Which of the following statements is not true of the test data approach in a test of computerised accounting system?

 Options:

a) Test data tests only those controls which the auditor wishes to rely b) Test data should consist of data related to all controls prevalent in the organization c) The result of test data indicates that all the application and general controls are functioning properly d) Test data processed by the client’s computer programme under the auditor’s control

The Correct Answer Is:

b) Test data should consist of data related to all controls prevalent in the organization

Correct Answer Explanation: b) Test data should consist of data related to all controls prevalent in the organization

In a test of a computerized accounting system, the test data approach involves using simulated or specially prepared data to evaluate the system’s functionality and controls.

Let’s break down why option (b) – “Test data should consist of data related to all controls prevalent in the organization” – is not entirely accurate, and then address why the other options are incorrect:

Option (b) suggests that test data should encompass data related to all controls prevalent in the organization. However, this statement is not entirely accurate because the test data used for evaluating controls does not need to cover every single control within the organization.

Rather, the test data is specifically designed to assess the functionality and reliability of certain controls deemed significant by the auditor.

Testing all controls in an organization’s system could be exhaustive, time-consuming, and unnecessary, as not all controls may be equally relevant or critical to the integrity of financial information. Thus, the test data approach strategically targets essential controls, ensuring a thorough assessment without the need to cover every control in the system.

Now, let’s address the other options:

a) Test data tests only those controls which the auditor wishes to rely

This statement is a fundamental principle of the test data approach. Auditors select and test controls that are crucial to ensuring the accuracy, integrity, and reliability of financial data.

The auditor determines which controls are significant based on risk assessment and the importance of those controls in the accounting process. By focusing on specific controls, auditors can efficiently evaluate their functionality and reliance.

c) The result of test data indicates that all the application and general controls are functioning properly

This statement is inaccurate. Test data is designed to evaluate a specific set of controls chosen by the auditor. It does not provide assurance that all application and general controls throughout the system are functioning correctly.

Rather, it assesses the selected controls’ effectiveness in processing the test data, offering insights into their reliability but not an overall assessment of all controls within the system.

d) Test data processed by the client’s computer programme under the auditor’s control

This statement accurately describes the test data approach. The auditor creates or oversees the creation of simulated data, which is then processed by the client’s computer system under the auditor’s supervision.

This allows the auditor to observe how the system handles the test data and assess the performance of the chosen controls in processing that data.

In summary, the test data approach in auditing computerized accounting systems is a targeted and strategic method that focuses on evaluating specific controls chosen by the auditor rather than attempting to cover every control in the system.

It provides a way to assess the effectiveness of controls in processing financial data accurately and reliably.

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