Internal Controls and Business Processes
Final Test Solutions
Course Introduction
This course explores the principles and practices of internal controls within modern business environments, emphasizing their critical role in safeguarding assets, ensuring reliable financial reporting, and promoting operational efficiency. Students will examine the design, implementation, and evaluation of internal control systems, with particular focus on frameworks such as COSO. The course also covers how business processes are mapped, analyzed, and reengineered to strengthen control activities and manage risks. Through real-world case studies and practical exercises, participants will gain the skills necessary to assess internal controls, identify weaknesses or risks, and recommend enhancements that align with organizational objectives and regulatory requirements.
Recommended Textbook
Accounting Information Systems 11th Edition by Marshall B. Romney Paul J. Steinbart
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Chapter 1: Accounting Information Systems
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Q1) A set of two or more interrelated components that interact to achieve a goal is:
A)A system
B)An accounting information system
C)Data
D)Mandatory information
Answer: A
Q2) Which of the following is a primary activity in the value chain?
A)infrastructure
B)technology
C)purchasing
D)marketing and sales
Answer: D
Q3) An AIS provides value by
A)improving products or services through information that increases quality and reduces costs.
B)providing timely and reliable information to decision makers.
C)creating new products.
D)both A and B
Answer: D
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Page 3
Chapter 2: Overview of Business Processes
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Sample Questions
Q1) A chart of accounts is an example of (select all that apply)
A)sequence codes
B)block codes
C)group codes
D)hierarchical codes
Answer: B,C
Q2) Describe the basic business activities and transactions for a typical merchandising company.
Answer: Revenue - sell goods and services to customers and collect cash.Expenditureobtain goods and services from vendors and pay cash.Human resources - hire qualified employees,train them,pay them,evaluate them,withhold and pay taxes,file tax forms,and comply with government regulations on employment.Financing - selling/issuing stock/securities to investors,procuring and repayment of loans,and payment of dividends and interest.
Q3) A typical source document could be
A)in some paper form.
B)a computer data entry screen.
C)a notepad entry.
D)both A and B
Answer: D
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Chapter 3: Systems Development and Documentation Techniques
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Sample Questions
Q1) Which is a true statement regarding the use of the manual processing symbol in a flowchart?
A)If a document is moved from one column to another,show the document only in the last column.
B)Each manual processing symbol should have an input and an output.
C)Do not connect two documents when moving from one column to another.
D)Each manual processing symbol should have an off-page connector.
Answer: B
Q2) In a payroll processing DFD,the "prepare reports" activity will be represented by __________,the "employee payroll file" will be represented by __________,and the "bank" will be represented by __________.
A)a circle; two horizontal lines; a square
B)a circle; two horizontal lines; two horizontal lines
C)a rectangle; a square; a circle
D)a square; two horizontal lines; a circle
Answer: A
Q3) P71 56)What are the four categories of flowcharting symbols?
Answer: The four categories of flowcharting symbols are: input/output,processing,storage,flow and miscellaneous.
Page 5
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Chapter 4: Relational Databases
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Sample Questions
Q1) Describe the information that is contained in the data dictionary.
Q2) Dana Halsey is chair of the Purebred Marmoset Society,which maintains a database of registered purebred marmosets and their breeding history.Originally,the database was stored on index cards,but recently Dana has been exploring the use of a computerized system.One file in the system will store the name,birth date,and other characteristics of all of the marmosets that have been registered.Each marmoset is uniquely identified by a registration number.A second file will contain data that link each marmoset to its male and female parents by means of their serial numbers.The primary key in the first file is:
A)Name
B)Registration number
C)Date of birth
D)Relationship number
Q3) Define and distinguish between these terms: database,database management system,database system and database administrator.
Q4) What is the difference in logical view and physical view?
Q5) What are the main constraints when a relational database model is being logically designed?
Q6) What is a data dictionary?
Page 6
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Chapter 5: Computer Fraud and Security
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Sample Questions
Q1) It was late on a Friday afternoon when Troy Willicott got a call at the help desk for Taggitt Finances.A man with an edge of panic clearly discernible in his voice was on the phone."I'm really in a bind and I sure hope that you can help me." He identified himself as Chet Frazier from the Accounting Department.He told Troy that he had to work on a report that was due on Monday morning and that he had forgotten to bring a written copy of his new password home with him.Troy know that Taggitt's new password policy,that required that passwords must be at least fifteen characters long,must contain letters and numbers,and must be changed every sixty days,had created problems.Consequently,Troy provided the password,listened as it was read back to him,and was profusely thanked before ending the call.The caller was not Chet Frazier,and Troy Willicott was a victim of A)phreaking.
B)war dialing.
C)identity theft.
D)social engineering.
Q2) A majority of fraud perpetrators are A)outsiders. B)employees.
C)computer hackers. D)vendors.
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Page 7
Chapter 6: Control and Accounting Information Systems
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Q1) One reason why many organizations do not adequately protect their systems is because
A)control problems may be overestimated by many companies.
B)productivity and cost cutting cause management to forgo implementing and maintaining internal controls.
C)control technology has not yet been developed.
D)all of the above
Q2) Segregation of duties is only effective if employees
A)are unable to collude.
B)have received supplemental ethics training.
C)understand the implications of the segregation of duties.
D)are carefully supervised.
Q3) Petty cash is disbursed by the Fred Haynes in the Cashier's Office.He also maintains records of disbursements,places requests to the Finance Department to replace expended funds,and periodically reconciles the petty cash balance.This represents a(an)___________ segregation of duties.
A)effective
B)partial
C)ineffective
D)limited
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Chapter 7: Infromation System Controls for Systems
Reliability
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Sample Questions
Q1) The process of turning off unnecessary features in the system is known as
A)Deep packet inspection
B)Hardening
C)Intrusion detection
D)War dialing
Q2) The trust services framework identifies four essential criteria for successfully implementing each of the principles that contribute to systems reliability.Which of the following is not one of those four essential criteria?
A)Developing and documenting policies
B)Effectively communicating policies to all outsiders
C)Designing and employing appropriate control procedures to implement policies
D)Monitoring the system and taking corrective action to maintain compliance with policies
Q3) What is a penetration test?
Q4) Which of the following is an example of a preventive control?
A)Encryption
B)Log analysis
C)Intrusion detection
D)Emergency response teams
Q5) Explain social engineering.
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Chapter 8: Auditing Computer-Based Information Systems
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Sample Questions
Q1) This batch processing data entry control sums a non-financial numeric field.
A)Batch total
B)Financial total
C)Hash total
D)Sequence check
Q2) Which of the following is not the objective of a disaster recovery plan?
A)Minimize the extent of the disruption,damage or loss.
B)Permanently establish an alternative means of processing information.
C)Resume normal operations as soon as possible.
D)Train employees for emergency operations.
Q3) Which of the following is not one of the 10 internationally recognized best practices for protecting the privacy of customers' personal information?
A)Access.
B)Monitoring and enforcement.
C)Registration.
D)Security.
Q4) Identify four data entry controls.
Q5) Identify the 10 internationally recognized best practices for protecting the privacy of customers' personal information.
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Chapter 9: Auditing Computer-Based Informtion Systems
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Q1) An auditor examining a firm's accounting information system sets an embedded audit module to record all credit transactions in excess of $1,500 and store the data in an audit log.This is an example collecting audit evidence using
A)an integrated test facility.
B)the snapshot technique.
C)a system control audit review file.
D)audit hooks.
E)continuous and intermittent simulation.
Q2) Which auditing technique will not assist in determining if unauthorized programming changes have been made?
A)use of a source code comparison program
B)use of the reprocessing technique to compare program output
C)interviewing and making inquiries of the programming staff
D)use of parallel simulation to compare program output
Q3) An increase in the effectiveness of internal controls will have the effect of
A)increasing inherent risk.
B)reducing inherence risk.
C)increasing control risk.
D)reducing control risk.
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Page 11
Chapter 10: The Revenue Cycle: Sales an Cash Collections
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Q1) In the revenue cycle,a customer places an order for a certain product.Before the order is checked for inventory availability,what step should be taken?
A)The customer's credit should be checked for a sale on account.
B)The sales order should be created and written to a file.
C)Shipping should be notified of an order in process.
D)A picking list should be generated for the warehouse.
Q2) Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company.He is a product packer.The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order.He encloses a paper form in the box when the order is complete.The form is called a
A)picking ticket.
B)bill of lading.
C)packing slip.
D)remittance advice.
E)credit memo.
Q3) How does a company avoid overbilling customers for items not yet shipped?
Q4) Explain how to effectively segregate duties in the sales order cycle.
Q5) What is cycle billing?
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Chapter 11: The Expenditure Cycle: Purchasing and Cash Disbursements
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Q1) Bob Chum is the sales manager at Folding Squid Technologies.At lunch with the company CEO,he pulled out a ______ that showed that recent deliveries had raised inventory levels enough to meet current sales quotas.
A)purchase order
B)blanket purchase order
C)receiving report
D)debit memo
E)credit memo
Q2) Bob Chum is the sales manager at Folding Squid Technologies.At lunch with the company CEO,he proudly announced that he had negotiated a ______ with a client that defined a long-term commitment to buy components from Folding Squid.
A)purchase order
B)blanket purchase order
C)receiving report
D)debit memo
E)credit memo
Q3) What types of decision-making and strategic information should the AIS provide in the expenditure cycle?
Q4) Define just-in-time (JIT)inventory methods.
Page 13
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Chapter 12: The Production Cycle
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Sample Questions
Q1) Discuss the criticisms of traditional cost accounting methods.
Q2) The first step in the production cycle is product design.There are several objectives connected with this step.Which objective below is not a product design objective?
A)to design a product that meets customer requirements
B)to design a quality product
C)to minimize production costs
D)to make the design easy to track for cost accounting purposes
Q3) In addition to identifying and dealing with defective products before they reach customers,quality management is concerned with initiating process changes that will reduce the number of defective units produced.All other things held constant,a decrease in the number of defective units will increase throughput by
A)increasing productive capacity.
B)increasing productive processing time.
C)increasing yield.
D)increasing all components of throughput.
Q4) What is CIM?
Q5) What role does the AIS play in the production cycle?
Q6) What is the production cycle.
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Chapter 13: The Human Resources Managementpayroll Cycle
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Q1) Which of the following forms is used to report a summary of all employees' wages and witholdings?
A)941
B)W-2
C)W-3
D)1099-Misc.
Q2) What factors should be considered in outsourcing payroll to a payroll service bureau? Discuss the advantages and disadvantages of using a payroll service bureau to process a payroll.
Q3) In most companies the HRM/payroll cycle activities are accomplished by two separate systems.Which task below is typically not performed by an HRM system?
A)training
B)performance evaluation
C)compensation
D)recruiting and hiring of new employees
Q4) What is the role of "soft assets" in the new information economy? Why has an AIS not reported on the company's human resources?
Q5) What are the control objectives in an HRM/payroll cycle?
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Q6) Name some of the benefits of using electronic direct deposit to pay employees.
Chapter 14: General Ledger and Reporting System
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Sample Questions
Q1) Adjusting entries that reflect a change in accounting principle used to value inventories are called
A)corrections.
B)estimates.
C)deferrals.
D)accruals.
E)revaluations.
Q2) Bobby Burns,CEO of Maudlin Motors,walked into the office of Tom Sanchez,chief information officer."Tom," he said."We have tons of data about customers,vendors,production,everything,but I don't think we're using it as well as we could.I'm thinking that we could analyze the data and try to find any patterns or relationships that would help us plan for the future." Tom should recommend that Maudlin Motors
A)implement a data mining operation.
B)set up an object linking and embedding function.
C)use online analytical processing (OLAP.)
D)implement balanced scorecard reorting.
Q3) Explain the preparation of financial statements as the third step in the general ledger and reporting system.
Q4) How is an audit trail used in the general ledger and reporting system?
Page 16
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Chapter 15: Data Modeling and Database Design
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Q1) Define minimum and maximum cardinalities.
Q2) List the five stages in the database design process.
Q3) Assume the cardinalities associated in a relationship all have zero minimums and N maximums.This would be an example of which cardinality rule?
A)agent-event relationship
B)resource-event relationship
C)event-event relationship
D)none of the above relationships
Q4) Concerning REA diagrams,which of the following is false?
A)Each organization will have its own unique REA diagram.
B)An REA diagram for a given organization will change over time.
C)Data modeling and REA diagram development involve complex and repetitive processes.
D)Redrawing an REA diagram several times during development is uncommon.
Q5) Developing an REA diagram for a specific transaction cycle consists of how many steps?
A)one
B)two
C)three
D)four
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Chapter 16: Implementing an Rea Model in a Relational Database
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Q1) Which entity is likely to be part of the payroll cycle,expenditure cycle,and the revenue cycle?
A)Customer
B)Cash
C)Supplier
D)Inventory
Q2) Concerning enterprise-wide REA diagrams,which of the following is false?
A)Merging two or more REA diagrams that contain the same resource entity does not require any changes to the cardinality pairs in the individual diagrams.
B)Merging two or more diagrams that contain a common event entity,however,often requires changing the minimum cardinalities associated with the other events to 0,to reflect the fact that the merged event may be connected to any one of several different events,but not to all of them simultaneously.
C)The minimum cardinalities associated with agents may also have to be changed to 0.
D)All of the above are true
Q3) What kinds of databases can the REA data model be used to design?
Q4) Explain where in the REA model you can find the information normally found in a ledger.
Page 18
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Chapter 17: Special Topics in Rea Modeling
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Q1) What are the benefits of an integrated enterprise-wide data model?
Q2) The minimum cardinality from the Take Order event to the Call on Customer event is _____ and the maximum cardinality is _____.
A)0;0
B)0;1
C)1;0
D)1;1
Q3) Why is the event Issue Debt often modeled as a separate event entity?
Q4) Customer number is least likely to be a foreign key in:
A)Call on Customers
B)Customers
C)Fill Customer Order
D)Take Customer Order
Q5) In the human resources REA model,the relationship between Skills and Employees is modeled as
A)0:N
B)1:1
C)1:N
D)M:N
Q6) Why might an REA diagram show relationships between agents?
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Chapter 18: Introduction to Systems Development and Systems Analysis
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Q1) What is the correct sequence of the phases in the systems development life cycle?
A)conceptual design,physical design,system analysis,implementation and conversion,and operations and maintenance
B)conceptual design,system analysis,physical design,implementation and conversion
C)system analysis,conceptual design,physical design,implementation and conversion,and operations and maintenance
D)system analysis,physical design,conceptual design,and operations and maintenance
Q2) Identify and briefly discuss the points at which a "go/no go" decision is made in the systems analysis process.
Q3) When is a proposal to conduct a systems analysis prepared?
A)after a written request for systems development is prepared
B)after the development team completes the survey of the existing AIS
C)after the initial investigation of the project is approved
D)before the initial investigation
Q4) Discuss the relative advantages and disadvantages of the four different methods for gathering data during a systems survey.
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Chapter 19: Ais Development Strategies
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Q1) Which statement is true regarding canned software and the SDLC?
A)Canned software cannot be modified to meet unique user needs.
B)Companies that buy rather than develop AIS software can still follow the SDLC process.
C)Most canned software meets all of a company's information or data processing needs.
D)The SDLC process does not apply to canned software.
Q2) Which is not a problem with CASE technology?
A)cost
B)incompatibility
C)lack of system documentation
D)unmet expectations
Q3) Which of the following statements about reengineering is inaccurate?
A)The data should be centralized and then dispersed throughout the company.
B)The information should be processed by those who use it.
C)The organization should be based on the different tasks that make up the processes.
D)The processes should be performed by output users.
Q4) What is outsourcing? What are the different types of outsourcing agreements?
Q5) Briefly identify the difficulties encountered when developing an AIS.
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Chapter 20: Systems Design, Implementation and Operation
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Q1) In the file and database design step of the physical systems design phase,it is advantageous to have
A)a compatible format.
B)easy access.
C)timely queries.
D)various capabilities.
Q2) There are several steps in the data conversion process that must take place in a certain sequence.What is the last step in this process?
A)actual data conversion
B)checking the files for completeness and removing any data inaccuracies or inconsistencies
C)documentation of conversion activities
D)monitoring of the system after the actual data conversion
Q3) In evaluating input design,the design team must identify
A)a single view so data can be shared.
B)organization and access.
C)types of data input and optimal input methods.
D)what is relevant,complete,and useful.
Q4) What are the eight basic steps used to develop and test software programs?
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