Final answer:
In the test data approach for auditing a computerized accounting system, test data are introduced to the system under auditor control, designed to test various conditions, but do not necessarily cover all possible cases and may not provide full-year assurance.
Step-by-step explanation:
When an auditor tests a computerized accounting system using the test data approach, it is true that test data are processed by the entity's computer programs under the auditor's control. This means that the auditor introduces specific transactions into the client's system to see if the controls correctly process the data. The test data does not need to encompass all possible valid and invalid conditions but should include a variety of conditions sufficient to test relevant controls. Additionally, testing a program at year-end does not necessarily provide assurance that the entity's processing was accurate for the entire year because it does not consider changes to the software or controls throughout the period. Finally, while using several transactions of each type provides a broader base for testing, it's not a strict requirement as some tests may be satisfied with a smaller focused sample if the auditor deems it sufficient.