day 15 chater 6 1

Which of the following is identified as a common pitfall (barrier to success) that decreases transparency in the external audit process?

A) Failure to update the audit methodology to internal control changes.

B) Lack of understanding of the data analytics process from the business side.

C) Structuring the analytics team in a silo, separate from the external audit team, decreasing transparency.

D) Embarking on a strategy that does not leverage connection points within the organization.

C) Structuring the analytics team in a silo, separate from the external audit team, decreasing transparency

Before starting an analytics-enabled audit, which key consideration should the team assess regarding the nature of the data received?

A) Determining the changes to internal controls from the previous audit period.

B) Communicating the data analytics process to all parties involved to manage expectations.

C) Engaging the data analytics team with the business side to better understand data sources.

D) Assess whether the data received is structured in a format that can be used for analytics.

Assess whether the data received is structured in a format that can be used for analytics.

Which statement best defines Risk Assessment in the context of an audit?

A) The process for assuring reliable financial reporting and compliance with laws.

B) An audit procedure that examines financial statements to see if they contain errors.

C) The process of matching two independent sets of financial records.

D) A systematic process of evaluating the potential risks that may be involved in a projected activity or undertaking.

A systematic process of evaluating the potential risks that may be involved in a projected activity or undertaking.

A benefit of using data analytics for risk assessment is its ability to relate the cost-benefit analysis of a control to:

A) The historical audit plan from the prior year.

B) The known risk, allowing practical choices.

C) The number of key reports that need to be tested.

D) The revocation testing process for user access.

The known risk, allowing practical choices.

As a substantive testing procedure, Reperformance is primarily intended to obtain evidence about client activities by:

A) Matching the client's records against a third party's records.

B) Using OCR software to analyze printed text.

C) Repeating the activities and comparing the result with the client's result.

D) Identifying high-volume, unusual journals with potential fraudulent activity.

Repeating the activities and comparing the result with the client's result.

Which of the following is a risk that internal controls are specifically designed to address?

A) Management override and financial statement fraud.

B) Customers fulfilling payment obligations late or not at all.

C) Users with conflicting roles that allow certain actions to go unmonitored.

D) Improper financial reporting of divisions or segments within a company.

Users with conflicting roles that allow certain actions to go unmonitored.

The Customization advantage of data analytics in auditing refers to the ability to tailor analytics solutions to support client needs, such as:

A) Repeating system key calculation activities.

B) Journal entry testing.

C) Testing the completeness and accuracy of key reports.

D) Unstructured text analysis using OCR.

Journal entry testing.

The characteristics used in data quality checks include:

A) Completeness, Consistency, Accuracy, Precision, and Data gaps

B) Availability, Repeatability, Risk/Impact, and Familiarity

C) Internal Controls, Risk Assessment, and Substantive Testing

D) Technology, People, and Progress

Completeness, Consistency, Accuracy, Precision, and Data gaps

The main purpose of an external audit is to:

A) Ensure compliance with Section 302 of the Sarbanes-Oxley Act of 2002

B) Extract key data points from unstructured sources

C) Provide an unbiased and independent audit opinion of whether the financial statements are presented in a fair and accurate view, without material misstatements

D) Identify high volumes of journals that might possess fraudulent activit

Provide an unbiased and independent audit opinion of whether the financial statements are presented in a fair and accurate view, without material misstatements

What is the fundamental role of Data Quality in data analytics?

A) It determines the number of key data points and relationships extracted from unstructured sources

B) It is the foundation of data analytics. The checks that are used to ensure the data is complete & accurate drives the external audit and final product.

C) It provides the ability to test the entire population instead of a sample

D) It ensures appropriate management approves every change to an application

t is the foundation of data analytics. The checks that are used to ensure the data is complete & accurate drives the external audit and final product.

What specific risk does the Accounts Payable risk profiling example help to determine?

A) Incomplete integration of IT infrastructure

B) Potential fraudulent activity that can cause a material misstatement on financial statements

C) Improper financial reporting of divisions

D) Customers fulfilling payment obligations late

Potential fraudulent activity that can cause a material misstatement on financial statements

Identifying duplicate vendor/payment, one-time payments, and restricted vendors are examples of analytics applied for risk assessment in which area

A) Internal Controls

B) Fraud, Waste, & Abuse

C) Accounts Payable

D) Substantive Testing

Accounts Payable

Data analytics for risk assessment helps auditors by:

A) Directly performing understatement tests more efficiently

B) Helping to identify and target the higher risk areas that are relevant to the auditor

C) Providing an unbiased and independent audit opinion of the financial statements

D) Allowing complex control logic to be replicated more effectively

Helping to identify and target the higher risk areas that are relevant to the auditor

An example of a risk area that Risk Assessment addresses is:

A) Users with conflicting roles that allow certain actions to go unmonitored

B) Material misstatements in financial statements

C) Improper financial reporting of divisions or segments within a company

D) Violations of Segregation of Duties

Improper financial reporting of divisions or segments within a company

The results of a Risk Assessment should primarily guide:

A) The reperformance of the client’s key calculation activities

B) The process of testing key calculations, including receiving and validating input data

C) The appropriate management action, priorities for managing information systems, and priorities for implementing controls

D) The identification of duplicate journals

The appropriate management action, priorities for managing information systems, and priorities for implementing controls

The systematic process of evaluating potential risks that may be involved in a projected activity or undertaking is the definition of:

A) Internal Controls

B) Substantive Testing

C) Risk Assessment

D) Reperformance

Risk Assessment

Which of the following assertions about financial records does Reconciliation specifically serve?

A) Valuation and Allocation

B) Rights and Obligations

C) Completeness and Existence/Occurrence

D) Accuracy and Presentation

Completeness and Existence/Occurrence

A duplicate journal is defined as one having:

A) The same gross reporting amounts posted to the same GL accounts

B) The same user and GL account number, but different dates

C) The same debit and credit amount regardless of the GL account D) Exactly the same net reporting amounts posted to exactly the same GL accounts in at least one other journal

Exactly the same net reporting amounts posted to exactly the same GL accounts in at least one other journal

What does Unstructured Text Analytics using OCR enable?

A) Repeating key calculation activities to validate business rules

B) Identifying duplicate journals with the same net impact to the same GL accounts

C) Software that automatically analyzes printed text and converts it into a structured format

D) Comparing summary system reports to raw data

Software that automatically analyzes printed text and converts it into a structured format

The goal of using analytics for Journal Entry Testing is primarily to: A) Find users with conflicting roles

B) Identify high risk journals by looking for large and unusual journals or fraudulent activity

C) Test contract modifications and financial disclosures

D) Test the completeness and accuracy of key reports

Identify high risk journals by looking for large and unusual journals or fraudulent activity

Reconciliation is a substantive testing application that involves:

A) Identifying high volumes of journals that might possess fraudulent activity

B) Repeating client activities and comparing the result with the client’s result

C) Converting printed text into a structured format

D) The process of matching two independent sets of records (Client’s records against a third party’s records)

The process of matching two independent sets of records (Client’s records against a third party’s records)

Which is a benefit of using data analytics for substantive testing?

A) It ensures that appropriate management revokes access to users who no longer require it

B) It allows to effectively identify accounts that may contain material misstatements in a timely manner

C) It helps to identify and target higher risk areas relevant to the auditor

D) It ensures the accuracy of financial reporting

It allows to effectively identify accounts that may contain material misstatements in a timely manner

A risk that substantive testing primarily addresses is:

A) Users with conflicting roles that allow unmonitored actions

B) The use of multiple data sources for one process

C) Incomplete integration of IT infrastructure when buying business units

D) Management override and financial statement fraud

Management override and financial statement fraud

The purpose of Substantive Testing is to provide evidence that:

A) Internal controls are compliant with the Sarbanes-Oxley Act of 2002

B) Processes are repeatable across client engagements

C) The financial records of an entity are complete, valid, and accurate

D) A few key factors affect the account balance

The financial records of an entity are complete, valid, and accurate

What is the main purpose of testing Key Reports?

A) To reperform the calculation and validate the input data

B) To test the completeness and accuracy of each key report

C) To identify journals which are apparent duplicates of each other D) To convert data within contracts into meaningful insights

To test the completeness and accuracy of each key report

If a financial institution has an internal control issue where a staff member approved a supervisor’s request for access to a certain application, they likely failed to properly follow the control related to: A) Segregation of Duties (SOD)

B) Key Report Testing

C) New User Testing (as appropriate management needs to approve access)

D) Key Calculations

New User Testing (as appropriate management needs to approve access)

Which internal control concept is violated when an employee who is a telephone operator is given access to edit financial data?

A) Revocation Testing

B) Change Management

C) New User Testing (specifically, that management approves appropriate access for all new users)

D) Segregation of Duties (SOD)

New User Testing (specifically, that management approves appropriate access for all new users)

What type of ITGC is designed to ensure that appropriate management approves every change that is made to an application?

A) Segregation of Duties (SOD)

B) Revocation Testing

C) Change Management

D) New User Testing

Change Management

What are Segregation of Duties (SOD) controls designed to prevent?

A) Unnecessary or harmful changes from being deployed to an application

B) Access being revoked for users who no longer need it

C) Material misstatements in financial statements

D) An overlap of responsibilities by clearly distinguishing user roles

An overlap of responsibilities by clearly distinguishing user roles

Which of the following is a benefit of using data analytics for internal controls?

A) The ability to identify accounts that may contain material misstatements in a timely manner

B) The process of matching two independent sets of records

C) Control reliability can be tested more accurately by using the entire population of input data

D) Obtaining evidence about client activities by repeating the activities

Control reliability can be tested more accurately by using the entire population of input data

The application of analytics for internal controls includes testing:

A) Source, manual/automated, and unusual entries

B) Fraud, waste, and abuse

C) IT General Controls (ITGCs) like application logical security, change management, and segregation of duties

D) Accounts Payable for duplicate vendor/payment

IT General Controls (ITGCs) like application logical security, change management, and segregation of duties

According to the slides, what is the primary function of Internal Controls?

A) Systematically evaluating potential risks involved in an activity

B) Examining financial statements for errors and misstatements

C) To ensure the accuracy of financial reporting

D) Identifying high-risk profile vendors

To ensure the accuracy of financial reporting

Which action is listed as a key consideration for the success of data analytics in auditing?

A) Focusing on a historical audit plan instead of risk

B) Restricting communication of the analytics process to only the external audit team

C) Assess whether the data received is structured in a format that can be used for analytics

D) Maintaining the prior audit period's internal controls methodology

Assess whether the data received is structured in a format that can be used for analytics

When assessing Complexity for an audit candidate, which of the following is considered?

A) Whether the audit has a high perceived impact

B) Whether the process is a common audit focus area

C) Whether the cost-benefit analysis relates to the known risk

D) Are there multiple sources? Is the data able to be validated for consistency and completeness?

Are there multiple sources? Is the data able to be validated for consistency and completeness?

The criterion of Familiarity in the selection framework for an analytics-enabled audit asks:

A) Are there multiple data sources, and can the data be validated for completeness?

B) Is the dataset or risk area applicable to other potential audits or business units?

C) Does the team have knowledge of the business process to understand the risks and data?

D) Does the process represent a high-risk area to the company?

Does the team have knowledge of the business process to understand the risks and data?

A "Strong analytics candidate" in the selection framework is characterized by a "Yes" answer for:

A) Data availability, repeatability, and process and data knowledge only

B) Repeatability, complexity, and applicability

C) All criteria: Data availability & complexity, Repeatability, Risk/Impact, Familiarity, and Applicability

D) Risk/Impact, familiarity, and ability to leverage in future only

All criteria: Data availability & complexity, Repeatability, Risk/Impact, Familiarity, and Applicability

In the framework for selecting an analytics-enabled audit, which question relates to Repeatability?

A) Does the team have knowledge of the business process to understand the risks and data?

B) Is data available for the process in an easy to access and use format?

C) Does the area represent a common audit focus areas that would repeat in the future?

D) Does the process represent a high-risk area to the company?

Does the area represent a common audit focus areas that would repeat in the future?

A secondary advantage of using the "right mix of mind and machine" in data analytics is:

A) Ensuring compliance with Sarbanes-Oxley (SOX) regulation standards

B) Helping reduce the impact of human bias

C) Automatically converting printed text into a structured format

D) Focusing on a few key factors that affect an account balance

Helping reduce the impact of human bias

The benefit of Predictability in data analytics is primarily related to: A) Better understanding the risks and data through process knowledge

B) The ability to replicate processes across type of work and client engagements

C) Tailoring analytics solutions to support client-specific requirements

D) Identifying journals that might possess fraudulent activity

The ability to replicate processes across type of work and client engagements

How does the application of data analytics enhance Efficiency in an audit?

A) By allowing for the testing of a complete population of transactions

B) By providing a framework for selecting audit candidates

C) By maximizing time spent structuring data into information

D) By facilitating the separation of duties for IT General Controls

By maximizing time spent structuring data into information

The advantage of Data Insight when applying data analytics in an audit is best described as:

A) The ability to replicate processes across different work and client engagements

B) The reduction of human bias and the yielding of more accurate answers

C) The capability to tailor solutions to specific client needs, such as journal entry testing

D) Visualization and analytics tools providing a better view of the data and pinpointing areas of interest for auditors

Visualization and analytics tools providing a better view of the data and pinpointing areas of interest for auditors

Which of the following is a primary advantage of using data analytics in an audit related to test size

? A) Ability to tailor analytics solutions to support client needs

B) Maximizing time spent structuring data into information

C) Ability to test the entire population instead of a sample

D) Yielding more accurate answers for complex problems

Ability to test the entire population instead of a sample