Certified Public Accountant Technology & Digital Applications 2 — Questions and Answers
Question 1: A CPA firm is implementing a cloud-based accounting system. Which control is MOST critical to establish before migrating sensitive client data?
- Automated invoice processing
- Data encryption in transit and at rest (Correct answer)
- Real-time currency conversion
- Multi-currency reporting dashboards
Correct answer: Data encryption in transit and at rest
Encryption of data both in transit and at rest is the foundational control for protecting sensitive client financial data in cloud environments.
Question 2: Under the AICPA's SOC 2 framework, which Trust Services Criterion addresses the system's availability for operation and use?
- Confidentiality
- Privacy
- Availability (Correct answer)
- Processing Integrity
Correct answer: Availability
The Availability criterion in SOC 2 addresses whether the system is available for operation and use as committed or agreed upon.
Question 3: A company uses robotic process automation (RPA) to process vendor invoices. What is the PRIMARY audit risk introduced by RPA?
- Increased processing time
- Errors or fraud propagating at machine speed without human review (Correct answer)
- Higher software licensing costs
- Reduced transaction volume
Correct answer: Errors or fraud propagating at machine speed without human review
RPA can execute thousands of transactions rapidly, meaning a misconfigured rule or fraudulent input can propagate errors at scale before detection.
Question 4: Which data analytics technique is BEST suited for identifying unusual journal entries that may indicate financial statement fraud?
- Regression analysis
- Benford's Law analysis (Correct answer)
- Moving average calculations
- Monte Carlo simulation
Correct answer: Benford's Law analysis
Benford's Law analysis tests whether the leading digits in financial data follow a natural logarithmic distribution, deviations from which can signal manipulation.
Question 5: An ERP system upgrade is planned during a client's fiscal year-end. What is the auditor's PRIMARY concern?
- The vendor's market capitalization
- Migration completeness and accuracy of historical data transferred (Correct answer)
- The number of user licenses purchased
- Whether the system supports mobile access
Correct answer: Migration completeness and accuracy of historical data transferred
Data migration errors during an ERP upgrade can cause incomplete or inaccurate financial records, directly affecting audit evidence reliability.
Question 6: Which of the following BEST describes a 'general IT control' as opposed to an 'application control'?
- A control that validates individual transaction amounts
- A pervasive control such as access management that supports multiple applications (Correct answer)
- A control embedded in the payroll calculation logic
- A report that reconciles accounts receivable balances
Correct answer: A pervasive control such as access management that supports multiple applications
General IT controls (e.g., logical access, change management, IT operations) are pervasive and underpin the reliability of application-level controls across the entire IT environment.
Question 7: A client stores financial records using a distributed ledger (blockchain). Which characteristic of blockchain is MOST relevant to auditor reliance on those records?
- Smart contract programmability
- Immutability of confirmed transaction records (Correct answer)
- Token issuance capabilities
- Anonymous transaction processing
Correct answer: Immutability of confirmed transaction records
Blockchain's immutability means confirmed records cannot be altered without consensus, which supports the integrity and reliability of recorded transactions for audit purposes.
Certified Public Accountant Technology & Digital Applications 2
A CPA firm is implementing a cloud-based accounting system.
Which control is MOST critical to establish before migrating sensitive client data?