Question

When an auditor tests a computerized accounting system, which of the following is true of the test data approach?

1) Test data are processed by the entity's computer programs under the auditor's control.
2) Test data must consist of all possible valid and invalid conditions.
3) Testing a program at year end provides assurance that the entity's processing was accurate for the entire year.
4) Several transactions of each type must be tested.

Answer 1

When testing a computerized accounting system, the test data approach involves processing data under the auditor's control to test the system's functionality and accuracy. It is not necessary to test all possible valid and invalid conditions, but rather focus on selecting data that effectively tests various aspects of the system. Testing a program at year end does not provide assurance for the entire year, and it's important to test several transactions of each type.

Step-by-step explanation:

When an auditor tests a computerized accounting system, the true statement about the test data approach is:

1. Test data are processed by the entity's computer programs under the auditor's control. This approach involves using specific data sets that are input into the system to test its functionality and accuracy. The auditor has control over these test data and can observe how the system handles them.
2. Test data do not need to consist of all possible valid and invalid conditions. Instead, the auditor focuses on selecting data that will effectively test various aspects of the system, such as input validation, calculations, and reporting.
3. Testing a program at year end does not necessarily provide assurance that the entity's processing was accurate for the entire year. It only reflects the system's performance and accuracy at a specific point in time.
4. Several transactions of each type should be tested to ensure the system can handle different scenarios and accurately process similar transactions.