Question Tag: Application Controls

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  • 15 Marks

AAA – Nov 2016 – L3 – Q4a – Audit of IT Systems and Data Analytics

Evaluate the advantages and disadvantages of test data and audit software for compliance and substantive testing.

You have been appointed as the Auditor of a company whose accounting transactions are processed using a computer. You have decided to use Computer-Assisted Audit Techniques (CAATs) to generate evidence for the audit assignment.

Required:
i. State FOUR advantages and THREE disadvantages of using test data in compliance testing of application controls. (7 Marks)
ii. List FOUR activities for which audit software may be used to perform substantive tests by the auditor. (4 Marks)
iii. List TWO advantages and TWO disadvantages of the use of audit software. (4 Marks)

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  • 15 Marks

AAA – Nov 2021 – L3 – Q6 – Audit of IT Systems and Data Analytics

Outline application controls for computerised systems and develop an audit strategy following ISA 300 for large, computerised clients.

The firm you work for has considered the growing development in some sectors of the economy and the opportunities this development portends.

Your firm is a sole practitioner, and though the partner has the skills and professional competences necessary to undertake big jobs, applications for big jobs have always been turned down.

To get involved and secure some of these big jobs, your partner has dialogued with some other sole practitioners who share the same view. They have agreed to operate a merged firm starting in the year 2022. Appropriate registration of the new practice name with the Corporate Affairs Commission and application for a license in the new name from the Institute are being processed. To prepare for securing and executing some of these big jobs, preparations are set to commence once the registrations are approved. Some of the target jobs involve computerised entities, so your partner has assigned you some preparatory tasks, as he is the lead partner.

Required:

a. Prepare a document showing the application controls that will be focused on in the computerised systems of the entities. (7 Marks)

b. Develop an appropriate audit strategy in accordance with ISA 300, “Planning an audit of financial statements.” (8 Marks)

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  • 20 Marks

AAA – May 2018 – L3 – SB – Q3 – Auditor’s Legal Liability

Evaluate necessary IT general and application controls for a fully computerized hotel to ensure data integrity and security.

A new hotel opened for operations on February 1, 2016, in Abuja. The directors at their board meeting in September 2016 selected December as the hotel’s year-end. Also, from the conception of the hotel, it was decided to fully computerize the hotel and its operations. This will make the hotel stand out and attract clientele in the federal capital territory where there are many other hotels with strong competition.

The room doors are electronically operated and use electronic cards for opening. If a customer does not specify his/her duration and has the lock properly programmed, the door will lock at 12 noon, requiring the customer to go back to the reception for access. Furthermore, all accounting and other processes are computerized.

The IT company that handled the computerization agreed to leave a member of staff who will train the hotel’s staff for three months and ensure that the system operates efficiently. Management believes that the staff will familiarize themselves with the system within that period. The server handles all doors, accounting processes including billing, and the determination of room occupancy rate on a daily basis. Various units of the hotel have desktop units which key employees use in both ordering and communication between themselves. The server is located next to the operations manager’s office, who is responsible for overseeing it in addition to other duties.

The last quarterly report on the hotel activities was not consistent with expectations, and the occupancy rate did not match turnover. The management of the hotel approached your firm of chartered accountants to be engaged as auditors to the hotel. Your review and interactions as the leader of the audit team revealed the information disclosed above.

Required:

Evaluate and apply the relevant general and application controls necessary to be installed in the hotel’s information environment.
(Total 20 Marks)

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  • 30 Marks

AAA – Nov 2018 – L3 – Q1 – Audit of IT Systems and Data Analytics

Training audit personnel on issues and controls for online businesses audit

You are the audit partner of Rolami Adiatu & Company, a firm of Chartered Accountants. In the process of planning an audit, you have identified the need to train audit personnel involved in the audit of clients engaged in online businesses.

You have concluded arrangements with your human resources department to organize training for the firm’s audit team, which includes trainees, supervisors, and managers. You are preparing notes that will assist you in training the team to appreciate the problems that may arise in the audit of online businesses and how they could be minimized.

Required:

a. Prepare briefing notes explaining online systems and the operational advantages they offer to entities that use them. (6 Marks)

b. Identify the general and application controls needed to tackle the audit problems created by online systems. (9 Marks)

c. i. Discuss Electronic Data Interchange (EDI). ii. Explain four possible problems EDI may create for the auditor. iii. Explain four relevant controls to minimize the audit risk inherent in EDI systems. (15 Marks)

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  • 20 Marks

AA – May 2021 – L2 – Q4 – Internal Control Systems

Examination of methods to document internal controls, control activities, and types of IT controls.

A regulatory review was conducted on SINAPE Microfinance Bank Limited in September 2018. During the course of the review, numerous findings and recommendations were made regarding the bank’s compliance with internal and external regulations, policies, and guidelines.

It was noted in the report that processing systems, internal controls over financial accounting, and financial reporting were inadequate. The review of the bank’s processes and transaction recognition procedures was unsatisfactory. Additionally, there were instances where management overrode controls in financial reporting processes.

The regulator required the bank to appoint a reputable firm of chartered accountants to perform a review of the internal control system and make a comprehensive recommendation. Your firm has been appointed by the bank to perform the internal control reviews, and a brainstorming forum has been arranged. You have been nominated to present at the forum.

Required:

a. Describe the principal methods available to record internal control systems. (6 Marks)

b. Identify and discuss categories of control activities. (6 Marks)

c. Explain general information technology controls and application controls. (8 Marks)

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  • 30 Marks

AA – May 2024 – L2 – SA – Q1 – Auditing in a Computerized Environment

This question examines audit risks, controls, and auditor considerations when auditing an online banking system like FinPay Financial Solutions Limited.

FINPAY FINANCIAL SOLUTIONS LIMITED

FinPay, an innovative payment service bank, operates from its office on Lagos Island, overseeing all financial transactions, customer interactions, and relationships nationwide. The bank streamlines its processes for customer convenience, embracing the digital age.

Customers’ bank accounts are linked to their GSM phone numbers, with the initial zero removed. All banking operations, from account creation and deposits to withdrawals and account closure, are conducted seamlessly through the bank’s mobile App, which can be easily downloaded from popular App stores.

Access to the bank’s mobile App is allowed using an account number and a private six-digit PIN. A prospective customer completes the onboarding process by uploading scanned passport photos, ID card, utility bill, alongside providing other essential personal information, like name, NIN, telephone number, email address, and residential address.

To facilitate transactions, a four-digit PIN linked to the customer’s debit card is activated at Automated Teller Machines (ATMs). Additionally, customers can leverage USSD codes for payments. Customers are required to use their registered phone numbers on their smartphones when transacting businesses with the bank.

In the event of a declined transaction, swift resolution is a priority. Debits are promptly reversed, ensuring customer satisfaction. Customers can report issues directly through the mobile App or via email, and FinPay’s responsive support team resolves matters without necessitating a visit to the bank’s physical office. This efficiency cements FinPay’s reputation as a leading online bank in Nigeria.

FinPay expedites the delivery of debit cards to customers, ensuring they reach their designated addresses within 48 hours of account creation. Furthermore, a proactive follow-up call is made just 24 hours after opening an account, enhancing the overall customer experience.

With a focus on catering for tech-savvy Nigerian youths, FinPay is steadily expanding its customer base. The bank even offers small, easily accessible loans over a six-month period, further attracting and retaining a young clientele. Some customers instruct FinPay to pay monthly DStv subscriptions or send amounts to third parties on a regular basis by activating a prompt on the mobile App.

For added convenience, FinPay features a responsive chatbot, named Bobo. Customers can engage with Bobo through the bank’s mobile App, website, and social media channels, providing another layer of support and accessibility. This comprehensive approach positions FinPay as a forward-thinking financial institution at the forefront of digital banking in Nigeria.

Required:

a. Highlight four benefits an online system offers to FinPay and its customers. (8 Marks)

b. Identify and explain five General controls and five Application controls embedded in FinPay’s system. (10 Marks)

c. Explain three areas the auditors will give special considerations because of the audit risks associated with the online real-time system that dominates FinPay’s operations. (12 Marks)

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  • 1 Marks

MI – May 2024 – L1 – SA – Q18 – Information Systems Development and Security

Differentiates between IT general controls and another category of IT controls.

IT controls are often described in TWO categories or types namely: IT general controls and which of the following controls?

A. System
B. Software
C. Hardware
D. Application
E. Program

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  • 15 Marks

AAA – Nov 2016 – L3 – Q4a – Audit of IT Systems and Data Analytics

Evaluate the advantages and disadvantages of test data and audit software for compliance and substantive testing.

You have been appointed as the Auditor of a company whose accounting transactions are processed using a computer. You have decided to use Computer-Assisted Audit Techniques (CAATs) to generate evidence for the audit assignment.

Required:
i. State FOUR advantages and THREE disadvantages of using test data in compliance testing of application controls. (7 Marks)
ii. List FOUR activities for which audit software may be used to perform substantive tests by the auditor. (4 Marks)
iii. List TWO advantages and TWO disadvantages of the use of audit software. (4 Marks)

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  • 15 Marks

AAA – Nov 2021 – L3 – Q6 – Audit of IT Systems and Data Analytics

Outline application controls for computerised systems and develop an audit strategy following ISA 300 for large, computerised clients.

The firm you work for has considered the growing development in some sectors of the economy and the opportunities this development portends.

Your firm is a sole practitioner, and though the partner has the skills and professional competences necessary to undertake big jobs, applications for big jobs have always been turned down.

To get involved and secure some of these big jobs, your partner has dialogued with some other sole practitioners who share the same view. They have agreed to operate a merged firm starting in the year 2022. Appropriate registration of the new practice name with the Corporate Affairs Commission and application for a license in the new name from the Institute are being processed. To prepare for securing and executing some of these big jobs, preparations are set to commence once the registrations are approved. Some of the target jobs involve computerised entities, so your partner has assigned you some preparatory tasks, as he is the lead partner.

Required:

a. Prepare a document showing the application controls that will be focused on in the computerised systems of the entities. (7 Marks)

b. Develop an appropriate audit strategy in accordance with ISA 300, “Planning an audit of financial statements.” (8 Marks)

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  • 20 Marks

AAA – May 2018 – L3 – SB – Q3 – Auditor’s Legal Liability

Evaluate necessary IT general and application controls for a fully computerized hotel to ensure data integrity and security.

A new hotel opened for operations on February 1, 2016, in Abuja. The directors at their board meeting in September 2016 selected December as the hotel’s year-end. Also, from the conception of the hotel, it was decided to fully computerize the hotel and its operations. This will make the hotel stand out and attract clientele in the federal capital territory where there are many other hotels with strong competition.

The room doors are electronically operated and use electronic cards for opening. If a customer does not specify his/her duration and has the lock properly programmed, the door will lock at 12 noon, requiring the customer to go back to the reception for access. Furthermore, all accounting and other processes are computerized.

The IT company that handled the computerization agreed to leave a member of staff who will train the hotel’s staff for three months and ensure that the system operates efficiently. Management believes that the staff will familiarize themselves with the system within that period. The server handles all doors, accounting processes including billing, and the determination of room occupancy rate on a daily basis. Various units of the hotel have desktop units which key employees use in both ordering and communication between themselves. The server is located next to the operations manager’s office, who is responsible for overseeing it in addition to other duties.

The last quarterly report on the hotel activities was not consistent with expectations, and the occupancy rate did not match turnover. The management of the hotel approached your firm of chartered accountants to be engaged as auditors to the hotel. Your review and interactions as the leader of the audit team revealed the information disclosed above.

Required:

Evaluate and apply the relevant general and application controls necessary to be installed in the hotel’s information environment.
(Total 20 Marks)

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  • 30 Marks

AAA – Nov 2018 – L3 – Q1 – Audit of IT Systems and Data Analytics

Training audit personnel on issues and controls for online businesses audit

You are the audit partner of Rolami Adiatu & Company, a firm of Chartered Accountants. In the process of planning an audit, you have identified the need to train audit personnel involved in the audit of clients engaged in online businesses.

You have concluded arrangements with your human resources department to organize training for the firm’s audit team, which includes trainees, supervisors, and managers. You are preparing notes that will assist you in training the team to appreciate the problems that may arise in the audit of online businesses and how they could be minimized.

Required:

a. Prepare briefing notes explaining online systems and the operational advantages they offer to entities that use them. (6 Marks)

b. Identify the general and application controls needed to tackle the audit problems created by online systems. (9 Marks)

c. i. Discuss Electronic Data Interchange (EDI). ii. Explain four possible problems EDI may create for the auditor. iii. Explain four relevant controls to minimize the audit risk inherent in EDI systems. (15 Marks)

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  • 20 Marks

AA – May 2021 – L2 – Q4 – Internal Control Systems

Examination of methods to document internal controls, control activities, and types of IT controls.

A regulatory review was conducted on SINAPE Microfinance Bank Limited in September 2018. During the course of the review, numerous findings and recommendations were made regarding the bank’s compliance with internal and external regulations, policies, and guidelines.

It was noted in the report that processing systems, internal controls over financial accounting, and financial reporting were inadequate. The review of the bank’s processes and transaction recognition procedures was unsatisfactory. Additionally, there were instances where management overrode controls in financial reporting processes.

The regulator required the bank to appoint a reputable firm of chartered accountants to perform a review of the internal control system and make a comprehensive recommendation. Your firm has been appointed by the bank to perform the internal control reviews, and a brainstorming forum has been arranged. You have been nominated to present at the forum.

Required:

a. Describe the principal methods available to record internal control systems. (6 Marks)

b. Identify and discuss categories of control activities. (6 Marks)

c. Explain general information technology controls and application controls. (8 Marks)

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  • 30 Marks

AA – May 2024 – L2 – SA – Q1 – Auditing in a Computerized Environment

This question examines audit risks, controls, and auditor considerations when auditing an online banking system like FinPay Financial Solutions Limited.

FINPAY FINANCIAL SOLUTIONS LIMITED

FinPay, an innovative payment service bank, operates from its office on Lagos Island, overseeing all financial transactions, customer interactions, and relationships nationwide. The bank streamlines its processes for customer convenience, embracing the digital age.

Customers’ bank accounts are linked to their GSM phone numbers, with the initial zero removed. All banking operations, from account creation and deposits to withdrawals and account closure, are conducted seamlessly through the bank’s mobile App, which can be easily downloaded from popular App stores.

Access to the bank’s mobile App is allowed using an account number and a private six-digit PIN. A prospective customer completes the onboarding process by uploading scanned passport photos, ID card, utility bill, alongside providing other essential personal information, like name, NIN, telephone number, email address, and residential address.

To facilitate transactions, a four-digit PIN linked to the customer’s debit card is activated at Automated Teller Machines (ATMs). Additionally, customers can leverage USSD codes for payments. Customers are required to use their registered phone numbers on their smartphones when transacting businesses with the bank.

In the event of a declined transaction, swift resolution is a priority. Debits are promptly reversed, ensuring customer satisfaction. Customers can report issues directly through the mobile App or via email, and FinPay’s responsive support team resolves matters without necessitating a visit to the bank’s physical office. This efficiency cements FinPay’s reputation as a leading online bank in Nigeria.

FinPay expedites the delivery of debit cards to customers, ensuring they reach their designated addresses within 48 hours of account creation. Furthermore, a proactive follow-up call is made just 24 hours after opening an account, enhancing the overall customer experience.

With a focus on catering for tech-savvy Nigerian youths, FinPay is steadily expanding its customer base. The bank even offers small, easily accessible loans over a six-month period, further attracting and retaining a young clientele. Some customers instruct FinPay to pay monthly DStv subscriptions or send amounts to third parties on a regular basis by activating a prompt on the mobile App.

For added convenience, FinPay features a responsive chatbot, named Bobo. Customers can engage with Bobo through the bank’s mobile App, website, and social media channels, providing another layer of support and accessibility. This comprehensive approach positions FinPay as a forward-thinking financial institution at the forefront of digital banking in Nigeria.

Required:

a. Highlight four benefits an online system offers to FinPay and its customers. (8 Marks)

b. Identify and explain five General controls and five Application controls embedded in FinPay’s system. (10 Marks)

c. Explain three areas the auditors will give special considerations because of the audit risks associated with the online real-time system that dominates FinPay’s operations. (12 Marks)

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  • 1 Marks

MI – May 2024 – L1 – SA – Q18 – Information Systems Development and Security

Differentiates between IT general controls and another category of IT controls.

IT controls are often described in TWO categories or types namely: IT general controls and which of the following controls?

A. System
B. Software
C. Hardware
D. Application
E. Program

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