Smith Corporation has numerous customers. A customer file is kept on disk. Each customer file contains the name, address, credit limit, and account balance. The auditor wishes to test this file to determine whether credit limits are being exceeded. The best procedure for the auditor to follow would be to Develop test data that would cause some account balances to exceed the credit limit and determine if the system properly detects such situations. Develop a program to compare credit limits with account balances and print out the details of any account with a balance exceeding its credit limit. Request a printout of all account balances so they can be manually checked against the credit limits. Request a printout of a sample of account balances so they can be individually checked against the credit limits.

1. Smith Corporation has numerous customers. A customer file is kept on disk. Each customer file contains the name, address, credit limit, and account balance. The auditor wishes to test this file to determine whether credit limits are being exceeded. The best procedure for the auditor to follow would be to
2. Develop test data that would cause some account balances to exceed the credit

limit and determine if the system properly detects such situations.

1. Develop a program to compare credit limits with account balances and print out

the details of any account with a balance exceeding its credit limit.

1. Request a printout of all account balances so they can be manually checked

against the credit limits.

1. Request a printout of a sample of account balances so they can be individually

checked against the credit limits.

1. Which of the following methods of testing application controls utilizes software prepared by the auditors and applied to the client's data?
2. Parallel simulation.
3. Integrated test facility.
4. Test data.
5. Exception report tests.

1. The test–data method is used by auditors to test the
2. Accuracy of input data.
3. Validity of the output.
4. Procedures contained within the program.
5. Normalcy of distribution of test data.
6. Which of the following is true of generalized audit software?
7. They can be used only in auditing on-line computer systems.
8. They can be used on any computer without modification.
9. They each have their own characteristics, which the auditor must carefully consider before using in a given audit situation.
10. They enable the auditor to perform all manual compliance test procedures less expensively.

1. Assume that an auditor estimated that 10,000 checks were issued during the accounting period. If an application control that performs a limit check for each check request is to be subjected to the auditor's test–data approach, the sample should include:
2. Approximately 1,000 test items.
3. A number of test items determined by the auditor to be sufficient under the circumstances.
4. A number of test items determined by the auditor's reference to the appropriate sampling tables.
5. One transaction.

1. Proper segregation of functional responsibilities calls for separation of the

functions of

1. Authorization, execution, and recording.
2. Authorization, execution, and payment.
3. Custody, execution, and reporting.
4. Authorization, payment, and recording.