In a Review of an Electronic Data Interchange Application Using

question 449

Multiple Choice

In a review of an electronic data interchange application using a third-party service provider, the auditor should:

• A) Ensure encryption keys meet International Organization for Standardization (ISO) standards. II. Determine whether an independent review of the service provider's operation has been conducted. III. Verify that only public-switched data networks are used by the service provider. IV. Verify that the service provider's contracts include necessary clauses, such as the right to audit.
• B) I and II only
• C) I and IV only
• D) II and III only
• E) II and IV only

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Definitions:

Variable Cost

Costs that vary in direct proportion to changes in the level of production or sales volume.

Fixed Cost

Fixed expenditures, including rent, salaries, and insurance, that are unaffected by changes in production or sales volumes.

Contribution Margin Ratio

A measure indicating the percentage of each sales dollar that contributes to covering fixed costs and generating profit, calculated as (Sales Revenue - Variable Costs) / Sales Revenue.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums, providing predictability in budgeting.