AI Journal Entry Testing Quiz

Answers and explanations appear as you take the quiz.

1. Why do AS 2401 and ISA 240 require journal entry testing in every audit, even at well-controlled companies?
   • Journal entries are always recorded incorrectly
   • Management override of controls is treated as a fraud risk at every entity
   • Software cannot record journal entries
   • Only small companies need it, but it is applied to all for consistency
2. Which of these is one of the journal entry traits described in the auditing standards?
   • Entries posted by the people who make them every day
   • Entries with detailed explanations and supporting documents
   • Entries generated during normal business hours
   • Entries by individuals who do not usually make journal entries
3. How was the WorldCom fraud carried out and discovered, according to the guide?
   • Operating line costs were moved into capital asset accounts through journal entries, and internal auditors traced the entries
   • Fake customers were created in the sales system and found by external confirmations
   • Cash was stolen from registers and found by surveillance
   • Inventory was double counted and found in a warehouse count
4. How can an auditor confirm the journal entry population is complete before scoring?
   • Ask the controller for a written statement
   • Count the entries posted on weekends
   • Check, for each account, that the opening balance plus posted activity equals the closing trial balance
   • Run an isolation forest on the entries
5. An entry recording revenue on the last day of the year is reversed on the first day of the next year. What might this signal?
   • A normal payroll accrual
   • A duplicate bank transaction
   • A properly separated approval process
   • Window dressing to improve reported results at period end
6. Why does the guide warn against giving full weight to both 'round amount' and 'ends in 000' flags?
   • They measure the same thing and can inflate scores for harmless entries
   • Neither trait appears in the auditing standards
   • Round amounts are never suspicious
   • Scoring models cannot process amounts
7. What advantage do unsupervised methods such as isolation forests offer for journal entry testing?
   • They prove intent to commit fraud
   • They do not need labeled fraud cases, which are rare
   • They remove the need to confirm completeness
   • They make supporting documents unnecessary
8. Why should system-generated journal entries stay in the tested population?
   • They are usually round amounts
   • They are always posted on weekends
   • Changes to interfaces and configurations can also be used to manipulate the books
   • Auditing standards forbid testing manual entries