CHAPTER 2
True or False
A.I. and data analytics enable the analysis of a full population of data and can identify outliers or
exceptions.
the auditor’s responsibilities for information contained in the financial statements is the same with
other information presented within the annual report outside of the financial statements.
It is imperative to invest in understanding and developing technologies, particularly in audit where the
pace of technological change, specifically the move from continuous transaction monitoring to
continuous control monitoring.
The performance attributes of a new technology that existing customers do value improve at such a
rapid rate that the new technology can later invade those established markets.
Machine learning and artificial intelligence are already at the stage where they can replace human input
and judgment.
In reality, with increasing complexity of systems, the need for humans intervention to manage and
oversee technology decreases.
Cyber breaches usually occur initially through perimeter and internal network layers and generally tend
not to be within the scope of the financial statement and ICFR audits.
Technology as a business driver levels the playing field in favor of small audit firms.
A.I. algorithms learn how to do things, such as classify objects or predict values, through explicit
programming.
Broader elements of security around the perimeter and network layers generally tend not to be within
the scope of the financial statement and Internal Control over Financial Reporting audits.
Fill in the blanks
The ability to process large volumes of data enables analysis of entire datasets, rather than __________.
In the future, an __________ function might be needed to settle disputes among the consortiumblockchain participants.
__________ is defined as the process by which the audit function end up becoming simple service
commodities in the eyes of the audit clients, who then may choose to do the function themselves.
The best way an auditor can understand technology is to examine how the users of the technology
might use it to __________ __________.
There is now more pressure for an audit to focus on __________ __________, as technology now
exists to highlight any journal entries that are deviating from the standard process and other anomalies.
__________ __________ refers to the technological changes that damage established companies or
propel start up companies which usually not radically new or difficult from a technological point of view.
As __________ __________ of Consortium Blockchains, in the future, the auditor may be hired to
provide independent assurance as to the stability and robustness of a blockchain architecture.
Blockchain technology creates a kind of ‘universal entry bookkeeping’, where an agreed-upon version
of the truth propagates to all users as part of a __________ record.
The auditor could have near real-time data access via read-only nodes on __________. This may allow
an auditor to obtain information required for the audit in a consistent, recurring format.
__________ __________ is increasing the accessibility of data, however human intervention is still
required to filter the data and to communicate and advise clients effectively
Multiple Choice
Which opportunistic future role for professional accountants is concerned about independence from
the blockchain participants?





Arbitrator
Service Auditor of Consortium Blockchains
none of these
Auditor of Smart Contracts and Oracles
Blockchain Administrator
Which of these statements is true regarding emerging or evolving technologies?
 Artificial Intelligence may impose future auditing standards and auditing guidance that address
the ability of clients to reuse smart contracts built by other entities.
 Blockchain techniques lets algorithms learn how to do things, such as classify objects or predict
values, through statistical analysis of large amounts of data, rather than through explicit
programming.
 Data Analystics allow humans to analyze a larger number of contracts, such as leases, in a much
shorter timeframe than is possible with a traditional manual review.
 none of these
 Blockchain users may need a trusted and independent third party to provide assurance as to
the effectiveness of controls over a private blockchain.
It is a concept related to data discovery which requires the entity to have a central repository of business
glossary, data definitions, data system inventory, reference data, report specifications, data quality
rules, data policies and other information.
 Data Governance Framework
 Common Knowledgebase
 Data Governance Solution
 Data System Inventory
 none of these
Which aspect of the audit function is artificial intelligence not having a big impact on?
 audit sampling
 none of these
 performance of audit procedures
 fraud detection
 professional judgment
Which of these areas of technology could eliminate many of the manual data extraction and audit
preparation activities that are labor intensive and time consuming for an entity’s management and
staff?





none of these
Blockchain
Data Analytics
Artificial Intelligence
Data Capabilities
It is that evolving technology which has the capacity to take over repetitive tasks like revenue and
payroll testing.
 Improvements in Cyber Security
 none of these
 Advances in data capabilities
 Artificial Intelligence
 Blockchain
Which technological effect has substantial impact of narrowing or closing the audit expectations gap?
 replace many manual audit procedures
 level the playing field in favor of small audit firms
 reduce the size of the audit team
 none of these
 move iS audit from CCM to CTM on client site, copy the auditors
Which of these equations is not true?
 Concerns on Cyber Security = growing reliance on IT and the internet has also greatly increased
the impact of hacking, security failures and the loss of systems
 Data Analytics = Robotic Process Automation
 Audit Expectation Gap = Society and Clients do not expect auditors to look for fraud
 Blockchain = even with no central owner, a single, agreed-upon version of the truth propagates
to all users
 none of these
 Artificial Intelligence = learning, knowing, sensing, reasoning, creating, achieving goals and
generating and understanding language
Which opportunistic future role for professional accountants will be responsible for verifying the
interface between smart contracts and external data sources that trigger business events?
 Auditor of Smart Contracts and Oracles
 Blockchain Administrator
 none of these
 Arbitrator
 Service Auditor of Consortium Blockchains
It is a concept related to data discovery which requires the entity to understand what data systems are
used, who has access to these data systems, and what data is in these data systems.
 Data Governance Solution
 Data Governance Framework
 Data Models
 Data System Inventory
 Common Knowledgebase