICE 1.Which of the following is NOT an implication of section 302 of the Sarbanes-Oxley Act? a.Auditors must determine, whether changes in internal control has, or is likely to, materially affect internal control over financial reporting. b.Auditors must interview management regarding significant changes in the design or operation of internal control that.
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11.A disaster recovery plan is a comprehensive statement of all actions to be taken after a disaster. 12.IT auditing is a small part of most external and internal audits. 13.Assurance services is an emerging field that goes beyond the auditor’s traditional attestation function. 14.An IT auditor expresses an opinion on the fairness of.
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21.The fundamental difference between internal and external auditing is that a.internal auditors represent the interests of management and external auditors represent outsiders b.internal auditors perform IT audits and external auditors perform financial statement audits c.internal auditors focus on financial statement audits and external auditors focus on operational audits and financial statement audits d.external auditors.
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7.Diamond acquired Heart's net assets. At the time of the acquisition Heart's Balance sheet was as follows: Accounts Receivable $130,000 Inventory 70,000 Equipment, Net 50,000 Building, Net 250,000 Land & Building, Net   100,000 Total Assets $600,000 Bonds Payable $100,000 Common Stock 50,000 Retained Earnings   450,000 Total Liabilities and Stockholders' Equity $600,000 Fair values on the date of acquisition: Inventory $100,000 Equipment 30,000 Building 350,000 Land 120,000 Brand name copyright 50,000 Bonds payable 120,000 Acquisition costs: $    5,000 Required: Record the entry for the purchase of.
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3.The Chan Corporation purchased the net assets (existing liabilities were assumed) of the Don Company for $900,000 cash. The balance sheet for the Don Company on the date of acquisition showed the following: Assets Current assets $100,000 Equipment 300,000 Accumulated depreciation (100,000) Plant 600,000 Accumulated depreciation (250,000) Total $650,000 Liabilities and Equity Bonds payable, 8% $200,000 Common stock, $1 par 100,000 Paid-in.
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6.Define general controls. 7.Discuss the key features of Section 302 of the Sarbanes-Oxley Act. 8.What the three primary CBIS functions that must be separated? 9.List three pairs of system functions that should be separated in the centralized computer services organization. Describe a risk exposure if the functions are not separated. 10.For disaster recovery purposes,.
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PROBLEM 1.Supernova Company had the following summarized balance sheet on December 31, 20X1: Assets Accounts receivable $   200,000 Inventory 450,000 Property and plant (net) 600,000 Goodwill      150,000      Total $1,400,000 Liabilities and Equity Notes payable $   600,000 Common stock, $5 par 300,000 Paid-in capital in excess of par 400,000 Retained earnings      100,000      Total $1,400,000 The fair value of the inventory and property and plant is $600,000 and $850,000, respectively. Assume that Redstar.
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5.Discuss the advantages and disadvantages of the three methods of converting to a new system: cold turkey cutover, phased cutover, and parallel operation cutover. 6.What issues must be considered in designing hardcopy documents? 7.What is the role of test data? What is a base case? 8.Correctly designed modules possess two attributes. Name and.
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11.A second site backup agreement between two or more firms with compatible computer facilities to assist each other with data processing needs in an emergency is called a.internally provided backup b.recovery operations center c.empty shell d.mutual aid pact 12.The major disadvantage of an empty shell solution as a second site backup is a.the host site may.
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31.Which test is not an example of a white box test? a.determining the fair value of inventory b.ensuring that passwords are valid c.verifying that all pay rates are within a specified range d.reconciling control totals 32.When analyzing the results of the test data method, the auditor would spend the least amount of time reviewing a.the test.
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11.Auditors examine the physical environment of the computer center as part of their audit. Many characteristics of computer centers are of interest to auditors. What are they? Discuss. 12.Explain why certain duties that are deemed incompatible in a manual system may be combined in a CBIS environment? Give an example. 13.Compare and.
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11.Separately identified intangible assets are accounted for by amortizing: a. exclusively by using impairment testing. b. based upon a pattern that reflects the benefits conveyed by the asset. c. over the useful economic life less residual value using only the straight-line method. d. over a period not to exceed a maximum of 40 years. 12.While performing a goodwill impairment.
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9.Mans Company is about to purchase the net assets of Eagle Incorporated, which has the following balance sheet: Assets Accounts receivable $  60,000 Inventory 100,000 Equipment $  90,000 Accumulated depreciation   (50,000) 40,000 Land and buildings $300,000 Accumulated depreciation (100,000) 200,000 Goodwill     60,000      Total assets $460,000 Liabilities and Stockholders' Equity Bonds payable $  80,000 Common stock, $10 par 200,000 Paid-in capital in excess of par 100,000 Retained earnings     80,000      Total liabilities and equity $460,000 Mans.
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MULTIPLE CHOICE 1.Which statement is not correct? The audit trail in a computerized environment a.consists of records that are stored sequentially in an audit file b.traces transactions from their source to their final disposition c.is a function of the quality and integrity of the application programs d.may take the form of pointers, indexes, and embedded.
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MULTIPLE CHOICE 1.An economic advantage of a business combination includes a. Utilizing duplicative assets. b. Creating separate management teams. c. Coordinated marketing campaigns. d. Horizontally combining levels within the marketing chain. 2.A tax advantage of business combination can occur when the existing owner of a company sells out and receives: a. cash to defer the taxable gain as a "tax-free reorganization." b. stock to.
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11.Achieving batch control objectives requires grouping similar types of input transactions (such as sales orders) together in batches and then controlling the batches throughout data processing. 12.The "white box" tests of program controls are also known as auditing through the computer. 13.The presence of a SPLMS effectively guarantees program integrity. 14.When using the.
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SHORT ANSWER 1.Contrast the source program library (SPL) management system to the database management system (DBMS). 2.Describe two methods used to control the source program library. 3.New system development activity controls must focus on the authorization, development, and implementation of new systems and its maintenance. Discuss at least five control activities that are.
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26.In an Electronic Data Interchange (EDI) environment, when the auditor compares the terms of the trading partner agreement against the access privileges stated in the database authority table, the auditor is testing which audit objective? a.all EDI transactions are authorized b.unauthorized trading partners cannot gain access to database records c.authorized trading partners have.
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10.Describe two tests of controls that would provide evidence that the database management system is protected against unauthorized access attempts. 11.What is event monitoring? 12.What are the auditor's concerns in testing EDI controls? 13.What is a database authorization table? 14.What is a user-defined procedure? 15.What are biometric devices? .
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ESSAY 1.Describe at least four advantages and two disadvantages of the Computer Aided Software Engineering (CASE) approach. 2.CASE tools develop systems without the intermediate step of writing human readable source code. This can pose some concerns for accountants. What are they? 3.Discuss the appropriate steps to take when selecting a commercial software package. 4.The.
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11.An example of a hash total is a.total payroll checks–$12,315 b.total number of employees–10 c.sum of the social security numbers–12,555,437,251 d.none of the above 12.Which statement is not true? A batch control record a.contains a transaction code b.records the record count c.contains a hash total d.control figures in the record may be adjusted during processing e.All the above are true 13.Which.
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TRUE/FALSE 1.Corporate management (including the CEO) must certify monthly and annually their organization’s internal controls over financial reporting. 2.Both the SEC and the PCAOB requires management to use the COBIT framework for assessing internal control adequacy. 3.Both the SEC and the PCAOB requires management to use the COSO framework for assessing internal control.
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21.Methods used to maintain an audit trail in a computerized environment include all of the following except a.transaction logs b.Transaction Listings. c.data encryption d.log of automatic transactions 22.Risk exposures associated with creating an output file as an intermediate step in the printing process (spooling) include all of the following actions by a computer criminal except a.gaining.
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31.All of the following tests of controls will provide evidence about the adequacy of the disaster recovery plan except a.inspection of the second site backup b.analysis of the fire detection system at the primary site c.review of the critical applications list d.composition of the disaster recovery team 32.Which of the following is true? a.In the CBIS.
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ESSAY 1.Goodwill is an intangible asset. There are a variety of recommendations about how intangible assets should be included in the financial statements. Discuss the recommendations for proper disclosure of goodwill. Include a comparison with disclosure of other intangible assets. 2.While acquisitions are often friendly, there are numerous occasions when a party.
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5.On January 1, 20X1, Honey Bee Corporation purchased the net assets of Green Hornet Company for $1,500,000. On this date, a condensed balance sheet for Green Hornet showed: Book Fair Value Value Current Assets $   500,000 $800,000 Long-Term Investments in Securities 200,000 150,000 Land 100,000 600,000 Buildings (net)      700,000 900,000 $1,500,000 Current Liabilities $   300,000 $300,000 Long-Term Debt 550,000 600,000 Common Stock (no-par) 300,000 Retained Earnings      350,000 $1,500,000 Required: Record the entry on Honey Bee's books for the.
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ESSAY 1.Discuss the key features of Section 404 of the Sarbanes-Oxley Act 2.Section 404 requires management to make a statement identifying the control framework used to conduct their assessment of internal controls. Discuss the options in selecting a control framework. 3.Explain how general controls impact transaction integrity and the financial reporting process. 4.Prior to.
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SHORT ANSWER 1.Briefly define an operating system. 2.What is a virus? 3.Describe one benefit of using a call-back device. 4.Contrast the Private Encryption Standard approach with the Public Key Encryption approach to controlling access to telecommunication messages. 5.List three methods of controlling unauthorized access to telecommunication messages. 6.Describe two ways that passwords are used to authorize.
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9.Input controls are programmed procedures (routines) that perform tests on transaction 10.A __________________________ fraud affects a large number of victims but the harm to each appears to be very small. 11.Describe a test of controls that would provide evidence that only authorized program maintenance is occurring. 12.Auditors do not rely on detailed knowledge.
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2.On December 31, 20X1, Priority Company purchased 80% of the common stock of Subsidiary Company for $1,550,000. On this date, Subsidiary had total owners' equity of $650,000 (common stock $100,000; other paid-in capital, $200,000; and retained earnings, $350,000). Any excess of cost over book value is due to the under.
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TRUE/FALSE 1.In a computerized environment, the audit trail log must be printed onto paper documents. 2.Disguising message packets to look as if they came from another user and to gain access to the host’s network is called spooling. 3.Access controls take on increased importance in a computerized environment because all of the records.
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7.Describe and contrast the test data method with the integrated test facility. 8.Contrast Embedded Audit Modules with Generalized Audit Software. 9.What is the purpose of the auditor's review of SDLC documentation? 10.Microcomputers have traditionally been difficult to control, leaving auditors with special problems in verifying physical controls. Discuss what an auditor's objectives might.
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TRUE/FALSE 1.Programs in their compiled state are very susceptible to the threat of unauthorized modification. 2.Maintenance access to systems increases the risk that logic will be corrupted either by the accident or intent to defraud. 3.Source program library controls should prevent and detect unauthorized access to application programs. 4.A check digit is a method.
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