AAT L4 Accounting Systems and Controls 2 — Questions and Answers
Question 1: Which of the following is a key objective of an internal audit function?
- To prepare the annual statutory accounts
- To provide an independent assessment of the effectiveness of internal controls (Correct answer)
- To negotiate contracts with suppliers
- To manage the company's bank accounts
Correct answer: To provide an independent assessment of the effectiveness of internal controls
Internal audit provides independent, objective assurance on the effectiveness of risk management, governance, and internal control processes. It reports to management and the audit committee rather than to shareholders.
Question 2: A company is considering moving from manual accounting to cloud-based software. Which risk is specific to cloud-based systems?
- Data entry errors by staff
- Lack of segregation of duties
- Dependency on internet connectivity and third-party data security (Correct answer)
- Inability to produce management reports
Correct answer: Dependency on internet connectivity and third-party data security
Cloud-based systems rely on internet connectivity and store data on third-party servers, raising concerns about availability, data security, GDPR compliance, and vendor reliability. These risks do not apply to on-premise solutions.
Question 3: Under UK GDPR, a data controller must:
- Store personal data indefinitely for future reference
- Share personal data with any third party that requests it
- Ensure personal data is processed lawfully, fairly, and transparently (Correct answer)
- Collect as much personal data as possible about each individual
Correct answer: Ensure personal data is processed lawfully, fairly, and transparently
Under UK GDPR, the data controller must comply with principles including lawfulness, fairness, and transparency. Data must be collected for specified purposes, kept to a minimum, accurate, stored only as long as necessary, and protected with appropriate security.
Question 4: The payroll clerk can add new employees, process payroll, and distribute pay. What control recommendation best addresses this risk?
- Install CCTV in the payroll office
- Require the payroll clerk to take annual leave
- Segregate duties so different people add employees, process payroll, and authorise payments (Correct answer)
- Increase the payroll clerk's salary to reduce motivation for fraud
Correct answer: Segregate duties so different people add employees, process payroll, and authorise payments
Segregation of duties is the most effective control. By ensuring different individuals handle employee setup, payroll processing, and payment authorisation, the risk of ghost employees or fraudulent payments is significantly reduced.
Question 5: What is the purpose of a systems flowchart in an accounting systems evaluation?
- To record journal entries for a transaction
- To visually map the flow of data and processes through the accounting system (Correct answer)
- To calculate depreciation of IT equipment
- To list all employees and their access levels
Correct answer: To visually map the flow of data and processes through the accounting system
A systems flowchart uses standard symbols to represent the flow of data, documents, and processes through an accounting system. It helps identify bottlenecks, control weaknesses, and areas for improvement.
Question 6: When recommending changes to an accounting system, which stakeholder consideration is MOST important?
- The colour scheme of the new software interface
- Staff training needs and resistance to change (Correct answer)
- The brand of computer hardware used
- The location of the company's registered office
Correct answer: Staff training needs and resistance to change
Staff training and change management are critical success factors. Even the best system will fail if users are not properly trained or if resistance to change is not managed effectively.
AAT L4 Accounting Systems and Controls 2
Which of the following is a key objective of an internal audit function?