AAT L4 Accounting Systems & Controls 4

Question 1

The risk of fraud is greater when:

Accepted Answer

One individual has control over all aspects of a transaction (lack of segregation)

Answer

Fraud risk increases significantly when one person has authority over multiple stages of a transaction — authorising, recording, and having custody of assets — with no independent check on their actions.

Question 2

The 'fraud triangle' identifies three conditions that typically need to be present for fraud to occur. These are:

Accepted Answer

Pressure (motive), opportunity, and rationalisation

Answer

The fraud triangle (Cressey) identifies three factors: pressure/motive (financial need or pressure), opportunity (weak controls or access), and rationalisation (justifying the behaviour). All three typically need to be present.

Question 3

Application controls in a computerised accounting system include:

Accepted Answer

Input validation checks (e.g., range checks, format checks) and sequence checks on transactions

Answer

Application controls are built into specific software applications: input validation (data type, range, and format checks), authorisation controls within the system, and completeness checks — they control individual transaction processing.

Question 4

Which of the following is an objective of an accounting system's output controls?

Accepted Answer

Ensuring that outputs (reports, invoices, financial statements) are complete, accurate, and distributed only to authorised recipients

Answer

Output controls ensure that system-generated outputs are complete, accurate, and secure; only authorised personnel should receive sensitive reports, and outputs should be reconciled to inputs to confirm completeness.

Question 5

A cost-benefit analysis of implementing a new control considers:

Accepted Answer

Whether the benefit of reducing the risk (e.g., value of prevented fraud or error) outweighs the cost of implementing and operating the control

Answer

Controls are only worthwhile if their benefits (risk reduction, fraud prevention, improved accuracy) exceed their costs (implementation, ongoing operation, staff time). A cost-benefit analysis guides this decision.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Accounting Systems & Controls 4