ACCT 555 External Auditing
Chapter 12, pages 390–397: Problems 12-17, 12-18, and 12-27
Chapter 13, pages 429–430: Problems 13-22, 13-23, and 13-24
Chapter 12, pages 390–397: Problems 12-17, 12-18, and 12-27
12-17
a. (2) technologies reduce some types of risks while introducing new types of risks to be managed. b. (1) Controls that determine whether a vendor number matches the pre-approved vendors in the vendor master file.
c. (3) expand testing of automated application controls used to reduce control risk to cover greater portions of the fiscal year under audit.
d. (3) The sales system automatically computes the total sale amount and posts the total to the sales journal master file.

12-18
a. (1) A system that performs relatively uncomplicated processes and produces detailed output. b. (3) completeness of sales transactions.
c. (3) completeness of input.
d. (3) procedures contained within the program.

12-27
Here are a few recommendations for change that I would suggest to improve Hardwood Lumber
Company’s information systems function:
Limited access to the important and sensitive information and clean up the structure of the organization and clearly define the chart of organization.
The vice president of information systems should report daily to senior management – not to or under the authority of user personnel. This will ensure that the information systems are not subordinate to a user which could improperly allocate information systems resources to other user projects.
The vice president of information systems should have better access to the executive management team as well as the board of directors.
The operations team should not be allowed or have any responsibility for maintaining the operating software security features.
The cameras record and tape all the time with the video monitors being examined all the time and probably consider taping what the cameras are actually viewing for subsequent retrieval in case immediate access is needed.

Limit access to the computer room and control entrance to the computer room by enhancing security.
Limit the access that the systems programmers have by only allowing them to approved test copies of systems software, and grant application.
Review key team members and look at hiring an information systems coordinator to review and work on all program development projects.
The secondary tape storage needs to be moved as it isn’t secure in its current location.
The librarian has too much control and higher level access to program and data files and thus those privileges should be lowered.

Chapter 13, pages 429–430: Problems 13-22, 13-23, and 13-24
13-22
a.
b.
c.
d.

(2) a test of control.
(2) relative effectiveness and efficiency of the tests.
(1) substantive tests.
(4) IV, I, III, and II

13-23
a. (2) Tests of controls include observations of the proper segregation of duties.
b. (3) Tests of controls
c. (1) a reasonable degree of assurance that the client’s internal controls are operating effectively on a consistent basis throughout the year.
d. (3) reperformance.

13-24
Number / a. / b.
1. test of details of balances / reperformance
2. test of details of balances / confirmation
3. test of control / documentation
4. test of details of balances / documentation
5. analytical procedure / analytical procedures
6. test of control / documentation
7. substantive test of transactions / documentation
8. analytical procedure / analytical procedures
9. test of details of balances / documentation
10. test of control / inquiry and observation
11. test of control / inquiry