TEST DATA APPROACH

MULTIPLE CHOICE QUESTIONS

1) The following are disadvantages of test data approach except:
A) The auditors are dependent on personnel of the computer service for the test data application.
B) Test data is the data at one point in time without any activity going on, when in real-time there
is likely much activity going on.
C) Test data approach has a really high implementation costs.
D) Test data approach use testing through computers which provide an auditor with undisputed
evidence regarding applications.
2) The ________ procedure for auditing computer process controls uses a hypothetical series of
valid and invalid transactions.
A) concurrent audit techniques
B) test data approach
C) integrated test facility
D) dual process
3) The following are the sources that an auditor can use to generate data except:
A) A listing of actual transactions.
B) Technique used to examine the integrity of the computer processing controls.
C) The initial transactions used by the programmer to test the system.
D) A test data generator program that generates data using program specifications.
4) When an auditor tests the internal controls of a computerized accounting system, which of the
following is true of the test data approach?
A) Test data are coded to a dummy subsidiary so they can be extracted from the system under
actual operating conditions.
B) Test data programs need not be tailor-made by the auditor for each client's computer
applications.
C) Test data programs usually consist of all possible valid and invalid conditions regarding
compliance with internal controls.
D) Test data are processed with the client's computer and the results are compared with the
auditor's predetermined results.
5) Approaches to address correctness of processing include:
A) Test Data approach
B) Integrated Test Facility
C) Concurrent processing
D) All of the above
6) The following are false regarding test data approach except:
A) The objective of the computer audit technique known as the test data
approach is to determine whether the clients computer programs can
correctly process valid and invalid transactions.

B) The test data approach requires the auditor to insert an audit module in
the clients application system to test transaction data specifically identified
by the auditor as unusual
C) When the auditor decides to audit around the computer, there is no
need to test the clients IT controls or obtain an understanding of the clients
internal controls related to the IT system
D) None of the above
7) Test data ability includes:
I. Can verify the correct functioning of a program
II. Can select sample for confirmation of balances
III. Can ensure computer responds correctly to deliberate errors on
data. (Error or exception report is generated by computer)
IV. Can verify computer generated total balance and analysis.
(Computer will do the adding and subtracting, and analysis will be compared
against the input).
A) I,II & IV
B) II, III & IV
C) I, III & IV
D) I, II & III
8) Used by the auditor during tests of controls:
A) Test Data Approach
B) Generalized Audit Software Programs
C) Both A and B
D) None of the above
9) When using test data, why are audit teams required to prepare only one transaction to test each
computer processing alternative?
A) Audit teams generally perform more extensive substantive testing in a computerized
processing environment, resulting in less need to test processing controls.
B) In a computerized processing environment, each transaction is handled in an identical manner
C) The speed and efficiency of the computer results in reduced sample sizes.
D) The risk of misstatement is typically lower in a computerized processing environment
10) Audit teams use the test data method to gain certain assurances with respect to
A) Control procedures contained within the program.
B) Machine capacity.
C) Input data.
D) General controls.

ANSWERS
1) Answer: D
Explanation: D is one of the advantages of using test data approach. Test data techniques
generally have three primary advantages. First, they employ through-the-computer testing. This
provides the auditor with explicit evidence concerning application functions. Secondly, test data
runs can be employed with only minimal disruption to the organization's operations. The third
advantage is they require only minimal computer expertise on the part of the auditors.
2) Answer: B
Explanation: Test data processing involves the creation of a series of hypothetical valid and
invalid transactions and the introduction of those transactions into the system. The invalid data
may include records with missing data, fields containing unreasonably large amounts, invalid
account numbers, etc. If the program controls are working, then all invalid transactions should be
rejected. Valid transactions should all be properly processed.
3) Answer: B
Explanation: The various ways test data can be generated are: A listing of actual transactions.
The initial transactions used by the programmer to test the system. A test data generator program
that generates data using program specifications. B is a definition of test data approach.
4) Answer: D
Explanation: When an auditor tests the internal controls, He/she usually use the sequential
method starting from creating the purchase requisition to the end of the payment cycle. He/she
checks the impact of each transaction on the General ledger and compares it with predetermined
results to check the internal controls of the computerized accounting system.
5) Answer: D
Explanation: There are four approaches to address correctness of processing. 1) Test Data, 2)
Integrated Test Facility, 3) Concurrent processing and 4) Embedded audit modules.
6) Answer: A
Explanation: A is true. The objective of test data approach is to determine
whether the clients computer programs can correctly process valid and
invalid transactions. Wherein invalid datas are rejected and valid data
should be properly processed.

7) Answer: C
Explanation: Verifying the correct functioning of a program, ensuring
computer responds correctly to deliberate errors on data and verify computer
generated total balance and analysis are abilities of a test data approach.
While selecting a sample for confirmation of balances is an ability of a
Generalized Audit Software Programs (GASPs).
8) Answer: A
Explanation: Test Data approach is used by the auditor during test of controls
while Generalized Audit Software Programs is used by the auditor during
substantive tests.
9) Answer: B
Explanation: In a manual processing system, random errors occur because humans are
processing transactions and humans make random mistakes. In contrast, computerized
processing systems handle all transactions in an identical manner. As a result, if a computerized
system processes a transaction erroneously, (either unintentional program error or planned error
for fraud), all transactions are affected in the same manner. As a result, audit teams need to
evaluate the accuracy of processing.
10) Answer: A
Explanation: Test data is data which has been specifically identified for use in tests, typically
of a computer program. So, its focus will definitely be in control procedures contained within the
program.