Accounting Information Systems, 10E George H Bodnar William S Hopwood Test Bank

Type:

Test Bank

Resource:

Accounting Information Systems

Edition:

10th Edition

Author(s):

George H. Bodnar William S. Hopwood

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 1 Accounting Information Systems: An Overview 1) A system is a collection of related resources designed to help a company achieve specified objectives.

Answer: TRUE Diff: 1 Page Ref: 1 2) Accounting information systems are designed to gather and utilize information which may cost more to provide than it is worth to the user.

Answer: FALSE Diff: 2 Page Ref: 3 3) The basic goal of accounting information systems is to convert financial data into information.

Answer: TRUE Diff: 1 Page Ref: 1 4) Examples of the information provided by a financial information system are cash flow summaries and payment information.

Answer: TRUE Diff: 2 Page Ref: 4 5) All data processed and information stored in an accounting information system are mandatory for financial reporting purposes.

Answer: FALSE Diff: 2 Page Ref: 3 6) A typical CRM contains one common database in which all departments with customer contact can access and update.

Answer: TRUE Diff: 1 Page Ref: 4 7) A typical CRM contains one database for each department which has customer contact.

Answer: FALSE Diff: 1 Page Ref: 4 8) An extended enterprise brings suppliers and customers together in order to meet customer demand while minimizing supplier costs.

Answer: FALSE Diff: 1 Page Ref: 4 9) Procurement and firm infrastructure are examples of primary business processes.

Answer: FALSE Diff: 3 Page Ref: 9

1 .

10) Good documentation means that records should be maintained by all parties involved in a transaction.

Answer: TRUE Diff: 1 Page Ref: 13 11) Some organizations that use computers to process transactional data must have an information system function.

Answer: FALSE Diff: 2 Page Ref: 15 12) The operations function allows specialization in areas such as operating systems and software and communications technology.

Answer: FALSE Diff: 3 Page Ref: 16 13) Personal computers give end users their own processing power.

Answer: TRUE Diff: 1 Page Ref: 17 14) Most batch processing environments are JIT environments.

Answer: FALSE Diff: 2 Page Ref: 20 15) XBRL is a language that facilitates the exchange over the Internet of all kinds of business documents and financial statements.

Answer: TRUE Diff: 2 Page Ref: 22 16) External users of accounting information include investors, customers, governmental agencies, and suppliers.

Answer: TRUE Diff: 1 Page Ref: 2 17) The functional components of a management information system (such as marketing, manufacturing, human resources, and financial) are logically independent.

Answer: TRUE Diff: 1 Page Ref: 3 18) A decision support system (DSS) is tailored to the strategic information needs of top-level management.

Answer: FALSE Diff: 1 Page Ref: 4 19) The AIS benefits of information technology include automation, information organization, and communication.

Answer: TRUE Diff: 1 Page Ref: 5 2 .

20) AIS application architecture currently focuses on automating the traditional accounting cycle.

Answer: FALSE Diff: 2 Page Ref: 6 21) MRP and MRP II software was created to aid in Supply Chain Management (SCM).

Answer: TRUE Diff: 2 Page Ref: 6 22) In CIM systems, computers control management designed parts of the manufacturing process.

Answer: FALSE Diff: 2 Page Ref: 6 23) Flexible manufacturing systems can be reprogrammed to produce entirely different products.

Answer: TRUE Diff: 1 Page Ref: 6 24) The process management approach aids in the management and improvement of a company's processes in order to increase customer satisfaction while ignoring the company's cost structure.

Answer: FALSE Diff: 2 Page Ref: 6 25) ERPs should reduce data duplication, increase communication between functional areas, and reduce complications of software updates.

Answer: TRUE Diff: 2 Page Ref: 7 26) ERPs can either be industry-specific or based around "best practices" of various sized companies.

Answer: TRUE Diff: 1 Page Ref: 7 27) ERPs are inexpensive and relatively easy to implement.

Answer: FALSE Diff: 1 Page Ref: 7 28) ERP II adds an Enterprise Application Suite (EAS) to aid in the communication between functional areas.

Answer: FALSE Diff: 2 Page Ref: 8 29) Business processes are always triggered by some economic event, and all have clearly defined starting and ending points.

Answer: TRUE Diff: 2 Page Ref: 8 3 .

30) A key characteristic and benefit of business processes is that they are always limited to one functional area of the information system.

Answer: FALSE Diff: 2 Page Ref: 8 31) Analyzing a company's value chain aids in the identification of a company's competitive advantages.

Answer: TRUE Diff: 2 Page Ref: 9 32) Operational transaction cycles have traditionally grouped activities of a business into six common operational processes.

Answer: FALSE Diff: 2 Page Ref: 11 33) Transactions are used by auditors to verify account balances and internal controls.

Answer: TRUE Diff: 2 Page Ref: 12 34) The accounting and finance functions should not be segregated in order to increase a company's internal control.

Answer: FALSE Diff: 2 Page Ref: 13 35) The director of internal auditing should report directly to the controller of the company.

Answer: FALSE Diff: 2 Page Ref: 14 36) The treasurer is responsible for the budgeting and tax planning aspects of a business.

Answer: FALSE Diff: 2 Page Ref: 14 37) Systems programmers usually report to the Manager of Systems Analysis.

Answer: FALSE Diff: 3 Page Ref: 16 38) A steering committee consists of high-level members of user functions such as manufacturing and marketing, as well as the head of the information system function and several of his or her staff.

Answer: TRUE Diff: 2 Page Ref: 16 39) An information center is a support facility for end users in an organization.

Answer: TRUE Diff: 1 Page Ref: 17 4 .

40) DBMS is the hands-on use of computers by end users.

Answer: FALSE Diff: 2 Page Ref: 17 41) Information system specialists are used in the traditional approach to data processing for end users.

Answer: TRUE Diff: 2 Page Ref: 17 42) EDI is a key component to quick-response technology system.

Answer: TRUE Diff: 2 Page Ref: 19 43) The philosophy that one should do the right thing the first time is better known as TQM or TQP. Answer: TRUE Diff: 2 Page Ref: 18 44) RFID tags are used for tracking objects within a quick-response system.

Answer: TRUE Diff: 1 Page Ref: 19 45) Only active RFID tags transmit signals containing digital information to receivers.

Answer: FALSE Diff: 1 Page Ref: 20 46) Lean manufacturing focuses on eliminating waste from the entire value chain.

Answer: FALSE Diff: 1 Page Ref: 20 47) A just-in-time manufacturing system is one form of lean manufacturing.

Answer: TRUE Diff: 1 Page Ref: 20 48) Microsoft sponsors the Web TrustTM seal of approval to certain web sites that meet their security and integrity criteria.

Answer: FALSE Diff: 2 Page Ref: 21 49) Electronic data interchange (EDI) is the direct computer-to-end-user exchange of business documents via a communications network.

Answer: FALSE Diff: 1 Page Ref: 21 50) ANSI X.12 is a public EDI standard.

Answer: TRUE Diff: 3 Page Ref: 22 5 .

51) The SEC requires that all companies must file their financial reports electronically using XBRL. Answer: FALSE Diff: 2 Page Ref: 22 52) FedWire is a retail EFT system used for telephone wire transfers and payments.

Answer: FALSE Diff: 2 Page Ref: 22 53) E-waste refers to dollars spent on unsuccessful implementations and technologies.

Answer: FALSE Diff: 2 Page Ref: 26 54) Green IT states system design should include a plan for recycling and reusing system components.

Answer: TRUE Diff: 1 Page Ref: 26 55) A systems development project consists of ________ general phases.

Answer: three Diff: 1 Page Ref: 23 56) The purpose of the ________ approach is to assist in the orderly development of effective systems.

Answer: systems Diff: 2 Page Ref: 23 57) Many companies prefer business process ________ because they find it more cost-effective than designing their own system from the ground up.

Answer: blueprinting Diff: 2 Page Ref: 24 58) A philosophy of ________ design fosters a set of attitudes and an approach to systems development that consciously considers the organizational context.

Answer: user-oriented Diff: 2 Page Ref: 25 59) Middle management uses ________ information in an organization.

Answer: tactical Diff: 2 Page Ref: 2 60) The source for most information used by lower-level managers is largely ________.

Answer: internal Diff: 2 Page Ref: 2

6 .

61) There are ________ major categories of information systems within an organization.

Answer: seven Diff: 2 Page Ref: 3 62) A(n) ________ information system is tailored to the strategic information needs of top-level management.

Answer: executive Diff: 1 Page Ref: 5 63) A(n) ________ system manages all contact with customers.

Answer: customer relation management (CRM) Diff: 1 Page Ref: 4 64) A(n) ________ system encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities.

Answer: supply chain management (SCM) Diff: 1 Page Ref: 4 65) A group of loosely-connected companies that work together to maximize the value of their economic outputs is a(n) ________.

Answer: extended enterprise Diff: 2 Page Ref: 4 66) The IT benefits for AISs are ________, ________, and ________.

Answer: automation, information organization, and communication Diff: 2 Page Ref: 5 67) Application ________ involves the process of ensuring the suite of organization's applications work together in order to meet organizational goals and objectives.

Answer: architecture Diff: 2 Page Ref: 6 68) ________ software assists management in managing inventories and scheduling production.

Answer: MRP Diff: 1 Page Ref: 6 69) In ________ computers take control of the entire production process (CIM) but also can be reprogrammed so the same processes can produce entirely different products.

Answer: flexible manufacturing systems (FMSs) Diff: 2 Page Ref: 6 70) The ________ management approach involves the application of knowledge, skills, tools, techniques and systems to manage and improve organizational processes to better meet customers' needs and maximize profitability.

Answer: process Diff: 2 Page Ref: 6 7 .

71) The ISO 9001 is a(n) ________-management standard published by the International Standards Organization.

Answer: quality Diff: 2 Page Ref: 6 72) ________ combines functional information systems in a single software package and a single database.

Answer: enterprise resource planning (ERP) Diff: 1 Page Ref: 7 73) ERP II adds collaborative ________ to ERP. Answer: commerce Diff: 2 Page Ref: 8 74) Enterprise ________ suite uses a group of individual packages that work with each other on a web browser as opposed to one large ERP software package.

Answer: application Diff: 2 Page Ref: 8 75) The linking of applications in suite is facilitated through a ________.

Answer: service oriented architecture (SOA) Diff: 2 Page Ref: 8 76) A business process is an interrelated set of tasks that involve data, ________ units, and a logical time sequence.

Answer: organizational Diff: 3 Page Ref: 8 77) A simple way of viewing the company's activities in a manner suited to analyzing its competitive advantages is known as the ________ ________.

Answer: value chain Diff: 1 Page Ref: 9 78) The controller is the executive in charge of ________ activities of the organization, while the treasurer supervises the ________ activities.

Answer: accounting; financial Diff: 1 Page Ref: 14 79) Events related to the acquisition of goods and services from other entities and the settlement of related obligations are in the ________ cycle; events related to the transformation of resources into goods and services are in the ________ cycle.

Answer: expenditure; production Diff: 1 Page Ref: 11

8 .

80) A common violation of the ________ principle is the delegation of both accounting and financial responsibilities to the same individual or department.

Answer: segregation Diff: 2 Page Ref: 13 81) The ________ is the head of the information systems function in an organization.

Answer: CIO (chief information officer) Diff: 2 Page Ref: 15 82) A ________ committee is an advisory group who can influence the policies, budget, and planning of information services within an organization.

Answer: steering Diff: 2 Page Ref: 16 83) Radio frequency identification tags (RFID) can be either ________, ________, or ________.

Answer: active, passive, or semi-passive Diff: 3 Page Ref: 19 84) The main focus of ________ manufacturing is eliminating waste and improving production flow.

Answer: lean Diff: 1 Page Ref: 20 85) The three major categories of waste under the original Toyota Production System (TPS) are ________, ________, and ________.

Answer: muda, muri, and mura Diff: 3 Page Ref: 20 86) Green IT is concerned with reducing ________ through recycling and reusing electronic products rather than discarding these products.

Answer: e-waste Diff: 1 Page Ref: 26 87) A just-in-time (JIT) environment is characterized by activities occurring in a ________ ________ environment.

Answer: continuous flow Diff: 1 Page Ref: 20 88) A(n) ________ ________ ________ is a type of information system that supports nonroutine needs for information, while ________ systems support routine, nonrecurring information needs.

Answer: decision support system; DP Diff: 2 Page Ref: 4 89) ________ is an automated clearing house system used for the clearing of Eurodollar payments between U.S. and non-U.S. financial institutions.

Answer: CHIPS Diff: 3 Page Ref: 22 9 .

90) The term that best describes an information system that is tailored to the strategic information needs of top-level management is a/an A) accounting information system.

B) expert system.

C) executive information system.

D) EDP system.

Answer: C Diff: 1 Page Ref: 5 91) Which of the following is not an example of a common functional MIS subsystem?

A) Decision support system B) Marketing information system C) Manufacturing information system D) Human resources information system Answer: A Diff: 1 Page Ref: 4 92) Which of the following is not a common transaction processing cycle found in business organizations?

A) Expenditure cycle B) Accounting cycle C) Production cycle D) Revenue cycle Answer: B Diff: 2 Page Ref: 11 93) Which of the following transaction processing cycles concerns events related to the distribution of goods and services to other organizations and the collection of related payments?

A) Production B) Expenditure C) Financial reporting D) Revenue Answer: D Diff: 1 Page Ref: 11 94) The transaction processing cycle that is concerned with the events related to the transformation of resources into goods and services is A) production.

B) revenue.

C) financial reporting.

D) expenditure.

Answer: A Diff: 1 Page Ref: 11

10 .

95) A system that manages all contacts with customers is a ________ system.

A) customer value chain B) customer relation management C) customer supply chain management D) customer requirements planning Answer: B Diff: 1 Page Ref: 4 96) A(n) ________ is a group of loosely-connected companies that work together to maximize the value of their economic outputs.

A) extended enterprise B) enterprise resource planners C) enterprise suite D) value chain consortium Answer: A Diff: 2 Page Ref: 4 97) A(n) ________ system encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities.

A) CRM B) SCM C) DS D) ES Answer: B Diff: 2 Page Ref: 4 98) The fundamental benefits of information technology for AISs include the following except A) communication.

B) information organization.

C) systems development.

D) automation.

Answer: C Diff: 1 Page Ref: 5 99) ________ involves the process of ensuring the suite of organization's applications work together as a composite application according to the goals and objectives of the organization.

A) Applications requirements planning B) Enterprise application structure C) Enterprise resource planning D) Applications architecture Answer: D Diff: 2 Page Ref: 6

11 .

100) Material requirements planning software assists management in managing A) inventories.

B) overhead.

C) scheduling production.

D) both inventories and scheduling production.

Answer: D Diff: 2 Page Ref: 6 101) The international quality-management standard credited for promoting the process management approach is the A) Six Sigma.

B) ISA-95.

C) ISO 9001.

D) ISA-Y2K. Answer: C Diff: 2 Page Ref: 6 102) Which systems permit the reprogramming of computers to produce entirely different products in the same manufacturing facility with the same equipment?

A) MRP and MRP II B) CIMs and FMSs C) ESs and FMSs D) ERPs and MRPs Answer: B Diff: 2 Page Ref: 6 103) A complete systems solution involving one software package and one database is referred to as A) ERP. B) MRP. C) SCM. D) DSS. Answer: A Diff: 1 Page Ref: 7 104) The following are benefits of an ERP except for the ability A) to eliminate data duplication and redundancy.

B) to standardize data formats.

C) to easily share data from various departments.

D) to easily customize software to meet company needs.

Answer: D Diff: 1 Page Ref: 7-8

12 .

105) Groups of organizations working together to create new products, new process methods, and/or human capital intelligence is referred to as a(n) A) ERP. B) e-commerce.

C) collaborative commerce.

D) application consortium.

Answer: C Diff: 2 Page Ref: 8 106) A group of individual software applications designed to run in web browsers and facilitated through a service oriented architecture (SOA) is referred to as a(n) A) ERP II. B) application architecture.

C) value chain application suite.

D) enterprise application suite.

Answer: D Diff: 2 Page Ref: 8 107) What language facilitates business to business commerce through the extended value chain, which includes both manufacturers and their suppliers?

A) VCML B) XBRL C) HTML D) COBOL Answer: A Diff: 3 Page Ref: 10 108) The staff position which would generally report to the treasurer rather than to the controller is A) budgeting.

B) accounts payable.

C) credit manager.

D) cost accounting.

Answer: C Diff: 1 Page Ref: 14 109) The high-level executive who supervises accounting functions such as budgeting, billing, and payroll is known as the A) treasurer.

B) controller.

C) chief information officer.

D) chief internal auditor.

Answer: B Diff: 2 Page Ref: 14

13 .

110) The three general phases of systems development projects and the order in which they occur are A) systems design, systems implementation, and systems analysis.

B) systems design, systems implementation, and systems auditing.

C) systems design, systems analysis, and systems programming.

D) systems analysis, systems design, and systems implementation.

Answer: D Diff: 2 Page Ref: 23 111) The functional subsystem of a management information system that would likely obtain data on wage and payroll tax summaries, benefit information, and government regulations is called the A) human resources information system.

B) manufacturing information system.

C) financial information system.

D) marketing information system.

Answer: A Diff: 2 Page Ref: 4 112) When information levels within an organization are viewed as a pyramid, strategic information is used primarily by A) lower-level management.

B) top-level management.

C) middle management.

D) lower-level and middle management.

Answer: B Diff: 2 Page Ref: 2 113) From an organization's viewpoint, a distinction can be drawn between the following two broad classes of accounting information A) historical and future.

B) strategic and operational.

C) internal and external.

D) mandatory and discretionary.

Answer: D Diff: 2 Page Ref: 3 114) Which item listed below is not considered a primary business process?

A) Marketing B) Outbound sales logistics C) Technology development D) Service Answer: C Diff: 2 Page Ref: 9

14 .

115) Which of the following is not an objective of internal control as a process?

A) Reliability of financial reporting B) Accuracy of accounting information C) Compliance with applicable laws and regulations D) Effectiveness and efficiency of operations Answer: B Diff: 1 Page Ref: 13 116) The preparation of forecasts and analyses used by management in planning and controlling the operations of the organization is generally a(n) A) budgeting function.

B) tax planning function.

C) accounting manager function.

D) treasurer function.

Answer: A Diff: 2 Page Ref: 14 117) The internal audit function within an organization should be considered a(n) A) activity supervised by the controller.

B) sub function of the treasurer.

C) independent appraisal activity.

D) optional service provided by the firm's external auditors.

Answer: C Diff: 2 Page Ref: 15 118) The area of functional specialization which is responsible for the design, coding, testing, and debugging of computer programs is the A) technical support function.

B) user function.

C) operations function.

D) programming function.

Answer: D Diff: 1 Page Ref: 16 119) Information retrieval from the organization's database using the query language feature of DBMS is a common A) programming function.

B) technical support function.

C) EUC application.

D) ES application.

Answer: C Diff: 3 Page Ref: 17

15 .

120) The technological philosophy that emphasizes "customer satisfaction" to the point of "customer obsession" is known as A) TQP. B) EDI. C) TQM. D) TQP and TQM. Answer: D Diff: 1 Page Ref: 18 121) Which of the following is not a consumer benefit of Web commerce?

A) There is no waiting for a salesperson or product information.

B) There is automatic electronic encoding of transaction data.

C) Web-based transactions are encrypted providing security.

D) Intelligent Web-based software can provide answers to complicated questions.

Answer: B Diff: 2 Page Ref: 21 122) Which of the following is not a benefit of electronic data interchange (EDI)?

A) Electronic mail messages are interpreted by humans.

B) EDI eliminates paper.

C) EDI saves time.

D) EDI may allow for EFT payments to vendor accounts.

Answer: A Diff: 2 Page Ref: 22 123) Which of the statements below is false regarding extensible business reporting language (XBRL)?

A) Many experts feel that XBRL will replace EDI. B) XBRL is in effect a narrower standard than the ANSI X.12 standard for EDI. C) The SEC allows use of the XBRL format.

D) XBRL facilitates the exchange of business documents over the Internet.

Answer: B Diff: 3 Page Ref: 22 124) The Clearing House Automated Payment System is also known as A) FedWire.

B) CHIPS. C) CHAPS. D) EFT. Answer: C Diff: 1 Page Ref: 22

16 .

125) Which of the steps below is not part of the systems approach process?

A) Creation of alternatives B) Statement of system objective(s) C) Systems evaluation D) All of the answers are steps in the systems approach process.

Answer: D Diff: 1 Page Ref: 23 126) Which of the following is not one of the criteria of the design specification step of the systems approach to design?

A) Using a team approach in many cases B) Sufficient detailed specifications for implementation process C) Identification of system inputs D) Strategies for producing system outputs Answer: A Diff: 3 Page Ref: 24 127) Which of the following is not an objective of a design group or project team charged with creating and implementing a new information system?

A) Securing funding for a new information system B) Identifying needs to be satisfied by a new system C) Developing technical specifications for a new system D) Implementation of a new system Answer: A Diff: 2 Page Ref: 23 128) Which of the following is not an objective of internal control?

A) Reliability of financial reporting B) Effectiveness and efficiency of operations C) Relevance of financial statements D) Compliance with applicable laws and regulations Answer: C Diff: 2 Page Ref: 13 129) An important quick response technology used to track objects using radio signals is called A) sonic tagging.

B) radio frequency identification.

C) object frequency tagging.

D) frequency waves identification.

Answer: B Diff: 2 Page Ref: 19

17 .

130) RFID tags include all of the following except A) active tags.

B) passive tags.

C) inactive tags.

D) semi-passive tags.

Answer: C Diff: 2 Page Ref: 19-20 131) Which of the following is not associated with lean manufacturing?

A) CRM B) Toyota Production System C) Eliminating waste D) JIT Answer: A Diff: 2 Page Ref: 20 132) The following are EDI standards except A) ANSI X.12.

B) AS2.

C) eBXML. D) ISO-95.

Answer: D Diff: 2 Page Ref: 22 133) Green IT is concerned with A) reducing e-waste by reusing and or refurbishing IT products.

B) using less fuel in the creation of IT systems.

C) designing more efficient systems in order to reduce necessary storage requirements.

D) Green IT is concerned with all of the above.

Answer: A Diff: 2 Page Ref: 25 134) The exchange of business documents such as purchase orders and invoices in an electronic format between the computers of separate organizations is known as: A) e-mail B) electronic data interchange C) computer-integrated information system D) electronic document exchange Answer: B Diff: 1 Page Ref: 21

18 .

135) Which of the following specialized information systems would be the most useful in providing information for routine decisions?

A) Decision support system B) Expert system C) Executive information system D) Accounting information system Answer: D Diff: 2 Page Ref: 4 136) Which of the following is not an example of good internal control?

A) Having adequate records B) Being sure that everyone clearly understands his or her own responsibilities C) Making sure that each department is responsible for keeping its own accounting records D) Having periodic physical checks (or counts) of the inventory Answer: C Diff: 2 Page Ref: 13 137) Which officer, department, or division within an organization is responsible for monitoring the other departments to ensure that the organization's policies and procedures are being carried out?

A) Internal auditing B) Vice President for Administration C) Chief Information Officer D) A steering committee Answer: A Diff: 2 Page Ref: 14 138) Which of the following is used to ensure a high-degree of user involvement in the control of an information systems department?

A) Maintenance programmers B) Operations manager C) Technical support committee D) Steering committee Answer: D Diff: 2 Page Ref: 16 139) Which of the following is not a merchant benefit of Web commerce?

A) Cost savings through automated ordering B) Worldwide availability of the company's products C) No waiting in line for a salesperson or to obtain product information D) Low overhead Answer: C Diff: 1 Page Ref: 21

19 .

140) A company known for its use of blueprints in systems design for clients is: A) SAM B) SAP C) SAS D) SAR Answer: B Diff: 1 Page Ref: 24 141) When should the actual users of a system be involved when a new system is being developed?

A) As soon as the new system is implemented B) After all unexpected bugs and glitches have been found and corrected C) Only after all employees have been thoroughly trained to use the new system D) Throughout the design of the new system Answer: D Diff: 2 Page Ref: 25 142) Which of the following information characteristics pertains to the situation when a lowerlevel manager receives a well-defined, narrowly focused report, while a top-level manager receives a report covering more general topics?

A) level of aggregation B) time horizon C) scope D) required accuracy Answer: C Diff: 3 Page Ref: 2 143) When a management report is discretionary rather than mandatory, the primary consideration should be: A) that there are benefits to be obtained by producing the report B) that the benefits obtained by producing the report exceed the cost of its production C) to minimize the cost of producing the report while maintaining minimum standards of usefulness D) to minimize the cost of producing the report while maintaining minimum standards of reliability and accuracy Answer: B Diff: 3 Page Ref: 3 144) Which of the following groups would not be considered external users of the company's information?

A) factory supervisors B) creditors C) investors D) labor unions Answer: A Diff: 2 Page Ref: 2 20 .

145) Internal users of reports from a company's information system might include all of the following except its: A) chief executive officer B) stockholders C) payroll department D) lower-level managers Answer: B Diff: 2 Page Ref: 2 146) A report prepared exclusively for use by this group is almost always mandatory: A) the company's labor union B) the Internal Revenue Service C) the company's main bank D) the company's main supplier of its raw materials Answer: B Diff: 2 Page Ref: 3 147) In the systems approach to administering a systems project, which of the following phases should be performed first?

A) Creating alternatives B) Analyzing the system C) Implementing the system D) Stating the system's objectives Answer: D Diff: 2 Page Ref: 23 148) A way of viewing company activities that breaks the activities down into components that can be individually optimized in terms of goals and strategies is known as the: A) primary business process B) accounting information system C) value chain D) internal control process Answer: C Diff: 2 Page Ref: 9 149) Software that integrates business processes on a company-wide basis is called: A) Enterprise Resource Planning B) Executive information systems C) Expert systems D) Manufacturing information systems Answer: A Diff: 2 Page Ref: 7

21 .

150) An accounting information system plays a key role in the internal control process, thereby helping management with its major responsibility of: A) managing the internal audit function B) stewardship C) global-level marketing D) managing the production cycle Answer: B Diff: 2 Page Ref: 13 151) Which statement regarding internal control is false?

A) Documentation is not a critical component of an internal control system.

B) Ideally, a task can be divided to make job functions as natural checks on each other.

C) A specific person should ideally be responsible for each task or job function.

D) All records should allow cross-referencing from one area of responsibility to another.

Answer: A Diff: 2 Page Ref: 13 152) An organization's internal control process consists of how many elements?

A) Six B) Four C) Five D) Seven Answer: C Diff: 2 Page Ref: 13 153) When viewing a typical organization chart, the individual responsible for the finances of the business is the A) controller.

B) president.

C) vice president.

D) treasurer.

Answer: D Diff: 1 Page Ref: 14

22 .

154) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Chief Information Officer ________ 2. Treasurer ________ 3. Transaction processing cycle ________ 4. Technical support function ________ 5. Computer-integrated manufacturing ________ 6. End user ________ 7. Controller ________ 8. Expert system ________ 9. Systems analysis ________ 10. Segregation of duties A. A common division or section within the information systems department B. The individual who supervises accounting functions C. An example of an internal control D. Individual who has overall responsibility for the information system function E. The first step in the systems development approach F. The department which has supervision over cash and credit activities G. A type of information system which requires an inference engine to make a decision for the user H. One or more applications systems consisting of logically related transactions I. An integrated approach to the use of information technology in manufacturing systems J. A department or section of an organization that uses the organization's computer data processing other than the information systems department Answer: 1. D 6. J 2. F 7. B 3. H 8. G 4. A 9. E 5. I 10. C Diff: 2 Page Ref: 26-28

23 .

155) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. XBRL ________ 2. Telecommuting ________ 3. JIT ________ 4. Total quality management ________ 5. OA ________ 6. Primary business processes ________ 7. Value chain ________ 8. Web Trust ________ 9. DSS ________ 10. Executive information system A. A way of viewing the company's activities in a manner suited to analyzing competitive advantages B. Allows employees to work at home and still have direct interaction with the organization's information systems C. An information system tailored to the information needs of top management D. A synonym for the acronym TQP E. A universal formatting language used for exchanging business documents via the Internet F. The use of electronic technology in the office or workplace G. Data are processed into a decision-making format for the end user H. A continuous flow environment that seeks to minimize or totally eliminate inventories I. Involves inbound and outbound logistics, operations, marketing, and service J. Seal of approval from the AICPA certifying that a Web site has met certain standards Answer: 1. E 6. I 2. B 7. A 3. H 8. J 4. D 9. G 5. F 10. C Diff: 2 Page Ref: 26-28

24 .

156) Explain what is meant by "internal control," and give two examples.

Answer: Suggested answer: Internal control consists of the policies and procedures established to provide reasonable assurance that specific organizational objectives will be achieved.

Examples mentioned in the chapter include: • segregation of duties • establishment of responsibilities • adequate records • periodic inventory counts • providing an internal audit function Diff: 2 Page Ref: 12-15 157) Explain the three fundamental benefits of information technology to accounting information systems.

Answer: Suggested answer: The student's response should explain the benefits of automation, information organization, and communication.

Automation includes replacing humans with machines; performing tasks impossible for humans without computers such as analyzing large quantities of data, producing complicated reports on demand, and moving towards real-time financial reporting.

Information organization includes automated transactions plus DASDs and DB technology making it possible to record, store, and organize larger amounts of data than would otherwise be humanly possible.

Communication technologies are a key component in the development of AISs. Communication technologies include developing Internet-based collaborative platforms, electronically coordinating business activities, and enhancing the effectiveness of extended enterprises.

Diff: 2 Page Ref: 5

25 .

158) Give four components that may be found in an organization's quick-response system and briefly describe each component.

Answer: Suggested answer: Possible components of a quick-response system are: • Electronic data interchange (EDI): the direct computer-to-computer exchange of business documents via a communications network.

• Just-in-time (JIT) inventory system: a continuous flow environment that seeks to minimize or totally eliminate inventories.

• Computer-integrated manufacturing (CIM): an integrated approach to the use of information technology in manufacturing enterprises.

• Electronic funds transfer (EFT): payment systems in which processing and communications are primarily or totally electronic.

Students might also mention: • Universal product code (UPC) bar code identification • Point-of-sale (POS) retail terminals • Quick-response technology is essential to total quality management/performance systems.

• Radio Frequency Identification (RFID) • Web commerce, e-mail communication, and use of the Internet makes quick-response technology accessible to both organizations and individuals.

Diff: 2

Page Ref: 18-19

159) Briefly describe and distinguish technical support and user support.

Answer: Suggested answer: Technical support is one of the five main functions of an information systems department. It is directed toward operating systems and software, data management and database design, and communications technology. The technical support area includes systems programming and software development using the conceptual system design and user requirements as determined by the analysis function. Technical support coordinates data storage and usage. Communications technology is concerned with the means by which data are transferred among networks.

User support is another of the five main functions of an information systems department. It is dedicated to the needs of end-users. An information center is a support facility in the user support area. It may provide hardware, software, and consultation to end-users. It assists users in developing and using their own computer processing applications.

Diff: 2 Page Ref: 16-17

26 .

160) Discuss the internal audit function within an organization.

Answer: Suggested answer: The internal audit function in an organization has evolved as a response to the need for and complexity of adequate internal control. The internal audit function is charged with monitoring and assessing compliance with organizational policies and procedures.

The internal audit function can only be effective if it is treated as an independent appraisal activity within the organization. It should be placed at an organization level where it can function independently of other departments and organizational functions. In many organizations the director of internal auditing is found at the level of vice-president. This placement attests to the importance of internal auditing, as well as the need for independence from other departments and functions. The internal audit function must be segregated from the accounting function, and it must not have responsibility or authority for any operating activities of the organization.

Diff: 2 Page Ref: 14-15 161) Discuss the nature of systems development.

Answer: Suggested answer: Most systems development projects consist of three general phases: • Systems analysis • Systems design • Systems implementation In the first phase, systems analysis involves creating and evaluating solutions to systems problems. There are three general objectives to systems analysis, summarized below: • Improvement of the quality of information • Improvement of internal control • Minimize costs when it is appropriate Within this phase, trade-offs will most likely be made among the objectives when the factors of economics, simplicity, and usefulness are considered to create, implement, and maintain a system.

Systems design, as the second phase of systems development, specifies the details of the solution selected via the systems analysis process. In this phase, alternative system designs are evaluated for their effectiveness and efficiency, using the overall system requirements as a benchmark.

Systems implementation, the third phase, is a process where the revised or newly designed procedures and methods are placed into operation. This phase includes testing of the system prior to its implementation, documentation, and reviewing the actual system to verify that it is working according to design specifications.

Diff: 2 Page Ref: 23-24

27 .

162) Describe an enterprise resource planning system to include the pros and cons of this type of system.

Answer: Suggested answer: ERP provide a complete solution by combining various functional information systems under one software package and one database. This eliminates data redundancy, aids a company in pursuing "best practices," and functional areas operating with the same data elements with the ability to share information seamlessly.

In an effort to implement an ERP, most companies will not pursue "best practices" as defined by the ERP software, therefore customization is typical. This dramatically increases costs, adds to implementation time, and increases the chance of failure.

Enterprise application suite may provide a solution for companies not ready to commit to implementing a complete ERP. Diff: 2 Page Ref: 7-8

28 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 2 Systems Techniques and Documentation 1) Tools used in the analysis, design, and documentation of system and subsystem relationships are known as system techniques.

Answer: TRUE Diff: 2 Page Ref: 38 2) The interim audit requires some type of substantive testing.

Answer: FALSE Diff: 1 Page Ref: 38 3) Substantive testing involves direct verification of financial statement figures.

Answer: TRUE Diff: 2 Page Ref: 38 4) When evaluating internal controls, auditors are usually not concerned with the flow of processing and distribution of documents within an application system.

Answer: FALSE Diff: 2 Page Ref: 38 5) Auditors undertake compliance testing to determine the degree of reliance of existing internal controls.

Answer: TRUE Diff: 2 Page Ref: 39 6) It is desirable for auditors to have a basic understanding of systems techniques.

Answer: TRUE Diff: 1 Page Ref: 39 7) The usual focus of an audit is to review an existing system rather than design a new system.

Answer: TRUE Diff: 2 Page Ref: 39 8) Analytic and system flowcharts are seldom found in the working papers of auditors.

Answer: FALSE Diff: 1 Page Ref: 39 9) A systems development project generally consists of three main phases.

Answer: TRUE Diff: 2 Page Ref: 39 10) Systems techniques assist the analyst in the collection and organization of facts.

Answer: TRUE Diff: 2 Page Ref: 39

1 .

11) Systems analysis involves formulating a blueprint for a completed system.

Answer: FALSE Diff: 2 Page Ref: 39 12) Auditors primarily use IPO and HIPO charts.

Answer: FALSE Diff: 1 Page Ref: 45 13) Section 404 of the Sarbanes-Oxley Act requires that annual filings of publicly traded companies include a statement of management's responsibility for establishing and maintaining adequate internal control as well as an assessment of the effectiveness of that internal control.

Answer: TRUE Diff: 1 Page Ref: 40 14) Section 404 of the Sarbanes-Oxley Act requires that monthly filings of publicly traded companies include a statement of management's responsibility for establishing and maintaining adequate internal control as well as an assessment of the effectiveness of that internal control.

Answer: FALSE Diff: 1 Page Ref: 40 15) Manual input/output and connector symbols are among the basic flowchart symbols.

Answer: FALSE Diff: 2 Page Ref: 41 16) In the United States, the AICPA is responsible for establishing standard flowchart symbols.

Answer: FALSE Diff: 1 Page Ref: 41 17) The four basic symbols corresponding to basic data processing functions are the input/output symbol, the process symbol, the flowline symbol, and the annotation or comment symbol.

Answer: TRUE Diff: 2 Page Ref: 41 18) If no special symbol exists to depict a function, verbal descriptions are used in the flowchart.

Answer: FALSE Diff: 3 Page Ref: 41 19) The decision symbol represents a named procedure consisting of one or more operations or program steps that are not specified within the set of flowcharts.

Answer: FALSE Diff: 3 Page Ref: 42 20) The decision symbol represents a decision or switching type of operation that determines which of a number of alternative paths is to be followed.

Answer: TRUE Diff: 3 Page Ref: 42 2 .

21) The normal flow direction of a flowchart is from left to right and top to bottom.

Answer: TRUE Diff: 1 Page Ref: 43 22) The triangle is a specialized symbol representing a decision process.

Answer: FALSE Diff: 3 Page Ref: 42 23) When the flow is bidirectional, it can only be shown by double lines.

Answer: FALSE Diff: 3 Page Ref: 43 24) An IPO chart provides a narrative description of the inputs needed to generate desired system outputs.

Answer: TRUE Diff: 2 Page Ref: 45 25) A HIPO chart contains two segments: a hierarchy chart and one or more IPO charts.

Answer: TRUE Diff: 1 Page Ref: 45 26) An IPO chart can provide much detail concerning the processing function.

Answer: FALSE Diff: 1 Page Ref: 45 27) HIPO structures a "bottom-up" strategy in structured systems analysis and design.

Answer: FALSE Diff: 2 Page Ref: 45 28) A program flowchart is also known as a block flowchart.

Answer: TRUE Diff: 1 Page Ref: 46 29) A systems flowchart is more detailed concerning individual processing functions than a program flowchart.

Answer: FALSE Diff: 1 Page Ref: 46 30) The intent of using DFDs is to clearly separate the logical process of systems analysis from the physical process of systems design.

Answer: TRUE Diff: 2 Page Ref: 46 31) A DFD may consist of either DFD or ANSI flowchart symbols.

Answer: FALSE Diff: 2 Page Ref: 46 3 .

32) A document flowchart is similar to a systems flowchart.

Answer: FALSE Diff: 3 Page Ref: 49 33) The forms distribution chart is closely related to the document flowchart.

Answer: TRUE Diff: 1 Page Ref: 50 34) The sandwich rule states that every process symbol should be placed between an input and output symbol.

Answer: TRUE Diff: 2 Page Ref: 52 35) UML is a United States standard, not yet supported by the International Standards Organization.

Answer: FALSE Diff: 1 Page Ref: 55 36) UML is a collection of modeling tools used to model the specifics of software development including functional equivalents of data flow diagrams, document flowcharting, and analytical flowcharting.

Answer: TRUE Diff: 2 Page Ref: 55 37) In UML, use case diagrams model the flow of activities involved in a single process.

Answer: FALSE Diff: 2 Page Ref: 55 38) The business process diagram focuses on the sequence of activities in a business process.

Answer: TRUE Diff: 2 Page Ref: 57 39) BPMN basic symbols include the task, sequence flow, gateway, and event symbols.

Answer: TRUE Diff: 2 Page Ref: 57 40) BPMN basic symbols include input/output, process, flowline, and annotation symbols.

Answer: FALSE Diff: 2 Page Ref: 57 41) All BPDs contain at least two pools.

Answer: FALSE Diff: 2 Page Ref: 60 42) Preparing flowcharts can be viewed as more ________ than ________.

Answer: art; science Diff: 2 Page Ref: 66 4 .

43) ________ ________ are a fact-gathering technique where persons provide written answers to general, rather than specific, questions.

Answer: Open-ended questionnaires Diff: 2 Page Ref: 61 44) ________ ________ is based on the premise that quantitative measurement is essential to the design of efficient procedures.

Answer: Work measurement Diff: 2 Page Ref: 62 45) The formula for capacity utilization can be expressed as Total time ________ / Total ________ time.

Answer: available; task Diff: 2 Page Ref: 62 46) After operational characteristics of a system have been identified and selected through some form of work measurement, a work ________ ________ must be undertaken to assign specific tasks to employees.

Answer: distribution analysis Diff: 2 Page Ref: 63 47) The basic ________ symbol represents the making available of data for processing of the recording of processed information.

Answer: input/output Diff: 1 Page Ref: 41 48) A(n) ________ flowchart identifies the overall flow of operations in a system, and focuses on storage media and processing functions.

Answer: systems Diff: 1 Page Ref: 46 49) ________ flowcharts are organized into columns or groups representing processing functions performed by different entities.

Answer: Analytic or Document Diff: 1 Page Ref: 48 50) When a flowchart covers more than one page, the continuation between pages is shown with a ________ symbol.

Answer: connector Diff: 1 Page Ref: 42 51) Terminator, process, data store, and data flow are the primary symbols used in the construction of ________.

Answer: logical data flow diagrams or DFDs Diff: 1 Page Ref: 46 5 .

52) The ________ is a specialized process symbol that represents a decision process in a flowchart.

Answer: diamond Diff: 2 Page Ref: 42 53) A branching table depicts a decision function by means of a statement of the ________ to be made, a list of ________ that can occur, and the path to be followed for each condition.

Answer: decision; conditions Diff: 2 Page Ref: 64 54) "Work" or "spread" sheets used in accounting systems are common examples of the ________ method.

Answer: matrix Diff: 1 Page Ref: 65 55) ________ ________ might be used in lieu of program flowcharts to analyze and document the logic of an application system.

Answer: Decision tables Diff: 2 Page Ref: 64 56) The ________ symbol is used when additional descriptions or explanations are needed to clarify a point on the flowchart.

Answer: annotation Diff: 1 Page Ref: 41 57) Section ________ of the Sarbanes-Oxley Act states management's responsibility for establishing and maintaining adequate internal control and procedures for financial reporting.

Answer: 404 Diff: 1 Page Ref: 40 58) Unified ________ Language is an international standard supported by ISO that uses a variety of graphical techniques to depict the different aspects and views of software development projects at various levels of abstraction.

Answer: Modeling Diff: 1 Page Ref: 55 59) The most basic symbols of BPMN are ________, ________, ________, and ________ symbols.

Answer: task, sequence flow, gateway, event Diff: 3 Page Ref: 57

6 .

60) The acronym for the organization responsible for standardizing flowchart symbols is A) FASB. B) ANSI. C) AICPA. D) CMA. Answer: B Diff: 1 Page Ref: 41 61) Audit tests that follow compliance tests and rely on the interim audit's results are called A) substantive tests.

B) follow-up tests.

C) internal control tests.

D) evaluation tests.

Answer: A Diff: 1 Page Ref: 38 62) Which of the following is a procedure included in systems design?

A) Computer program documentation B) Forms design C) Training personnel D) Document review Answer: B Diff: 2 Page Ref: 39 63) In an analytic flowchart, the symbol which could be used to indicate unclaimed payroll checks is the A) connector symbol.

B) terminal symbol.

C) document symbol.

D) process symbol.

Answer: C Diff: 2 Page Ref: 42 64) Which of the following symbols should not be used to specify an input/output operation?

A) Decision symbol B) Document symbol C) Off-line storage symbol D) Communication link Answer: A Diff: 2 Page Ref: 43

7 .

65) In an analytic flowchart, the symbol which could be used to indicate the computation of gross pay is the A) connector symbol.

B) terminal symbol.

C) input/output symbol.

D) process symbol.

Answer: D Diff: 2 Page Ref: 51 66) In an analytic flowchart, the symbol which could be used to indicate unclaimed payroll checks is the A) connector symbol.

B) terminal symbol.

C) document symbol.

D) process symbol.

Answer: C Diff: 2 Page Ref: 42 67) In an analytic flowchart, the symbol which could be used to indicate the payroll data is the A) connector symbol.

B) magnetic disk symbol.

C) terminator symbol.

D) decision symbol.

Answer: B Diff: 2 Page Ref: 42 68) The manual input symbol could be used to represent A) the entering of data at an on-line keyboard.

B) the entering of data using switch settings.

C) the entering of data using touch screens.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 42 69) The off-line storage symbol could be used to represent data stored A) on diskettes.

B) on magnetic tapes.

C) in paper form.

D) on all of these named media.

Answer: D Diff: 2 Page Ref: 42

8 .

70) The "hierarchy" aspect of HIPO charts refers to the fact that this technique factors a task into modules by A) using the entity's organization chart.

B) utilizing a horizontal approach.

C) going from the general to the specific.

D) None of these answers are correct.

Answer: C Diff: 2 Page Ref: 45 71) The charting technique which emphasizes a logical rather than a physical description of a system is a(n) A) analytic flowchart.

B) forms distribution flowchart.

C) data flow diagram.

D) document flowchart.

Answer: C Diff: 2 Page Ref: 46 72) In the preparation of a logical data flow diagram for a payroll system, which of the following symbols could be used to indicate the payroll data?

A) magnetic disk symbol B) data store symbol C) terminator symbol D) input/output symbol Answer: B Diff: 2 Page Ref: 46 73) Instead of using the on-line storage symbol, a systems analyst wants to use an analytic flowcharting symbol that represents the medium that is used for the file. Which of the following would be the best symbol to use in place of the on-line analytic storage symbol?

A) The display symbol B) The magnetic tape symbol C) The document symbol D) None of these answers are correct.

Answer: D Diff: 3 Page Ref: 41 74) An internal auditor wants to flowchart a file of (hardcopy) purchase orders. Which of the following would be the best symbol to use for the file?

A) The on-line storage symbol B) The off-line storage symbol C) The terminal symbol D) The auxiliary operation symbol Answer: B Diff: 3 Page Ref: 42

9 .

75) Which of the following analytic flowcharting symbols is most appropriate to represent the accounts receivable subsidiary records?

A) The basic input/output symbol B) The basic manual operation symbol C) The document symbol D) None of these answers are correct.

Answer: A Diff: 3 Page Ref: 41 76) In a HIPO chart of a payroll system, which of the following activities would appear higher in the chart than the other activities?

A) Calculate gross pay B) Accumulate hours worked C) Find correct pay rate D) Look up authorized deductions Answer: A Diff: 3 Page Ref: 45 77) Which of the following would not appear in a HIPO chart of a payroll system?

A) Data preparation B) Calculate gross pay C) Payroll master file D) Look up authorized deductions Answer: C Diff: 3 Page Ref: 45 78) In an IPO chart of a payroll system, the payroll master file would A) appear as an input.

B) appear as an output.

C) answers A and B are correct.

D) not be represented in the chart Answer: C Diff: 3 Page Ref: 45 79) In a logical data flow diagram for a payroll system, the employees would best be represented by which of the following symbols?

A) The process symbol B) The terminator symbol C) The data store symbol D) The data flow symbol Answer: B Diff: 3 Page Ref: 46

10 .

80) In a logical data flow diagram for a payroll system, the employees' time cards would best be represented by which of the following symbols?

A) The terminator symbol B) The process symbol C) The data store symbol D) The data flow symbol Answer: A Diff: 3 Page Ref: 46 81) Which of the following systems development activities may require the use of systems techniques?

A) Systems analysis B) Systems design C) Systems implementation D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 39 82) Which of the following is not one of the basic symbols used in analytic flowcharting?

A) Input/output B) Manual input C) Flowline D) Annotation Answer: B Diff: 1 Page Ref: 43 83) The symbol which is used to link other symbols and indicate the sequence of information and operations is the A) flowline symbol.

B) annotation symbol.

C) input/output symbol.

D) process symbol.

Answer: A Diff: 1 Page Ref: 41 84) Which of the following is not a specialized input/output symbol that represents a particular medium?

A) The magnetic tape symbol B) The magnetic disk symbol C) The connector symbol D) The document symbol Answer: C Diff: 1 Page Ref: 41

11 .

85) Which of the following is not a specialized process symbol?

A) The connector symbol B) The manual operation symbol C) The decision symbol D) The preparation symbol Answer: A Diff: 1 Page Ref: 42 86) Which of the following flow directions is(are) assumed in a flowchart?

A) From top to bottom B) From left to right C) Neither answer A nor B is correct.

D) Answers A and B are both correct.

Answer: D Diff: 1 Page Ref: 43 87) The technique that is characterized by a series of charts that represent the system at increasing levels of detail is called A) analytic flowcharting.

B) HIPO. C) IPO. D) logical data flow diagram.

Answer: B Diff: 1 Page Ref: 45 88) Which of the following is not a basic symbol used in logical data flow diagrams?

A) Terminator B) Data store C) Data flow D) Manual input Answer: D Diff: 1 Page Ref: 46-47 89) Which of the following would not be appropriate to head a column in an analytic flowchart?

A) Remittance advice B) Production department C) Purchasing department D) Cashier Answer: A Diff: 1 Page Ref: 49

12 .

90) Which of the following would generally not be appropriate in preparing a document flowchart?

A) Columnar headings B) Flowlines C) Process symbols D) Connector symbols Answer: C Diff: 1 Page Ref: 50 91) A type of resource utilization technique which is used to rationally assign work activities to particular individuals, departments, or other entities is A) work measurement.

B) work distribution analysis.

C) branching table.

D) decision table.

Answer: B Diff: 1 Page Ref: 63 92) Which of the following is an example of narrative techniques?

A) Depth interviews B) Open-ended questionnaires C) Document reviews D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 61 93) The decision analysis techniques that are similar because both are tabular representations of decision-making processes are A) work measurement and work distribution analysis.

B) work distribution and decision tables.

C) branching and decision tables.

D) None of these answers are correct.

Answer: C Diff: 1 Page Ref: 64 94) Systems techniques may be used to A) assist in designing computer programs.

B) give an overall picture of transaction processing in the organization.

C) assist a systems analyst in organizing facts about a system.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 38

13 .

95) Which of the following is not true with respect to the use of systems techniques by auditors?

A) Systems techniques assist the auditor in evaluating a client's internal control.

B) Systems techniques replace audit working papers.

C) Auditors rely on systems techniques to assist with compliance testing.

D) Auditors use systems techniques as part of their documentation for their audit working papers.

Answer: B Diff: 2 Page Ref: 39 96) Systems techniques may be used by A) internal auditors.

B) external auditors.

C) systems personnel.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 38 97) The component of an audit whose objective is to establish the degree of reliance that can be placed on the organization's internal control structure is called A) the interim audit.

B) the financial statement audit.

C) work paper verification.

D) the internal audit.

Answer: A Diff: 1 Page Ref: 38 98) To confirm the existence and assess the effectiveness of an organization's internal controls, auditors A) create systems techniques.

B) perform substantive testing.

C) perform compliance testing.

D) create HIPO and IPO charts.

Answer: C Diff: 2 Page Ref: 39 99) The flowchart which is most similar to a document flowchart is the A) IPO chart.

B) DFD. C) analytic flowchart.

D) HIPO chart.

Answer: C Diff: 2 Page Ref: 49

14 .

100) The first step in preparing a flowchart is to A) select the symbols to be used.

B) analyze the system.

C) sketch a rough draft of the system.

D) consult the work papers from previous audits.

Answer: B Diff: 2 Page Ref: 51 101) How many general guidelines should be followed when preparing a flowchart?

A) Three B) Five C) Seven D) Four Answer: B Diff: 2 Page Ref: 54 102) The goal of work measurement is to create a benchmark or yardstick to use in measuring the efficiency of an operation. The first step taken in work measurement is to A) identify the tasks.

B) analyze requirements.

C) examine IPO and HIPO documentation.

D) obtain time estimates for performing the tasks.

Answer: A Diff: 2 Page Ref: 62 103) The formula used to compute total task time for work measurement purposes is A) (average time / unit + idle time / unit) × average volume.

B) total time available / total task time.

C) (average volume / unit + average time / unit) × average volume.

D) total task time / total time available.

Answer: A Diff: 2 Page Ref: 62 104) A branch table may be used to A) validate the degree of reliance placed on an organization's internal controls.

B) document the decision logic in a computer program.

C) document work measurement analysis.

D) validate the computing speed of a program.

Answer: B Diff: 2 Page Ref: 64

15 .

105) A decision table format generally uses a(n) A) "or" premise.

B) "some, many" premise.

C) "if, then" premise.

D) "all, none" premise.

Answer: C Diff: 2 Page Ref: 64 106) In an application control matrix, row entries are ________.

A) controls B) processing actions C) either controls or processing actions D) neither controls nor processing actions Answer: A Diff: 2 Page Ref: 65 107) A block flowchart is also known as a(n) ________.

A) data flow diagram B) HIPO chart C) analytic flowchart D) program flowchart Answer: D Diff: 1 Page Ref: 46 108) A tabular technique used to represent a decision function in a flowchart is known as a ________.

A) block flowchart B) logical data flow diagram C) decision table D) branching table Answer: D Diff: 2 Page Ref: 64 109) The display symbol in a flowchart represents information displayed for human use using a device such as a ________.

A) video monitor B) plotter C) console printer D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 42

16 .

110) Flowchart symbols that represent the I/O function and the medium upon which the information is recorded, and/or the manner of handling such information, are known as ________.

A) basic input/output symbols B) specialized input/output symbols C) LDFD symbols D) HIPO hierarchy chart modules Answer: B Diff: 1 Page Ref: 41 111) The principle behind the "sandwich rule" states that A) flowcharts should leave as little white space as possible on each page to minimize waste.

B) annotations should be placed between each key input and output symbol.

C) every process symbol should be placed between an input and output symbol.

D) flowcharts should use as many different types of symbols as possible to thoroughly document basic I/O functions.

Answer: C Diff: 1 Page Ref: 52 112) Connector symbols may be used in place of ________.

A) comment symbols B) long flowlines C) data flow symbols D) communications links Answer: B Diff: 1 Page Ref: 53 113) The on-line storage symbol would be used to represent ________.

A) a deck of cards B) a magnetic tape C) an optical disk D) a punched tape Answer: C Diff: 1 Page Ref: 42 114) An annotation or comment may be represented in a flowchart using a ________.

A) brace B) flowline C) square D) diamond Answer: A Diff: 1 Page Ref: 41

17 .

115) Which part of the Sarbanes-Oxley Act requires annual filings of publicly traded companies to include a statement of management's responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting?

A) ISO 404 B) ANSI X3.5 C) Section 404 D) Section X3.5 Answer: C Diff: 1 Page Ref: 40 116) UML is a/an ________ standard.

A) United States B) international C) ANSI D) AICPA Answer: B Diff: 1 Page Ref: 55 117) UML includes techniques that are the functional equivalents of A) data flow diagrams.

B) document flowcharting.

C) analytical flowcharting.

D) All of the above are included in the UML standard.

Answer: D Diff: 1 Page Ref: 55 118) UML version 2.0 defines ________ types of diagrams divided into three categories.

A) 9 B) 10 C) 13 D) 15 Answer: C Diff: 1 Page Ref: 55 119) The three categories of diagrams under the UML version 2.0 include ________ diagrams.

A) structure, activity, and iteration B) form, behavior, and iteration C) structure, behavior, and interaction D) form, activity, and interaction Answer: C Diff: 2 Page Ref: 55

18 .

120) A graphical representation focusing on the sequence of activities in a business process is a /an A) analytical flow chart.

B) business process diagram.

C) process flow chart.

D) data flow diagram.

Answer: B Diff: 2 Page Ref: 57 121) The basic symbols in a BPMN include A) task, sequence flow, gateway, and event symbols.

B) process, flowline, input/output, and annotation.

C) task, flowline, event, and comments.

D) input/output, sequence flow, entities, and storage.

Answer: A Diff: 2 Page Ref: 57

19 .

122) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. On-line storage symbol ________ 2. Off-page connector symbol ________ 3. Manual input symbol ________ 4. Basic process symbol ________ 5. Decision symbol ________ 6. Off-line storage symbol ________ 7. Terminal symbol ________ 8. Basic input/output symbol ________ 9. Connector symbol ________ 10. Manual process symbol A. To indicate that a factory employee uses a workstation on the factory floor to key in a code that means that the production run has been completed B. To indicate that the treasurer will sign the payroll checks C. To indicate that a check is being mailed outside the company D. To indicate that a document is being sent to another department E. To indicate that the bank loan officer approves or does not approve of an increase in the customer's line of credit F. To indicate that computer software will calculate the employees' gross pay deductions, and net pay G. To indicate a file of paper documents H. To indicate files stored on the hard disk I. To indicate the general ledger file J. To indicate the beginning or the end of the flowchart Answer: 1. H 6. G 2. C 7. J 3. A 8. I 4. F 9. D 5. E 10. B Diff: 2 Page Ref: 51

20 .

123) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Systems techniques ________ 2. Work measurement ________ 3. Decision table ________ 4. HIPO chart ________ 5. Data flow diagram ________ 6. Program flowchart ________ 7. Systems development project ________ 8. Compliance testing ________ 9. Substantive testing ________ 10. Sandwich rule ________ 11. Business process diagram ________ 12. Unified modeling language ________ 13. Business process modeling notation ________ 14. Computer-aided software engineering ________ 15. Analytic flowchart A. Consists of systems analysis, design, and implementation B. Charting technique used to document the logical design of a system C. Every process symbol should be placed between an input symbol and an output symbol D. Techniques used to measure activities in a production framework E. Tools used in the analysis, design, and documentation of systems F. Confirms the existence and assesses the effectiveness of internal controls G. Supplements or replaces flowcharts when there are a large number of alternative decision paths H. Indicates detailed processing functions I. International standard predominately a software systems development technology J. Uses pools and lanes in swimlanes to organize activities K. Process of using computer software that supports development and maintenance L. Charts the flow of documents and processing between different entities, represented by columns M.Graphical representation of the sequence of activities of business processes N. A collection of IPO charts O. The direct verification of financial statement figures Answer: 1. E 6. H 11. M 2. D 7. A 12. I 3. G 8. F 13. J 4. N 9. O 14. K 5. B 10. C 15. L Diff: 2 Page Ref: 68 21 .

124) The following data is related to the time required to post checks drawn by the Last National Bank's depositors: Number of checks posted Total elapsed minutes Rest period minutes Interruption minutes

795 520 12 15

Required: a. Calculate the standard posting time per check. b. Calculate the combined rest and interruption time as a percentage of the standard time per check.

Answer: a. Standard time/check = (520 + 12 + 15)/795 = 0.688 min./check b. Rest/interruption per check = (12 + 15)/795 = 0.033962 min./check (rounded) Rest/interruption percentage = 0.033962/0688 = 0.049 (rounded) × 100 = 4.9% Diff: 3 Page Ref: 62-63

22 .

125) The following data is related to the time required to post Kriptonite Corporation's daily general ledger entries: Number of GL entries posted 850 Total elapsed minutes 340 Rest period minutes 6 Interruption minutes 6.5 Required: a. Calculate the standard posting time per GL entry. b. Calculate the combined rest and interruption time as a percentage of the standard time per GL entry.

Answer: a. Standard time/entry = (340 + 6 + 6.5)/860 = 0.40988 min./entry (rounded) b. Rest/interruption per entry = (6 + 6.5)/860 = 0.014535 min./entry (rounded) Rest/interruption percentage = 0.014535/0.40988 = 0.035461 (rounded) × 100 = 3.55% Diff: 3 Page Ref: 62-63

23 .

126) Complete the limited-entry decision table below to document credit card purchase authorization procedures for The Whodunit Bookshop.

A purchase under $75 is approved automatically. Purchases between $75 and$500 (inclusive) are given an authorization number. For purchases over $500, a hold is placed on the customer's account as well as an authorization number being assigned.

Condition/Action Purchase less than $75 Purchase between $75 and $500 Purchase over $500

Rules: 1 2 3

Approve with no action Assign authorization number Place hold on account Answer: Rules: Condition/Action 1 2 3_ Purchase less than $75 Y N N Purchase between $75 and $500 Y N Purchase over $500 Y Approve with no action Assign authorization number Place hold on account Diff: 2 Page Ref: 64-65

x x x

24 .

127) The approval policies for sales on account at Barton Brothers Lumber Company are given below: A sale under $1,000 is automatically approved for a builder or contractor. Sales between $1,000 and $5,000 (inclusive) require the approval of the credit department. Sales over $5,000 require the approval of the credit department and the vice president of the company.

Required: Create a limited-entry decision table to document the sales department approval policies for Barton Brothers Lumber Company.

Answer: Rules: Condition/Action 1 2 3_ Sales less than $1,000 Y N N Sales between $1,000 and $5,000 Y N Sales over $5,000 Y Automatic approval Approval from credit dept.

Approval from credit dept. & V.P. Diff: 3 Page Ref: 64-65

x x x

x

128) Name the four basic symbols used in analytic flowcharting, and briefly define them.

Answer: Suggested answer: Basic input/output symbol: Represents the making available of data for processing or the recording of processed information Basic process symbol: Represents any kind of processing function Flowline symbol: Used to link other symbols; indicates the sequence of available information and operation Annotation symbol: Represents the addition of descriptive comments or explanations Diff: 2 Page Ref: 41 129) Name the four basic symbols used in data flow diagrams, and briefly define them.

Answer: Suggested answer: Terminator Represents sources and destinations of data Process Represents the task or function being done Data store Represents a repository (store, source) of data Data flow Represents a communication channel Diff: 2 Page Ref: 46-47

25 .

130) Discuss one major characteristic of logical data flow diagrams which may be an advantage over analytic flowcharts in some situations.

Answer: Suggested answer: Logical data flow diagrams emphasize logical design rather than physical design. Some symbols used in analytic flowcharts emphasize data processing operations or physical media for inputs, storage, and outputs. Advocates of logical data flow design believe that such symbols confuse logical design with physical design.

Some logical data flow diagrams emphasize processes rather than physical characteristics and are more suited to structured systems analysis.

Diff: 2 Page Ref: 46 131) One broad type of resource utilization analysis is work measurement. a. What fundamental assumption underlies work measurement? b. What is an essential ingredient for an organization to be able to perform work measurement?

Answer: Suggested answer: a. The fundamental assumption is that quantitative measurement is essential to designing efficient work procedures. b. The essential ingredient is the existence of a standard, norm, or yardstick by which the procedure can be measured.

Diff: 2 Page Ref: 62-63

26 .

132) Describe the purpose and nature of the following types of flowcharts: • Systems • Program or block • Analytic • Document • Forms distribution Answer: Suggested answer: A systems flowchart identifies an organization's overall data flows. It shows the origination of inputs, processing (manual or automated), and the disposition of outputs. It emphasizes storage media and general processing rather than a detailed view of individual processes.

A program flowchart is a more detailed version of a systems flowchart. Each process in the systems flowchart is further detailed in the program flowchart. Program flowcharts are also known as block flowcharts.

Analytic flowcharts highlight the flow documents in significant processes, emphasizing processing tasks that apply controls. Symbols are connected with flowlines, as in the systems flowchart. The flowchart is separated into columns representing entities.

A document flowchart identifies the point of origination, distribution, and ultimate disposition of each document in the system. It does not emphasize processes, and is arranged by columns by entity as is the analytic flowchart. However, the primary (and many times only) symbol used is the document symbol.

The forms distribution chart emphasizes the distribution of multiple-copy forms in an organization, and it can be used to analyze unauthorized distribution, unnecessary copies, or unnecessary filing of copies. It is arranged in columns, with the form's originating department to the left and the departments receiving copies in columns to the right.

Diff: 2 Page Ref: 46, 48-50

27 .

133) Discuss the main activities in each systems development phase: systems analysis, systems design, and systems implementation. Include two systems techniques in each phase.

Answer: Suggested answer: Systems analysis includes activities to help formulate and evaluate solutions to systems problems. The systems analyst must first observe the system as it currently functions, and uses depth interviews, questionnaires, and documents reviews. The analyst organizes facts with work measurement analysis and work distribution analysis. To understand information flow, the analyst may prepare logical data flow diagrams and analytic flowcharts.

Systems design includes activities to evaluate the relative effectiveness and efficiency of design alternatives compared with the overall system requirements. Input/output analysis, systems flowcharting, and data flow diagrams help the designer understand and convey the completed system's concepts. This phase uses IPO and HIPO charts, program or block flowcharts, and branching and decision tables to document the design.

Systems implementation includes the activities to carry out the design plan and put it into operation. Systems techniques are used to document the completed system. The development team prepares program flowcharts and decision tables to help in training users and to assure that the systems design specifications are met.

Diff: 2 Page Ref: 39-40 134) How do systems techniques help in auditing?

Answer: Suggested answer: Most auditing engagements are divided into two basic components: the interim audit and the financial statement audit. In an interim audit, auditors must first establish some degree of reliance on the organization's internal control structure. This is achieved through the use of compliance testing to confirm the existence, assess the effectiveness, and check the continuity of the operation of internal controls. The auditor must understand the internal controls that are selected for testing. Controls that are part of the organization's information system require an understanding of the technology employed in the system. To understand the technology and the basics of the information system, the auditor must make use of systems techniques used to document such a system.

Auditors must also document the results of the audit using working papers. Auditors document and analyze the content of working papers using various systems techniques. Internal control questionnaires, analytic flowcharts, and systems flowcharts help to provide excellent documentation for the evaluation of internal controls, and provide evidence of such audit evaluation in the working papers.

The financial statement audit of financial figures cannot be relied upon without the proper compliance testing and reliance upon the internal controls of the organization. Systems techniques form "building blocks" upon which the auditor can examine, assess, and place reliance upon controls used to ultimately prepare the financial statement audit.

Diff: 2 Page Ref: 38-40 28 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 3 Electronic Commerce 1) Groups of computers connected together electronically are known as networks.

Answer: TRUE Diff: 1 Page Ref: 81 2) A WAN is a network that spans a single city or metropolitan area.

Answer: FALSE Diff: 1 Page Ref: 82 3) Electronic business and electronic commerce have the same meaning.

Answer: FALSE Diff: 1 Page Ref: 81 4) Web commerce is a type of eCommerce and eCommerce is a type of eBusiness.

Answer: TRUE Diff: 1 Page Ref: 81 5) One reason for the worldwide popularity of the Internet is that it has brought universal standards of communication to all networks.

Answer: TRUE Diff: 2 Page Ref: 82 6) The RAND Corporation created one of the earliest versions of the Internet in the 1970s.

Answer: FALSE Diff: 2 Page Ref: 82 7) The Internet operates based upon a central command-and-control architecture created in the 1990s.

Answer: FALSE Diff: 2 Page Ref: 82 8) Software known as firewalls limits access to information on a company's servers from the rest of the world.

Answer: TRUE Diff: 2 Page Ref: 84 9) One common type of electronic mail server is known as POP server.

Answer: TRUE Diff: 1 Page Ref: 85 10) Internet Explorer and Netscape Navigator are examples of Web servers.

Answer: FALSE Diff: 2 Page Ref: 85

1 .

11) A sender using public-key encryption keeps one key private and makes the other key public.

Answer: TRUE Diff: 2 Page Ref: 98 12) A digital signature occurs when someone encrypts a message with his or her own private key.

Answer: TRUE Diff: 2 Page Ref: 100 13) Under Internet law, digital signatures are not legally binding in most states.

Answer: FALSE Diff: 2 Page Ref: 102 14) File servers exist mainly as storage for electronic files.

Answer: TRUE Diff: 1 Page Ref: 85 15) The enterprise architecture describes the joint structure and behavior of the enterprise and its information system.

Answer: TRUE Diff: 2 Page Ref: 87 16) The enterprise involves five enterprise architectural domains.

Answer: FALSE Diff: 1 Page Ref: 88 17) Human resources is part of the application architecture of a company.

Answer: FALSE Diff: 2 Page Ref: 88 18) The relational data model is a three-dimensional structure similar in look to that of a cube.

Answer: FALSE Diff: 2 Page Ref: 89 19) The data model uses structured query language to perform operations on data within a database.

Answer: TRUE Diff: 2 Page Ref: 89 20) Data modeling is a database design process that proceeds through the conceptual, logical, and implementation phases.

Answer: FALSE Diff: 2 Page Ref: 90

2 .

21) The corporate information factory can be represented by a 3-part model including data acquisition, management, and delivery.

Answer: TRUE Diff: 2 Page Ref: 90 22) The transactional interface is used for queries, analysis, and research whereas the decision support interface is used for access and manipulation of data in the operational database.

Answer: FALSE Diff: 2 Page Ref: 92 23) Service oriented architecture is applications architecture design framework that facilitates the development of application suites that share information with each other.

Answer: TRUE Diff: 2 Page Ref: 93 24) Database drivers connect applications to printers.

Answer: FALSE Diff: 2 Page Ref: 94 25) The enterprise service bus transfers data to users through a graphical user interface.

Answer: FALSE Diff: 2 Page Ref: 95 26) A guessed plain text attack will succeed even though the sender adds a few random numbers at the end of a message.

Answer: FALSE Diff: 3 Page Ref: 103 27) Another name for a digital ID is a digital certificate.

Answer: TRUE Diff: 1 Page Ref: 104 28) All digital certificates are issued by InterNIC. Answer: FALSE Diff: 2 Page Ref: 104 29) A TCP can be used to securely store private keys.

Answer: FALSE Diff: 2 Page Ref: 105 30) To make keys as useful as possible, they should not have an expiration date attached to them.

Answer: FALSE Diff: 2 Page Ref: 106

3 .

31) Digital cash and real cash are virtually identical because digital cash can only be "spent" once.

Answer: FALSE Diff: 2 Page Ref: 108 32) Under current law, anyone can issue his or her digital notes for use in Internet transactions.

Answer: TRUE Diff: 2 Page Ref: 108 33) A major issue in electronic transactions is privacy.

Answer: TRUE Diff: 1 Page Ref: 107 34) Blinding permits a bank to issue digital cash so that it is unable to link the payer to the payee.

Answer: TRUE Diff: 2 Page Ref: 108 35) Memory cards provide a high degree of security and can be used for complex financial transactions.

Answer: FALSE Diff: 2 Page Ref: 109 36) A system such as an Internet store can be fully automated with no human intervention.

Answer: TRUE Diff: 2 Page Ref: 111 37) Cookies prevent a merchant from viewing and analyzing a person's computer to determine any other Web sites that the person has visited.

Answer: FALSE Diff: 2 Page Ref: 112 38) Almost all privacy statements prohibit Web merchants from sharing their customer information with other merchants.

Answer: FALSE Diff: 2 Page Ref: 112 39) A merchant can obtain a third-party seal of approval, such as the AICPA's Web Trust, to assure its customers their privacy will be protected.

Answer: TRUE Diff: 2 Page Ref: 113 40) ATM cards are really smart cards because they are used for both identification and payment.

Answer: FALSE Diff: 2 Page Ref: 109

4 .

41) Networks of computers, which span at least two metropolitan areas, are known as ________.

Answer: WANs Diff: 2 Page Ref: 82 42) ________ is the protocol used to divide electronic messages into "packets" of information which are then reassembled at the receiving end.

Answer: TCP Diff: 2 Page Ref: 82 43) When the intranets of two or more companies are linked together a(n) ________ is formed.

Answer: extranet Diff: 2 Page Ref: 83 44) A robot-type program that continually runs on a computer and exchanges information with users who request it is called a(n) ________.

Answer: server Diff: 1 Page Ref: 84 45) A(n) ________ ________ is a collection of related documents, files, and programs that falls under the control of one individual.

Answer: Web site Diff: 2 Page Ref: 74 46) Encryption involves using a password to scramble a readable message into a(n) ________ message.

Answer: unreadable or ciphertext Diff: 2 Page Ref: 98 47) A(n) ________ ________ allows the encryption and decryption of a large message from a sender to a receiver.

Answer: secret key Diff: 2 Page Ref: 98 48) The sender's transmission of the both the encrypted key and an encrypted message constitute a ________ ________.

Answer: digital envelope Diff: 2 Page Ref: 99 49) The verification of a digital signature involves the use of a(n) ________ algorithm.

Answer: hashing Diff: 3 Page Ref: 101 50) Whereas ________ signatures are relatively easy to forge, ________ signatures are next to impossible to forge.

Answer: handwritten; digital Diff: 2 Page Ref: 102 5 .

51) A sufficiently long key is a useful countermeasure against a ________ ________.

Answer: cryptanalysis attack Diff: 3 Page Ref: 103 52) Digital IDs are issued by a ________ ________.

Answer: certifying authority Diff: 2 Page Ref: 104 53) A(n) ________ key that has been revoked before its expiration date may be found in a certificate revocation list.

Answer: public Diff: 2 Page Ref: 105 54) The highest level of security should be given to the private keys of ________.

Answer: CAs Diff: 2 Page Ref: 105 55) An electronic ________ is essentially a computer program that keeps track of various keys, digital certificates, and other items of information associated with electronic funds.

Answer: wallet Diff: 2 Page Ref: 111 56) A merchant's Web site may perform important functions, such as opening an encrypted ________ session.

Answer: SSL Diff: 2 Page Ref: 111 57) ________ is one of the adverse results of privacy problems on the Internet.

Answer: Spam or Unsolicited e-mail Diff: 2 Page Ref: 112 58) A ________ ________ ________ model is a set of best practices for a given business process or group of processes.

Answer: business process reference Diff: 2 Page Ref: 96 59) The four levels of abstraction in the value reference model are ________, ________, ________, and ________.

Answer: strategic, tactical, operational, activities/actions Diff: 3 Page Ref: 96 60) The activities that relate to moving the produce are often referred to as ________-________ activities.

Answer: supply-chain Diff: 2 Page Ref: 96

6 .

61) The ________ reference model defines the typical business model in terms of infrastructure, offering, customers, and finance.

Answer: Osterwalder Diff: 3 Page Ref: 97 62) The Act which recognizes transactions as legally binding if electronic signatures are used is the ________ ________ ________ Act. Answer: Uniform Electronic Transactions Diff: 3 Page Ref: 102 63) A ________ server is one in which the communications link between the client and server is protected by encryption.

Answer: secure Diff: 2 Page Ref: 107 64) A ________ is a web site to which individuals regularly posts news stories pertaining to anything from someone's personal life to world events.

Answer: blog Diff: 1 Page Ref: 111 65) ________ ________ ________ is a technical means for publishing blog and other news stories to the web in XML format.

Answer: Really simple syndication Diff: 3 Page Ref: 111 66) Web pages that are collages of other web pages are called ________.

Answer: mashups Diff: 3 Page Ref: 112 67) A web-based scripting language that is typically embedded in web pages but runs inside the client's web browser is ________.

Answer: JavaScript Diff: 2 Page Ref: 112 68) Networks are sometimes classified according to the distance they span. A network that spans a single city or metropolitan area is known as a ________.

A) WAN B) MAN C) LAN D) TCP Answer: B Diff: 1 Page Ref: 82

7 .

69) Which factor below was not a consideration of the RAND Corporation when it was charged with the problem of finding a reliable means of military communication?

A) The network should be able to withstand a nuclear attack.

B) The network should have no central command-and-control center.

C) The physical path between computers was important to keeping the network intact.

D) The network should be able to operate in tatters from its inception.

Answer: C Diff: 2 Page Ref: 82 70) Predecessor networks to the Internet eventually adopted a set of communication protocols called A) TCP. B) IP. C) VPN. D) TCP/IP. Answer: D Diff: 1 Page Ref: 82 71) A domain name is A) an alias name that can be used in place of an IP number.

B) an alias name that can be used in place of a TCP protocol.

C) a series of numbers such as 207.49.159.2.

D) used by a firewall to keep intruders out of a network.

Answer: A Diff: 2 Page Ref: 83 72) One major difference between an organization's intranet and the Internet is A) the intranet may be totally unavailable to outsiders.

B) the Internet may be totally unavailable to outsiders.

C) an intranet user almost never can access the Internet.

D) the Internet operates over a local area network.

Answer: A Diff: 2 Page Ref: 83 73) A client is A) a robot-type program that runs on a computer and exchanges information with users.

B) another name for a proxy server.

C) a user program that accesses and exchanges information with servers.

D) a program that holds incoming electronic mail.

Answer: C Diff: 2 Page Ref: 85

8 .

74) One type of server which acts as an electronic post office is called a ________.

A) file server B) mail server C) Web server D) commerce server Answer: B Diff: 1 Page Ref: 85 75) The protocol that specifies the format of all documents on the World Wide Web is ________.

A) HTML B) hyperlinks C) URL D) ciphertext Answer: A Diff: 1 Page Ref: 85 76) Certain software allows clients to use exchange information with accounting programs and databases that may reside on the server's computer. Such software is called ________.

A) CGI B) ActiveX C) JAVA D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 85 77) The type of electronic payment system in which the payer sends electronic instructions to his or her bank is known as a A) traditional electronic bill pay system.

B) virtual cash system.

C) secure electronic transaction system.

D) traditional credit card system.

Answer: A Diff: 2 Page Ref: 107 78) A plaintext message can be changed into a ciphertext message by using ________.

A) a password B) a digital key C) Answers A and B are both correct.

D) Neither answer A nor B is correct.

Answer: C Diff: 2 Page Ref: 98

9 .

79) If Company A wants to send Company B a secure message, Company A will use Company B's public key to encrypt the message. Company B must then A) use Company A's public key to decrypt the message.

B) use its private key to decrypt the message.

C) use Company A's private key to decrypt the message.

D) use is public key to decrypt the message.

Answer: B Diff: 2 Page Ref: 98-99 80) For sending large messages, secret-key encryption may be used because A) it requires fewer computations than public-key encryption.

B) it allows smaller "packets" of information to be sent and received.

C) it requires more computations than public-key encryption.

D) public-key encryption is highly insecure.

Answer: A Diff: 2 Page Ref: 99 81) A digital envelope consists of A) an encrypted key.

B) an encrypted message.

C) both an encrypted key and an encrypted message.

D) electronically mailing a public key to the recipient.

Answer: C Diff: 2 Page Ref: 99 82) A message which contains a digital signature A) must be encrypted along with the signature.

B) must be sent once as plaintext and once as ciphertext if no message digest exits.

C) does not have to be encrypted when a message digest is used as a digital signature.

D) Answers B and C are correct.

Answer: D Diff: 2 Page Ref: 101-102 83) A long variable-length string can be converted into a short fixed-length string by using A) a digital time-stamping service.

B) a hashing function.

C) public-key encryption.

D) secret-key encryption.

Answer: B Diff: 2 Page Ref: 102

10 .

84) The security of public-key encryption depends on the assumption that A) an attacker cannot factor the product of two large prime numbers.

B) the Internet is a safe communications platform in which to send and receive messages.

C) private keys encrypt using both prime and non-prime numbers.

D) None of these answers are correct.

Answer: A Diff: 2 Page Ref: 103 85) Which statement below regarding keys is false?

A) Each user should create his or her own public and private keys.

B) Using a central office authority to create and distribute keys is highly recommended.

C) The longer the life of the key, the more security that must be applied to protect it.

D) Sensitive keys should be themselves protected by passwords.

Answer: B Diff: 2 Page Ref: 104 86) Digital certificates A) for all practical purposes serve as electronic proof of identity.

B) are issued by some certifying authority.

C) are only useful if appropriate people know the public key of the CA. D) All of these statements are correct.

Answer: D Diff: 2 Page Ref: 104 87) Which keys require the highest level of security?

A) The private keys of CAs B) A sender's public keys C) The private keys of an individual Internet user D) A sender's private keys Answer: A Diff: 2 Page Ref: 105 88) Jane Franklin works for AB Company in its parts division. Someone interested in verifying Jane Franklin's public key and her association with AB Company would first A) check the authority of CA Company which issued AB Company's digital certificate.

B) check the digital certificate issued to AB Company by CA Company.

C) check the digital certificate issued by AB Company to its parts division.

D) None of these answers are correct.

Answer: C Diff: 3 Page Ref: 104-105

11 .

89) The longer a key is in the public domain A) the more popular it will become with users as rated by search engine surveys.

B) the more powerful computers become, increasing the likelihood of successful factoring attacks against the key.

C) the least likely it is to expire since it has withstood the test of time.

D) the shorter in length it should be (e.g., 128 bits).

Answer: B Diff: 3 Page Ref: 104 90) With the unprecedented popularity of the Internet, cryptographic techniques have given rise to new payment systems based on ________.

A) digital cash B) credit and debit card transactions C) new electronic Federal Reserve standards D) All of these answers are correct.

Answer: A Diff: 2 Page Ref: 107 91) Privacy is a major issue in electronic transactions. Therefore, the Internet should not be used if A) a bank uses a different digital signature for each denomination of currency.

B) digital signatures need to be issued for coins used in electronic transactions.

C) the IP address of one of the parties to a transaction needs to remain fully confidential.

D) All of these answers are correct.

Answer: C Diff: 2 Page Ref: 107 92) The technique that permits a bank to issue digital cash so that it is unable to link the payer to the payee is called ________.

A) laundering money B) using a blinded digital signature C) using a generic digital signature D) digitized recycling Answer: B Diff: 1 Page Ref: 108 93) There are different types of electronic wallet-sized cards used in virtual cash transactions.

ATM cards are classified as ________.

A) shared-key cards B) signature-creating cards C) memory cards D) signature-transporting cards Answer: C Diff: 2 Page Ref: 109

12 .

94) There are different types of electronic wallet-sized cards used in virtual cash transactions.

The card that shows the most promise for wide-scale retail transaction use in the foreseeable future is the ________.

A) shared-key card B) signature-creating card C) memory card D) signature-transporting card Answer: D Diff: 2 Page Ref: 110 95) Which feature below would not be considered a highly convenient feature for consumers of an Internet store transaction?

A) Consumers usually must wait for delivery of items purchased via delivery by third parties.

B) Internet store transactions can be completed without any human intervention on the part of the vendor.

C) Internet stores are "open" 24 × 7 with virtually worldwide access.

D) Internet stores accept most credit cards.

Answer: A Diff: 2 Page Ref: 110-111 96) Electronic commerce poses many problems with consumer's privacy. Small pieces of information that are placed on a user's computer by an electronic merchant are called ________.

A) spybots B) cookies C) worms D) viruses Answer: B Diff: 1 Page Ref: 112 97) Electronic commerce poses many problems with consumer's privacy. The best way for a merchant to assure its customers that it will protect their privacy is to A) engage a CPA to perform a special audit.

B) establish a written privacy policy.

C) use SSL encryption for all financial transactions.

D) use cookies as a security feature.

Answer: A Diff: 2 Page Ref: 113 98) The AICPA's Web Trust attestation program provides assurance that a merchant's Web site has A) some type of functioning information protection.

B) business practices disclosure.

C) transaction integrity.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 113 13 .

99) Groups of computers that are connected together electronically form networks. Trent Plan Administrators has a three-room office suite on the fourth floor of a building. Needing more space, the firm has leased an additional two-room suite on the fifth floor. Excluding Internet considerations, the best network configuration that Trent should use to communicate between office suites is ________.

A) a MAN B) a WAN C) a LAN D) the Internet Answer: C Diff: 1 Page Ref: 82 100) Groups of computers that are connected together electronically form networks. Northern Research Associates has two facilities in Bridgeport, CT. One building is located about eight miles from the other. Both are located within easy access of Interstate 95. Excluding Internet considerations, the best network configuration that Northern Research should use to communicate between their two office locations is ________.

A) a MAN B) a WAN C) a LAN D) the Internet Answer: A Diff: 1 Page Ref: 82 101) Groups of computers that are connected together electronically form networks. The Nathan Lumber Company has two main facilities: one in Minneapolis, MN, and the other in Madison, WI. Excluding Internet considerations, the best network configuration that Nathan Lumber Company should use to communicate between their two office locations is ________.

A) a MAN B) a WAN C) a LAN D) the Internet Answer: B Diff: 1 Page Ref: 82 102) Groups of computers that are connected together electronically form networks. Tina Dutton works as a freelance writer and editor out of her house in Trinidad, CO. Tina works occasionally with other independent writers and two different publishing companies throughout the U.S. The best network configuration that Tina should use to communicate with her associates and publishers is ________.

A) a MAN B) a WAN C) a LAN D) the Internet Answer: D Diff: 1 Page Ref: 82 14 .

103) One of the earliest practical versions of the Internet was created in the early 1970s by ________.

A) ARPA B) the Rand Corporation C) the CIA D) MILnet Answer: A Diff: 1 Page Ref: 82 104) Gloria has Internet dial-up services furnished by a local area ISP. She generally uses the Internet after work several evenings each week, logging on and off during each session. The type of Internet address used by Gloria's computer during each of her sessions on the net is most likely a ________.

A) fixed IP address B) DSN C) dynamic IP address D) CRL Answer: C Diff: 2 Page Ref: 83 105) HTML documents found on the World Wide Web can easily be accessed and crossreferenced to each other using ________.

A) XML B) hyperlinks C) footnotes D) certificate chains Answer: B Diff: 1 Page Ref: 85 106) Servers that exist to support eBusiness are ________.

A) mail servers B) file servers C) web servers D) All of the above support eBusiness.

Answer: D Diff: 1 Page Ref: 85 107) ________ servers and ________ servers make applications and data in databases available to remote clients.

A) Application, database B) Application, mail C) File, database D) Web, mail Answer: A Diff: 1 Page Ref: 86

15 .

108) A three-tiered application architecture involves applications that contain ________, ________, and ________ tiers.

A) conceptual, logical, and physical B) conceptual, knowledge, and functional C) presentation, logic, and data D) planning, design, and implementation Answer: C Diff: 2 Page Ref: 86 109) The ________ ________ describes the joint structure and behavior of the enterprise and its information system.

A) relational architecture B) business architecture C) business modeling D) enterprise architecture Answer: D Diff: 2 Page Ref: 87 110) Enterprise architecture involves ________ enterprise architectural domains.

A) 3 B) 4 C) 5 D) EA does not involve architectural domains.

Answer: B Diff: 2 Page Ref: 88 111) The ________ architecture defines the needed data and how it is to be stored, processed, utilized, and integrated with other domains.

A) business B) data C) application D) technical Answer: B Diff: 2 Page Ref: 88 112) The ________ architecture defines standards, principles, procedures and best practices to govern the information technology architecture.

A) business B) data C) application D) technical Answer: D Diff: 2 Page Ref: 95

16 .

113) In a relational database model, operations on data are performed by using ________.

A) EA B) Java C) SQL D) UML Answer: C Diff: 1 Page Ref: 89 114) The corporate information factory model includes A) data acquisition.

B) data management.

C) data delivery.

D) data acquisition, data management, and data delivery.

Answer: D Diff: 1 Page Ref: 90-91 115) ________ ________ store relatively current transaction data for quick access by management in support of tactical decision making.

A) Data warehouses B) Operational databases C) Relational databases D) Data marts Answer: B Diff: 1 Page Ref: 90 116) ________ ________ store enormous volumes of current and historical data for use in research and analysis.

A) Data warehouses B) Operational databases C) Relational databases D) Data marts Answer: A Diff: 1 Page Ref: 90 117) ________ works better with tables that have more than two dimensions for complex analyses.

A) OLTP B) ETL C) SQL D) OLAP Answer: D Diff: 2 Page Ref: 92

17 .

118) A ________ interface is used for access and manipulation of data in the operational database.

A) decision support B) transactional C) graphical user D) relational Answer: B Diff: 2 Page Ref: 92 119) Service oriented architecture services are ________ software units of functionality.

A) dependent B) intradependent C) independent D) multiple Answer: C Diff: 2 Page Ref: 93 120) ________ refers to software that serves as a go-between for two applications, enabling communication between them that would otherwise be impossible.

A) Interfacing B) Bridgeware C) Middleware D) None of the above enables communication between applications.

Answer: C Diff: 2 Page Ref: 93 121) ________ drivers connect application to databases.

A) Application interface B) Warehouse C) Middleware D) Database Answer: D Diff: 2 Page Ref: 94 122) The ________ serves as a central switchboard for communications between all enterprise services and applications.

A) enterprise service bus (ESB) B) application interface (AI) C) enterprise architecture (EA) D) data warehouse (DW) Answer: A Diff: 2 Page Ref: 95

18 .

123) The ________ framework views the organization from the perspectives of the different stakeholders.

A) Osterwalder B) federal enterprise C) open group D) Zachman Answer: D Diff: 2 Page Ref: 96 124) Primary value chain activities include all the following activities except for A) inbound logistics.

B) accounting.

C) marketing.

D) manufacturing.

Answer: B Diff: 2 Page Ref: 96 125) The value reference model depicts the value chain at ________ levels of abstraction.

A) one B) two C) three D) four Answer: D Diff: 2 Page Ref: 96 126) The activities related to moving a product is referred to as A) value chain activities.

B) supply-chain activities.

C) logistical activities.

D) primary activities.

Answer: B Diff: 2 Page Ref: 96 127) The ________ reference model defines the typical business model in terms of infrastructure, offering, customers, and finance.

A) Osterwalder B) Zachman C) federal enterprise D) open group Answer: A Diff: 2 Page Ref: 97

19 .

128) What act recognizes electronic signatures as legally binding in commerce and business related transactions?

A) Sarbanes-Oxley Act B) Section 404 Act C) Uniform Electronic Transactions Act D) Contract Validation Act Answer: C Diff: 2 Page Ref: 102 129) What standard, developed by credit card companies, represents a security framework based on numerous control objectives?

A) Payment card industry data security standard B) Credit card security interface standard C) Credit card settlement security payment standard D) Electronic bill payment security standard Answer: A Diff: 2 Page Ref: 107 130) ________ systems integrate all the major accounting functions, as well as the web store, into a single software system.

A) Open enterprise planning B) Application server planning C) Enterprise resource planning D) Zachman enterprise planning Answer: C Diff: 2 Page Ref: 111 131) Which of the following statements best describes the business architecture's relation to other architectures?

A) The business architecture supports all the other architectures B) The data and technology architectures determine business architectures C) The business architectures determines the data and technology architectures D) None of the above correctly describe the stated relationship.

Answer: C Diff: 2 Page Ref: 88 132) ETL stands for ________, ________, and ________.

A) examine, track, list B) extract, transform, load C) extract, track, load D) examine, transform, list Answer: B Diff: 2 Page Ref: 91

20 .

133) Which of the following is a standard communications protocol in SOA? A) XML B) URL C) XBRL D) SOAP Answer: D Diff: 2 Page Ref: 93 134) Which of the following is not an example of middleware?

A) Enterprise system bus B) Database driver C) Application programming interface D) All of the above are examples of middleware.

Answer: A Diff: 2 Page Ref: 93-95 135) Which of the following is not a server-side web scripting language A) Perl B) VBScript C) JavaScript D) PHP Answer: C Diff: 3 Page Ref: 112 136) The label "www.google.com" is an example of a ________.

A) domain name B) fixed IP address C) domain name server D) dynamic IP address Answer: A Diff: 2 Page Ref: 83 137) "207.49.159.2" is an example of a(n) ________.

A) domain name B) domain name server C) transmission control protocol D) Internet protocol address Answer: D Diff: 2 Page Ref: 82

21 .

138) Ben Black works as an instructor at Cheyenne School, whose domain name is Chey. Ben Black's user name is bblack. Cheyenne School's e-mail system uses the POP protocol. Ben Black's e-mail address is ________.

A) bblack@chey.edu B) bblack@chey.com C) benblack@chey.org D) benblack@chey.com Answer: A Diff: 2 Page Ref: 83 139) In an encryption system, which key length is considered the most secure?

A) 32 bits B) 128 bits C) 1,000 bits D) 640 bits Answer: C Diff: 1 Page Ref: 104 140) An Internet merchant captured all of the cookies present on Ron's personal computer at his home A) because Ron's bank required it.

B) the merchant wanted to speed its transaction with Ron. C) the merchant wanted to know all of the other sites visited by Ron. D) because the merchant's bank required it.

Answer: C Diff: 1 Page Ref: 112

22 .

141) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Spoofing ________ 2. Ciphertext ________ 3. LAN ________ 4. FTP ________ 5. JAVA ________ 6. POP ________ 7. Key ________ 8. Digital cash ________ 9. Hyperlink ________ 10. Encryption A. The most commonly used protocol for file servers B. Assuming a false identify, such as using a false IP address C. A network which is configured to a single site D. The most commonly used protocol for mail servers E. An electronic "promissory note" F. The process of making a readable message or file unreadable G. A "pointer" to another document on a Web server H. An example of software which allows a server to transfer a program to a client for execution on the client's computer I. Needed to decode an encrypted message J. A message or file that has been encrypted Answer: 1. B 6. D 2. J 7. I 3. C 8. E 4. A 9. G 5. H 10. F Diff: 2 Page Ref: 115-118

23 .

142) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. ActiveX ________ 2. Firewall ________ 3. Internet ________ 4. XML ________ 5. SET protocol ________ 6. URL ________ 7. Public key ________ 8. CGI ________ 9. IP ________ 10. DNS A. Microsoft's alternative to JAVA B. A name for a Web document's location C. Software that helps Web clients communicate with programs (such as accounting or database programs) linked to the server D. Limits access to information on the company's servers from the rest of the world E. Electronic phone book that associates domain names with IP addresses F. Involves encrypting all communications between the client and the server, thus assuring that transactions are private and free from outside manipulation G. A variant of HTML H. Protocol that assigns a unique address to each computer on the Internet I. "The" electronic highway J. Typically based on the product of two prime numbers Answer: 1. A 6. B 2. D 7. J 3. I 8. C 4. G 9. H 5. F 10. E Diff: 2 Page Ref: 115-118 143) Give the e-mail address for DJ Jack (his user name is djjac) who works for radio station WXYZ (the station's domain). WXYZ is a privately held corporation.

Answer: djjac@wxyz.com Diff: 2 Page Ref: 83 144) Give the e-mail address for Red Duke (his user name is reddu), who is an instructor at Badlands Community Technical School (whose domain is blcomtech).

Answer: reddu@blcomtech.edu Diff: 2 Page Ref: 83 24 .

145) Name four types of smart cards that are used for electronic payments, and describe the functions of each card.

Answer: Suggested answer: There are four types of smart cards. Their functions and uses are: • Memory cards, which are only capable of storing information. For example, a memory card could store a customer's prepaid account balance information. A cash register could deduct charges from the card when the card is inserted in the cash register.

• Shared-key cards, which encrypt all communications between the card and the point of payment device, such as a cash register. Shared-key cards could provide more security for prepaid account balances.

• Signature-transporting cards, which are similar to shared-key cards, but also allow the user to spend digital cash notes. When the customer inserts the card into the cash register, the note is transferred to the cash register. The cash register can verify on-line with the bank that the note has not previously been spent.

• Signature-creating cards, which are similar to signature-transporting cards, but are capable of generating their own digital signatures, allowing the user to write electronic "checks" containing the cardholder's digital signature.

Diff: 2 Page Ref: 109-110 146) Explain the difference between a "server" and a "client." List and describe the four types of servers.

Answer: Suggested answer: A server is a program that constantly runs on a computer and shares (exchanges) information, files, etc., with users who request the information. A client is a user program which requests information, files, etc., which has been placed on a server.

The four types of servers are: • Mail servers (such as POP servers) act like electronic mailboxes, holding incoming electronic mail until the user's client program requests it.

• File servers (or FTP servers) allow clients to send and retrieve files to and from remote computers.

• Web servers allow clients to access documents and run computer programs residing on remote computers via the World Wide Web. • Commerce servers are Web servers that specialize in secure financial transactions.

• Application servers and database servers make applications and databases available to remote clients.

Diff: 2 Page Ref: 84-86

25 .

147) Describe at least three ways in which the privacy of a company's communications may be violated by unauthorized means.

Answer: Students may mention the following: • Encrypted messages may be decoded by means of guessed plaintext attacks. Senders can avoid this attack by adding random numbers to the end of a message, using sufficiently long keys, and frequently changing keys.

• Encrypted keys may be the targets of factoring attacks. The attacker tries to discover the two large prime numbers that make up the public key. Then, the attacker attempts to factor the private key from the two large prime numbers. Fortunately, this is almost mathematically impossible to do.

• Computers that contain sensitive key information may be compromised. This is considered the most likely attack. Once an attacker obtains a private key, he or she can decrypt any messages encrypted with the related public key. To prevent attacks, personal computers containing private keys should have limited physical access. Both the computers and the keys themselves should be accessible only through passwords.

• Former employees may use keys which have not been discontinued. To prevent this attack, companies should place keys on a certificate revocation list associated with the certifying authority that originally issued the key.

• Attackers may monitor messages to determine their origins and destinations. This form of attack does not have a good defense. If one party needs to remain anonymous, the Internet should not be used as a communications medium.

Diff: 2 Page Ref: 103-107

26 .

148) What is an intranet and what security issues surround its use by a corporation?

Answer: Suggested answer: An intranet is a self-contained, in-house network or Internet that is used by a company for its own internal communications. Employees within an organization may use an intranet in exactly the same fashion as the Internet; however, the intranet may be partially or completely unavailable to those outside of the organization.

The main security problem with intranets is that such a network can potentially expose the organization's sensitive information to everyone on the Internet. To help avert such a problem, companies use combinations of hardware and software to limit access from outsiders. A firewall is a software program that filters each packet of incoming information to ensure that it has originated from an authorized source. One typical approach is to use IP filtering, which blocks out incoming packets which do not originate from preauthorized IP addresses. Such preauthorized addresses are maintained in an access control list. Unfortunately, such firewall protection can be defeated if an outsider can "spoof" an IP address (by sending incoming message requests that falsely appear to come from an authorized IP address). Firewalls are still useful, but should be considered only the first-line of defense.

Another type of security device used with an intranet is a proxy server. Such servers are used "on the inside" of a company's firewall to filter all outgoing requests for information. If a request is valid (as determined by settings found in an access control list), the request passes through the proxy server; otherwise it is blocked. Proxy servers can also be used "in reverse" to filter all incoming requests, thus preventing unauthorized access to specific locations within the organization. Proxy servers which operate this way provide another type of firewall protection from outside intruders.

Diff: 2 Page Ref: 83-84 149) What is the most commonly used encryption method, and what is its main advantage and disadvantage?

Answer: Suggested answer: The most common encryption method is public-key encryption. The message sender encrypts the message with the receiver's public key. The receiver decrypts the message with the receiver's private key. One advantage to public-key encryption is, unlike secret-key encryption, the sender needs only to know the receiver's public key. The private keys of the receiver and sender are not disclosed. Another advantage is that only the recipient's private key can decrypt the message. An intercepting party cannot decrypt the message with the recipient's public key. A disadvantage of public-key encryption is that it requires more computations and it is slower than secret-key encryption, providing both security and speed to encrypted transactions.

Diff: 2 Page Ref: 98 150) What is the difference between electronic business and electronic commerce?

Answer: eBusiness refers to the use of information technologies in any aspect of the business, whereas eCommerce is a part of eBusiness that directly involves the exchange of products and services.

Diff: 1 Page Ref: 81 27 .

151) Describe enterprise architecture and its four architectural domains.

Answer: EA describes the joint structure and behavior of the enterprise and its information system. The four architectural domains are the business architecture, the information architecture, the applications architecture, and the technical architecture. The BA defines the human resources, processes, and the infrastructure that a business needs to accomplish its business strategy. The IA or data architecture defines the needed data and how it is stored, processed, utilized, and integrated with the other main domains. The AA defines the applications needed to run the business and how the applications communicate with each other through intranets, extranets, and electronic data interchange (the focus is on the applications and how they work together to form a single composite application). The TA describes the structure and behavior of the IT infrastructure and defines standards, principles, procedures, and best practices to govern the IT architecture.

Diff: 1 Page Ref: 88-95

28 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 4 Transaction Processing and the Internal Control Process 1) The term risk is synonymous with exposure.

Answer: FALSE Diff: 1 Page Ref: 129 2) Selecting the best opportunities and managing uncertainties is part of Enterprise Risk Management (ERM).

Answer: TRUE Diff: 1 Page Ref: 128 3) COBiT stands for Control Objectives for Businesses in Technology fields.

Answer: FALSE Diff: 1 Page Ref: 137 4) ISO 27002 is a widely-accepted international standard for best practices in information security.

Answer: TRUE Diff: 1 Page Ref: 137 5) Financial accounting is concerned with the prevention and detection of fraud and white-collar crime.

Answer: FALSE Diff: 1 Page Ref: 131 6) Recent survey results indicate that the most frequent reason frauds are discovered is due to internal controls.

Answer: TRUE Diff: 2 Page Ref: 132 7) COSO reports contain the most authoritative framework for internal control processes.

Answer: TRUE Diff: 2 Page Ref: 137 8) The production cycle is defined as the events related to the distribution of goods and services to other entities and the collection of related payments.

Answer: FALSE Diff: 2 Page Ref: 133 9) Typically, an organization's internal control process consists of five components.

Answer: TRUE Diff: 2 Page Ref: 133

1 .

10) Management's consideration of the relative costs for benefits of internal controls will often be subjective in nature.

Answer: TRUE Diff: 2 Page Ref: 133 11) For both public and privately held companies, the Sarbanes-Oxley Act of 2002 (SOA) imposes certain requirements and restrictions on management, auditors, and company audit committees.

Answer: FALSE Diff: 2 Page Ref: 136 12) Many companies have adopted ethics codes of conduct which provide guidance for conducting business in an ethical manner.

Answer: TRUE Diff: 2 Page Ref: 138 13) Some believe that every corporation has its own corporate culture, and it is such a culture that ultimately either promotes or hinders ethical behavior within the corporation.

Answer: TRUE Diff: 2 Page Ref: 139 14) Most control processes can function irrespective of the competence of employees.

Answer: FALSE Diff: 2 Page Ref: 140 15) The board of directors serves as an interface between the stockholders of an organization and its operating management.

Answer: TRUE Diff: 1 Page Ref: 141 16) Audit committees are usually charged with evaluation and assessment of a corporation's internal control processes.

Answer: FALSE Diff: 2 Page Ref: 142 17) Control is established in the budgeting process by comparing the results of activity to the budget for each activity.

Answer: TRUE Diff: 2 Page Ref: 142 18) The third component of internal control is risk assessment.

Answer: FALSE Diff: 1 Page Ref: 144

2 .

19) The segregation of authorization from the recording of transactions and custody of assets is an essential internal control process.

Answer: TRUE Diff: 2 Page Ref: 144 20) Physical theft is only a minor threat to the solvency of most business organizations.

Answer: FALSE Diff: 2 Page Ref: 146 21) Approval (authorization) limits the initiation of a transaction or performance of an activity to selected individuals.

Answer: FALSE Diff: 2 Page Ref: 146 22) The audit trail concept is basic to the design and audit of an accounting information system.

Answer: TRUE Diff: 1 Page Ref: 147 23) In an internal audit function, the nature of independence is different than that of an external auditor.

Answer: TRUE Diff: 2 Page Ref: 148 24) General controls can be a substitute for application controls.

Answer: FALSE Diff: 2 Page Ref: 149 25) The computer operations supervisor has a good attendance record, which demonstrates the general operating procedure of competency of personnel.

Answer: FALSE Diff: 2 Page Ref: 150 26) A list of changes to on-line computer files is stored on magnetic tape to provide a transaction trail.

Answer: TRUE Diff: 2 Page Ref: 151 27) Application controls are designed to provide assurance that processing has occurred.

Answer: FALSE Diff: 2 Page Ref: 151 28) A hash total is a meaningless number that only is important for internal control purposes.

Answer: TRUE Diff: 2 Page Ref: 152

3 .

29) The immediate return of input information to the sender for comparison and approval is called feedback.

Answer: FALSE Diff: 2 Page Ref: 153 30) A trailer label is the last record of an inventory file, which contains a record count of the number of records in the file.

Answer: TRUE Diff: 2 Page Ref: 154 31) Detective controls are not considered transaction processing controls, but rather internal audit controls.

Answer: FALSE Diff: 2 Page Ref: 155 32) Internal control should be looked upon as part of a larger process within the organization.

Answer: TRUE Diff: 2 Page Ref: 156 33) Collusion occurs when a white-collar individual attempts to commit fraud within an organization.

Answer: FALSE Diff: 1 Page Ref: 157 34) A negative answer given to a question on an internal control questionnaire almost always indicates a weakness in an internal control process area.

Answer: FALSE Diff: 2 Page Ref: 158 35) A structured form of analysis relevant to internal control reviews is an applications control matrix.

Answer: TRUE Diff: 2 Page Ref: 159 36) Someone who has personally observed the activities under review should complete an internal control questionnaire.

Answer: TRUE Diff: 2 Page Ref: 158 37) Ratings of the relative strength or reliability of controls may be entered in a control matrix.

Answer: TRUE Diff: 2 Page Ref: 159 38) Corrective controls act to prevent errors and fraud before they happen.

Answer: FALSE Diff: 2 Page Ref: 155 4 .

39) An example of a suspense file is a file of back-ordered items awaiting shipment to customers.

Answer: TRUE Diff: 2 Page Ref: 155 40) The chief goal of an information system is productivity.

Answer: TRUE Diff: 2 Page Ref: 157 41) Controls increase productivity and the reliability of resulting output.

Answer: FALSE Diff: 2 Page Ref: 157 42) Informal pressure from employees does not cause collusion.

Answer: FALSE Diff: 1 Page Ref: 157 43) COSO's next report to be published will pertain to the monitoring of internal control systems in order to keep them current and effective.

Answer: FALSE Diff: 1 Page Ref: 137 44) ________ tend to reduce ________, but they rarely affect the causes.

Answer: Controls; exposures Diff: 2 Page Ref: 129 45) An exposure is a(n) ________ times its ________ consequences.

Answer: risk; financial Diff: 3 Page Ref: 129 46) Deficient revenues and excessive costs reduce ________.

Answer: profits Diff: 1 Page Ref: 129 47) The diversion or misrepresentation of assets from either employees or third parties is known as ________ ________.

Answer: management fraud Diff: 2 Page Ref: 131 48) Fraud examination draws on the fields of ________, ________, and ________.

Answer: accounting; law; criminology Diff: 3 Page Ref: 132 49) White-collar crime that benefits an organization rather than individuals is ________ crime.

Answer: corporate Diff: 2 Page Ref: 131 5 .

50) The ________ cycle involves events related to the acquisition and management of capital funds, including ________.

Answer: finance; cash Diff: 3 Page Ref: 133 51) The concept of internal control is based on ________ major premises: ________ and reasonable ________.

Answer: two; responsibility; assurance Diff: 3 Page Ref: 133 52) Commitment and competence are factors included in the ________ environment.

Answer: control Diff: 2 Page Ref: 138 53) All companies whose stock is traded on the New York Stock Exchange are required to have a(n) ________ ________ composed of outside directors.

Answer: audit committee Diff: 2 Page Ref: 136 54) The ________ budget is the budget for the entire organization.

Answer: master Diff: 1 Page Ref: 142 55) ________ bonding is common for employees who are directly responsible for the custody of assets.

Answer: Fidelity Diff: 1 Page Ref: 143 56) Employees can check and verify the operations of other employees when the employees are forced to take a(n) ________.

Answer: vacation Diff: 2 Page Ref: 143 57) ________ controls affect all transaction processing, while ________ controls are specific to individual applications.

Answer: General; application Diff: 2 Page Ref: 149 58) In cases of ________, "the procedures did not fail, the people did."

Answer: defalcations Diff: 2 Page Ref: 148 59) ERM is defined by ________ as a process applied in strategy setting and across the enterprise, to manage risk.

Answer: COSO Diff: 2 Page Ref: 128 6 .

60) ISO 27002 aids companies with Section ________ compliance.

Answer: 404 Diff: 2 Page Ref: 137 61) Businesses without an IT department or IT expertise can rely on outside ________ ________ ________ for their accounting, software and IT needs.

Answer: application service providers Diff: 3 Page Ref: 161 62) Which of the items below would not be considered a possible common exposure for a corporation?

A) Excessive prices are paid for goods for use in the organization.

B) The corporation never was billed for a sale of merchandise shipped to a customer.

C) A flash flood destroys the merchandise contained in a warehouse.

D) Certain equipment was accidentally misplaced and not depreciated.

Answer: C Diff: 1 Page Ref: 129 63) Intentional or reckless conduct, whether intentional or not, and which results in materially misleading financial statements, is called A) fraudulent financial reporting.

B) corporate crime.

C) management fraud.

D) None of these answers are correct.

Answer: A Diff: 2 Page Ref: 131 64) DWB Corporation suffered a loss due to the spoilage of certain raw materials used in the manufacturing of its products. The business transaction cycle in which this loss occurred is the ________.

A) revenue cycle B) expenditure cycle C) finance cycle D) production cycle Answer: D Diff: 1 Page Ref: 133 65) Which of the objectives listed below is not considered part of the internal control process?

A) Compliance with applicable laws and regulations B) The prevention of fraud and embezzlement C) Effectiveness and efficiency of operations D) Reliability of financial reporting Answer: B Diff: 2 Page Ref: 133

7 .

66) "Amounts due to vendors should be accurately and promptly classified, summarized, and reported." is a representative control objective of the ________.

A) revenue cycle B) finance cycle C) production cycle D) expenditure cycle Answer: A Diff: 2 Page Ref: 133 67) The internal control premise that concerns the relative costs and benefits of controls is known as A) responsibility.

B) risk.

C) reasonable assurance.

D) exposure.

Answer: C Diff: 2 Page Ref: 133 68) Section 102 of the Federal Foreign Corrupt Practices Act of 1977 (FCPA) applies to A) all public and privately held U.S. based companies.

B) all companies subject to the Securities Exchange Act of 1934.

C) any publicly held company, whether it is a for-profit or non-profit entity.

D) all foreign-owned companies currently operating in the United States.

Answer: B Diff: 2 Page Ref: 135 69) The Omnibus Trade and Competitiveness Act of 1988 (OTCA) amends the A) Securities Exchange Act of 1934.

B) accounting provisions of the FCPA. C) antibribery provisions of the FCPA. D) accounting and antibribery provisions of the FCPA. Answer: D Diff: 2 Page Ref: 135 70) The Sarbanes-Oxley Act of 2002 imposes certain requirements and restrictions on ________.

A) management B) auditors C) audit committees D) All of these answers are correct.

Answer: A Diff: 2 Page Ref: 135

8 .

71) The Sarbanes-Oxley Act of 2002 explicitly deals with the non-audit services which auditors can provide to their audit clients. Certain non-audit services may be permissible, without prior approval of a company's audit committee, if the non-audit services A) constitute less than 5% of the audit fees for the corporation.

B) constitute less than 5% of the audit fees for the corporation and are not specifically identified as being barred by SOA 2002.

C) constitute less than 20% of the audit fees for the corporation.

D) Auditors are barred from any and all non-audit services for their audit clients according to SOA 2002.

Answer: B Diff: 3 Page Ref: 136 72) The component of internal control that is the foundation for all other components is ________.

A) risk assessment B) information and communication C) control activities D) control environment Answer: D Diff: 2 Page Ref: 138 73) One way in which a company can produce a corporate culture that supports ethical behavior is through A) emphasis on sales quotas and deadlines.

B) emphasis on short-run goals and objectives.

C) a cultural audit to bring to light the corporation's true culture and ethical behavior.

D) All of these answers are correct.

Answer: C Diff: 2 Page Ref: 139 74) The formal communications patterns within an organization can be communicated using A) a specific, precise management philosophy.

B) an organizational chart.

C) a cultural audit.

D) an ethical code of conduct.

Answer: B Diff: 2 Page Ref: 141 75) Assets fraudulently appropriated for one's own use from an organization is considered ________.

A) fraud B) theft C) embezzlement D) a corporate loan Answer: C Diff: 1 Page Ref: 130 9 .

76) An interesting aspect of white-collar crime is that A) it often seems to be victimless.

B) it usually amounts to less than $1,000 per organization per year on average.

C) internal controls almost never reveal the perpetrators of such crimes.

D) None of these answers are correct.

Answer: A Diff: 2 Page Ref: 130 77) Many aspects of computer processing tend to significantly A) decrease an organization's exposure to undesirable events.

B) strengthen the corporate culture's ethical behavior in the long-term analysis.

C) increase employee productivity through the use of monitoring software.

D) increase an organization's exposure to undesirable events.

Answer: D Diff: 2 Page Ref: 132 78) The department or division of larger organizations which is responsible for monitoring and evaluating controls on an ongoing basis is ________.

A) internal auditing B) external auditing C) internal affairs D) division monitoring Answer: A Diff: 1 Page Ref: 148 79) The two broad categories of transaction control are A) general controls and specific controls.

B) general controls and application controls.

C) general controls and controls.

D) basic controls and application controls.

Answer: B Diff: 1 Page Ref: 149 80) Application controls are often classified as A) general, processing, and specific.

B) basic, specific, and accounting.

C) general, application, and output.

D) input, processing, and output.

Answer: D Diff: 1 Page Ref: 151

10 .

81) An agreement or conspiracy among two or more people to commit fraud is known as ________.

A) embezzlement B) misappropriation C) collusion D) misrepresentation Answer: C Diff: 1 Page Ref: 157 82) An analytical technique commonly used to analyze and examine an internal control process is known as a(n) A) control flowchart.

B) internal control questionnaire.

C) exposure checklist.

D) segregation of duties.

Answer: B Diff: 1 Page Ref: 158 83) An exposure is A) synonymous with risk.

B) equal to risk multiplied times the likelihood of detection.

C) equal to risk multiplied times the financial consequences.

D) not possible with a good system of internal control in place.

Answer: C Diff: 2 Page Ref: 129 84) Fraudulent financial reporting A) involves intentional or reckless conduct.

B) may be due to an act of omission or commission.

C) results in misleading financial statements.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 131 85) Internal control is affected by an organization's A) board of directors, management, and other personnel.

B) management and internal auditors.

C) management and external auditors.

D) board of directors, management, and shareholders.

Answer: A Diff: 2 Page Ref: 133

11 .

86) Management's philosophy and operating style are part of which component of internal control?

A) Control activities B) Control environment C) Information and communication D) Monitoring Answer: B Diff: 2 Page Ref: 138 87) Organizational structure is part of which component of internal control?

A) Control activities B) Control environment C) Information and communication D) Monitoring Answer: B Diff: 2 Page Ref: 138 88) An audit committee is required by A) the AICPA. B) the Securities and Exchange Commission.

C) generally accepted accounting principles.

D) both the New York Stock Exchange and the Sabanes-Oxley Act of 2002.

Answer: D Diff: 2 Page Ref: 136 89) Which of the following are examples of risks that are relevant to the financial reporting process?

A) Changes in the operating environment B) Changes in personnel C) Changes in the information system D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 144 90) The three types of functions that normally should be segregated to promote internal control are A) recording transactions, authorizing transactions, and approval.

B) authorizing transactions, approving transactions, and custody of assets.

C) authorizing transactions, recording transactions, and custody of assets.

D) authorizing transactions, inputting data, and outputting data.

Answer: C Diff: 2 Page Ref: 144

12 .

91) A computer-produced document that is intended for resubmission into the system, such as the part of the utility bill that the customer returns with payment, is a(n) A) invoice.

B) dual-submit document.

C) turnaround document.

D) automated input document.

Answer: C Diff: 2 Page Ref: 151 92) The marking of a form or document to direct or restrict its further processing is called ________.

A) an endorsement B) a restriction C) blocking D) a cancellation Answer: A Diff: 2 Page Ref: 152 93) Identifying transaction documents to prevent their further or repeated use after they have performed their function is known as ________.

A) cancellation B) restriction C) blocking D) endorsement Answer: A Diff: 2 Page Ref: 152 94) The general term for any type of control total or count applied to a number of transaction documents is A) amount control total.

B) line control total.

C) hash total.

D) batch control total.

Answer: D Diff: 2 Page Ref: 153 95) Totals of homogeneous amounts for a group of transactions or records, usually expressed in dollars or quantities, is known as a(n) A) batch control total.

B) hash total.

C) amount control total.

D) line total.

Answer: C Diff: 2 Page Ref: 152

13 .

96) The reentry of transaction data with machine comparison of the initial entry to the second entry to detect errors is called A) batch balancing.

B) key verification.

C) validity checking.

D) a run-to-run comparison.

Answer: B Diff: 2 Page Ref: 153 97) A repetition of processing and an accompanying comparison of individual results for equality is called A) redundant processing.

B) matching.

C) run-to-run comparison.

D) readback.

Answer: A Diff: 2 Page Ref: 154 98) The identification and analysis of differences between the values contained in two substantially identical files or between a detail file and a control file is ________.

A) validity checking B) verification C) reconciliation D) clearing Answer: C Diff: 2 Page Ref: 154 99) The identification of unprocessed or retained items in files according to their date, usually the transaction date, is ________.

A) clearing B) aging C) periodic auditing D) summary processing Answer: B Diff: 2 Page Ref: 155 100) Research indicates that the most frequent type of fraud is A) misappropriation of funds.

B) check forgery.

C) false invoices.

D) credit card fraud.

Answer: A Diff: 3 Page Ref: 132

14 .

101) Research indicates that the most expensive type of fraud is A) patent infringement.

B) false financial statements.

C) credit card fraud.

D) All of these answers are correct.

Answer: D Diff: 3 Page Ref: 132 102) An audit committee A) is composed only of an organization's shareholders.

B) should be primarily composed of only external board members (a NYSE requirement).

C) ideally should be composed only of members who are also high-level executives in the organization.

D) ideally should report directly to the controller.

Answer: B Diff: 3 Page Ref: 136 103) The FCPA requires that a system of internal accounting control A) guarantees that profits are correctly stated in a firm's audited financial statements.

B) provides absolute assurance that transactions are executed only in accordance with management's authorization.

C) provides reasonable assurance that access to assets is permitted only in accordance with management's authorization.

D) ensures the long-run profitability of an organization.

Answer: C Diff: 3 Page Ref: 135 104) If the treasury and controller functions are independent, which of the following should be assigned to the controller to maintain effective control?

A) Approval of disbursements B) Responsibility for check signing C) Custody of short-term investment securities D) Authorization of write-offs of accounts receivable Answer: A Diff: 3 Page Ref: 146 105) A clerk accidentally posts a prenumbered sales invoice of $625 as $265 to a customer's account. What control would detect this error?

A) A hash total of the invoice numbers B) A sequence check of the numbers of the invoices which are to be posted C) A document count of the invoices D) A control total of the amounts to be posted Answer: D Diff: 3 Page Ref: 152

15 .

106) Which of the following would impair the effectiveness of the separation of incompatible functions in an organization?

A) The personnel director reports to the vice president for administration B) The controller reports to the vice president of sales C) The cashier reports to the treasurer D) The director of budgeting reports to the controller Answer: B Diff: 3 Page Ref: 144 107) A well planned system of internal accounting control normally would include procedures that are designed to provide reasonable assurance that A) employees act with integrity when performing their assigned tasks.

B) decisions leading to management's authorization of transactions are sound.

C) collusive activities would be detected by segregation of employee duties.

D) transactions are executed in accordance with management's general or specific authorization.

Answer: D Diff: 3 Page Ref: 135 108) Monitoring, the fifth component of internal control, involves A) assessing the quality of internal controls over time and taking corrective actions if necessary.

B) studying the methods used and records established to identify, assemble, analyze, classify, record, and report the organization's transactions.

C) maintaining accountability for the financial structure (i.e., assets and liabilities) of the organization.

D) assessing and managing the risks that affect the organization's objectives.

Answer: A Diff: 3 Page Ref: 148 109) ERM contains eight components. Which one of the following is not a component of ERM? A) Internal environment B) Risk assessment C) Risk response D) Risk elimination Answer: D Diff: 2 Page Ref: 128-129 110) Which one of the following is not an element of the internal control process?

A) Control environment B) Risk assessment C) Risk response D) Monitoring Answer: C Diff: 2 Page Ref: 137

16 .

111) Guidance for Section 404 compliance can be found in A) COSO reports.

B) ISO 27002.

C) The United States Federal Sentencing Guidelines.

D) Guidance can be found in all of the above.

Answer: D Diff: 2 Page Ref: 137 112) COSO's Guidance on Monitoring Internal Control Systems the below phases except for A) establishing a foundation for monitoring.

B) designing and executing monitoring procedures that are based on risk.

C) developing the objectives for the level of risk that can be tolerated by management.

D) assessing and reporting the results.

Answer: C Diff: 2 Page Ref: 149 113) The problems small businesses encounter with internal control that are addressed by COSO includes the following EXCEPT A) effective boards of directors.

B) limited segregation of duties and increased focus on monitoring.

C) compensating for limitations in information technology.

D) outsourcing increased reporting requirements.

Answer: D Diff: 2 Page Ref: 161 114) Small and large companies can gain cost efficiencies in internal control by A) focusing financial items that have changed the most from period to period.

B) managing reporting objectives.

C) effectively managing the amount and types of documentation on adequate controls.

D) All of the above will enable small companies to gain cost efficiencies.

Answer: D Diff: 2 Page Ref: 162

17 .

115) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Fidelity bond ________ 2. Tickler file ________ 3. Suspense account ________ 4. Anticipation ________ 5. Corrective controls ________ 6. Input controls ________ 7. Authorization ________ 8. Batch sequence ________ 9. Forensic accounting ________ 10. Managerial audit A. A synonym for batch serial numbers B. The expectation of a given transaction or event at a particular time C. A contract with an insurance company that provides a financial guarantee of the honesty of the individual who is named in the bond contract.

D. A synonym for a managerial audit E. A control total for items awaiting further processing F. Designed to prevent or detect errors in the beginning stage of processing G. An activity concerned with preventing and detecting fraud H. A control file consisting of items sequenced by age are for processing or follow-up purposes I. These act to correct errors J. Limits the initiation of a transaction or performance of an activity to selected individuals Answer: 1. C 6. F 2. H 7. J 3. E 8. A 4. B 9. G 5. I 10. D Diff: 2 Page Ref: 164-165

18 .

116) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. FCPA ________ 2. Audit committee ________ 3. Collusion ________ 4. Application controls matrix ________ 5. Internal auditing ________ 6. Control environment ________ 7. Cancellation ________ 8. Statutory sanction ________ 9. Format check ________ 10. Endorsement A. Has responsibility for reviewing the reports of the company's external auditors B. The identification of documents to prevent their repeating use C. A type of exposure D. A law which requires publicly-held companies to maintain adequate accounting systems E. One of the main components of internal control F. Agreement or conspiracy among two or more people to commit fraud G. An example of this procedure is: all characters in the vendor number field are numeric H. A technique for internal control analysis I. Marking a form or document to restrict its further processing J. An example of the monitoring component Answer: 1. D 6. E 2. A 7. B 3. F 8. C 4. H 9. G 5. J 10. I Diff: 2 Page Ref: 164-165

19 .

117) Listed below is a list of terms relating to internal control processes, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Check digit ________ 2. Upstream resubmission ________ 3. Exposure ________ 4. Control register ________ 5. Hash total ________ 6. Internal control questionnaire ________ 7. Physical controls ________ 8. Preventive controls ________ 9. Run-to-run totals ________ 10. General controls A. These affect all transaction processing B. An internal control analysis technique C. A detective control used to determine if input is correct D. A log indicating the disposition and control values of batches or transactions E. A detective control use to determine if processing is complete F. The sum of a batch's preprinted check numbers is an example G. Segregation of duties is an example H. A limited access area, for example I. Business interruption is an example J. This is an example of a corrective control Answer: 1. C 6. B 2. J 7. H 3. I 8. G 4. D 9. E 5. F 10. A Diff: 2 Page Ref: 164-165

20 .

118) Listed below are various controls found in a system of internal control.

Required: Label each of the following controls as preventive (P), detective (D), or corrective (C). ________ 1. Transaction detail ________ 2. Rotation of duties ________ 3. Reconciliation ________ 4. Visual verification ________ 5. Batch controls ________ 6. Endorsement ________ 7. Redundant processing ________ 8. Rotation of duties ________ 9. Batch balancing ________ 10. Automatic error correction Answer: 1. C 6. P 2. P 7. D 3. D 8. P 4. D 9. D 5. D 10. C Diff: 2 Page Ref: 155

21 .

119) Presented below are ten control features, followed by ten statements describing either the achievement of a control feature (i.e., a system success) or a system deficiency.

Required: On the answer line to the left of each control feature, insert the capital letter from the list of the most closely related system success or deficiency. Each letter will be used only once. ________ 1. Backup and recovery ________ 2. Check digit ________ 3. Batch balancing ________ 4. Format check ________ 5. Suspense file ________ 6. Hash total ________ 7. Password ________ 8. Turnaround document ________ 9. Forms design ________ 10. Reasonableness test A. This helps control input accuracy by ensuring that dates are properly entered using the format MM/DD/YYYY. B. Many customer account numbers entered into the billing transaction file are invalid.

C. This could help prevent the entry of inconsistent data elements, such as entering a tax code for a customer for whom sales should be nontaxable.

D. In entering a batch of invoices into the computer, an operator made several errors in keying the invoice numbers. As a result, the computer program updated computer accounts with incorrect invoice information.

E. A new field salesperson omitted several data elements when completing the sales order forms.

F. The vendor master file was damaged in yesterday's update, and cannot be used for today's update.

G. A former employee gained access to the computer system and damaged the customer master file.

H. A computer operator discovered that he had not input all items in a batch.

I. This feature speeds up data entry because some of the input data is prerecorded on the source document and can be scanned.

J. A supervisor reviews this document frequently to dispose of partially processed transactions.

Answer: 1. F 6. D 2. B 7. G 3. H 8. I 4. A 9. E 5. J 10. C Diff: 2 Page Ref: 150-155

22 .

120) Listed below are several examples of internal control procedures.

Required: For the following internal control procedures, give the reason or objective of the control: a. Checks are mailed by someone other than the person who prepares and signs a check. b. The accounting department matches invoices received to receiving reports prior to recording the payable. c. The cashier deposits cash and mails checks to vendors, but does not record any information in the accounting system. d. The employee performing the bank reconciliation does not perform any cash handling or recording activities.

Answer: a. This prevents an employee from processing phony payables and diverting the signed check to himself/herself. b. This prevents the company from recording and subsequently paying for goods and services not actually received. c. The cashier cannot conceal cash thefts with accounting entries. d. The employee performing the reconciliation cannot perpetrate a theft by stealing cash, and cannot conceal a theft by recording it. The employee's reconciliation serves as a check on the activities of others.

Diff: 2 Page Ref: 144-147 121) Listed below are examples of several internal control procedures.

Required: For the following internal control procedures, give the objective of the control: a. The stock of unused checks is kept under lock and key. b. "Surprise" counts of cash funds are conducted periodically. c. All purchases must be made by the purchasing department. d. The accounting department matches invoices to copies of purchase orders.

Answer: a. This prevents checks from being stolen and forged. b. This prevents a theft of cash. c. This prevents unauthorized parties from purchasing goods. d. This prevents the company from paying for unauthorized purchases.

Diff: 2 Page Ref: 144-147

23 .

122) Listed below are four examples of possible exposures found in the various business cycles of a certain business.

Required: For each example, identify the transaction cycle control objective and give a solution which will help to reduce the possible exposure found in each example. a. There is no written policy regarding access to the securities the company purchases as an investment. The securities are in a file in the bottom drawer of a file cabinet in the office. b. The office supervisor makes "spur of the moment" decisions regarding the hiring and use of vendors for office supplies and maintenance of the office and warehouse building. c. A sales representative sent out a shipment of merchandise to a customer on Friday afternoon, telling the warehouse supervisor that he would write up the paperwork the following Monday morning. d. The clerk who prepares and sends statements to customers was hurt in an auto accident and is on sick leave. As a result, the sales representative now prepares and sends out customer statements when he has some free time.

Answer: a. Finance cycle. "Access to cash and securities should be permitted only in accordance with management's criteria." Management of the company should create a policy regarding access to securities or cash, and then implement the policy by training employees and limiting physical access to securities (probably by using a safe or a safety deposit box at a bank). b. Expenditure cycle. "Vendors should be authorized in accordance with management's criteria."

Management of the company should create and implement a policy regarding the use of vendors.

Management should authorize vendors before they are hired or used by the company. The office manager may be given some authorization to buy office supplies and necessary items under a certain dollar amount. c. Revenue cycle. "All shipments of goods should result in a billing to the customer." The problem here is that the shipment may not be billed if the sales representative and warehouse manager fail to prepare the paperwork. Paperwork should be prepared prior to the shipment of any merchandise sold to customers. d. Revenue cycle. "Billings to customers should be accurately and promptly classified, summarized, and reported." Since it appears that the designated employee who handles customer billing will be off work in the foreseeable future, a temporary employee should be hired and trained. The sales representative should not be sending out customer statements when he has "some free time." The temporary employee must be held accountable for preparing and sending out statements, which need to be properly recorded in a timely manner.

Diff: 2 Page Ref: 133

24 .

123) Metaluna, Inc., is a new software company that recently began operations in 2003.

Metaluna's stock is publicly traded. Listed below are several statements made recently by the CEO and Chairman of the Board of Metaluna at a directors meeting.

Required: Please comment on each statement in light of the requirements imposed by the Sarbanes-Oxley Act (SOA) of 2002. a. "I would like our external auditors to have a major role in our financial systems design and implementation in the future. They seem like a good group of knowledgeable individuals who I believe can help us in this area." b. "As you know, our controller resigned from her position this week. I would like to see if someone from the auditing firm who worked on our most recent audit would be interested in coming 'on board' with us." c. "I am ready to approve a $20,000 company loan to our CIO to help him send his daughter to Stanford in the fall." d. "The audit committee has suggested that a new auditing firm be hired after completion of our current audit. I would like the board to make a resolution giving me sole discretion and authorization in this matter, since I believe I am better qualified to make such a decision."

Answer: The CEO and Chairman of Metaluna, Inc., has made several statements, which if acted upon by the board and company, are serious violations of the Sabranes-Oxley Act of 2002. a. The SOA severely restricts the non-audit services that auditors can provide to their clients. In the case of Metaluna, the auditing firm is expressly barred from offering its services in the area of financial systems design and implementation. Metaluna should find a competent third-party consultant with a high degree of expertise in this area. b. Metaluna cannot hire someone from the auditing firm as controller if the individual has worked on the audit of the company during a one-year period preceding the audit. SOA prohibits such as hiring as a conflict of interest. Metaluna should hire a controller either from another company in the same industry, or seek someone from another auditing firm who has no connection with Metaluna's current external auditor. c. The SOA specifically prohibits Metaluna from making a personal loan to its CIO (an executive officer of the company). d. Under SOA, the audit committee is given the sole responsibility for selecting, hiring, and overseeing the auditor of a company. In this situation, if the board votes to give the CEO "sole discretion and authorization in this matter," it will be violating the law, and undermining the role the audit committee of Metaluna, Inc. Diff: 3 Page Ref: 135-137

25 .

124) The following three questions on an internal control questionnaire relate to comparisons of one amount to a second amount.

Required: What is the purpose of each of these comparisons? a. Does the company compare budgeted amounts with actual expenditures? b. Does the company mail monthly statements of account to all customers? c. Does the company adjust inventory records to physical counts at least once a year?

Answer: a. Comparing actual with planned expenditures and investigating any significant differences helps the company determine if there are errors or irregularities in the accounting records, and sheds some light on whether the company is operating in an efficient and effective manner. b. In addition to reminding customers of the amounts due, monthly statements allow the company to use the customer to determine the validity of invoice amounts. The company compares its records with the customers' records. c. Periodically, recorded amounts should be compared with actual physical amounts. These amounts may be different because of inaccurate recordkeeping or spoiled or stolen inventory.

Diff: 3 Page Ref: 158-159 125) Briefly describe five types of common business exposures and their related causes.

Answer: Suggested answer: The text lists eight exposures, as follows: •

Excessive costs potentially result from every business expenditure.

Deficient revenues result from decreases in sales, failure to record sales, and uncollected balances from customers.

• Loss of assets may result from theft, acts of violence, or natural disaster. The loss may be intentional or unintentional.

• Inaccurate accounting results from errors or intentional misstatements in records and financial statements.

• Business interruption is a temporary or permanent cessation of operations resulting from natural disasters, physical acts of violence, or other business exposures.

• Statutory sanctions result from a company's noncompliance with laws and regulations.

• Competitive disadvantage is the inability of an organization to remain viable in the marketplace and results from ineffective management decisions or business exposures.

• Fraud and embezzlement may result from actions of those inside or outside of the organization to divert the organization's assets or to mislead investors.

Diff: 2 Page Ref: 129-130 •

26 .

126) Discuss three behavioral issues that should be considered when implementing an internal control plan.

Answer: Suggested answer: Students may mention: • Internal controls may conflict with productivity. For example, an employee may omit a control in the interest of productivity.

• Segregation of duties assumes that employees will not collude with each other.

• Many controls are based on the assumption that employees will report irregularities committed by other employees.

• The position/power of an individual in the organization who commits an irregularity may influence whether or not the irregularity gets reported.

• Informal pressures, such as peer pressure, may lead to an irregularity not being reported.

Diff: 2 Page Ref: 156-157 127) Give five examples of ways a company may be exposed to excessive costs.

Answer: Suggested answer: Students may mention any of the following problems with expenditures: • paying higher prices than necessary for purchases of goods or services • paying employees for work that was not effective • paying employees for inefficient work • buying and using too much raw materials because of inefficient production • incurring excessive advertising, travel, or other expenses • paying penalties due to late payment of taxes • paying penalties or finance charges due to late payment of bills Diff: 2 Page Ref: 129 128) Discuss why a fraud examiner needs to be educated in the fields of accounting, law, and criminology to properly perform a fraud investigation.

Answer: Suggested answer: Fraud examination can be termed a multi-disciplinary activity, since it attempts to find fraud committed by employees or outside individuals. An examiner needs to understand and know about accounting transactions to understand the nature of fraudulent accounting. Since fraud is a violation of any number of local, state, and federal laws, the examiner must have an essential understanding of the related laws that apply to such crimes. An examiner must also possess some understanding of the nature of criminals and their actions, so a basic knowledge of criminology is essential. A fraud examiner must also know legal procedures and the rules of evidence to properly (and legally) conduct an investigation and gather appropriate evidence for later use in a court of law.

Diff: 2 Page Ref: 132

27 .

129) What is corporate culture? Why might someone argue that the corporate culture has more influence over ethical behavior in a firm than the corporate ethics code of conduct?

Answer: Suggested answer: Corporate culture includes the general beliefs, practices, and attitudes of employees. If the general belief of the company is that complying with safety practices is important, for example, employees will probably operate safely despite what the code of conduct states about safety. If management has made it clear that being honest in dealing with customers and suppliers is important, employees will probably practice honesty. The code of conduct may be more useful in disciplining inappropriate behavior than it is in encouraging good behavior.

Diff: 2 Page Ref: 138-140 130) Enterprise risk management contains eight components. Identify at least six and explain its importance to managing risk within a company.

Answer: Suggested answer: 1. Internal Environment - the overall culture, atmosphere, and tone of the organization.

2. Objective Setting - management's process for setting objectives in a way that is consistent with their tolerance for risk.

3. Event identification - the process of identifying internal and external events that affect the entity's opportunities and risks as they relate to achieving management objectives.

4. Risk assessment - the process of analyzing risks, their likelihood of identified events, and their potential impact.

5. Risk response - the process of responding to risks and identified events.

6. Control activities - the policies and procedures that are implemented to effect risk responses.

7. Information and communication - the overall flow of information as it's applied to managing risks in support of the other ERM components.

8. Monitoring - the process of monitoring the entire ERM process.

Diff: 2 Page Ref: 128-129

28 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 5 Information Systems Security 1) An information security system has the basic elements of any information system: hardware, software, databases, procedures, and reports.

Answer: TRUE Diff: 1 Page Ref: 181-182 2) The objective of the first phase of the security system life cycle is to design risk control measures such as various security measures and contingency plans.

Answer: FALSE Diff: 2 Page Ref: 182 3) One of the duties of the CSO is to present reports to the board of directors for approval.

Answer: TRUE Diff: 1 Page Ref: 183 4) The CSO should report directly to the president of the organization.

Answer: FALSE Diff: 1 Page Ref: 183 5) Using the qualitative approach to risk assessment, each loss exposure is computed as the product of the cost of an individual loss times the likelihood of its occurrence.

Answer: FALSE Diff: 2 Page Ref: 184 6) An information security threat is a potential exploitation of a vulnerability.

Answer: TRUE Diff: 2 Page Ref: 184 7) Computer security and information security mean the same thing.

Answer: FALSE Diff: 2 Page Ref: 181 8) Information security is broader in concept than computer security and deals with all information not just computerized information.

Answer: TRUE Diff: 2 Page Ref: 181 9) Information security management system is an internal control process and manages risk.

Answer: TRUE Diff: 2 Page Ref: 182 10) The ERM process is part of the information security management system.

Answer: FALSE Diff: 2 Page Ref: 182 1 .

11) ISO27001 defines standards for building, operating, and maintaining ISMSs. Answer: TRUE Diff: 2 Page Ref: 182 12) ISO27001 includes 132 general security controls, organized under 11 topics and further broken down into over 5000 detailed controls.

Answer: FALSE Diff: 2 Page Ref: 182 13) ISO27001 defines PDCA which is planning, development, checking, and acting.

Answer: FALSE Diff: 2 Page Ref: 182 14) ISO27001 defines PDCA which is planning, doing, checking, and acting.

Answer: TRUE Diff: 2 Page Ref: 182 15) All hackers are malicious.

Answer: FALSE Diff: 2 Page Ref: 186 16) White hat hackers legitimately probe systems for weaknesses in order to help with security control procedures.

Answer: TRUE Diff: 2 Page Ref: 186 17) Black hat hackers formally probe systems for legitimate purposes in order to help with security control procedures.

Answer: FALSE Diff: 2 Page Ref: 186 18) Social engineering is a form of manipulation of people in order to trick them into divulging privileged information.

Answer: TRUE Diff: 2 Page Ref: 186 19) Pretexting and phishing are forms of social engineering.

Answer: TRUE Diff: 2 Page Ref: 187 20) Malware is short for malicious hardware that compromises the security of the victim's computer.

Answer: FALSE Diff: 2 Page Ref: 188

2 .

21) Malware can be hidden in email, downloaded software, disk or web browser.

Answer: TRUE Diff: 2 Page Ref: 188 22) Hacker methods include social engineering, direct observation, electronic interception, and exploits.

Answer: TRUE Diff: 2 Page Ref: 186-191 23) Direct observation includes shoulder surfing and piggybacking.

Answer: FALSE Diff: 2 Page Ref: 190 24) Direct observation includes shoulder surfing and dumpster diving.

Answer: TRUE Diff: 2 Page Ref: 190 25) In general, vulnerabilities arise from improperly installed or configured software and from unforeseen defects or deficiencies in the software.

Answer: TRUE Diff: 2 Page Ref: 191 26) Three major groups of individuals that may attack information systems include information personnel, users, and employees.

Answer: FALSE Diff: 2 Page Ref: 185 27) Three major groups of individuals that may attack information systems include information personnel, users, and hackers.

Answer: TRUE Diff: 2 Page Ref: 185 28) Virtualization involves running multiple operating systems, or multiple copies of the same operating system, all on the same machine.

Answer: TRUE Diff: 2 Page Ref: 203 29) Using cloud-based services and data storage is referred to as cloud computing.

Answer: TRUE Diff: 2 Page Ref: 204 30) Business continuity planning and disaster recovery, in general, mean the same thing.

Answer: TRUE Diff: 2 Page Ref: 209

3 .

31) In the health insurance sector, the Gramm-Leach-Bliley Act, requires federal agencies that oversee the health insurance sector to implement regulatory standards aimed at protecting the security of critical information resources.

Answer: FALSE Diff: 2 Page Ref: 209 32) GASB statement #34 requires utility companies to maintain business continuity plans.

Answer: TRUE Diff: 2 Page Ref: 209 33) Criminal Code 301.2(1) makes it a federal crime in the United States to knowingly and with intent fraudulently gain unauthorized access to data stored in financial institution computers.

Answer: FALSE Diff: 3 Page Ref: 187 34) Intruders who attack information systems for fun and challenge are known as hackers.

Answer: TRUE Diff: 2 Page Ref: 186 35) Input manipulation is the least-used method in most cases of computer fraud.

Answer: FALSE Diff: 1 Page Ref: 193 36) A serious business problem today is the theft of data.

Answer: TRUE Diff: 1 Page Ref: 194 37) A trapdoor is a portion of a computer program that, upon detecting an intruder, "traps" the intruder by activating a firewall to prevent unauthorized access to critical data.

Answer: FALSE Diff: 2 Page Ref: 193 38) Logic bombs are dormant pieces of code placed in programs for activation at a later date by a specific event.

Answer: TRUE Diff: 2 Page Ref: 194 39) A worm is any type of Trojan that silently spreads from one computer to another over a network, without the intervention of any individual or server.

Answer: TRUE Diff: 2 Page Ref: 189 40) Implementing security measures and contingency plans help to control computer information threats.

Answer: TRUE Diff: 1 Page Ref: 195 4 .

41) In a denial of service attack, an intruder is denied access to an organization's Web site after the intruder attempts to break through its firewalls and proxy server countermeasures.

Answer: FALSE Diff: 2 Page Ref: 189 42) In most organizations, accounting, computing, and data processing are all organized under the controller.

Answer: FALSE Diff: 2 Page Ref: 196 43) Employees should be laid off or terminated with the greatest care because terminated employees account for a significant portion of all sabotage incidents.

Answer: TRUE Diff: 2 Page Ref: 197 44) With today's excellent computer security software, it is no longer necessary to physically separate unauthorized individuals from computer resources.

Answer: FALSE Diff: 1 Page Ref: 197 45) Software should not be installed on any computer without prior approval of security.

Answer: TRUE Diff: 1 Page Ref: 198 46) System-access controls prevent unauthorized individuals from physically accessing computer resources.

Answer: FALSE Diff: 2 Page Ref: 199 47) The ideal password should consist of easy-to-remember names such as banana, kitty, IBM, password, or Friday.

Answer: FALSE Diff: 1 Page Ref: 199 48) No password system is of much value unless the passwords themselves are protected.

Answer: TRUE Diff: 2 Page Ref: 200 49) A program kept in a locked file is one which can be run but not looked at (i.e., code) or altered in anyway.

Answer: TRUE Diff: 2 Page Ref: 200 50) Fault tolerance can be applied at any of three levels: input, processing, or output.

Answer: FALSE Diff: 2 Page Ref: 201 5 .

51) An incremental backup backs up all files whose archive bit is set to 0 before termination of the session.

Answer: FALSE Diff: 2 Page Ref: 202 52) The problem with Web server attacks is that the Web server is essentially an extension of the operating system.

Answer: TRUE Diff: 2 Page Ref: 202 53) One study indicates that 45% of all disasters are due to human error.

Answer: FALSE Diff: 2 Page Ref: 205 54) Escalation procedures state the conditions under which a disaster should be declared, who should declare it, and whom that person should notify when executing the declaration.

Answer: TRUE Diff: 2 Page Ref: 206 55) The information security management system is an organizational ________ that controls special risks associated with computer-based information systems.

Answer: internal control process Diff: 1 Page Ref: 181 56) The method of risk assessment for computer systems where system vulnerabilities and threats are listed and subjectively ranked is known as the ________ approach.

Answer: qualitative Diff: 2 Page Ref: 184 57) The Treadway Commission has linked ________ ________ to computer crime.

Answer: management fraud Diff: 2 Page Ref: 185 58) The most sophisticated type of wire tapping is called ________.

Answer: piggybacking Diff: 2 Page Ref: 190 59) The least common method used to commit computer fraud is ________ ________.

Answer: program alteration Diff: 2 Page Ref: 193 60) A defrauder may use ________ to cover up ________.

Answer: sabotage; fraud Diff: 3 Page Ref: 194

6 .

61) In computer environments, ________ control is especially important as there is often a tendency to either overspend or spend on the wrong things.

Answer: budgetary Diff: 2 Page Ref: 196 62) ________ authentication systems identify individuals based on their fingerprints, hand sizes, retina patterns, or voice patterns.

Answer: Biometric Diff: 2 Page Ref: 197 63) The distribution of ________ should be controlled by a formal, secure delivery system.

Answer: output Diff: 2 Page Ref: 198 64) A security system where the user enters an identification number and the system responds with a sign (i.e., code word) is known as a ________ system.

Answer: sign-countersign Diff: 2 Page Ref: 199 65) ________ can be digitally signed in the same way that electronic messages are signed to authenticate the identity of the source of the program.

Answer: Programs Diff: 2 Page Ref: 200 66) Backing up files is not the same thing as ________ them.

Answer: archiving Diff: 1 Page Ref: 202 67) A weakness in the ________ system is also likely to create a related weakness in ________ server security.

Answer: operating; Web Diff: 2 Page Ref: 203 68) The best security ________ will not help if the system ________ do not enforce the policies.

Answer: software; administrators Diff: 2 Page Ref: 205 69) An alternate site that contains the wiring, equipment, and very up-to-date back-up data and software is a ________ site.

Answer: flying-start Diff: 2 Page Ref: 207 70) The three objectives of information security are ________, ________, and ________.

Answer: confidentiality, integrity, availability Diff: 2 Page Ref: 182

7 .

71) Information security management system is an internal control process and manages ________.

Answer: risk Diff: 2 Page Ref: 182 72) Information security management system is part of the larger ________ risk management process.

Answer: enterprise Diff: 2 Page Ref: 182 73) In ISO27001 PDCA stands for ________, ________, ________, and ________.

Answer: planning, doing, checking, and acting Diff: 2 Page Ref: 182 74) ________ ________ involves manipulating victims in order to trick them into divulging privileged information.

Answer: Social engineering Diff: 2 Page Ref: 186 75) ________ is a form of social engineering in which one impersonates another typically in a phone call or electronic communication.

Answer: Pretexting Diff: 2 Page Ref: 187 76) ________ is a form of social engineering which is aimed directly at tricking victims into giving information, money, or other valuable assets to perpetrators.

Answer: Phishing Diff: 2 Page Ref: 187 77) ________ ________ includes unnoticed intruders, wiretrappers, piggybackers, impersonating intruders, and eavesdroppers.

Answer: Direct observation Diff: 2 Page Ref: 190 78) A ________ cell phone is an exact and illegitimate copy of another cell phone, including a copy of the internal SIM in order to intercept text and voice messages.

Answer: cloned Diff: 2 Page Ref: 190 79) In general, ________ arise from improperly installed or configured software and from unforeseen defects or deficiencies in the software.

Answer: vulnerabilities Diff: 2 Page Ref: 191 80) ________ is the best defense against electronic interception.

Answer: Encryption Diff: 2 Page Ref: 190 8 .

81) Mose financial institutions use ________ ________ layer encryption to communication with their clients through web browsers.

Answer: secure socket Diff: 2 Page Ref: 190 82) ________ involves running multiple operating systems or multiple copies of the same operating system on the same machine.

Answer: Virtualization Diff: 2 Page Ref: 203 83) In virtualization, the individual operating system instances run under the control of a "master program" called a ________.

Answer: hypervisor Diff: 2 Page Ref: 203 84) Within the health-care sector the ________ Portability and accountability Act requires that health-care providers, insurance companies, and payment clearinghouses to adopt standardized processes for electronic payments and claims.

Answer: Health Insurance Diff: 2 Page Ref: 209 85) GASB statement number ________ requires utility companies to maintain business continuity plans.

Answer: 34 Diff: 2 Page Ref: 209 86) A significant benefit of quantitative approach to risk assessment is that A) often the most likely threat to occur is not the one with the largest exposure.

B) the relevant cost of the loss's occurrence is an estimate.

C) the likelihood of a given failure requires predicting the future.

D) the approach estimates the costs and benefits to the perpetrators of attacks.

Answer: A Diff: 2 Page Ref: 183 87) When the qualitative approach to risk assessment is used, costs might be estimated using A) replacement costs.

B) service denial costs.

C) business interruption costs.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 184

9 .

88) An extremely risk-seeking perpetrator A) will offer his or her services to the "highest bidder."

B) will take very large risks for a small reward.

C) is almost always a terminated employee of the organization he or she attacks.

D) will take small risks for small rewards.

Answer: B Diff: 1 Page Ref: 184 89) A weakness in an information security system is A) a threat.

B) computer sabotage.

C) a vulnerability.

D) system fault.

Answer: C Diff: 2 Page Ref: 184 90) Information security is an international problem. Which countries below have set criminal penalties of up to 10 years for fraudulent use of computer services or the intentional changing of a data processing record with the intent of enrichment?

A) Canada and Finland B) Switzerland and Canada C) Denmark and Finland D) France and Germany Answer: B Diff: 3 Page Ref: 185 91) Which group of people listed below would not pose a high degree of threat to an organization's information system?

A) Systems personnel B) Users C) Intruders D) External auditors Answer: D Diff: 2 Page Ref: 186 92) Which individual listed below is placed in a position of great trust, normally having access to security secrets, files and programs?

A) The systems supervisor B) Programmers C) Computer maintenance persons D) Data control clerks Answer: A Diff: 2 Page Ref: 186

10 .

93) An intruder who intercepts legitimate information and replaces it with fraudulent information is known as a ________.

A) hacker B) wiretapper C) piggybacker D) spy Answer: C Diff: 2 Page Ref: 190 94) Someone who intercepts legitimate information and substitutes fraudulent information in its place is called a(n) ________.

A) hacker B) wiretapper C) eavesdropper D) piggybacker Answer: D Diff: 2 Page Ref: 190 95) The method used in most cases of computer fraud is A) program alteration.

B) input manipulation.

C) data theft.

D) sabotage.

Answer: B Diff: 2 Page Ref: 193 96) A defrauder substitutes his own version of a company's master file for the real one. This method of computer fraud is known as A) direct file alteration.

B) data theft.

C) misappropriation of information resources.

D) Answers B and C above are both correct.

Answer: A Diff: 1 Page Ref: 193 97) Sometimes computer programs are use to commit acts of sabotage. A destructive program masquerading as a legitimate one is called a ________.

A) logic bomb B) worm C) virus D) Trojan horse Answer: D Diff: 2 Page Ref: 213

11 .

98) Sometimes computer programs are used to commit acts of sabotage. A computer program that actually grows in size as it infects more and more computers in a network is known as a ________.

A) Trojan horse B) logic bomb C) virus D) worm Answer: D Diff: 2 Page Ref: 189 99) In an information security system, security measures focus on A) correcting the effects of threats.

B) preventing and detecting threats.

C) management philosophy and operating style.

D) the internal audit function.

Answer: B Diff: 1 Page Ref: 195 100) A form of sabotage in which very large numbers of requests flood a Web server within a short time interval is known as a ________.

A) denial of service attack B) logic bomb C) macro virus D) grid overload Answer: A Diff: 2 Page Ref: 189 101) The most important personnel policy and practice regarding information systems security is that A) there should be adequate supervision of personnel at all times.

B) employees should be required to rotate jobs.

C) the duties of computer users and computer systems personnel should be segregated.

D) employees should be required to take vacations.

Answer: C Diff: 2 Page Ref: 196 102) The primary way to prevent active threats concerning fraud and sabotage is to implement successive layers of access controls. The second step behind the layered approach to access control is to A) prevent unauthorized access to both data and program files.

B) physically separate unauthorized individuals from computer resources.

C) classify all data and equipment according to their importance and vulnerability.

D) keep unauthorized users from using the system.

Answer: D Diff: 2 Page Ref: 199

12 .

103) The primary way to prevent active threats concerning fraud and sabotage is to implement successive layers of access controls. Withholding administrative rights from individual PC users is an example of a A) file access control.

B) system access control.

C) site access control.

D) None of these answers are correct.

Answer: B Diff: 2 Page Ref: 200 104) The primary way to prevent active threats concerning fraud and sabotage is to implement successive layers of access controls. Such an approach involves erecting multiple layers of controls that separate the would-be perpetrator from his or her potential targets. One file-access control system that will prevent unauthorized access is (are) A) a password management system.

B) biometric hardware authentication.

C) locked files.

D) a firewall.

Answer: C Diff: 1 Page Ref: 200 105) Controls can be designed to provide a defense from both active and passive threats. An example of a passive threat is A) a rolling blackout.

B) a Trojan horse.

C) an unhappy employee.

D) a password which has been compromised.

Answer: A Diff: 1 Page Ref: 201 106) What is an example of fault tolerance applied at the transaction level?

A) Consensus-based protocols B) Read-after-write checks C) Database shadowing D) Flagging Answer: C Diff: 2 Page Ref: 201 107) Disk shadowing is an example of a fault tolerance applied at what level?

A) Network communications B) DASD C) Transaction D) CPU processor Answer: B Diff: 2 Page Ref: 201

13 .

108) An example of a fault tolerance at the network communications level is A) a watchdog processor.

B) disk mirroring.

C) rollback processing.

D) an uninterruptable power supply.

Answer: A Diff: 2 Page Ref: 201 109) Since many personal computer users do not properly back up their files, a system that centralizes the backup process is essential. A backup of all files on a given disk is known as a(n) ________.

A) full backup B) differential backup C) incremental backup D) emergency backup Answer: A Diff: 2 Page Ref: 202 110) The type of backup which avoids the problems which arise from restoring incremental backups is a(n) ________.

A) full backup B) partial backup C) archive restoration D) differential backup Answer: D Diff: 2 Page Ref: 202 111) One Internet security problem arises from configuration problems in the area of configuring permissions for directories. This is an example of A) an operating system vulnerability.

B) a Web server vulnerability.

C) a private network vulnerability.

D) server program vulnerability.

Answer: B Diff: 2 Page Ref: 203 112) A Trojan horse program placed on one computer with the objective of attacking another computer is an example of which Internet security vulnerability?

A) A Web server and its configuration B) An operating system and its configuration C) A private network and its configuration D) A general security procedure Answer: C Diff: 2 Page Ref: 204

14 .

113) The primary way to prevent active threats concerning fraud and sabotage is to implement successive layers of access controls. However, the widespread adoption and use of the Internet has made it impossible to completely implement which layer of the layered-access approach to security?

A) Site-access B) System-access C) File-access D) None of these answers are correct.

Answer: A Diff: 2 Page Ref: 197 114) The best general security procedure is A) to use advanced information security system software.

B) for system administrators to enforce system security policies that already exist.

C) to isolate computer facilities from the rest of the company.

D) to eliminate access privileges to all remote users.

Answer: B Diff: 2 Page Ref: 205 115) General security procedures are essential in Internet security. One especially important weakness that hackers may attempt to exploit in this area is to A) guess at passwords.

B) rewrite computer source code.

C) alter log files to "cover their tracks."

D) steal the hard drives of personal computers used as Web servers.

Answer: C Diff: 2 Page Ref: 205 116) Which item listed below is a weakness of using a firewall for Internet security?

A) IP addresses can be spoofed.

B) Firewalls can block incoming access on computer networks.

C) Firewalls can block outgoing access on computer networks.

D) Firewalls can be set to only allow limited outgoing access to particular programs or servers.

Answer: A Diff: 2 Page Ref: 205 117) Disaster risk management is concerned with A) the prevention of disasters.

B) the layered-access approach to security.

C) contingency planning.

D) Answers A and C are both correct.

Answer: D Diff: 2 Page Ref: 205

15 .

118) The first step in managing disaster risk is A) to obtain business interruption insurance.

B) disaster prevention.

C) contingency planning.

D) to analyze and list recovery priorities.

Answer: B Diff: 2 Page Ref: 205 119) Which of the following causes of disasters occurs less than any other cause?

A) Natural disasters B) Human errors C) Deliberate actions D) Passive threats Answer: B Diff: 1 Page Ref: 205 120) A disaster recovery plan should include A) a list of priorities for recovery.

B) an evaluation of a company's needs in the event of a disaster.

C) a set of recovery strategies and procedures.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 206 121) One recovery strategy in the event of a disaster is an alternative processing arrangement. An arrangement between two companies in which each company agrees to help the other if the need arises is a(n) A) commercial vendor arrangement.

B) computer service bureau agreement.

C) shared contingency arrangement.

D) alternate site center.

Answer: C Diff: 2 Page Ref: 207 122) A company which specializes in processing the data of other companies, but not its own, is a A) computer service bureau.

B) commercial vendor of disaster services.

C) emergency response center.

D) flying-start site.

Answer: A Diff: 2 Page Ref: 207

16 .

123) The possibility of losing employees to a disaster should be addressed in A) a salvage plan.

B) an alternative processing arrangement.

C) the personnel replacement plan.

D) the personnel relocation plan.

Answer: C Diff: 1 Page Ref: 207 124) One recovery strategy in the event of a disaster is an alternative processing arrangement using a backup site. A site which contains the wiring for computers and also having the equipment is a ________.

A) cold site B) hot site C) flying-start site D) service bureau Answer: B Diff: 1 Page Ref: 206 125) Which of the following is an ideal password?

A) ABC123 B) DOG&bone C) sky&CAT D) 2s&Ytc8x Answer: D Diff: 3 Page Ref: 199 126) If users are permitted to choose their own passwords, the best procedure is to A) forbid users from choosing certain "easy-to-guess" passwords.

B) forbid users to change their passwords later.

C) allow users to choose passwords they can easily remember.

D) allow users to choose the appropriate expiration date for their passwords.

Answer: A Diff: 2 Page Ref: 199 127) A flying-start site A) is the most commonly adopted option for companies with disaster recovery plans.

B) usually cannot be made operational within 24 hours.

C) involves mirroring of transactions at the primary site, followed by transmission of data to the backup site.

D) is arranged through a service bureau.

Answer: C Diff: 3 Page Ref: 207

17 .

128) After a planning committee has been appointed and the support of senior management has been obtained, the first step in designing a disaster recovery plan is A) determining what computer-related resources are critical.

B) naming an emergency response team.

C) finding a suitable alternative processing site to use in an emergency.

D) listing the company's recovery priorities.

Answer: A Diff: 2 Page Ref: 206 129) Sandra Johnson is her company's chief security officer. She is interested in obtaining fault tolerance at the direct-access storage device level. Which of the following methods would be of the most interest to her?

A) Rollback processing B) Disk mirroring C) Consensus-based protocols D) Database shadowing Answer: B Diff: 3 Page Ref: 201 130) The best way to prevent EMI (electromagnetic interference) eavesdropping is to A) use LED and gas plasma displays.

B) boot personal computers only from internal or network drives.

C) shield the building to keep out electromagnetic radiation.

D) not display sensitive information such as passwords on computer displays.

Answer: D Diff: 3 Page Ref: 198 131) The best way to test the integrity of a computer system is to A) review all system output thoroughly.

B) review all system input thoroughly.

C) sample the system's actual transactions.

D) process hypothetical transactions through the system.

Answer: D Diff: 2 Page Ref: 196 132) To detect unauthorized direct changes to master files, the auditor traces these changes back to the underlying ________.

A) transaction files B) source documents C) hypothetical transactions D) control account balances Answer: B Diff: 2 Page Ref: 196

18 .

133) A type of processing that writes a transaction to disk only if it has been completed successfully is A) rollback processing.

B) disk mirroring.

C) fault-tolerant processing.

D) read-after-write checking.

Answer: A Diff: 1 Page Ref: 201 134) The most basic security procedure in system-access controls is the A) sign-countersign system.

B) identification of the user's ID, time, and date of each entry.

C) user's responsibility to protect his or her password.

D) system's assignment of the user ID and password.

Answer: C Diff: 3 Page Ref: 199 135) Jennifer Nguyen is interested in archiving several data files. She should A) use a full backup for each file.

B) use an incremental backup for each file.

C) store the data files on media suitable for long-term storage.

D) use a differential backup for each file and restore each file.

Answer: C Diff: 3 Page Ref: 202 136) The US Code, Title 44 (USC 3542) definition of information security includes protecting information and systems from unauthorized access, use, disruption, modification, and/or ________.

A) theft B) transfer C) destruction D) viruses Answer: C Diff: 3 Page Ref: 181 137) The three objectives of information security include A) confidentiality, integrity, and availability.

B) protection, responsibility, and continuity.

C) confidentiality, protection, and continuity.

D) responsibility, integrity, and availability.

Answer: A Diff: 3 Page Ref: 181

19 .

138) The information security management system life cycle include analysis, design, implementation, and A) operation, evaluation, and management B) operation, evaluation, and control.

C) operation, management, and continuity.

D) operation, control, and continuity.

Answer: B Diff: 3 Page Ref: 182 139) Guidelines and standards that are important to Information Security Management Systems include all the following but A) COSO. B) COBIT. C) ERM. D) ISO 27000 series.

Answer: C Diff: 2 Page Ref: 208 140) The ISO series number that defines a code of best practices for ISMSs is ________.

A) 27000 B) 27001 C) 27002 D) 27003 Answer: C Diff: 2 Page Ref: 182 141) The ISO series number/s that defines implementation, measuring performance, and risk management for ISMS's include A) 27000-27002.

B) 27003-27005.

C) 27006-27008.

D) 27001-27008.

Answer: B Diff: 2 Page Ref: 182 142) In ISO 27001, PDCA stands for planning, ________, checking, and acting.

A) design B) development C) drive D) doing Answer: D Diff: 2 Page Ref: 182

20 .

143) Hackers can be categorized as white, black, or ________ hat hackers.

A) gray B) green C) top D) None of these answers are correct.

Answer: A Diff: 2 Page Ref: 186 144) Hacker methods include all of the following EXCEPT A) social engineering.

B) direct observation.

C) electronic interception.

D) continuity prevention.

Answer: D Diff: 1 Page Ref: 186-190 145) Examples of social engineering include A) pretexting and phishing.

B) pretexting and direct observation.

C) phishing and direct observation.

D) pretexting, phishing, and direct observation.

Answer: A Diff: 2 Page Ref: 187 146) Viruses and denial of service attacks are examples of ________.

A) electronic interception B) spyware C) malware D) exploits Answer: C Diff: 2 Page Ref: 189 147) The ________ Act makes it a federal crime, with a mandatory prison sentence, to pretext any kind of information that relates to a relation between a consumer and a financial institution.

A) HIPPA B) ISO 27001 C) Gramm-Leach-Bliley D) US Code Title 44 Answer: C Diff: 2 Page Ref: 187

21 .

148) When a hacker takes advantage of a vulnerability to access the software, hardware, or data in an unauthorized manner a/an ________ has occurred.

A) exploit B) vector C) exposure D) virtualization Answer: A Diff: 2 Page Ref: 191 149) In general, ________ arise from improperly installed or configured software and from unforeseen defects or deficiencies in the software.

A) exploits B) virtualizations C) vulnerabilities D) exposures Answer: C Diff: 2 Page Ref: 191 150) Sabotage and direct file alteration are two examples of six main attack ________ (methods).

A) points B) vectors C) exploits D) exposures Answer: B Diff: 2 Page Ref: 193 151) Input ________ is an example of a system attack method.

A) vector B) manipulation C) hacking D) buffer Answer: B Diff: 2 Page Ref: 193 152) ________ involves running multiple operating systems, or multiple copies of the same operating system, all on the same machine.

A) Hypervisor B) Business continuity planning C) Virtualization D) Subscriber Identity Module (SIM) Answer: C Diff: 2 Page Ref: 203

22 .

153) All software and data is stored by the SaaS provider in the ________.

A) hypervisor B) cloud C) stars D) grid Answer: B Diff: 2 Page Ref: 204 154) ________ computing involves clusters of interlinked computers that share common workloads.

A) Grid B) Cloud C) Networked D) Malware Answer: A Diff: 2 Page Ref: 204 155) Which of the following forms of social engineering involves impersonation?

A) Contexting B) Phishing C) Hypervising D) Pretexting Answer: D Diff: 2 Page Ref: 187 156) Botnets are normally used for which of the following?

A) Grid computing B) Denial of service attacks C) Continuity planning D) Cloud computing Answer: B Diff: 2 Page Ref: 189 157) Adware is a type of ________.

A) virus B) logic bomb C) spyware D) trojan horse Answer: C Diff: 2 Page Ref: 189

23 .

158) On the local workstation, cloud computing A) complicates security considerations.

B) simplifies security considerations.

C) is not involved with security considerations.

D) affects security minimally but still must be considered under ISO 27000.

Answer: B Diff: 2 Page Ref: 204 159) In the following, which source of information security frameworks or standards targets managers rather than IP professionals?

A) COSO B) ISMS C) COBIT D) ISO Answer: A Diff: 2 Page Ref: 208

24 .

160) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Biometric authentication device ________ 2. Archive bit ________ 3. System console ________ 4. Trapdoor ________ 5. Consensus-based protocol ________ 6. Hacker ________ 7. Fault tolerance ________ 8. Electromagnetic interference ________ 9. Service bureau ________ 10. System fault A. The concept that if one part of the computer fails, a redundant part is available to take over B. This generally cannot be prevented by appropriate wall shielding C. An example of this is hand pattern recognition D. This type of system requires an odd number of processors E. A workstation for operators to use in monitoring the computer system F. A company that provides data processing services to other companies for a fee G. A type of intruder or attacker H. A portion of the computer program that allows someone to access a system while bypassing normal security procedures I. This would include hard disk crashes, power failures, or printer jams J. Commonly used in backup systems to indicate whether a file has been altered Answer: 1. C 6. G 2. J 7. A 3. E 8. B 4. H 9. F 5. D 10. I Diff: 2 Page Ref: 211-213

25 .

161) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Database shadowing ________ 2. Logic bomb ________ 3. Information security system ________ 4. Risk management ________ 5. File-access controls ________ 6. Site-access controls ________ 7. Piracy ________ 8. Incremental backup ________ 9. Piggybacking ________ 10. Risk-seeking perpetrator A. Prevents unauthorized access to both data and program controls B. A duplicate of all transactions is automatically recorded C. All files whose archive bit is set to 1 are backed up D. One who will take risks "just because," without significant monetary gain E. A dormant piece of code placed in a computer program for later activation by a later event F. The copying and distributing of copyrighted software or files without permission G. The process of assessing and controlling computer system risks H. The interception of legitimate information and substitution of fraudulent information in its place I. The subsystem of the organization that controls these risks J. These separate unauthorized individuals from computer resources Answer: 1. B 6. J 2. E 7. F 3. I 8. C 4. G 9. H 5. A 10. D Diff: 2 Page Ref: 211-213

26 .

162) Your company has been rapidly growing and increasing in profitability for the past five years. Suddenly, a new, smaller company has appeared, and it seems to have an uncanny ability to win away your previously loyal customers. You know that the owner of the new company is your company's former employee. You suspect the former employee has continued to access your databases.

Required: a. Identify and briefly discuss the method that the former employee is likely using to access the system. b. Recommend three controls your company could employ to address this problem.

Answer: a. This situation indicates that the former employee is probably engaging in data theft. The new company probably has your company's customer information. If the theft is being perpetrated through the computer, the former employee may be using his or her old user identification and password. Alternatively, the former employee may be using a different current employee's ID and password (perhaps without their knowledge), or simply guessing a password. The former employee may also be using direct file alteration to delete information from customer records.

Direct file alteration occurs when an attacker bypasses normal data entry procedures to access a file. It is also possible that the former employee has had physical access to the company's facilities and its customer information. The former employee may be entering the company and using a computer already logged onto the system to steal the information. b. Some suggested corrective and preventive controls are: • Reprogram locks on buildings and rooms containing computer devices or storage media.

• Verify that the former employee's user account has been (and still is) terminated and disabled.

• Use a password management system to assign new passwords to all current employees.

The system should reassign passwords periodically.

• Implement and enforce a strict policy regarding passwords: each employee should keep passwords secret; do not give out passwords over the phone; do not allow easily guessed passwords to be used; do not post passwords near computers; do not throw paper containing passwords in the trash.

• Review operating system records to find the time, date, and user ID numbers associated with access to customer files.

Diff: 2 Page Ref: 197-200

27 .

163) You've been hired as the chief security officer of your company. Before long, you learn that one of the operators has been making changes to the accounts receivable database. Upon this discovery, the employee is immediately terminated.

Required: List three procedures that you should implement to prevent this problem from happening in the future.

Answer: Some preventive measures are: • Management should provide education in security to computer operators and other employees with the objective of creating a security-conscious environment.

• Rotate operator shifts so the same operator is not always processing the accounts receivable database.

• Require mandatory vacations for operators and all other systems-related personnel having access to sensitive files. Many frauds are disrupted when the perpetrator is away from his or her duties.

• Monitor operations via closed-circuit television and videotaping employees at random intervals.

• Provide personal supervision when appropriate.

• Review master file entries for the user ID and time of all transactions to determine when the operator has accessed the accounts receivable database.

Diff: 2 Page Ref: 197-199 164) You are the chief security officer for the Astra Corporation. You have decided that the risk of viruses is too great to allow employees to install and run games on the company's computer system.

Required: a. What types of controls are required, and what is the objective of the required controls? b. List three procedures that you can implement to guard against the unauthorized installation of software (and the inadvertent installation of viruses) on computer computers.

Answer: a. Site-access controls are appropriate. The objective of site-access controls is to physically separate unauthorized individuals and programs from computer viruses. b. Some procedures that will help prevent the installation of unauthorized software are: • Require security authorization for software installed on any computer.

• Require all software purchases come through central purchasing and receiving.

• Inspect or destroy programs that come to the company from unsolicited sources.

• Randomly audit computers to check for any software programs that have not been approved for installation.

Diff: 2 Page Ref: 197

28 .

165) New Millennium Company is concerned about the security of its information system. It hosts a company Web site that accessible through the Internet. Certain employees can access New Millennium's private network through the Internet as well. Employees can also access the Internet through the private network. The chief security officer for the company is worried about hackers and intruder attacks on both its Web site as well as the private network.

Required: a. What Internet-related vulnerabilities may be present in New Millennium's information system? b. What procedures or steps might be implemented to strengthen system security?

Answer: a. Since New Millennium's system is accessible via the Internet, vulnerabilities may arise from weaknesses in any of five major areas: • The operating system or its configuration • The Web server or its configuration • The private network or its configuration • Various server programs • Lack of adherence to established general security procedures b. The following procedures may help to strengthen system security: • The chief security officer needs to be aware of advisory bulletins for security updates and new information on configuration issues, and take appropriate action when necessary to secure the operating system.

• The company should have in operation a firewall that restricts incoming traffic on network computers. The firewall can also be configured to limit outgoing traffic or block access to certain IP addresses on the Internet.

• The company should use a proxy server to monitor and route traffic to and from its private network and restrict access only to authorized users.

• All servers should have the latest anti-virus software installed to continually monitor for the possibility of viruses entering into or migrating within the system.

• The FTP server should be equipped with the encryption-based software that prevents "clear" transmission of passwords and computer files of a highly sensitive nature.

• Web usage and all network traffic should be monitored to ensure that unauthorized activity is not occurring. The chief security officer should hold employee-training sessions on software/hardware security policies and enforce those policies.

• Passwords should be routinely changed and employees should not be allowed to choose "easy-to-remember" passwords.

• The chief security officer should routinely review log files for unusual network traffic and file transfers.

Diff: 2 Page Ref: 202-204

29 .

166) Describe the similarities and differences between a quantitative and a qualitative approach to computer risk assessment.

Answer: Suggested answer: Both the quantitative and qualitative approaches require the company to identify vulnerabilities and threats, consider the monetary losses the company could suffer and the probability that the loss will be realized, and rank the exposures.

The primary difference between the two approaches is that the quantitative approach requires that the company quantify both the amount of the loss and the probability of occurrence. The qualitative approach, on the other hand, is based on a subjective, non-quantitative consideration of potential losses and likelihoods, and the resulting ranking of exposures is subjective.

Diff: 2 Page Ref: 183-184 167) Give four factors that are important to a company's control environment in the area of computer security, and illustrate each with an example.

Answer: Suggested answer: Students might answer as follows (the chapter identifies seven factors, and several examples are given of each; only two examples are listed below): • Management philosophy and operating style Examples: maintaining an overall atmosphere of security consciousness; maintaining high morale and good communication with employees • Organization structure Examples: clearly designating who is responsible for decisions relating to accounting software and accounting procedures; designating one individual to be in charge of the computer security system • Board of directors and its committees Examples: having an audit committee, which appoints or approves the internal auditor(s); having an internal auditor who is knowledgeable about computer security and serves as chief security officer • Management control activities Examples: establishing controls over the use of computer resources; using budgets • Internal audit function Examples: constantly monitoring the system; requiring all modifications to the system to be approved in writing • Personnel policies and practices Examples: separating the duties of users and computer system personnel; separating duties regarding access to key accounting files; job rotation • External influences Examples: providing security measures to ensure that the company complies with laws regarding customer privacy, government-classified records, privacy of employees; having a company policy regarding software piracy by employees Diff: 2 Page Ref: 195-197

30 .

168) When devising its disaster recovery plan, a company should have a detailed set of recovery strategies and procedures. What are five considerations that should be covered by the company's recovery strategies and procedures?

Answer: Suggested answer: (Note: The chapter lists seven considerations; the question asks for five.)

• An emergency response center (including a director, a response team, and a site) • Escalation procedures • Alternate processing arrangements (sites) • A personnel relocation plan • A personnel replacement plan • A salvage plan • A plan for testing and maintaining the system Diff: 2 Page Ref: 206-207 169) Discuss how U.S. law has addressed the issue of information systems fraud.

Answer: Suggested answer: Computer-based crimes such as information systems fraud are part of the general problem of white-collar crime. The United States is now addressing this issue in both federal and state courts. Most states have enacted specific criminal statutes directed against computer crimes. The federal Computer Fraud and Abuse Act of 1986 makes it a federal crime to knowingly and with intent to fraudulently gain unauthorized access to data stored in the computers of financial institutions, computers owned or used by the federal government, or computers operating in interstate commerce. Trafficking in computer access passwords is also illegal under the Act. Violations under the Act are treated as felonies with both monetary damages as well as jail sentences given to anyone convicted under the Act. Diff: 2 Page Ref: 184

31 .

170) Discuss the information security system life cycle.

Answer: Suggested answer: Because the electronic security system is an information system, the life-cycle approach should be used in its development. Such systems are modeled by applying the established methods of system analysis, design, implementation; and operation, evaluation, and control.

The objectives of the phases of the life-cycle approach are: • System analysis: Analyze system vulnerabilities in terms of threats and exposures • System design: Design security measures and contingency plans based on the exposures identified in the analysis • System implementation: Implement the security measures as designed • System operation, evaluation, and control: Test the system under normal conditions to assess its effectiveness and efficiency, making any necessary changes The chief security officer should also report on information system security to the company's board of directors on a regular basis. Such reports should cover the four phases of the life-cycle, and include a discussion of loss exposures, plans for exposure management, specifics on security system performance, and a summary of activities including actual losses, security breaches, and the associated costs.

Diff: 2 Page Ref: 182

32 .

171) The main group of international standards for information security is ISO/IEC 27000 series published by the International Organization for Standardization (ISO). ISO/IEC 27002 addresses over 5,000 controls categorized under 12 categories. Discuss 10 of the 12 categories that should be used as a general guide by any company considering information security.

Answer: Suggested answer: 1. Risk assessment - threat and vulnerability analysis.

2. Security policies - requires organized security policies.

3. Organization and governance of information security - requires formal organization structure relating to security policies.

4. Asset management - classify information assets as to importance and identify related threats and vulnerabilities.

5. Human resources - issues relating to employees joining, leaving, and transferring within an organization; to employee security training; and to hiring practices.

6. Physical and environmental security - physical protection and physical access restrictions.

7.Communications and operations management - mgmt. of technical security controls in systems and networks.

8. Access control - layered approach to access.

9. Information systems acquisition, development ,and maintenance - controls over software purchases and outsourcing, controls over changes, and controls over IT projects.

10. Information security incident management - monitoring, reporting, and responding to security breaches.

11. Business continuity management - implement a complete business continuity management system using the PDCS approach, maintain adequate insurance.

12. Compliance - ensure compliance with relevant laws, regulations, and standards.

Diff: 2 Page Ref: 208 172) COBIT is a framework that defines a set, or code, of best practices. Discuss the 4 domains within the COBIT standard.

Answer: Suggested answer: 1. Plan and organize - focuses on IT organization and how IT can effectively be used in the organization.

2. Acquire and implement - focuses on developing, acquiring, and maintaining IT process.

3. Deliver and support - focuses on delivery, implementation, managing, and configuring IT processes.

4. Monitor and evaluate - focuses on assessing IT processes according to their stated goals and objectives.

Diff: 2 Page Ref: 208

33 .

173) Describe the security advantage of virtualization.

Answer: Suggested answer: The security advantage of virtualization is that each operating system instance is isolated from all other operating system instances running on the same computer. This means that each virtual machine has access only to data, software, and memory allocated to it by the hypervisor. The result is that if a hacker compromises one virtual machine he will not have access to the data, software, and memory of other virtual machines running on the same computer.

Diff: 2 Page Ref: 203

34 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 6 Electronic Data Processing Systems 1) A sales order is an example of a source document that may be prepared manually.

Answer: TRUE Diff: 1 Page Ref: 228 2) The absence of control procedures over data transmitted between user departments and the data processing department could represent a serious weakness in the system.

Answer: TRUE Diff: 2 Page Ref: 228 3) The use of input control documents is not necessary when forwarding data to the data entry group for input into the system.

Answer: FALSE Diff: 2 Page Ref: 229 4) A batch control form should require the preparer's signature or name.

Answer: TRUE Diff: 2 Page Ref: 229 5) When key-verification software is used, the software automatically corrects any mismatches to ensure smooth and uninterrupted processing.

Answer: FALSE Diff: 2 Page Ref: 230 6) Visual verification is another highly effective method used to detect data-entry error.

Answer: FALSE Diff: 2 Page Ref: 230 7) Program data editing is often used in place of verification.

Answer: FALSE Diff: 2 Page Ref: 230 8) Data editing routines may be applied to each of the basic data structures.

Answer: TRUE Diff: 2 Page Ref: 231 9) An edit program performs a table lookup when it compares the actual value of a field to acceptable values found in a table.

Answer: TRUE Diff: 2 Page Ref: 231 10) A check digit is a value found in an input field that is visually compared, or "checked."

Answer: FALSE Diff: 2 Page Ref: 231 1 .

11) Accounting data entered into an AIS must be in the form of debits and credits.

Answer: FALSE Diff: 2 Page Ref: 234 12) Sophisticated information systems can capture system events and their attributes.

Answer: TRUE Diff: 2 Page Ref: 234 13) REA stands for Resources, Enterprise, and Agents.

Answer: FALSE Diff: 2 Page Ref: 234 14) In a REA model, for each event there are two general categories of related attributes.

Answer: TRUE Diff: 2 Page Ref: 234 15) In a sales transaction in a REA model, inventory would be an example of a resource.

Answer: TRUE Diff: 2 Page Ref: 234 16) In a sales transaction in a REA model, the sales department is an example of a resource.

Answer: FALSE Diff: 2 Page Ref: 234 17) For supply chain management, in a REA model, location is added as an additional resource, making REA a REAL model.

Answer: FALSE Diff: 3 Page Ref: 234 18) For supply chain management, in a REA model, location is added as an additional attribute, making REA a REAL model.

Answer: TRUE Diff: 2 Page Ref: 234 19) A benefit of a REA model is that it is not necessary to specify relationships between events.

Answer: FALSE Diff: 2 Page Ref: 235 20) An entity-relationship approach is a typical implementation approach for REA where agents will be defined as entities.

Answer: TRUE Diff: 2 Page Ref: 235 21) Even in a pure REA system, journals, ledgers, and accounts are still required.

Answer: FALSE Diff: 2 Page Ref: 235 2 .

22) In a REA system, journals, ledgers, and accounts can be generated as reports or "views" from the basic recorded data.

Answer: TRUE Diff: 2 Page Ref: 235 23) A drawback of REA modeling is that it is difficult to use XML-type data formats.

Answer: FALSE Diff: 2 Page Ref: 235 24) Service oriented architectures (SOAs) build on the standardized XML exchange of data, which makes REA a good modeling choice.

Answer: TRUE Diff: 2 Page Ref: 235 25) electronic input systems are referred to as on-line input systems.

Answer: TRUE Diff: 1 Page Ref: 233 26) Matching a vendor code to a table file of valid vendor codes is an example of a valid code check.

Answer: TRUE Diff: 2 Page Ref: 232 27) Using a electronic input system helps ensure the segregation of duties and provides a solid audit trail.

Answer: FALSE Diff: 2 Page Ref: 233 28) Tagging occurs when additional, audit-oriented information is included with original transaction data.

Answer: TRUE Diff: 2 Page Ref: 233 29) A common example of an automated identification system is an automated POS system used in most retail, grocery, and discount stores.

Answer: TRUE Diff: 1 Page Ref: 234 30) All electronic input systems require no human intervention.

Answer: FALSE Diff: 1 Page Ref: 234 31) Few manual processing systems are batch oriented.

Answer: FALSE Diff: 2 Page Ref: 236

3 .

32) Batch processing is economical when large numbers of transactions must be processed.

Answer: TRUE Diff: 2 Page Ref: 236 33) Batch processing can only be performed using random-accessed (i.e., direct or indexed) file updating.

Answer: FALSE Diff: 2 Page Ref: 237 34) A sequentially organized master file commonly resides on a direct-access storage device.

Answer: TRUE Diff: 3 Page Ref: 238 35) When preparing the transaction file, occasional data editing of source documents prior to input is suggested.

Answer: FALSE Diff: 2 Page Ref: 238 36) Editing as a function may be placed between the input and process functions in a processing flow diagram.

Answer: TRUE Diff: 2 Page Ref: 239 37) There are three major aspects to the operation of a computerized general ledger system.

Answer: FALSE Diff: 2 Page Ref: 240 38) All entries into the general ledger should be documented with journal vouchers.

Answer: TRUE Diff: 2 Page Ref: 240 39) Line coding is the process that links general ledger accounts and the reports in which they appear.

Answer: TRUE Diff: 2 Page Ref: 241 40) Line codes should never be stored within the general ledger file itself.

Answer: FALSE Diff: 2 Page Ref: 242 41) Sequential-access file updating is simpler than random-access file updating.

Answer: FALSE Diff: 2 Page Ref: 243

4 .

42) An accounts receivable control file is a summary of the accounts receivable by type of account, such as "installment" or "net 30 days."

Answer: TRUE Diff: 2 Page Ref: 243 43) The last step in the cash remittance processing of customer payments by check is to restrictively endorse the checks.

Answer: FALSE Diff: 2 Page Ref: 244 44) Paid customer invoice records are retained on-line for a year and are available for inquiries.

Answer: TRUE Diff: 2 Page Ref: 245 45) Comparing the activity file and the bank summary file does not ensure that all cash has been deposited and has been applied and recorded on the activity file.

Answer: FALSE Diff: 2 Page Ref: 246 46) Using an OLRS, master files are always up-to-date because they are updated as soon as transaction data is input.

Answer: TRUE Diff: 2 Page Ref: 246 47) Control of transaction process is far less involved in OLRS than it is in batch-oriented systems.

Answer: FALSE Diff: 2 Page Ref: 247 48) A significant degree of cooperation among trading partners is required to implement realtime sales systems.

Answer: TRUE Diff: 2 Page Ref: 248 49) Batch-processing systems rely almost exclusively on wands and scanners for UPC bar code recognition.

Answer: FALSE Diff: 2 Page Ref: 248 50) POS systems provide a variety of timely and detailed reports concerning operations, which is of great benefit to the management of a retail firm.

Answer: TRUE Diff: 2 Page Ref: 249

5 .

51) EDI documents typically contain three control numbers, two at the beginning of the message and one at the end.

Answer: FALSE Diff: 3 Page Ref: 252 52) Because real-time sales systems pose certain internal control problems, good computer security and careful program data edits checks are essential.

Answer: TRUE Diff: 2 Page Ref: 252 53) On-line, real-time electronic systems produce significant amounts of output.

Answer: FALSE Diff: 1 Page Ref: 253 54) The use of ________ control over the entire data processing input-process-output sequence is fundamental to organizational independence.

Answer: batch Diff: 2 Page Ref: 229 55) The use of programmed edit checks to discriminate among acceptable data is called ________ ________ auditing.

Answer: continuous operational Diff: 3 Page Ref: 231 56) Using ________ ________ can compensate for the loss of manual internal controls.

Answer: transaction logs or transaction registers Diff: 2 Page Ref: 233 57) The POS gasoline pump is a good example of a(n) ________ ________ machine.

Answer: networked vending or NVM Diff: 2 Page Ref: 234 58) Many manual, batch-oriented systems use ________ file processing.

Answer: sequential Diff: 2 Page Ref: 237 59) Using son-father-grandfather retention, if the old master file is the ________, the backup master file must be the ________.

Answer: father; grandfather Diff: 2 Page Ref: 239 60) Computer processing of accounting data is typically a(n) ________ procedure.

Answer: two-step Diff: 1 Page Ref: 241

6 .

61) The summary of the current month's general ledger activity is the general ledger by ________.

Answer: account Diff: 2 Page Ref: 243 62) Each month ________ ________ should be reconciled to reports prepared from the bank summary file.

Answer: bank statements Diff: 1 Page Ref: 246 63) Users interactively input data in ________ ________ systems.

Answer: data entry Diff: 2 Page Ref: 246 64) The technologies that make real-time sales systems feasible are the ________ system; bar coding for automatic identification, and the ________ ordering system.

Answer: POS; EDI Diff: 2 Page Ref: 248 65) The ________ has enhanced the real-time sales system by extending it to customers who are off-site.

Answer: Internet Diff: 2 Page Ref: 249 66) REA stands for ________, ________, ________.

Answer: resources, events, agents Diff: 2 Page Ref: 234 67) In a REA model the two general categories of related attributes are ________ and ________.

Answer: resources and agents Diff: 2 Page Ref: 234 68) In a REA model, ________ are the things of value or utility to the firm that are affected by the event.

Answer: resources Diff: 2 Page Ref: 234 69) In a REA model, ________ are those who participate in events.

Answer: agents Diff: 2 Page Ref: 234 70) In supply chain management, a third attribute is added to the REA model making it REAL. The L stands for ________.

Answer: location Diff: 2 Page Ref: 234

7 .

71) In a pure REA system, journals, ledgers, and accounts can be generated as reports or ________ from the basic recorded data.

Answer: "views" Diff: 2 Page Ref: 235 72) In a real-time sales system, ________ can be used to transmit retail sales data captured from the retail store to vendors.

Answer: EDI Diff: 2 Page Ref: 250 73) A group that is often part of the internal audit function that is charged with monitoring EDP operations is the ________ ________ group.

Answer: EDP control Diff: 2 Page Ref: 253 74) Fundamental controls over data transfer between user departments and data processing include A) batch control totals.

B) data transfer registers.

C) activity file totals.

D) Answers A and B are both correct.

Answer: D Diff: 1 Page Ref: 229 75) Input data should be accompanied by the completion of a(n) A) data transfer log.

B) input document control form.

C) data transfer register.

D) key verification control procedure.

Answer: B Diff: 1 Page Ref: 229 76) Errors in the keying operation can be detected using A) a key verification control procedure.

B) a data transfer control register.

C) program data editing.

D) None of these are correct.

Answer: A Diff: 2 Page Ref: 230 77) In a manual input system, batch controls are prepared initially by the A) EDP department.

B) computer software.

C) user department.

D) general ledger department.

Answer: C Diff: 1 Page Ref: 228 8 .

78) A software-based control procedure that checks for some errors as they are being input is called A) input verification.

B) key verification.

C) input control testing.

D) transcription checking.

Answer: B Diff: 1 Page Ref: 230 79) Key verification is often used A) to verify only selected essential fields.

B) to verify essential and nonessential numeric fields.

C) to verify all input fields, both alpha and numeric.

D) when two or more people key input data in unison.

Answer: A Diff: 2 Page Ref: 230 80) As a control procedure, key verification requires that A) user departments key all of their own data.

B) input fields are visually verified.

C) key mismatches are electronically corrected.

D) each source document is key-transcribed a second time.

Answer: D Diff: 2 Page Ref: 230 81) Key verification control procedures A) edit data.

B) do not use batch totals.

C) do not edit data.

D) electronically replace incorrect data with data from an existing database.

Answer: C Diff: 2 Page Ref: 230 82) Program data editing is a software technique that should A) be used in addition to verification.

B) be used in place of verification.

C) be applied only to characters within input fields.

D) only be used after visual verification has detected errors in the input.

Answer: A Diff: 2 Page Ref: 230

9 .

83) Program data editing techniques may be applied to ________.

A) fields B) records C) files D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 231 84) A data editing routine that compares data with acceptable values is a ________.

A) limit test B) table lookup C) financial total check D) valid code check Answer: B Diff: 1 Page Ref: 231 85) A data editing routine that compares numeric data input within a range is a(n) ________.

A) table lookup B) hash total check C) limit test D) internal label test Answer: C Diff: 1 Page Ref: 231 86) An extra digit added to a code number verified by applying mathematical calculations to the individual code number characters is a ________.

A) control digit B) hash digit C) check digit D) verification digit Answer: C Diff: 1 Page Ref: 231 87) Check digits are especially effective at detecting A) transposition errors.

B) accidental keying mistakes.

C) incorrect account numbers.

D) customer accounts that were never assigned.

Answer: A Diff: 2 Page Ref: 231

10 .

88) The use of check digits A) is highly unusual in today's EDP environment.

B) is very common because of the high reliability of this procedure.

C) eliminates using key verification as a control procedures.

D) eliminates using data editing routines as a method to detect errors.

Answer: B Diff: 2 Page Ref: 231 89) Electronic data entry A) requires no human intervention.

B) is sequentially processed.

C) is always manually entered.

D) is on-line.

Answer: D Diff: 2 Page Ref: 233 90) An essential input field that should contain data is empty. The data edit control that would detect this error is a ________.

A) limit check B) completeness check C) sequence check D) hash total check Answer: B Diff: 2 Page Ref: 232 91) The "amount due" field of a bill is checked to ensure that the sign is positive. This is an example of a field ________.

A) sign check B) length check C) format check D) type check Answer: A Diff: 1 Page Ref: 232 92) During input, a data entry clerk incorrectly keyed product codes "ABXY" as "BAXY." Both ABXY and BAXY are valid codes. Which of the following controls would prevent this situation?

A) A table-lookup procedure B) A check digit test C) Key verification D) Limit test Answer: C Diff: 2 Page Ref: 230

11 .

93) The compensating control for the loss of segregation of duties in an electronic input system is A) supervision and review.

B) input document control forms.

C) prenumbered documents.

D) transaction logs.

Answer: D Diff: 2 Page Ref: 233 94) The REA model captures resources, events, and ________.

A) attributes B) agents C) alliances D) audited data Answer: B Diff: 2 Page Ref: 234 95) In the REA model the two general categories of related attributes are A) events and resources.

B) attributes and events.

C) events and agents.

D) agents and resources.

Answer: D Diff: 2 Page Ref: 234 96) ________ are the things of value or utility to the firm that are affected by the event in the REA model.

A) Assets B) Equity C) Resources D) Agents Answer: C Diff: 2 Page Ref: 234 97) ________ are those who participate in events in the REA model.

A) Agents B) Resources C) Entities D) Assets Answer: A Diff: 2 Page Ref: 234

12 .

98) In a REA mode, for a sales transaction both inventory and cash are ________.

A) events B) agents C) resources D) attributes Answer: C Diff: 2 Page Ref: 234 99) In a REA model, for a sales transaction the sales department and the customer are ________.

A) events B) agents C) resources D) attributes Answer: B Diff: 2 Page Ref: 234 100) In a REA model for supply chain management, ________ has/have been added as an additional attribute.

A) logistics B) supplies C) entities D) location Answer: D Diff: 2 Page Ref: 234-235 101) In implementing a REA model, it is necessary to specify how events relate to one another and how the events and their interrelationship are ________ and ________ within the database system.

A) stored, retrieved B) retrieved, exported C) stored, processed D) retrieved, accessed Answer: C Diff: 2 Page Ref: 235 102) Entity-relationship approach is a typical implementation approach for REA where ________ will be defined as entities.

A) agents B) resources C) attributes D) events Answer: A Diff: 2 Page Ref: 235

13 .

103) In a REA system, journals, ledgers, and accounts can be generated as reports or ________ from the basic recorded data.

A) tables B) views C) queries D) statements Answer: B Diff: 2 Page Ref: 235 104) REA promotes more effective and efficient generation of reports using ________-type data formats.

A) XBRL B) URL C) HTML D) XML Answer: D Diff: 2 Page Ref: 235 105) Three technologies make extended supply-chain systems feasible. Which of the below is not one?

A) XML-type data generation B) POS system C) Bar coding for automate for automatic identification D) EDI ordering system Answer: A Diff: 2 Page Ref: 248-250 106) A transaction log that is "tagged" means that A) it has been catalogued in the EDP library.

B) it is full and cannot hold any more information.

C) it has been key verified and data edited.

D) additional, audit-oriented information is included with original transaction data.

Answer: D Diff: 2 Page Ref: 233 107) Sue Pang enters sales data directly into the computer-input program using a keyboard. The type of system Sue is using is a(n) A) automatic identification system.

B) manual data entry system.

C) point-of-sale system.

D) electronic data interchange system.

Answer: B Diff: 2 Page Ref: 233

14 .

108) In a electronic input system requiring human intervention, the main processing phases and their proper sequence are A) (1) data input and (2) data editing.

B) (1) data editing and (2) data input.

C) (1) data input and editing, and (2) transfer to the host application system.

D) (1) data input, (2) transfer to the host application system, and (3) data editing.

Answer: C Diff: 2 Page Ref: 234 109) A customer pumps gas at a local convenience store. The customer pays for the gasoline by inserting a credit card into the gasoline pump. This is an example of a(n) A) networked vending machine.

B) point-of-sale system.

C) automatic identification system.

D) electronic data interface system.

Answer: A Diff: 2 Page Ref: 234 110) A batch processing system would work best when processing ________.

A) inventory B) payroll C) accounts receivable D) accounts payable Answer: B Diff: 2 Page Ref: 236 111) The first step in a batch-processing environment using sequential file updating is A) preparing general ledger reports.

B) updating the master file.

C) preparing the transaction file.

D) updating the general ledger.

Answer: C Diff: 2 Page Ref: 237 112) In a system using batch processing with sequential file updating, at what point is the general ledger updated?

A) After all master files are updated B) After each transaction batch is entered C) After all transactions are entered D) After each transaction batch is edited Answer: A Diff: 2 Page Ref: 237

15 .

113) When preparing the transaction file in a batch processing with sequential file system, the edit program A) builds a transaction file from processed batch input.

B) performs batch balancing procedures.

C) ensures all documents are accounted for prior to processing.

D) accumulates revised batch-control totals for the input data.

Answer: D Diff: 2 Page Ref: 238 114) When a system sorts edited data immediately before a master file update in a batch-oriented system, the operation sequence for editing and sorting is called ________.

A) sort and edit B) edit and sort C) sort and update D) edit and update Answer: B Diff: 1 Page Ref: 239 115) Alberta Products Company updates their accounts receivable master file each day. The EDP department uses the son-father-grandfather retention of master files. A computer operator accidentally destroyed the most recent accounts receivable master file by using the purchase transaction file to update it. The operator now has today's correct transaction file. How can the operator reconstruct the accounts receivable master file for the update?

A) Process yesterday's son against today's transaction file.

B) Process yesterday's grandfather against yesterday's transaction file.

C) Process yesterday's father against yesterday's transaction file.

D) Process yesterday's son against yesterday's transaction file.

Answer: C Diff: 3 Page Ref: 239 116) The master file in a computer system is equivalent to which one of the following manual system features?

A) Subsidiary ledger B) Journal C) Register D) Log Answer: A Diff: 1 Page Ref: 239 117) For a general ledger accounting system to be properly maintained, data must be A) collected.

B) recorded.

C) properly classified and entered into appropriate records for further summations.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 240 16 .

118) In a general ledger file update, all entries into the general ledger are A) first documented using a journal voucher.

B) updated by each user department as necessary.

C) dumped and not processed if any invalid data is found in any entry.

D) first documented using a journal voucher, then are used to build a journal voucher file.

Answer: D Diff: 2 Page Ref: 240 119) Computer processing of accounting data is typically composed of A) producing preliminary reports and then final listings after submission of corrections.

B) five steps which occur in four separate and distinct cycles.

C) seven steps (following the typical accounting cycle).

D) a series of mathematical algorithms.

Answer: A Diff: 2 Page Ref: 241 120) In a general ledger accounting system, the link created between the general ledger accounts and the report(s) in which they appear is called ________.

A) a line locator B) line coding C) soft coding D) hard coding Answer: B Diff: 2 Page Ref: 241 121) The type of file updating which should be used in a DBMS system using batch processing is ________.

A) random-access B) sequential-access C) automatic D) peer-to-peer Answer: C Diff: 1 Page Ref: 243 122) In a cash remittance application, the open-items accounts receivable file serves as the A) billing data.

B) credit sales journal.

C) accounts receivable control account.

D) subsidiary accounts receivable ledger.

Answer: D Diff: 1 Page Ref: 245

17 .

123) A electronic processing system can be used A) only in a batch environment.

B) with real-time, on-line processing.

C) in either a batch or real-time, on-line processing environment.

D) in situations where documentation is not a priority.

Answer: C Diff: 2 Page Ref: 246 124) The type of OLRS system in which users do not input, but only request information, is a A) data entry system.

B) inquiry/response system.

C) file processing system.

D) transaction processing system.

Answer: B Diff: 2 Page Ref: 246 125) Which application would not be ideally suited to processing by an OLRS system?

A) Payroll B) On-line reservations C) Inventory control D) Customer accounts Answer: A Diff: 2 Page Ref: 246 126) A technology that is not typically used in a real-time sales system is A) bar coding.

B) sequential file processing.

C) a POS system.

D) an EDI ordering system.

Answer: B Diff: 2 Page Ref: 246 127) A retail sale POS terminal records A) cash and charge sales.

B) updates inventory records.

C) provides data for posting to daily sales records.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 249 128) Automatic identification of products is greatly enhanced by A) using UPC as a base.

B) employing JIT processing.

C) manually prepared price tags affixed by receiving personnel upon delivery.

D) transaction tagging using each manufacturer's unique inventory control numbers.

Answer: A Diff: 1 Page Ref: 250 18 .

129) In a real-time sales system, which transaction-processing step below would not be performed entirely by using EDI? A) Receiving and translating an incoming customer order B) Sending an acknowledgement of the incoming order C) Sending the customer a three-ring bound catalogue using the U.S. mail D) Transmitting an advance shipping notice to the customer Answer: C Diff: 3 Page Ref: 250 130) Output systems can be manual, electronic, or something in between. Irrespective of the media used in an output system, output distribution should be controlled using a ________.

A) distribution register B) transaction register C) check register D) POS terminal Answer: A Diff: 1 Page Ref: 253

19 .

131) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Key verification ________ 2. Valid code check ________ 3. OLRS ________ 4. Output distribution register ________ 5. Tagging ________ 6. Check digit ________ 7. Output controls ________ 8. Son-father-grandfather retention ________ 9. Table lookup ________ 10. Batch processing A. Designed to check that processing results in valid output and that outputs are distributed properly to users.

B. On-line real-time system C. Source documents are accumulated into groups for periodic processing.

D. A table-lookup procedure in which the table file consists of valid data codes.

E. Audit-oriented information that is included with original transaction data when they are recorded.

F. A control procedures to ensure the accuracy of the key-transcribed input data.

G. A log maintained to control the disposition of outputs and reports.

H. An extra digit added to a code number which is verified by applying mathematical calculations to the individual digits in the code number.

I. An edit program that compares the value of a field to the acceptable values contained in a table file.

J. Retaining the old master and the transaction file for backup over the new master file.

Answer: 1. F 6. H 2. D 7. A 3. B 8. J 4. G 9. I 5. E 10. C Diff: 2 Page Ref: 254

20 .

132) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Key verification ________ 2. Real-time ________ 3. On-line, real time computing ________ 4. Input document control form ________ 5. Tagging ________ 6. Program data editing ________ 7. Valid code check ________ 8. Transaction processing system ________ 9. Table lookup ________ 10. POS system A. A table-lookup procedure in which the table file consists of valid data codes.

B. A system that processes input data immediately after they are input and can provide immediate output to users.

C. Technology that enhances the traditional cash register to allow it to function as a source dataentry device for sales transactions.

D. A computer environment where immediate or fast-response processing occurs.

E. Audit-oriented information that is included with original transaction data when they are recorded.

F. A control procedures to ensure the accuracy of the key-transcribed input data.

G. Documents batch control totals for batches of input data transmitted between user departments and the data processing department.

H. A software technique used to screen data prior to computer processing.

I. An edit program that compares the value of a field to the acceptable values contained in a table file.

J. A system that collects and processes transactions and provides immediate output concerning processing.

Answer: 1. F 6. H 2. D 7. A 3. B 8. J 4. G 9. I 5. E 10. C Diff: 2 Page Ref: 254

21 .

133) Base your answer using the following version of the Modulus 11-check digit found in Chapter 6.

For a four-digit account number: 1. Multiply each digit separately by the corresponding digit in the sequence: 5, 4, 3, 2.

2. Add results of digit multiplication in Step 1, digit-by-digit.

3. Subtract Step 2 results from the next highest multiple of 11.

4. The Step 3 result is the check digit.

Required: Calculate the check digit for each of the following account numbers: a. 8369 b. 2386 Answer: a. The check digit is 8, as follows: 8 × 5 = 40 4 + 0 + 1 + 2 + 1 + 8 + 1 + 8 = 25; 33 - 25 = 8 3 × 4 = 12 6 × 3 = 18 9 × 2 = 18 b. The check digit is 9, as follows: 2 × 5 = 10 1 + 0 + 1 + 2 + 2 + 4 + 1 + 2 = 13; 3 × 4 = 12 8 × 3 = 24 6 × 2 = 12 Diff: 2 Page Ref: 231

22 .

22 - 13 = 9

134) Base your answer using the following version of Modulus 11-check digit found in Chapter 6.

For a four-digit account number: 1. Multiply each digit separately by the corresponding digit in the sequence: 5, 4, 3, 2.

2. Add results of digit multiplication in Step 1, digit-by-digit.

3. Subtract Step 2 results from the next highest multiple of 11.

4. The Step 3 result is the check digit.

Required: Calculate the check digit for each of the following account numbers: a. 2596 b. 7428 Answer: a. The check digit is 7, as follows: 2 × 5 = 10 1 + 0 + 2 + 0 + 2 + 7 + 1 + 2 = 15; 22 - 15 = 7 5 × 4 = 20 9 × 3 = 27 6 × 2 = 12 b. The check digit is 5, as follows: 7 × 5 = 35 3 + 5 + 1 + 6 + 6 +1 + 6 = 28; 4 × 4 = 16 2×3=6 8 × 2 = 16 Diff: 2 Page Ref: 231

33 - 28 = 5

135) The following input is in an accounts receivable application: Account number

Gross amount

5864 1438 2289 9822 2877

8362 7866 6483 8968 5214

Required: Calculate the appropriate (a) record count; (b) financial total; and (c) hash total.

Answer: a. 5 b. 36,893 c. 22,290 Diff: 2 Page Ref: 232

23 .

136) The following input is in an accounts payable application: Account number

Gross amount

6289 3276 1280 9764 1283

9482 4860 7298 9062 5775

Required: Calculate the appropriate (a) record count; (b) financial total; and (c) hash total.

Answer: a. 5 b. 36,477 c. 21,892 Diff: 2 Page Ref: 232 137) For each of the following situations, indicate the program data editing technique that is appropriate to detect the error: a. A system user transposed digits when entering a customer's account number. b. An input clerk input the wrong sales territory number for employee number 35 in a sales commissions payable program. c. The data processing department failed to process all the items in a batch.

Answer: a. check digit b. combination field check c. record count or financial total or hash total Diff: 2 Page Ref: 232 138) For each of the following situations, indicate the program data editing technique that is appropriate to detect the error: a. Calgary Mountain Equipment Company uses prenumbered sales orders. The company is not sure that it can account for all sales orders for the week of October 21, 200X. b. The amount of a check in a vouchers payable program was negative. c. A data entry clerk failed to complete customer address information in a batch of sales orders.

Answer: a. sequence check b. limit check c. completeness check Diff: 2 Page Ref: 232 24 .

139) Describe how random-access file updating differs from sequential file updating.

Answer: Suggested answer: Random-access file updating does not require that transactions be sorted before the master file update. Also, random-access file updating changes the records on the master file without creating a new master file. Sequential-access transactions are sorted before updating the master file, and process the transaction file against the previous run's master file to create a new master file.

Diff: 2 Page Ref: 243 140) Describe how a son-father-grandfather master file retention system works. Describe how a master file destroyed in an update can be restored using this retention system.

Answer: Suggested answer: In an SFG system, the transaction file is processed against the current master file. After processing, the old (outdated) master file, the new master file, and the transaction file are retained as backups. As many generations of the old master files and related transaction files can be retained as desired. The current master file is the "son, " the next oldest master is the "father," and so on. If the "son" is destroyed in the next master file update, it can be restored by processing the previous run's transaction file against the "father." The new "son" can then be used in the next processing run.

Diff: 2 Page Ref: 239-240

25 .

141) Discuss the components necessary to operate a real-time sales system.

Answer: Suggested answer: There are a minimum of three modern technologies required to make a real-time sales system work and feasible for a retailer: • a POS (point-of-sale) system • bar coding for automatic identification of inventory • an EDI ordering system When inventory items are uniformly coded (using UPC bar codes), a POS system can easily scan items purchased by customers. This automatically allows critical records (such as inventory and sales receipts) to be updated and kept current in a convenient electronic format. It also allows the real-time sales system to initiate orders for additional items when order quantity reaches its "safety stock" reorder point. This is why almost all real-time retail systems use the UPC coding system (which is practically universal). For other types of sales systems other coding schemes may be used (such as the EAN Bookland bar code system used by most publishers, bookstores and chain book retailers such as Borders and Barnes & Noble). Since the POS system has captured and generated inventory and sales information in an electronic format, the electronic data interface (EDI) ordering system can almost instantly place orders with vendors. Sales information can also be transmitted from retail stores to vendors to help them with inventory planning and control.

One unique benefit of such a real-time sales system is that it can be adapted to a Web site and accessed by customers over the Internet. Such a system operates without any human intervention, thus significantly cutting costs, and with Internet access virtually worldwide, customers can "order without borders." Also, the "Internet store" is open 24 × 7, 365 days per year.

Diff: 2 Page Ref: 248-250 142) What are the benefits of program data editing?

Answer: Suggested answer: Input data should be thoroughly edited after entry to ensure valid content. Program data editing is a software technique used to screen data for errors prior to processing. Such software should be used in addition to verification, not in place of it. Data editing routines may be applied to any of the basic data structures: characters, fields, records, and files. Data editing checks for validity, completeness, format, sign assignment, length, and reasonableness among other criteria. Data editing techniques use hash totals, record count totals, and financial totals to ensure the integrity of the input data.

Diff: 2 Page Ref: 230-231

26 .

143) Discuss how batch totals are prepared and used. Explain how the use of batch totals and data transfer logs helps to establish segregation of duties between user departments and the data processing department.

Answer: Suggested answer: User departments prepare batch totals when submitting documents to data processing. A user includes batch totals on an input document control form that accompanies the documents when they are sent to data processing. Data processing records the control form information, including the batch totals, in a data transfer log. Data processing reconciles the batch output, which includes calculations of batch totals, to the amounts on the control form. Data processing sends the output to the user, who reconciles the batch totals to the previously prepared totals. The user department's establishment of the control total prevents data processing from inserting, deleting, or changing transactions in the batch.

Diff: 2 Page Ref: 228-229 144) Explain what a REA model is and how it is useful to designers and accountants. Also, discuss the need for debits and credits in a REA system.

Answer: Suggested answer: REA stands for resources, events, and agents. Events are similar to entities in a ER diagram.

Resources are the things of value or utility to the firm that are affected by the event. Agents are those who participate in events. For each event there are 2 general categories of related attributes - resources and agents. In supply chain management a third attribute is added location. When location is added the model moves from a REA model to a REAL model.

Designers and accountants both use REA in order to understand, build, and implement a system.

In implementing a REA model, it is necessary to specify how events relate to one another and how the events and their interrelationships are stored and processed within the database system.

In a pure REA system there are no journals, ledgers, or accounts. The journals, ledgers and accounts can be generated as reports or "views" from the basic recorded data.

Diff: 2 Page Ref: 234-235

27 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 7 Customer Order and Account Management Business Processes 1) Inquiry is an essential activity in the customer order business management process.

Answer: FALSE Diff: 1 Page Ref: 269 2) The primary function of the customer order business management process is order fulfillment.

Answer: TRUE Diff: 1 Page Ref: 269 3) Inquiries contain delivery information; quotations do not.

Answer: FALSE Diff: 2 Page Ref: 269 4) A legal agreement, prepared before selling to customers as a matter of company policy, is a contract.

Answer: TRUE Diff: 1 Page Ref: 270 5) After a sales order has been placed, the next step in the customer order business management process is to ship the goods or perform the requested services.

Answer: FALSE Diff: 2 Page Ref: 271 6) In the shipping step of the customer order business management process, the ERP may recheck the availability of goods to ensure that delivery is immediately possible.

Answer: TRUE Diff: 2 Page Ref: 271 7) The complexity of picking and packing differs significantly for different products.

Answer: TRUE Diff: 1 Page Ref: 271 8) Customer master records should be unique in a SAP ERP system.

Answer: TRUE Diff: 2 Page Ref: 272 9) A customer's hierarchy assignment must be known prior to the creation of the master record in SAP ERP. Answer: TRUE Diff: 2 Page Ref: 272 10) Most input used in creating a customer master record in the SAP ERP system is displayed as text and coded as alpha characters by the system.

Answer: FALSE Diff: 2 Page Ref: 273 1 .

11) In the SAP ERP system, the "contact person" screen is used to indicate the specific days and times the customer will accept deliveries.

Answer: FALSE Diff: 1 Page Ref: 274 12) The SAP ERP "sales" screen is used to code a customer's currency exchange rate.

Answer: TRUE Diff: 2 Page Ref: 275 13) The transmission medium used for preparing and sending an invoice to customer can be found in the "create customer" partner functions screen.

Answer: FALSE Diff: 2 Page Ref: 275 14) The Incoterms field is found in the "create customer" taxes screen.

Answer: FALSE Diff: 2 Page Ref: 275 15) In the "create sales order" screen, the date input into the "PO Date" field is always the same as the order date.

Answer: FALSE Diff: 1 Page Ref: 276 16) As item data are entered into the "create sales order" screen in SAP ERP, the system automatically checks the availability status of the item.

Answer: TRUE Diff: 2 Page Ref: 277 17) In the SAP ERP system, a "Delivery Block" field is used to prevent the further processing of an order.

Answer: TRUE Diff: 2 Page Ref: 277 18) Transaction cycle controls are based on a separation of functions within a business process.

Answer: TRUE Diff: 1 Page Ref: 277 19) A credit check is only necessary when selling to new customers.

Answer: FALSE Diff: 1 Page Ref: 278 20) A goods-issued notice is the documentation exchanged between a shipper and a carrier such as a trucking company.

Answer: FALSE Diff: 2 Page Ref: 280

2 .

21) Accounts receivable often represents the majority of an organization's working capital.

Answer: TRUE Diff: 2 Page Ref: 283 22) Selling accounts receivable at a discount to a collection agency is part of a company's cycle billing plan.

Answer: FALSE Diff: 2 Page Ref: 284 23) The approval of sales returns and allowances is a function of the credit department.

Answer: TRUE Diff: 1 Page Ref: 285 24) After an allowance has been authorized and approved, the credit department issues a credit memo to document the reduction in the customer's account.

Answer: FALSE Diff: 1 Page Ref: 285 25) It is important for the internal audit department to contact a customer directly regarding a past-due invoice.

Answer: FALSE Diff: 2 Page Ref: 286 26) The acknowledgement of customer payments using a receipt or monthly statement is optional.

Answer: FALSE Diff: 2 Page Ref: 287 27) The recorded receivable that exists prior to the payment by a customer enhances control over payments received.

Answer: TRUE Diff: 2 Page Ref: 288 28) The remittance list is posted to the accounts receivable ledger.

Answer: FALSE Diff: 2 Page Ref: 289 29) The validated deposit slip from a bank should be returned to the cash receipts department.

Answer: FALSE Diff: 2 Page Ref: 290 30) The control of actual cash (as opposed to checks) received in the mail relies largely on direct supervision.

Answer: TRUE Diff: 2 Page Ref: 291

3 .

31) The party best suited to reconciling a company's bank account is the internal auditor.

Answer: TRUE Diff: 2 Page Ref: 291 32) Cash sales should be recorded in a cash register or other secure device that can provide immediate documentation of the sales.

Answer: TRUE Diff: 2 Page Ref: 292 33) The focal point of the cash sales business process is the quick generation of cash sales.

Answer: FALSE Diff: 2 Page Ref: 292 34) Cash sales are only subject to accounting control if a record of the sale has been created.

Answer: TRUE Diff: 2 Page Ref: 292 35) Imprest techniques control cash receipts with far greater accuracy than cash payments.

Answer: FALSE Diff: 2 Page Ref: 293 36) Sarbanes-Oxley compliance requires companies maintain an adequate internal control structure over the business processes that support financial reporting.

Answer: TRUE Diff: 2 Page Ref: 281 37) The SEC Interpretive Guidance "Management's Report on Internal Control Over Financial Reporting" approved in 2007, focuses management on preventing and uncovering fraud.

Answer: FALSE Diff: 2 Page Ref: 281 38) The SEC Interpretive Guidance "Management's Report on Internal Control Over Financial Reporting" approved in 2007, focuses management on internal controls that best protect against risk of material misstatements in financial statements.

Answer: TRUE Diff: 2 Page Ref: 281 39) Auditing standard #5 describes a bottom-up approach to selecting controls to be tested.

Answer: FALSE Diff: 2 Page Ref: 282 40) Risk assessment of the sales business process is NOT necessary under SOX if internal control is considered adequate.

Answer: FALSE Diff: 2 Page Ref: 282

4 .

41) Risk assessment of the sales business process is necessary for compliance with SOX. Answer: TRUE Diff: 2 Page Ref: 282 42) Risk assessment should evaluate whether a company's controls will sufficiently address identified risks of material misstatement due to fraud.

Answer: TRUE Diff: 2 Page Ref: 287 43) The accounts receivable business process generates asset amounts that are significant to a company's balance sheet and cash flow statement, therefore, risk assessment of the accounts receivable process will be necessary for compliance with SOX. Answer: TRUE Diff: 2 Page Ref: 287 44) Unlike the sales business process, the accounts receivable business process does not generate cash, therefore, risk assessment of the accounts receivable process is optional under SOX as long as internal control is adequate.

Answer: FALSE Diff: 2 Page Ref: 287 45) Risk assessment should evaluate identified risks of material misstatement due to fraud and controls intended to address the risk of management override of these controls.

Answer: TRUE Diff: 2 Page Ref: 287 46) A well-designed customer order business management process captures ________ ________ as early as possible and reuses it in subsequent activities.

Answer: customer information Diff: 2 Page Ref: 270 47) A contract to provide goods or services over a period of time is sometimes called a(n) ________ ________.

Answer: blanket order Diff: 2 Page Ref: 270 48) ________ is an information system that enables the implementation of sophisticated and flexible customer-specific and material-specific pricing procedures.

Answer: ERP or Enterprise resource planning Diff: 2 Page Ref: 270 49) The ________ contains much of the information found in a sales order.

Answer: delivery Diff: 2 Page Ref: 271

5 .

50) In the SAP ERP system, all of the information that pertains to a customer is stored in a(n) ________ ________ record.

Answer: customer master Diff: 1 Page Ref: 272 51) In the SAP ERP system, a code indicating the ________ to be used must be entered in the communications section of the customer address screen.

Answer: language Diff: 3 Page Ref: 273 52) In the SAP ERP system, the screen used to specify account reconciliation data is the ________ ________ screen.

Answer: account management Diff: 2 Page Ref: 274 53) SAP ERP features powerful database ________ capabilities.

Answer: query Diff: 2 Page Ref: 277 54) The SAP ERP system database allows the user to ________ to obtain more detailed information concerning a line item in an order.

Answer: drill-down Diff: 2 Page Ref: 277 55) The distinction between ________ and ________ ________ is important to maintain separation of functions.

Answer: billing; accounts receivable Diff: 2 Page Ref: 280 56) In ________ processing, a separate record is maintained in the accounts receivable system for each of the customer's unpaid invoices.

Answer: open-items Diff: 2 Page Ref: 283 57) The mail room prepares a(n) ________ ________ that documents payments received.

Answer: remittance list Diff: 1 Page Ref: 288 58) An objective of managing accounts receivable is to reduce the ________, because in collecting accounts receivable, "time is money."

Answer: float Diff: 2 Page Ref: 292 59) A customer ________ is a term used to describe procedures in which the customer acts as a control over the initial documentation of a transaction.

Answer: audit Diff: 2 Page Ref: 293 6 .

60) An example of a(n) ________ technique is a clerk who is given a precounted number of tickets and held responsible for either the retail value of the tickets or the tickets themselves.

Answer: imprest Diff: 2 Page Ref: 293 61) Sarbanes-Oxley Act of 2002 requires companies maintain an ________ internal control structure over the business processes that support financial reporting.

Answer: adequate Diff: 2 Page Ref: 281 62) Effective internal control provides ________ assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

Answer: reasonable Diff: 2 Page Ref: 282 63) ________ assessment of the sales business process will be necessary for compliance with Sarbanes-Oxley.

Answer: Risk Diff: 2 Page Ref: 282 64) Risk assessment should evaluate identified risks of material misstatement due to fraud and controls intended to address the risk of ________ override of these controls.

Answer: management Diff: 2 Page Ref: 287 65) Which of the following activities is optional in the customer order business management process?

A) Order entry B) Contract creation C) Shipping D) Billing Answer: B Diff: 1 Page Ref: 269 66) The customer order business management process begins when a A) customer order is entered into the system.

B) customer order is shipped.

C) customer invoice is generated and sent to the customer.

D) potential customer makes an inquiry or requests a quotation.

Answer: D Diff: 1 Page Ref: 269

7 .

67) A document sent to an outside firm to inform them of product prices, availability, and delivery information is known as a ________.

A) inquiry B) blanket order C) quotation D) sales order Answer: C Diff: 2 Page Ref: 269 68) An outline detailing the goods or services to be provided to a customer is a(n) ________.

A) contract B) inquiry C) quotation D) sales order Answer: A Diff: 2 Page Ref: 270 69) The document prepared when a customer is requesting the delivery of goods that are detailed in a contract is called a A) sales order.

B) release order.

C) call-off.

D) Answers B and C are both correct.

Answer: D Diff: 2 Page Ref: 270 70) A customer has placed an order. The customer's credit has been checked and is satisfactory.

When the availability of the goods is checked, it is found that some items are in stock and the vendor has back ordered other items. At this point the customer A) may cancel the order.

B) may request the order be held until all goods can be shipped.

C) may request partial shipment of the goods currently in.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 271 71) A warehouse employee uses a document to fulfill a customer order. The employee is most likely using a ________.

A) picking list B) packing list C) bill of lading D) shipping advice Answer: A Diff: 1 Page Ref: 271

8 .

72) In the billing stage of the customer order business management process, the ERP uses much of the data from a customer's sales order to create the ________.

A) goods issued notice B) invoice C) delivery D) packing list Answer: B Diff: 2 Page Ref: 271 73) In the SAP ERP system, how many types of customer records must be created and maintained?

A) Four B) One C) Six D) Two Answer: A Diff: 2 Page Ref: 272 74) In the SAP ERP system, all of the different master records are created when the A) payee customer record is created.

B) ship-to-customer record is created.

C) sold-to-customer record is created.

D) bill-to-customer record is created.

Answer: C Diff: 2 Page Ref: 272 75) Hierarchy assignment includes a customer's A) distribution channel.

B) geographical location.

C) credit approval.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 273 76) The first screen used to create a customer in a SAP ERP system is A) control data.

B) contact person.

C) initial.

D) account management.

Answer: C Diff: 1 Page Ref: 273

9 .

77) In the SAP ERP system, the "create customer" screen, which is used to input statistical and demographic data, is A) control data.

B) marketing.

C) unloading points.

D) initial.

Answer: B Diff: 2 Page Ref: 274 78) In the SAP ERP system, if a company wishes to initiate a dunning procedure against a customer, input will be made in the A) account management screen.

B) payment transactions screen.

C) correspondence screen.

D) control data screen.

Answer: C Diff: 2 Page Ref: 274 79) A company that uses the SAP ERP system wants to identify the areas within their company that have responsibility to a certain customer. The screen that should be used to enter this information is ________.

A) correspondence B) sales C) billing D) initial Answer: B Diff: 2 Page Ref: 275 80) Input concerning whether manual invoicing is required or if a customer is entitled to rebates in the SAP ERP system can be found in the A) billing screen.

B) sales screen.

C) payment transactions screen.

D) account management screen.

Answer: A Diff: 2 Page Ref: 275 81) The final input screen in the "create customer" function of the SAP ERP system is the A) billing screen.

B) taxes screen.

C) partner functions screen.

D) output screen.

Answer: C Diff: 2 Page Ref: 275

10 .

82) The SAP ERP system requires a customer master record for each customer. A one-time customer of the company A) can be passed through the system by using a "dummy" customer master record.

B) should be manually billed using a 30-day account, thus bypassing the SAP ERP system.

C) must pay cash and pick up the goods from the company's shipping dock.

D) must be set up using detailed records in the SAP ERP system like any other customer.

Answer: A Diff: 2 Page Ref: 276 83) When a "sold-to" customer record is created in the SAP ERP system, other master records are automatically created using the same information. The input screen in which these records are associated with each other is the A) output screen.

B) billing screen.

C) account management screen.

D) partner functions screen.

Answer: D Diff: 2 Page Ref: 275 84) Which input field listed below is not mandatory when creating a sales order in the "initial" screen of the SAP ERP system?

A) Sales organization field B) Sales group C) Distribution channel field D) Division code field Answer: B Diff: 3 Page Ref: 276 85) Which of the screens listed below in SAP ERP system is not optional when a company records information relating to a sale?

A) Pricing B) Create sales order C) Business data header D) Scheduling Answer: B Diff: 1 Page Ref: 276 86) The prices entered on sales orders should be independent of the sales order function. To achieve this transaction cycle control, the company's ordering system should use A) an independently prepared master price list authorized by management.

B) prices found in the order database.

C) prices listed by the sales representative who initiated the order.

D) All of these answers are correct.

Answer: A Diff: 2 Page Ref: 278

11 .

87) A sales order is A) the same as the purchase order.

B) an external use document.

C) an internal use document.

D) optional when selling to established customers.

Answer: C Diff: 1 Page Ref: 278 88) As part of adequate transaction cycle controls in order processing, after the finished goods department has picked a customer's order according to a delivery document, the records which should be updated to reflect actual quantities picked are found in the A) order database.

B) credit files.

C) master price list.

D) inventory database.

Answer: D Diff: 2 Page Ref: 279 89) What documents typically accompany the physical shipment of goods to a customer?

A) The picking list and purchase order B) Packing and picking lists C) The packing list and a bill of lading D) The sales order and an invoice Answer: C Diff: 2 Page Ref: 280 90) To maintain an adequate separation of duties, various functions within the customer order process should be independent of each other. An example of this is A) that billing does not have access to the accounts receivable ledger.

B) that shipping only accepts goods from finished goods that are identified on an independentlyprepared packing list.

C) Answers A and B are both correct.

D) None of these answers are correct.

Answer: C Diff: 2 Page Ref: 280 91) There are various approaches to an accounts receivable application. The approach in which a customer's remittances are applied against a customer's total outstanding balance is called A) aging schedule processing.

B) balance-forward processing.

C) open-item processing.

D) None of these answers are correct.

Answer: B Diff: 2 Page Ref: 283

12 .

92) To maintain adequate separation of functions, accounts receivable should not have access to A) cash received from customers.

B) checks received from customers.

C) invoices and credit memos.

D) Answers A and B are both correct.

Answer: D Diff: 2 Page Ref: 283 93) One process, which is transparent to customers and has a beneficial effect on the company's cash flow, is to A) implement a cycle billing plan.

B) factor accounts receivable.

C) decrease the amount of time in which customers have to pay their monthly invoices.

D) Answers B and C are both correct.

Answer: A Diff: 2 Page Ref: 284 94) To provide an adequate separation of functions in the accounts receivable business process, maintaining the subsidiary accounts receivable ledger should be the responsibility of ________.

A) billing B) accounts receivable C) cash receipts D) general ledger Answer: B Diff: 2 Page Ref: 284 95) To provide an adequate separation of functions in the accounts receivable business process, maintaining the accounts receivable control account should be the responsibility of ________.

A) billing B) accounts receivable C) cash receipts D) general ledger Answer: D Diff: 2 Page Ref: 285 96) A sales return occurs when a customer actually returns goods that have been shipped. The departments involved with processing this transaction up to the point of issuing a credit memo are the A) shipping, receiving, and billing departments.

B) receiving, billing, and accounts receivable departments.

C) shipping, receiving, and credit departments.

D) receiving, credit, and billing departments.

Answer: D Diff: 2 Page Ref: 286

13 .

97) The Bad Luck Fortune Cookie Company has a 360-day past-due balance of $1,300.00. After repeated attempts at collection, the account is deemed worthless. The departments involved with processing this transaction up to the point of issuing an approved write-off memo are the A) credit and accounts receivable departments.

B) treasurer, billing, and accounts receivable departments.

C) credit, treasurer, accounts receivable, and internal audit departments.

D) credit, treasurer, cash receipts, and internal audit departments.

Answer: C Diff: 2 Page Ref: 286 98) The business process used when there is an existing customer account balance is ________.

A) accounts receivable B) cash-received-on-account C) cash sales D) aged trial balance Answer: B Diff: 2 Page Ref: 287 99) In the cash-received-on-account process, the remittance list is used to post the A) cash receipts journal.

B) accounts receivable ledger.

C) Answers A and B are both correct.

D) None of these answers are correct.

Answer: A Diff: 1 Page Ref: 289 100) The amount of cash receipts for August 12 is $6,389.42. For general ledger to post this amount, it must receive A) a journal voucher from cash receipts.

B) the deposit slip from the bank for August 12 showing $6,389.42 as a deposit.

C) a control total from accounts receivable.

D) a journal voucher from cash receipts and a control total from accounts receivable.

Answer: D Diff: 2 Page Ref: 290 101) To control incoming cash from the mail and ensure an accurate accounting, the department which should have complete control over the transaction is the ________.

A) mailroom B) cash receipts C) accounts receivable D) No one department should have complete control over incoming cash Answer: D Diff: 1 Page Ref: 291

14 .

102) A turnaround document that is used to enhance internal control and promote the accuracy of incoming cash receipts is the ________.

A) journal voucher B) remittance advice C) bank deposit slip D) remittance list Answer: B Diff: 2 Page Ref: 291 103) Using a lock-box system A) expedites the cash flow for a company.

B) helps to reduce interest income lost due to delays in depositing out-of-state-checks.

C) promotes the segregation of duties because a third-party handles cash receipts.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 292 104) A company located in Delaware has customers nationwide. The most effective system to deal with the issue of float is to A) use one lock-box collection system located in the Midwest.

B) have customers send their remittances to the company's corporate office in Delaware.

C) use several regional lock-box systems located geographically around clusters of customers.

D) factor its accounts receivable to a collection agency.

Answer: C Diff: 2 Page Ref: 292 105) A significant difference between a cash sales business process and a cash-received-onaccount business process is that A) no previous customer account balance exists in a cash sales business process.

B) the float is shorter in a cash-received-on-account business process.

C) more direct supervision is required in a cash-received-on-account business process.

D) There is no significant difference between the two business processes.

Answer: A Diff: 2 Page Ref: 292 106) A grocery store customer will be given a gallon of ice cream if his or her receipt has a red star stamped on it. The idea behind this technique from an accounting control standpoint is to A) promote the dairy industry's "Got Milk" campaign.

B) have the customer audit his or her cash receipt.

C) keep the customer happy.

D) Answers A and C are both correct.

Answer: B Diff: 2 Page Ref: 293

15 .

107) Which illustration is not an example of a customer audit technique?

A) Providing a customer with a remittance advice that must be returned with payment.

B) Pricing items at $1.00 rather than 99 cents so the customer does not expect change.

C) Entering the customer in a prize contest if he or she calls a number and provides feedback about the purchase.

D) All of these answers are correct.

Answer: B Diff: 2 Page Ref: 293 108) Which illustration is not an example of a supervision technique?

A) Using professional shoppers in a retail environment B) Using a test package for a bank teller or cash counter C) Having a cash register make sound when it is opened in the presence of a customer D) All of these answers above are correct.

Answer: C Diff: 2 Page Ref: 293 109) Sarbanes-Oxley Act of 2002 requires companies maintain an adequate ________ structure over the business processes that support financial reporting.

A) risk assessment B) internal control C) assurance assessment D) reliability process Answer: B Diff: 2 Page Ref: 281 110) The SEC Interpretive Guidance "Management's Report on Internal Control Over Financial Reporting" approved in 2007, focuses management on internal controls that best protect against risk of material ________ in financial statements.

A) fraud B) misstatements C) negligence D) mistakes Answer: B Diff: 2 Page Ref: 281 111) Effective internal control provides ________ assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

A) little B) adequate C) total D) reasonable Answer: D Diff: 2 Page Ref: 282

16 .

112) Auditing standard #5 describes a ________ approach to selecting controls to be tested.

A) hybrid B) bottom-up C) top-down D) This standard does not discuss the selection of controls to be tested.

Answer: C Diff: 2 Page Ref: 282 113) Risk assessment should evaluate whether controls sufficiently address identified risks of material misstatements due to fraud and A) controls specifically designed to prevent fraud.

B) controls intended to address the risk of collusion.

C) controls intended to address the risk of management override of these controls.

D) controls specifically designed to prevent material misstatements.

Answer: C Diff: 2 Page Ref: 287

17 .

114) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Remittance list ________ 2. Credit memo ________ 3. Open-item processing ________ 4. Bill of lading ________ 5. Invoice ________ 6. Balance-forward processing ________ 7. Sales order ________ 8. Inquiry ________ 9. Goods issue notice ________ 10. Float A. Documentation which is forwarded to the billing function to evidence a shipment to a customer B. Invoice received from a carrier for shipments C. The time between the signing of the payment check by a customer and the moment the firm has use of the funds D. A form used to document reductions to a customer's account due to sales returns or allowances E. A customer's remittances are applied against a customer's outstanding balance rather than against individual invoices.

F. A listing of customer payments in cash and by check that is prepared for control purposes G. A document similar to a quotation that does not contain delivery information H. A document that informs a customer of charges for goods or services rendered I. A customer's remittances are applied against individual invoices rather than a customer's outstanding balance.

J. A document prepared to initiate the shipment of goods to a customer Answer: 1. F 6. E 2. D 7. J 3. I 8. G 4. B 9. A 5. H 10. C Diff: 2 Page Ref: 294

18 .

115) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Imprest techniques ________ 2. Factoring ________ 3. Blanket order ________ 4. Customer audit ________ 5. Cycle billing ________ 6. Professional shoppers ________ 7. Lock-box deposit system ________ 8. Bill ________ 9. Shipping advice ________ 10. Quotation A. A single order which calls for several shipments to the same customer over a specific period of time B. The selling of accounts receivable at a discount to a collection agency C. People hired to purchase goods in a retail environment for the specific purpose of observing the recording of transactions D. A synonym for "good issue notice" E. The processing of accounts receivable, subdivided by alphabet or account number in order to distribute the preparation of statements over the working days of the month F. A control technique in which an item is held accountable to a specified total amount G. A procedure in which the customer acts as a control over the initial documentation of a transaction H. A document sent to a potential customer to inform them of product prices, availability, and delivery information I. Customer remittances are sent directly to a bank and are credited to a company's account before they are posted to customer accounts.

J. Another name for an invoice Answer: 1. F 6. C 2. B 7. I 3. A 8. J 4. G 9. D 5. E 10. H Diff: 2 Page Ref: 292-293

19 .

116) The following ten paragraphs describe control weaknesses in customer order and account management business processes. Listed below are 11 controls that may help control the weaknesses: A. Customer credit check B. Master price list independent from Order Entry C. Credit department approval of customer account adjustments D. Independent confirmation from internal audit to customer E. Independent confirmation from Accounts Receivable to customer F. Balance the posted remittance advices to the remittance list in Accounts Receivable G. Customer audit H. Billing information generated from sales order data I. Comparison of goods, picking list, and packing list in Shipping J. Packing list generated from sales order data K. File of picking lists, signed by Shipping, in Finished Goods Required: In the blank next to each number, list one capital letter representing the best control to address the system weakness. You will use each letter only once, and one letter will not be used.

1. ________ Employees of Micro-Speed Computer Company's billing department observed that for the sales of January 15, inventory item number 7856 was priced at a different amount on ten different orders.

2. ________ Hemingway Manufacturing Company sent a $7,500 payment on account to United Coastal Hardware Company. A mailroom clerk stole the payment and accompanying remittance advice, but included the payment on the day's remittance list. The accounts receivable department later sent Hemingway a statement showing $7,500 credited its account.

3. ________ An employee worked for a week at Bob's Belly Buster Burgers. After the employee quit, the owner noticed that the dollar amount of sales for the week was unusually low, although the amount of food ordered was typical.

4. ________ At Washington Square Company, customers are complaining that they are not receiving the correct quantities of goods ordered, or the wrong items are being shipped to them.

5. ________ To increase its catalog business, Great Southwest Company permitted new customers to open a $500 account with the company. A disgruntled company employee placed several fraudulent telephone orders with the company, each time disguising his voice and acting as a new customer. The employee obtained $5,000 in merchandise before he was caught.

6. ________ As an added convenience to her customers, Melanie Jacobi, a saleswoman for The New People Shoe Company, negotiates and approves sales returns and allowances. Auditors performing an analytical review of sales and inventory data have discovered a decrease in sales without a corresponding increase in the number of finished goods.

7. ________ Customers of Miller Magnetic Company are complaining that they are being billed for amounts greater than they ordered and received.

20 .

8. ________ Iron Works Equipment Company had financial difficulty and fell behind in its payments to Great Lakes Manufacturing Company. After repeated attempts at collection, Great Lakes' credit department finally wrote off the Iron Works account on September 30, 200X. On December 14 200X, auditors discovered that an accounts receivable employee conspired with a mailroom employee to divert $6,500 in payments made by Iron Works after their account was written-off.

9. ________ At Young People Accessory Company, the finished goods department sends goods to the shipping department, accompanied by a picking list. The shipping department clerk compares the goods to the pickling list and signs the picking list, returning it to the finished goods warehouse clerk. Then the shipping department prepares a three-part shipping notice, one copy of which serves as the packing list and is enclosed with the goods to be shipped. An auditor recently discovered that the sales of a popular woman's purse were far less than the amount of inventory reduction for the purse.

10. ________ At Goode Brothers Office Supply, Inc., the correct goods for a customer's order were "picked" and transferred from the finished goods warehouse to shipping. The shipping clerk kept part of the customer's order. The customer later complained that he had received only half of his order. The shipping clerk claimed that shipping had not received the complete order from finished goods. Since Goode Brothers could not prove the source of the shortage, it sent additional goods to the customer at no charge.

Answer: 1. B 6. C 2. F 7. H 3. G 8. D 4. I 9. J 5. A 10. K Diff: 3 Page Ref: 278-290

21 .

117) Melbourne Manufacturing Company is a new start-up business that has not yet opened its doors. The controller for the company is concerned about the best way to process accounts receivable. The controller expects each individual sale to be relatively large, and her goal is for all customers to pay on an individual invoice basis. The marketing department's sales forecast estimates that about Melbourne will build a customer base of 1,800 in six to nine months.

Required: a. What is the appropriate accounts receivable processing method for Melbourne Manufacturing?

Describe how it would work. b. Describe the concept of cycle billing. What are the potential benefits of cycle billing for Melbourne Manufacturing?

Answer: a. The company should use the open-item processing method. The accounts receivable system will maintain a separate record for each unpaid invoice. This is a practical approach given that each sale will be relatively large. As the customers pay invoices, the payments are matched against the unpaid invoice records. b. Cycle billing refers to the distribution of statements throughout the month rather than only at month-end. Melbourne Manufacturing Company could subdivide their accounts receivable file either by account number or alphabetically, and devise a plan to spread the preparation of statements over different working days of the month. This would even the work flow for the accounts receivable department, since statements would be created at different times during the month (not all at month-end). The company would also benefit from cycle billing since cash inflows will be more evenly received over the month from customers.

Diff: 2 Page Ref: 283-284

22 .

118) National Auto Loan has customers throughout the 48 contiguous states. Its current policy is to have all customers mail their payments to National Auto's corporate office located in Lansing, Michigan. It is considering a regional lock-box system to collect loan payments from its customers. Changing to a regional lock-box system will decrease the company's float time from eight days (on average) to three days. The company's average daily collection is $1,750,000. The bank that operates the regional lock-box system requires compensating balances totaling $800,000. Annual fees and expenses associated with the lock-box system are $350,000.

Required: a. Compute the dollar amount of net funds freed if National Auto uses the lock-box system. b. Compute the percentage rate of net funds freed.

Answer: a.

Float for the Lansing, MI, location (8 days × $1,750,000) $14,000,000 Less: Float using a lock-box system (3 days × $1,750,000) 5,250,000 Gross funds freed if a lock-box system is used 8,750,000 Less: Required compensating balance for lock-box system 800,000 Net funds freed if a lock-box system is used $7,950,000 b. Cost of net funds freed = $350,000 fees and expenses / $7,950,000 = 4.40% Diff: 2 Page Ref: 292 119) The Jackson Supply Company recently started using a regional lock-box collection system.

The controller for the company compared the float using the lock-box system with the float using the company's prior, one-location collection system. The controller found that the company was saving $2,600,000 in average float. The bank that provides the regional lock-box system requires that the company maintain a $500,000 compensating balance at all times. The bank also charges service fees of $120,000 annually.

Required: Calculate the percentage cost of net funds freed for Jackson Supply Company.

Answer: Gross savings using a lock-box system $ 2,600,000 Less: Required compensating balance for the lock-box system 500,000 Net savings using a lock-box system $ 2,100,000 $120,000 fees and expenses / $2,100,000 = 5.71% percentage cost of funds freed Diff: 2 Page Ref: 292

23 .

120) Southeastern Supply Company has been in business for one month. The chief information officer of the company is designing procedures for its sales order entry system. Top management wants procedures for both general and specific authorization.

Required: Describe procedures to accomplish each of the following activities and indicate whether each procedure requires general or specific authorization.

1. Establishment of prices to be entered on sales orders 2. Establishing terms of sale, including credit limits 3. Disposition of blocked orders for customers over the credit limit 4. Disposition of sales allowances 5. Writing off accounts deemed worthless Answer: 1. Management separate from the sales order function should prepare a master price list for use in sales orders. This is a general authorization.

2. Management can establish general guidelines for credit customers, such as: requiring a credit check; a credit limit for an initial order from a new customer; and establishing a credit limit after the initial order. These general guidelines would be a general authorization. Occasionally, new customers might need more credit than the company normally allows, or a new customer might have a credit record that does not meet the company's normal requirements. The sales terms for such customers would be a specific authorization.

3. Blocked orders are those that put customers over their credit limit. The sales order department informs the credit department of blocked orders, and the credit department decides which ones should be released for fulfillment. This is a specific authorization.

4. The sales order department negotiates the amount of sales allowances with customers. (An allowance is a reduction in the amount owed by the customer due to damaged merchandise, shortages in shipment, or other fulfillment problems.) The credit department approves the amount of the allowance and authorizes the billing department to prepare a credit memo reducing the customer's account. This is a specific authorization.

5. The credit department reviews the accounts receivable aging schedule and recommends accounts to be written off. The treasurer approves the write-offs and authorizes the accounts receivable department to write off the customer accounts. This is a specific authorization.

Diff: 3 Page Ref: 278-286

24 .

121) Describe the following order entry procedures: a. Pricing b. Credit checking c. Availability checking Answer: Suggested answer: a. To price an order, the order-taker must know the current prices of products or services, and surcharges or discounts that apply, and shipping costs. b. Credit checking occurs after pricing is complete and before inventory availability is checked.

The system blocks orders that are over the customer's previously established credit limit. The credit department reviews blocked orders and may authorize some or all of them to be released. c. Availability checking occurs after the pricing is complete and after the customer's credit is determined to be satisfactory. If goods are in stock or are expected to arrive before the customer's requested delivery date, the order proceeds normally without any exceptions. If goods are not expected to be in stock, the company may offer the customer an option of accepting a partial shipment, or delaying the shipment until sufficient stock arrives.

Diff: 2 Page Ref: 270-271, 278 122) Goodfellows Manufacturing Company is a mature user of the SAP ERP order processing system. Goodfellows recently acquired another manufacturing company and it wants to consolidate its customer records into Goodfellows' SAP ERP system. What are two things Goodfellows must do before it consolidates the other manufacturing company's customer records into its SAP ERP system?

Answer: Suggested answer: (The text lists three things a company should do before entering new customer master records into the SAP ERP system.)

• SAP ERP requires that each customer master record be unique. Goodfellows should eliminate any duplicate customers and verify that the customers of the other company are "new customers" in its system.

• Each new customer's hierarchy assignment must be known to the system before the new customer master record is created. The hierarchy assignment includes information related to pricing, such as the distribution channel, type of industry, and geographic location.

•

The new customers must be approved for sales before creation of their master records in SAP ERP. Diff: 2 Page Ref: 272-273

25 .

123) Why should management or an organizational function that is independent of the sales order function, prepare the master price list?

Answer: Suggested answer: The sales order application's purpose is to record sales orders. When management or a different (independent) function prepares the master price list, the authorization of pricing is separated from the recording of prices on sales orders. This separation of duties provides a control over the activities of sales order employees. They may not give preferential prices to certain customers or engage in any discriminatory pricing practice (which is a key reason for the separation of duties in this situation).

Diff: 2 Page Ref: 278 124) Describe the procedures for a sales return and explain how the procedures relate to the segregation of duties of authorization, custody of assets, and record keeping.

Answer: Suggested answer: The customer returns goods for credit to the selling firm's shipping department. Shipping returns the items to inventory and prepares a sales return memo for the credit department. The credit department approves the sales return memo and forwards it to the billing department. Billing issues a credit memo to the customer based on the authorization contained in the sales return memo. Billing prepares a journal entry for the credit memo. Accounts receivable posts the credit memo entry to the customer's account. The duties of custody, authorization, and record keeping are separated in these procedures. Shipping has custody of the returned inventory items (asset).

The credit department authorizes the reduction of the customer's account receivable. Billing prepares the entry, and accounts receivable maintains the records.

Diff: 2 Page Ref: 286 125) Explain SOX compliance as this Act relates to the sales business process and the accounts receivable business process.

Answer: Suggested answer: Both the sales business process and the accounts receivable business process generates asset amounts that are significant on a company's income, balance sheet, and cash flow statements.

Given the significant accounts, disclosures, and assertions, risk assessment of both the sales and AR business process will be necessary for compliance with SOX. Risk assessment should also evaluate identified risks of material misstatement due to fraud and controls intended to address the risk of management override of these controls.

Diff: 2 Page Ref: 281-283, 287

26 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 8 Procurement and Human Resources Business Processes 1) A synonym for the word "purchasing" is "procurement."

Answer: TRUE Diff: 1 Page Ref: 308 2) The eight documents in the SAP ERP Materials Management module may be processed "online."

Answer: TRUE Diff: 2 Page Ref: 309 3) All eight documents in the SAP ERP Materials Management module are used each time an item is purchased.

Answer: FALSE Diff: 2 Page Ref: 309 4) Numeric document type codes are assigned to each new procurement document created in the SAP ERP system.

Answer: FALSE Diff: 2 Page Ref: 309 5) ERP can copy relevant information from an existing document to a new one, reducing error and expediting the business process.

Answer: TRUE Diff: 2 Page Ref: 309 6) A purchase order is an internal document created to request the procurement of something so that it is available at a certain point in time.

Answer: FALSE Diff: 2 Page Ref: 309 7) Approval of a purchase requisition usually means that the request is within cost limits.

Answer: TRUE Diff: 2 Page Ref: 310 8) ERP maintains lists of approved and disapproved sources of supply.

Answer: TRUE Diff: 1 Page Ref: 310 9) It is common for companies to configure their systems to automatically issue purchase orders for purchase requisitions meeting certain criteria.

Answer: TRUE Diff: 2 Page Ref: 311

1 .

10) An outline agreement contains line items.

Answer: FALSE Diff: 2 Page Ref: 311 11) Invoice verification is responsible for the payment of invoices in ERP. Answer: FALSE Diff: 2 Page Ref: 313 12) In ERP, every module can access every master record.

Answer: TRUE Diff: 2 Page Ref: 313 13) Goods movement can be either an internal or external event.

Answer: TRUE Diff: 2 Page Ref: 314 14) Well-designed receiving procedures should call for an independent count of materials delivered and for the preparation of the receiving report.

Answer: TRUE Diff: 2 Page Ref: 317 15) In the procurement business process it is not necessary to separate receiving from stores.

Answer: FALSE Diff: 1 Page Ref: 318 16) Buyer-vendor relationships are more a matter of procedure than of policy.

Answer: FALSE Diff: 2 Page Ref: 319 17) The imprest fund concept is primarily restricted to petty cash control.

Answer: FALSE Diff: 1 Page Ref: 321 18) A voucher payable system encompasses all expenditures, including trade accounts, payroll, and capital expenditures.

Answer: TRUE Diff: 2 Page Ref: 322 19) Vouchers themselves can take several forms, and the form of the voucher itself is not significant.

Answer: TRUE Diff: 1 Page Ref: 322 20) When using a built-up voucher system, the account "Vouchers Payable" is used in addition to "Accounts Payable."

Answer: FALSE Diff: 2 Page Ref: 323 2 .

21) In a negative timekeeping system only exceptions are recorded.

Answer: TRUE Diff: 1 Page Ref: 325 22) The travel expense component of the ERP HR-PA does not support HR recruitment efforts.

Answer: FALSE Diff: 2 Page Ref: 325 23) An "infotype" is a SAP term that denotes a collection of data fields that is grouped together for display.

Answer: TRUE Diff: 2 Page Ref: 325 24) Payroll processing is one of the simplest procedures within a large organization.

Answer: FALSE Diff: 1 Page Ref: 326 25) The individual who distributes paychecks should be independent of personnel, timekeeping, and the payroll department.

Answer: TRUE Diff: 2 Page Ref: 328 26) The ERP system's "create" function adds a new blank infotype with a default validity date from "current date" to "end of time."

Answer: TRUE Diff: 2 Page Ref: 326 27) In the ERP system a personnel event is a single HR infotype.

Answer: FALSE Diff: 2 Page Ref: 325 28) One of the functions of the personnel department is the timekeeping function.

Answer: FALSE Diff: 1 Page Ref: 328 29) Unemployment compensation laws are the same in all states, and all states participate in the federal-state unemployment insurance program.

Answer: FALSE Diff: 2 Page Ref: 329 30) An employer is responsible for the full amount of federal payroll taxes even when he or she fails to withhold the appropriate contributions from employees.

Answer: TRUE Diff: 2 Page Ref: 329

3 .

31) Because the procurement business process generates revenue amounts that are considered to be significant accounts, disclosures, and assertions on a company's income statement, risk assessment of the procurement business process is necessary for compliance with SarbanesOxley.

Answer: FALSE Diff: 2 Page Ref: 321 32) The payroll business process is a subset of procurement and therefore, falls outside the control of Sarbanes-Oxley.

Answer: FALSE Diff: 2 Page Ref: 329 33) Within the procurement business process, fundamental controls are based on a separation of function.

Answer: TRUE Diff: 2 Page Ref: 321 34) Risk assessment for the payroll business process is required for compliance with SarbanesOxley.

Answer: TRUE Diff: 2 Page Ref: 329 35) For the procurement business process, assessed risk must be clearly documented and controls selected for testing and evaluation.

Answer: TRUE Diff: 2 Page Ref: 321 36) For the procurement business process, assessed risk is optional under Sarbanes-Oxley as long as a company's internal control system has been approved by external auditors.

Answer: FALSE Diff: 2 Page Ref: 321 37) Once a purchase requisition is completed, it is electronically forwarded to a(n) ________ for approval.

Answer: supervisor or manager Diff: 2 Page Ref: 310 38) ________ documents are used in the selection of a vendor.

Answer: Quotation Diff: 2 Page Ref: 311 39) The ________ ________ purchase order is issued to initiate a movement of goods between plants in a company.

Answer: stock transport Diff: 2 Page Ref: 311

4 .

40) ERP Master Material records contain so much data that they are organized as ________.

Answer: views Diff: 2 Page Ref: 314 41) Master records used only by purchasing in the ERP system are ________ ________ records.

Answer: purchasing master Diff: 2 Page Ref: 314 42) Purchasing policies may require ________ ________, which is usually implemented through use of request for quotation documents.

Answer: competitive bidding Diff: 2 Page Ref: 320 43) A voucher system is essentially a(n) ________ technique.

Answer: review Diff: 2 Page Ref: 322 44) SAP ERP contains the ________ and the ________ HR modules.

Answer: PA; PD Diff: 1 Page Ref: 325 45) The most often used feature in the SAP ERP HR modules is the ________ ________.

Answer: time management Diff: 2 Page Ref: 325 46) In the ERP system there are ________ data structures which provide the basis for the storage and manipulation of data.

Answer: three Diff: 2 Page Ref: 325 47) To make each infotype in the ERP system unique and to prevent overwriting when updating infotypes, ________ data is added to each infotype.

Answer: validity Diff: 2 Page Ref: 326 48) The SAP ERP HR object code for the object Job is ________.

Answer: C Diff: 2 Page Ref: 326 49) The rate of pay for an employee cannot be changed unless authorized by the ________ department.

Answer: personnel Diff: 2 Page Ref: 328 50) In most states, unemployment compensation laws provide for taxes only on ________ .

Answer: employers Diff: 2 Page Ref: 329 5 .

51) The basic information about what the U.S. government requires with respect to payroll is outlined in the Internal Revenue Service's publication called ________ ________.

Answer: Circular E Diff: 2 Page Ref: 330 52) Risk ________ for payroll, procurement, and customer order management business processes is required for compliance with Sarbanes-Oxley.

Answer: assessment Diff: 2 Page Ref: 321, 329 53) For compliance with SOX, assessed risk for business processes must be clearly documented and ________ selected for testing and evaluation.

Answer: controls Diff: 2 Page Ref: 321 54) Management and auditors must be concerned with evaluating the existence and functioning of controls as they are necessary to protect against the risk of ________ misstatements.

Answer: material Diff: 2 Page Ref: 320 55) Risk ________ for payroll, procurement, and customer order management business processes is required for compliance with Sarbanes-Oxley A) control B) compliance C) assessment D) assertions Answer: C Diff: 2 Page Ref: 321, 329 56) For compliance with SOX, assessed risk for business processes must be clearly A) tested and reported to FASB. B) documented on form Circular E and submitted to the SEC. C) tested and checked for material irregularities.

D) documented and controls selected for testing and evaluation.

Answer: D Diff: 2 Page Ref: 321 57) Management and auditors must be concerned with evaluating the existence and functioning of controls as they are necessary to protect against the risk of A) material misstatements.

B) fraud.

C) management misrepresentations.

D) human errors.

Answer: A Diff: 2 Page Ref: 321 6 .

58) In the materials planning system, purchase requisitions can A) only be prepared electronically.

B) only be prepared manually.

C) be prepared either manually or electronically.

D) Purchase requisitions are not part of the materials planning system.

Answer: C Diff: 2 Page Ref: 309 59) The final step in the procurement process should be A) preparation of the purchase order.

B) vendor payment.

C) receipt of the goods.

D) invoice verification.

Answer: B Diff: 2 Page Ref: 308 60) A procurement document that is not available in ERP is the ________.

A) quotation B) contract C) scheduling agreement D) invoice Answer: D Diff: 1 Page Ref: 309 61) ERP can check to see whether a contract exists with a vendor to fill the requirements of a purchase requisition. If no vendor is available, ERP will A) prepare a request for quotation.

B) prepare a quotation.

C) select an appropriate vendor.

D) issue a warning diagnostic to the user about the situation.

Answer: A Diff: 2 Page Ref: 310 62) In the SAP ERP system, an outline agreement with a vendor is basically a A) request for a quotation.

B) contract.

C) purchase order.

D) purchase requisition.

Answer: B Diff: 2 Page Ref: 311

7 .

63) How does ERP's materials management module assist in vendor selection?

A) It links the quotation documents with the requisition.

B) It downloads product information from the vendor's system.

C) It provides a 100-point scoring system to evaluate vendors.

D) It sends rejection letters to vendors whose bids are not accepted.

Answer: C Diff: 2 Page Ref: 311 64) A document which identifies a vendor and confirms the quantity and price of goods identified in it is called a(n) ________.

A) purchase requisition B) outline agreement C) purchase order D) scheduling agreement Answer: C Diff: 2 Page Ref: 311 65) The type of purchase order a vendor receives when the vendor must receive and assemble parts into an end product is known as a ________.

A) third-party purchase order B) standard purchase order C) stock transport purchase order D) subcontract purchase order Answer: D Diff: 2 Page Ref: 311 66) An outline agreement detailing the total quantity of material to be ordered over a period of time is a ________.

A) quantity contract B) value contract C) scheduling agreement D) subcontract Answer: A Diff: 2 Page Ref: 312 67) A purchase order prepared under an existing contract or scheduling agreement is called a A) consignment purchase order.

B) stock transport purchase order.

C) standard purchase order.

D) release order.

Answer: D Diff: 2 Page Ref: 312

8 .

68) Goods receipt documents can be prepared in several ways. Which way below would not be used when preparing a goods receipt document?

A) By the Inventory Management system B) By allowing accounts payable to prepare the document C) By reference to the purchase order D) Posting the goods receipt document into quality inspection Answer: B Diff: 2 Page Ref: 312 69) In ERP, the invoice verification component ensures that A) cost requirements have been met.

B) quantity requirements have been met.

C) shipping deadlines have been met.

D) Answers A and B are correct.

Answer: D Diff: 2 Page Ref: 313 70) The ERP system compares which of the following documents in its invoice verification procedure?

A) Purchase order and goods receipt document B) Goods receipt document, invoice, and requisition C) Goods receipt document, invoice, purchase order, and requisition D) Goods receipt document, invoice, and purchase order Answer: D Diff: 2 Page Ref: 313 71) Vendor payment is typically made A) when an authorized order is placed.

B) once an invoice is posted.

C) when a goods receipt document is prepared.

D) when a purchase requisition has been approved.

Answer: B Diff: 2 Page Ref: 313 72) In ERP, master records are created that reflect the organization structure and business processes of the company. Company, plant, and storage location are known in ERP as ________.

A) objects B) organizations C) targets D) entities Answer: A Diff: 1 Page Ref: 313

9 .

73) A code is not used in ERP master records to identify a(n) ________.

A) plant B) accounting unit C) specific invoice D) purchasing organization Answer: C Diff: 2 Page Ref: 314 74) The Materials Management module of ERP maintains vendor master data. Users in different departments can update these records as necessary. There are several categories of information maintained in vendor master records. Which category of data below is not maintained in the vendor master records?

A) General data such as name, address, and telephone B) Purchasing data such as quotations, invoice verification, or inventory control C) Object data such as an organization accounting unit D) Company code (accounting data) defines agreed payment terms and sub-ledger reconciliation account number Answer: C Diff: 3 Page Ref: 314 75) The ERP master records that has a hierarchical structure is the A) material master record.

B) vendor master record.

C) object master record.

D) purchasing information master record.

Answer: A Diff: 2 Page Ref: 314 76) The specific component of ERP which allows a user to check goods movement and manage inventory stocks is the A) materials management module.

B) inventory management module.

C) vendor master record.

D) material master record.

Answer: B Diff: 3 Page Ref: 314 77) The department or function that is responsible for selecting a vendor to order materials from is A) purchasing.

B) individual departments requesting the material.

C) requisitioning (stores).

D) sales.

Answer: A Diff: 1 Page Ref: 316

10 .

78) Which of the following accesses the purchase order database during the processing of a purchase order?

A) General ledger and accounts payable B) Accounts payable, stores, and the receiving department C) Receiving department, stores, and the general ledger D) Accounts payable, stores and the general ledger Answer: B Diff: 2 Page Ref: 316 79) Which of the following normally receives a copy of the purchase requisition?

A) Vendor B) Stores C) Purchasing D) Receiving department Answer: C Diff: 2 Page Ref: 316 80) Which of the following reviews and approves the purchase order prior to its further processing?

A) Stores B) Receiving C) Internal audit D) The requesting department Answer: D Diff: 2 Page Ref: 316 81) To do a blind count, the receiving department A) should receive a copy of the purchase order with the quantities omitted.

B) should not receive a copy of the purchase requisition.

C) should not receive a copy of the purchase order.

D) should prepare the receiving report only after the count is completed.

Answer: A Diff: 2 Page Ref: 317 82) The document(s) which accounts payable should use to verify a purchase transaction is (are) A) purchase requisition, receiving report, and invoice.

B) receiving report and purchase order.

C) invoice, purchase requisition, and purchase order.

D) purchase requisition, invoice, receiving report, and purchase order.

Answer: D Diff: 2 Page Ref: 318

11 .

83) With respect to the segregation of duties, the main function of cash disbursements is ________.

A) custody of assets B) authorization C) reconciliation D) recording of transactions Answer: A Diff: 2 Page Ref: 321 84) The best way to prevent improper vendor-buyer relationships is to A) separate the purchasing and receiving functions.

B) have formal written policies and procedures over procurement.

C) have cash disbursements report to the treasurer.

D) permit only purchasing supervisors to select vendors.

Answer: B Diff: 2 Page Ref: 320 85) Among the following pair of functions, which pair represent the most serious internal control weakness when the duties are performed by the same individual?

A) Purchasing and verification of vendor invoices B) Check signing and cancellation of voucher documentation C) Cash disbursement and verification of vendor invoices D) Physical handling of incoming merchandise and preparation of receiving reports Answer: C Diff: 3 Page Ref: 318 86) The key to the success of the attribute rating approach to vendor selection is A) attributes must be identified and listed.

B) a weight must be assigned to each identified attribute.

C) individual evaluators should rank attributes independently of each other.

D) attribute numerical rankings should be multiplied by their appropriate weights.

Answer: C Diff: 3 Page Ref: 320 87) Vendors found on a company's approved vendor list should possess the attribute(s) of A) financial soundness.

B) reliability.

C) no conflicts of interest.

D) An approved vendor should possess all of these attributes.

Answer: D Diff: 2 Page Ref: 320

12 .

88) Which of the following is not a major control feature of the cash disbursements business process?

A) Use of a voucher system B) Use of an imprest fund C) An independent bank reconciliation D) Separation of approval from actual payment Answer: B Diff: 3 Page Ref: 322 89) The function responsible for forwarding voucher checks directly to payees is ________.

A) cash disbursements B) accounts payable C) internal audit D) purchasing Answer: A Diff: 1 Page Ref: 322 90) The function responsible for reconciling the bank account upon which voucher checks are drawn is ________.

A) cash disbursements B) accounts payable C) internal audit D) purchasing Answer: C Diff: 1 Page Ref: 322 91) The greatest amount of internal and business process control in the cash disbursements process comes from A) the signing of voucher checks by an authorized party.

B) the prenumbering of vouchers and voucher checks.

C) the accounts payable function.

D) a final review of transaction documents prior to the authorization of payment.

Answer: D Diff: 3 Page Ref: 322 92) The primary objective of a voucher system is to A) sign checks.

B) review cash payments.

C) record liabilities.

D) reconcile the vendor subsidiary ledger to the control account.

Answer: B Diff: 2 Page Ref: 322

13 .

93) Which one of the following identifies the necessary information to maintain a built-up voucher system?

A) All approved invoices awaiting payment, paid invoices, and the vendor subsidiary ledger B) All approved invoices awaiting payment C) All paid and unpaid invoices D) A vendor subsidiary ledger and paid invoice file Answer: A Diff: 3 Page Ref: 323 94) SAP ERP contains more than one human resource module. The module that incorporates organizational structure represented as an administrative hierarchy composed of units is A) time management.

B) personnel planning and development.

C) payroll.

D) personnel administration.

Answer: B Diff: 2 Page Ref: 325 95) A timekeeping system in which all employee attendance and absence information is maintained is A) comprehensive time management.

B) negative timekeeping system.

C) positive timekeeping system.

D) complex timekeeping system.

Answer: C Diff: 1 Page Ref: 325 96) In the ERP HR modules, several infotypes for the same object can exist at the same time, but only one infotype for the object is valid. In such a case, the other infotypes are referred to as ________.

A) delimited B) invalid C) archived D) parents Answer: A Diff: 2 Page Ref: 326 97) In the ERP system, which one of the following is an "infotype"?

A) Hiring B) Leaving employment C) Changing jobs D) Employee personnel data Answer: D Diff: 2 Page Ref: 325

14 .

98) In ERP, human resource object types are identified with a one or two letter identifier. The code for the object Employee is ________.

A) E B) EE C) P D) W Answer: C Diff: 3 Page Ref: 326 99) The department responsible for authorizing employee pay deductions is the ________.

A) payroll department B) personnel department C) independent paymaster D) production department (for factory workers) Answer: B Diff: 1 Page Ref: 328 100) The department responsible for collecting and maintaining time cards and reconciling these to job time summary tickets is the ________.

A) timekeeping department B) payroll department C) personnel department D) production department (for factory workers) Answer: A Diff: 1 Page Ref: 328 101) The department responsible for the actual computation and preparation of payroll is the ________.

A) accounts payable department B) payroll department C) personnel department D) production department (for factory workers) Answer: B Diff: 1 Page Ref: 328 102) Which of the following should not have access to signed paychecks?

A) Payroll and personnel B) Cash disbursement, personnel, and timekeeping C) Personnel, payroll, and timekeeping D) Cash disbursement, personnel, and bookkeeping Answer: C Diff: 2 Page Ref: 328

15 .

103) Which one of the following represents a weakness in internal control regarding the human resources area?

A) The payroll staff distributes paychecks to employees in other departments.

B) The payroll department supervisor makes decisions regarding the hiring of payroll department employees.

C) The supervisors of all departments are responsible for initiating requests for salary increases for their subordinate employees.

D) Supervisors are responsible for reviewing and approving time reports of their subordinate employees.

Answer: A Diff: 3 Page Ref: 328 104) The federal tax which requires that employees and employers contribute equally for old age, survivors', disability, and hospital insurance benefits is ________.

A) federal unemployment tax B) federal income tax C) workers' compensation D) social security tax Answer: D Diff: 2 Page Ref: 329 105) Employers engaged in interstate commerce are required by law to pay overtime at a minimum of one and one-half times the regular rate for hours worked in excess of 40 per week.

The law that requires this is called the ________.

A) Fair Labor Standards Act (FLSA) B) Federal Unemployment Tax Act (FUTA) C) Federal Income Tax Act (FITA) D) Federal Insurance Contributions Act (FICA) Answer: A Diff: 2 Page Ref: 329 106) Various payroll forms and reports must be submitted to federal and state entities by certain deadlines. The federal form which is not due on or before January 31 of each year is the ________.

A) Form W-2 B) Form W-3 C) Form 941 D) Form 1099-MISC Answer: B Diff: 3 Page Ref: 330

16 .

107) Form 941 is filed to report federal income and social security taxes withheld from employees. It is filed ________.

A) weekly B) monthly C) quarterly D) annually Answer: C Diff: 2 Page Ref: 330 108) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Purchase requisition ________ 2. Procurement ________ 3. Approved vendor list ________ 4. Blind count ________ 5. Purchase order ________ 6. Attribute rating ________ 7. Request for quotation ________ 8. Receiving report ________ 9. Invoice verification ________ 10. Voucher package A. Counters in receiving do not have access to quantities shown on purchase orders.

B. Document used to request a purchase C. A summary of vendors approved for use by the purchasing function D. A collection of documents that are reviewed and approved to authorize a transaction E. An approach to vendor selection which identifies, lists, and evaluates several different aspects concerning a vendor F. Prepared to document the receipt of deliveries from vendors.

G. The document issued to a vendor to initiate a purchase H. The business process of selecting a source, ordering, and acquiring goods or services I. The review of purchasing documentation prior to authorizing payment to vendors J. Documents used to request competitive bids from vendors Answer: 1. B 6. E 2. H 7. J 3. C 8. F 4. A 9. I 5. G 10. D Diff: 2 Page Ref: 331

17 .

109) The following ten paragraphs describe control weaknesses in customer order and account management business processes. Listed below are ten controls that may help regulate the weaknesses: A. Separation of payroll and personnel departments B. Independent paymaster to distribute paychecks C. Imprest payroll bank account D. Vendor selected by purchasing department E. Timekeeping department reconciles time cards to job time summaries F. Requisition form prepared by requestor G. Receiving report signed by stores H. Vendor list approved independent of purchasing I. Purchase order copy sent to accounts payable J. Receiving report copy sent to accounts payable Required: In the blank next to each number, list one capital letter representing the best control to address the system weakness. You will use each letter only once.

1. ________ Rattlesnake Wire Company's purchasing manager selected his brother-in-law as a vendor and received a kickback for providing the business.

2. ________ Blazing Saddles Corporation ordered goods that receiving personnel stole.

Receiving prepared a receiving report and sent it to accounts payable. The company unknowingly paid for the stolen goods.

3. ________ The production manager at Ghost Manufacturing Company told the payroll department he had hired a new employee. On payday, the paymaster could not find the employee and upon investigation, found that the employee did not exist.

4. ________ Price Company's purchasing department ordered goods requested by the maintenance department by phone. When the goods arrived, the maintenance department claimed that the goods were of such poor quality they could not be used.

5. ________ Connecticut Yankee Manufacturing Company ordered goods that were never received. The company, as a matter of standard policy, paid the invoice.

6. ________ Southern Star Manufacturing Company's payroll department routinely distributed paychecks on payday. The payroll supervisor suddenly quit her job. On the next payday, the payroll department could not find employees to claim two paychecks.

7. ________ Panhandle Products Company cannot easily identify vendors, and consistently selects vendors whose goods are overpriced and whose delivery schedules are too slow for Panhandle's needs.

8. ________ Lone Star Production Company received goods that were never ordered. The company paid the invoice.

18 .

9. ________ Half Moon Manufacturing Company's production manager is unsure that the second shift employees are working all hours reported on the job time tickets.

10. ________ The internal auditor of Eastern Overboard Company prepares the bank reconciliation. He has difficulty managing the large number of outstanding checks at month-end in the bank reconciliation. Most of the outstanding checks are employee paychecks.

Answer: 1. H 6. B 2. G 7. D 3. A 8. I 4. F 9. E 5. J 10. C Diff: 3 Page Ref: 314-323, 326-330

19 .

110) The following ten items describe positions or departments related to procurement and human resource business processes. Listed below are ten positions or departments: A. Cash disbursements B. Paymaster C. Purchasing D. Receiving E. Accounts Payable F. Payroll G. Personnel H. Timekeeping I. Internal audit J. Stores Required: Next to each number, write the letter of the answer representing the department or position described. ________ 1. Has authority to request the purchase of needed items ________ 2. Prepares a control total of checks paid and sends it to general ledger ________ 3. Reconciles bank statements ________ 4. Performs final matching of documents to authorize payments ________ 5. Computes gross pay, deductions, and net pay ________ 6. Counts and inspects incoming goods ________ 7. Has responsibility for distributing employee payroll checks ________ 8. Maintains clock cards and reconciles them to job time summary sheets ________ 9. Authorizes new employees and their pay rates and payroll deductions ________ 10. Frequently uses request-for-quotation forms to obtain bids Answer: 1. J 6. D 2. A 7. B 3. I 8. H 4. E 9. G 5. F 10. C Diff: 2 Page Ref: 314-323, 326-330

20 .

111) Below are the documents commonly encountered in a procurement business process: a. Purchase requisition b. Purchase order c. Receiving report d. Payment voucher Required: For each document, (1) state where it originated, and (2) give the entity or entities (e.g., other departments or parties) which would most likely receive a copy of the document or that should access it in a database.

Answer: (1) (2) Document Origin Copies to or accessed by: a. Purchase requisition

Stores

Purchasing, accounts payable

b. Purchase order

Purchasing

Vendor, stores, accounts payable, receiving

c. Receiving report

Receiving

Stores, accounts payable

d. Payment voucher Accounts payable Diff: 2 Page Ref: 314-323

Cash disbursements

112) Below are three procedures that violate common internal control guidelines over the purchasing function: a. The company has never established any written policies regarding conflicts of interest for its buyers. b. The company's buyers are allowed to select suppliers without submitting a list of bidders for review. c. The same buyers who ask suppliers to submit requests for quotations receive the suppliers' bids directly from the mailroom.

Required: For each procedure, state one problem that could arise because of the failure to follow common guidelines in the purchasing function.

Answer: Problems that could arise under each condition include: a. 1. Management may not be aware of the buyer-supplier relationship that results in excessive purchase costs or inferior quality goods.

2. If the policies are informal (not written), the buyers may not know about them.

3. Buyers who are aware of informal policies may nonetheless deny knowledge of them if confronted with evidence of inappropriate activities. b. 1. Buyers may ask only favored suppliers to bid on orders.

2. Low-cost suppliers may be excluded from the bidding process. c. Buyers may discard bids from bidders they consider unacceptable.

Diff: 3 Page Ref: 314-320 21 .

113) The following is a description of the payroll procedures for Cherokee Custom Crafters, a small company that customizes vans and RVs according to customers' specifications: The payroll department prepares a time card for each employee on the payroll every Monday and leaves the time cards in a box near the entrance to the factory. Workers fill in their time daily.

A payroll clerk picks up the time cards the following Monday when dropping off the new time cards. The payroll clerk then inputs the number of hours for each employee into the computer.

The payroll application calculates gross pay, deductions, and net pay, and prints a payroll register.

Payroll checks are prepared manually by the payroll clerk and signed by the chief accountant, who takes them to the factory supervisor. The factory supervisor distributes the checks. The chief accountant prepares the monthly reconciliation of the payroll bank accounts.

Required: List five recommendations for improving Cherokee Custom Crafters' internal controls over its payroll function.

Answer: Some recommendations for internal controls over payroll are: • A time clock or software should be used which requires factory employees to clock in and out. The time clock should be placed so that the factory supervisor or other responsible party can observe employees clocking in and out.

• The factory supervisor should review time cards daily, and at the end of the week should sign the time cards before the payroll clerk picks them up.

• The factory supervisor should compare the time cards with the job cost sheets for consistency before signing. The chief accountant should perform an independent review of the time cards and the job cost sheets. (As an alternative, Cherokee Custom Crafters could hire a timekeeper to collect time cards and reconcile them to the job cost sheet.)

• The factory supervisor should prepare control totals of the total number of time cards and the total number of hours for later comparison with the payroll register. (Or, the timekeeper could prepare these control totals for the chief accountant.)

• The chief accountant should compare the payroll register with the control totals each payday.

• The company's treasurer should sign the payroll checks. A paymaster or an employee other than the payroll clerk, the chief accountant, and the factory supervisor should distribute the checks.

• If the chief accountant signs and distributes the checks, he or she should not be responsible for reconciling the payroll bank account. Ideally, a party with no related responsibilities should prepare the bank reconciliation.

• Occasionally, an officer of the company should witness the distribution of the paychecks on a surprise basis.

Diff: 3 Page Ref: 326-330

22 .

114) Name four federal acts or types of taxes that relate to payroll, and briefly discuss the main provision of each.

Answer: Suggested answer: •

The Federal Insurance Contributions Act (FICA): requires employers and employees to contribute equally to provide for old age, survivors, disability, and hospital insurance benefits.

• The Federal Unemployment Tax Act (FUTA): requires payroll taxes to be paid by employers to fund federal unemployment insurance programs.

• Federal Internal Revenue Code (federal income taxes): requires the taxation of employee earnings and requires employers to withhold required amounts.

• Federal Fair Labor Standards Act: defines overtime and requires payment of overtime rates under certain circumstances.

Diff: 2 Page Ref: 329 115) Discuss the employer's requirements for FICA tax, including the procedures for deposit, penalties for failure to deposit, the form used to report the tax, and the due dates of the form.

Answer: Suggested answer: An employer is required by law to deduct FICA tax from each employee's pay each pay period.

The employer is also required to match the employee's deducted amounts and deposit the total in a bank serving as a government depository. The employer is responsible for the total amount of tax even if the employer fails to withhold it from employees. A penalty is charged to the employer if it fails, without reasonable cause, to make timely deposits. Employers who claim on the federal form to have made tax deposits when they in fact they have not made them are subject to criminal penalties. Employers must file Form 941 at the end of each calendar quarter to report federal income tax withheld and FICA tax for all employees.

Diff: 2 Page Ref: 329 116) Discuss why the buyer-vendor relationship is the most critical point of control in the procurement business process, and describe two procedures that can improve control in the buyer-vendor relationship.

Answer: Suggested answer: The buyer-vendor relationship is the most critical point of control in procurement because it exists in every purchase transaction. The goal of the procurement process should be to obtain the most appropriate goods at the best price, but faulty buyer-vendor relationships can quickly result in companies paying too much for goods or ordering improper goods. In addition, buyers can illegally profit through vendor kickbacks. A company should have a formal written policy regarding vendor relationships that is communicated to the buyers and strongly supported by management. Requiring bids through request-for-quotation documents is one way of obtaining the most appropriate goods at the best price. The company can rotate buyers' responsibilities so they are not always dealing with the same vendors. A party, who is independent of the purchasing function, can prepare an approved vendor list containing vendors who have been found reliable, financially sound, and free of conflicts of interest.

Diff: 2 Page Ref: 319-320

23 .

117) When goods arrive at a company's location, what are the ways a receiving report (goods receipt document) can be prepared in SAP ERP's procurement business process?

Answer: Suggested answer: The goods receipt document can be prepared through SAP ERP's inventory management system when the goods are delivered to stores. A second way to prepare the goods receipt document is through reference to the purchase order (after the goods have been received, counted, and verified). The data on the purchase order is used to complete the goods receipt, and the purchase order receives data that the goods have arrived. A third way to prepare the goods receipt is through a quality inspection procedure. SAP ERP transfers accepted goods from quality inspection to available inventory.

Diff: 2 Page Ref: 312-313 118) Explain the difference in a voucher system between recording invoices when they are approved for payment versus recording invoices when paid.

Answer: Suggested answer: Invoices recorded when approved result in an accrual of liabilities. A formal record of liabilities exists until the invoices are paid. Invoices recorded when paid bypass being recorded as liabilities, since the accounts payable general ledger account is simultaneously debited and credited. Recording invoices when paid does not create any complexity in record keeping, but invoices recorded when approved must be sorted again by due date for payment purposes.

Diff: 2 Page Ref: 322-323

24 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 9 The Production Business Process 1) Costs in job or processing costing may be either actual or standard costs.

Answer: TRUE Diff: 1 Page Ref: 352 2) Detailed material specifications for a product are recorded on a bill of lading.

Answer: FALSE Diff: 2 Page Ref: 351 3) Factor availability reports communicate the availability of labor and machine resources for use in production.

Answer: TRUE Diff: 2 Page Ref: 363 4) Sales forecasts are generally unrelated to the amount of a product held in inventory.

Answer: FALSE Diff: 2 Page Ref: 363 5) An important internal control function is the reconciliation of time cards to production labor reports.

Answer: TRUE Diff: 2 Page Ref: 353 6) Reorder point is calculated as the purchasing cost per order multiplied by the average inventory usage rate.

Answer: FALSE Diff: 2 Page Ref: 354 7) The best sources of information necessary to calculate an EOQ are prior purchase orders.

Answer: FALSE Diff: 2 Page Ref: 354 8) The perpetual inventory method is a term used to describe a system in which parts are produced only as they are required in subsequent operations.

Answer: FALSE Diff: 2 Page Ref: 355 9) Fixed assets are often the company's largest investment.

Answer: TRUE Diff: 2 Page Ref: 356 10) Automated drafting software is part of a CAM system.

Answer: FALSE Diff: 1 Page Ref: 359 1 .

11) Industrial robots are used to move material, parts, tools, or specialized devices through variable programmed motions for the performance of a variety of tasks.

Answer: TRUE Diff: 1 Page Ref: 359 12) CAM systems are used to collect and process data from programmable manufacturing processes to provide decision support.

Answer: TRUE Diff: 2 Page Ref: 359 13) Systems that incorporate programmable production processes that can be quickly reconfigured to produce different types of products are called ZIPS. Answer: FALSE Diff: 2 Page Ref: 360 14) FMS greatly speeds up time-consuming retooling.

Answer: TRUE Diff: 2 Page Ref: 360 15) The "heart" of the MRP II system is the MRP system.

Answer: TRUE Diff: 1 Page Ref: 360 16) The value of a typical EDI system is that vendor and customer are linked electronically.

Answer: TRUE Diff: 2 Page Ref: 361 17) Distributed processing increases the overall responsiveness of a system by keeping processing elements physically close together.

Answer: FALSE Diff: 2 Page Ref: 362 18) A finished goods status report is sent to production planning from the stores department.

Answer: FALSE Diff: 2 Page Ref: 362 19) The master-operations file is one of the data sources integrated with others in the productionplanning application program.

Answer: TRUE Diff: 2 Page Ref: 364 20) The central feature of the cost accounting application is updating of the production-loading file.

Answer: FALSE Diff: 2 Page Ref: 365

2 .

21) The cost-accounting application program processes the production data and production-status files.

Answer: TRUE Diff: 2 Page Ref: 365 22) Outputs of a cost-accounting program are job time and machine time tickets.

Answer: FALSE Diff: 2 Page Ref: 365 23) The term "applied overhead" refers to the element of direct labor hours or cost used in the CIM environment.

Answer: FALSE Diff: 2 Page Ref: 367 24) Activity-based costing calculates a single overhead rate for each different manufacturing activity.

Answer: FALSE Diff: 2 Page Ref: 368 25) Production volume is one way to measure a cost driver.

Answer: TRUE Diff: 1 Page Ref: 368 26) The significance of activity-based costing as a management tools depends largely on the accuracy of the cost drivers selected as allocation bases.

Answer: TRUE Diff: 2 Page Ref: 368 27) The MRP II systems extends MRP in production order processing by including the creation of transaction files and numerical control tapes for the plant floor.

Answer: TRUE Diff: 2 Page Ref: 369 28) There are seven major processing modules in MRP II. Answer: FALSE Diff: 1 Page Ref: 369 29) In MRP II, batch size is determined from the production-planning module.

Answer: TRUE Diff: 2 Page Ref: 370 30) As a manufacturer moves from a batch to at JIT continuous flow manufacturing environment, more emphasis may be placed on an MRP II system.

Answer: FALSE Diff: 2 Page Ref: 370

3 .

31) Lean production is a concept based on the concept that inventory is a waste.

Answer: TRUE Diff: 2 Page Ref: 355 32) Lean production is an inventory system in which parts are stored when there is evidence of a stock out.

Answer: FALSE Diff: 2 Page Ref: 355 33) Lean production is a production system in which parts are produced only as they are required in subsequent operations.

Answer: TRUE Diff: 2 Page Ref: 355 34) RFID stands for radio-frequency inventory documentation.

Answer: FALSE Diff: 2 Page Ref: 361 35) Radio-frequency identification is an automatic identification technology that uses low power radio waves to send and receive data between RFID tags and readers.

Answer: FALSE Diff: 2 Page Ref: 361 36) RFID tagging is more popular than bar coding in inventory management systems because they are cheaper and have a lower error rate.

Answer: FALSE Diff: 2 Page Ref: 361 37) EAN-13 is a bar coding standard which is a superset of the original 12-digit UPC system.

Answer: TRUE Diff: 2 Page Ref: 361 38) GS1 is a global organization dedicated to the design and implementation of global standards and which is the creator of EAN-13.

Answer: TRUE Diff: 2 Page Ref: 361 39) GTIN is the Global Trade Item Number which is an identifier for trade items developed by GS1.

Answer: TRUE Diff: 2 Page Ref: 361 40) A GTIN can be 8-14 digits long and can be constructed using several number structures.

Answer: FALSE Diff: 2 Page Ref: 361

4 .

41) The procedure in which costs are compiled in process or department accounts by periods is called ________ costing.

Answer: process Diff: 1 Page Ref: 352 42) A document that details the resources available in stock for use in production is the ________ ________ report.

Answer: inventory status Diff: 2 Page Ref: 351 43) A document detailing the work completed on individual orders as they move through the manufacturing process is the ________ ________ report.

Answer: production status Diff: 2 Page Ref: 352 44) An out-of-stock condition may occur if the ________ ________ is not known for a particular inventory item.

Answer: reorder point Diff: 2 Page Ref: 354 45) Systems that include software for defining the manufacturing process or tools to increase productivity are known as ________ systems.

Answer: CAM Diff: 2 Page Ref: 360 46) The ________ in MRP is used comprehensively to include all types of inventories.

Answer: "M" Diff: 2 Page Ref: 360 47) In the production-planning application system, ________ contain information about the work center, length of time, and tooling required to perform each task.

Answer: routings or RTGs Diff: 2 Page Ref: 364 48) There are ________ major elements that enter into the cost of manufacturing a product.

Answer: three Diff: 2 Page Ref: 367 49) To assist in overall production-control function, ________ ________ reports are distributed to department supervisors.

Answer: resource usage Diff: 2 Page Ref: 366 50) CIM significantly alters a manufacturer's cost behavior patterns by substituting ________ ________ for direct labor.

Answer: capital equipment Diff: 2 Page Ref: 367 5 .

51) An element that influences the total cost of an activity is a ________ ________.

Answer: cost driver Diff: 2 Page Ref: 368 52) In MRP II, the production ________ control module is used to implement the production plan and to reduce delays and waiting time by monitoring feedback and production and shop floor status data.

Answer: activity Diff: 2 Page Ref: 370 53) In contrast to a(n) ________ environment, there is no advance scheduling in a ________ environment.

Answer: batch; JIT or just-in-time Diff: 2 Page Ref: 370 54) Systems ________ is "mission critical" in quick response manufacturing systems.

Answer: development Diff: 2 Page Ref: 371 55) ________ ________ is a concept based on the idea that inventory is a waste.

Answer: Lean production Diff: 2 Page Ref: 355 56) ________ ________ scanners require a direct line of sight in order to function.

Answer: Bar code Diff: 2 Page Ref: 361 57) ________ ________ in RFID, eliminates the need for direct line of sight to the RFID tag.

Answer: Radio signals Diff: 2 Page Ref: 361 58) EAN-13 is a ________ coding standard which is a superset of the original 12-digit UPC system.

Answer: bar Diff: 2 Page Ref: 361 59) GTIN is an identifier used to look up product information in a ________ like UPCs. Answer: database Diff: 2 Page Ref: 361

6 .

60) A production system in which parts are produced only as they are required in a subsequent operation is known as A) periodic production.

B) green production.

C) lean production.

D) push production.

Answer: C Diff: 2 Page Ref: 355 61) Radio-frequency identification is an automatic identification technology that uses A) high frequency radio waves to send and receive data between RFID tags and readers.

B) low power radio waves to send and receive data between RFID tags and readers.

C) bar coders to eliminate the need for direct line of sight to the RFID tags.

D) radio waves to send and receive data between bar coded tags.

Answer: B Diff: 2 Page Ref: 361 62) The following are reasons RFID tags are not widely used EXCEPT that A) RFIDis more costly that printed bar codes.

B) there is a much higher error rate in RFID than in scanning printed bar codes.

C) RFID cannot be used in lean manufacturing.

D) All of the above are reasons RFID tags are not widely used.

Answer: C Diff: 2 Page Ref: 361 63) ________ is a bar coding standard which is a superset of the original 12-digit UPC system.

A) RFID-12 B) GS1-12 C) GTIN-13 D) EAN-13 Answer: D Diff: 2 Page Ref: 361 64) GTIN stands for A) Global Trade Item Number.

B) Global Tracking Item Number.

C) Global Tracking Identifying Number.

D) Global Trade Identifying Number.

Answer: A Diff: 2 Page Ref: 361

7 .

65) GTIN is an identifier used to look up product information in ________.

A) GS1 tables B) web based list structures C) databases D) eBXML Answer: C Diff: 2 Page Ref: 361 66) Which of the following controls is not a typical function found in the production business process of manufacturing firms?

A) Cost accounting B) Production control C) Property accounting D) Capital expenditure review and authorization Answer: D Diff: 1 Page Ref: 350 67) Which inventory control is the most critical in the production business process?

A) Separation of functions B) Maintaining basic records and documentation C) Periodic physical counts and tests against independent records D) All of these controls are critical to inventory control in the production business process.

Answer: D Diff: 2 Page Ref: 353 68) The document which specifies detailed labor operations, their sequencing, and their related machine requirements is A) the bill of materials.

B) the master operations list.

C) either the bill of materials or master operations list.

D) the product specification and design abstract.

Answer: C Diff: 2 Page Ref: 351 69) Several factors are integrated when determining what products should be manufactured. The factor which is predominantly driven by influences external to the production business process is A) product requirements.

B) demand for the product.

C) production resources available to the firm.

D) Answers A and C are correct.

Answer: B Diff: 2 Page Ref: 351

8 .

70) The document which gives authorization to the production department to manufacture a product is a A) production order.

B) materials requisition.

C) purchase order.

D) sales forecast.

Answer: A Diff: 2 Page Ref: 351 71) The source for the item and quantity information shown on a materials requisition is the A) bill of lading.

B) bill of materials.

C) inventory status report.

D) factor availability report.

Answer: B Diff: 2 Page Ref: 351 72) The department that receives copies of materials requisitions from both the inventory control function and the production department is ________.

A) accounting B) sales C) accounts payable D) purchasing Answer: A Diff: 2 Page Ref: 353 73) The document used by the cost accounting function to establish a WIP record for each job is the A) sales forecast.

B) production order.

C) materials requisition.

D) job time card.

Answer: B Diff: 2 Page Ref: 353 74) Which document is not updated when a manufacturing order is complete and goods are transferred to stores?

A) Production order B) WIP record C) Finished goods inventory records D) Materials requisition Answer: D Diff: 3 Page Ref: 353

9 .

75) The general formula for calculating the inventory reorder point is A) average inventory usage rate multiplied by lead time.

B) economic order quantity less average inventory usage rate.

C) lead time multiplied by economic order quantity.

D) lead time multiplied by average inventory turnover rate.

Answer: A Diff: 2 Page Ref: 354 76) A manufacturing company wants to know the optimal amount to order of part number 45612.

It should gather appropriate inventory information about the part and then calculate the part's A) inventory usage rate.

B) lead time.

C) economic order quantity.

D) reorder point.

Answer: C Diff: 1 Page Ref: 354 77) Calculation of the reorder point requires knowledge of A) the economic order quantity multiplied by the average usage rate.

B) the time from the issuance of a purchase order until the order is received.

C) the average time from the issuance of a purchase order until the economic order quantity occurs.

D) the minimum inventory usage rate.

Answer: B Diff: 2 Page Ref: 354 78) Which is the best way for a company to prevent having outdated inventory on hand?

A) Store inventory securely B) Classify inventory according to location in the company's records C) Evaluate inventory turnover D) Write down the inventory balance when a warehouse employee finds outdated inventory Answer: C Diff: 2 Page Ref: 355 79) Which of the following is not a concern regarding the storage and handling of inventory items?

A) Price paid per unit B) Protection against damage or spoilage C) Avoidance of obsolescence D) Security against embezzlement Answer: A Diff: 2 Page Ref: 355

10 .

80) Which of the following is the best internal control to ensure accurate inventory records?

A) Require the approval of a company officer for any parts requisitions B) Maintain inventory records for the parts C) Require accounts payable personnel to match purchase orders, receiving reports, and vendors' invoices D) Conduct periodic physical inventory counts and compare them with inventory records Answer: D Diff: 3 Page Ref: 355 81) Inventories serve as a buffer between different operations in a A) just-in-time production system.

B) materials as needed system.

C) perpetual inventory system.

D) Answers A and B are correct.

Answer: D Diff: 2 Page Ref: 355 82) Which of the following objectives in a property accounting application system relates to the process of periodic comparison of physical assets with the accounting records?

A) Provide for appropriate depreciation and/or amortization calculations B) Maintain adequate records that identify assets with description, cost, and physical location C) Provide for reevaluation for insurance and replacement cost purposes D) Provide management with reports for planning and controlling individual asset items Answer: B Diff: 2 Page Ref: 356 83) The file or record that is essentially a subsidiary ledger for tangible assets such as land, buildings, machinery, and equipment, is the A) fixed assets register.

B) fixed assets control ledger.

C) property master ledger.

D) property control ledger.

Answer: A Diff: 1 Page Ref: 357 84) Which of the following is the best internal control over fixed assets?

A) Analyze monthly variances between authorized and actual expenditures.

B) Establish a written company policy distinguishing between capital and revenue expenditures.

C) Require acquisitions to be authorized by user departments.

D) Use a budget to control acquisitions and retirements.

Answer: A Diff: 3 Page Ref: 357

11 .

85) Which of the following is the best internal control over disposals of fixed assets?

A) Periodically analyze the scrap sales revenue and the repairs and maintenance expense accounts.

B) Periodically compare removal work orders and disposal authorization.

C) Separate the duties of the official authorizing a disposal and the official approving removal work orders.

D) Use serial numbers to identify fixed assets that could be sold.

Answer: C Diff: 3 Page Ref: 357 86) The employee who is responsible for the custody of investments should A) authorize the purchase of additional investments.

B) maintain the investment register.

C) open the safety deposit or depository area only when a second employee is present.

D) conduct periodic physical inventories comparing the investment register to the investments on hand.

Answer: C Diff: 3 Page Ref: 357 87) Which of the following is not a common internal accounting control procedure in a property business process?

A) Having physical inventories of property taken periodically under the supervision of staff who are responsible for the custody of the assets B) Requiring authorization by an official or committee for expenditures over a certain amount C) Reconciling detailed subsidiary property records with the control accounts at least annually D) Having the property appraised periodically for insurance purposes Answer: A Diff: 2 Page Ref: 357 88) Solids modeling, finite-elements analysis, and automated drafting are common capabilities of ________.

A) CIM B) CADD C) CAM D) MRP II Answer: B Diff: 1 Page Ref: 358 89) Software that often includes components to facilitate process planning, line analysis, and statistical process control, among other tasks, is called ________.

A) CIM B) MRP II C) CADD D) CAM Answer: D Diff: 1 Page Ref: 359 12 .

90) The system that uses statistical process control to determine whether a manufacturing process is within limits is ________.

A) CADD B) CAM C) CIM D) MRP II Answer: B Diff: 1 Page Ref: 359 91) Which of the following occurs when a manufacturing facility uses statistical process control?

A) A plan is developed to describe the routing of each production process.

B) Production processes can be quickly reconfigured.

C) Process outputs are compared to engineering specifications.

D) A programmable device moves material, parts, tools, or specialized devices to perform tasks.

Answer: C Diff: 2 Page Ref: 359 92) MRP systems integrate several subsystems. Which subsystem below is not integrated into the MRP system?

A) Production planning B) Production scheduling C) Reporting D) Procurement Answer: D Diff: 1 Page Ref: 362 93) A manufacturing system's flexibility and speed of response depends largely on the degree to which its components are integrated. Which technology below would effectively integrate the company's system with the systems of its suppliers and customers?

A) EDI B) Automatic identification C) Distributed processing D) All of these answers are correct.

Answer: A Diff: 2 Page Ref: 361 94) Which of the following is false regarding the standard UPC bar code system?

A) Both customer and supplier can use the same UPC product code.

B) Problems with vendor-based coding usually result when a vendor uses different codes for different items.

C) UPC assigns a six-digit code to each vendor.

D) UPC coding is vendor-based coding which can be applied at any point.

Answer: B Diff: 3 Page Ref: 361

13 .

95) Which of the following is a common benefit of UPC standardization?

A) Paper invoices are no longer needed.

B) Inventory levels are reduced.

C) Cross-referencing of inventory codes is eliminated.

D) Physical inventory counts are no longer needed.

Answer: C Diff: 2 Page Ref: 361 96) The production planning report that discloses the availability of labor and machine resources is the A) production schedule.

B) sales forecast.

C) raw materials status report.

D) factor availability report.

Answer: D Diff: 1 Page Ref: 363 97) The focal point of the materials requirements planning system (MRP) is to A) manufacture inventory items on time.

B) report the sequencing of all operations connected with production.

C) produce the master production schedule.

D) disclose all data related to product components.

Answer: C Diff: 2 Page Ref: 363 98) In a production planning system, the production status file is an input to which of the following?

A) Production scheduling program B) Inventory update program C) Report generator program D) Production planning system Answer: D Diff: 2 Page Ref: 364 99) In a production planning system, output from the production-planning program includes which of the following?

A) Production loading file B) Routings C) Completed production order file D) Finished goods stock status report Answer: B Diff: 2 Page Ref: 364

14 .

100) In a production planning system, the production status file is used as an input for which of the following groups of applications?

A) Scheduling and cost accounting B) Cost accounting and planning C) Scheduling and reporting D) Reporting and cost accounting Answer: A Diff: 3 Page Ref: 364 101) In a production planning system, the production-loading file is an input to which of the following?

A) Production planning program B) Production scheduling application C) Cost-accounting program D) Inventory update program Answer: B Diff: 2 Page Ref: 365 102) Data is required from which of the following to build a production data file?

A) Materials requisition data B) Goods receipt data C) RTG data D) Materials requisition and RTG data are both required.

Answer: D Diff: 2 Page Ref: 365 103) Which of the following outputs from the cost-accounting program is used in the next cycle of production planning and scheduling?

A) Resource usage file B) Production-order file C) Production-status file D) Summary report Answer: C Diff: 2 Page Ref: 366 104) In a production planning system, which of the following files updates the finished goods inventory file?

A) Completed production-order file B) Production status file C) Production data file D) Production loading file Answer: A Diff: 2 Page Ref: 366

15 .

105) Which of the following reports specifies production cost variances?

A) Completed production cost report B) Resource usage report C) Factor availability report D) Production order report Answer: B Diff: 2 Page Ref: 366 106) In traditional accounting methods, predetermined overhead rates are based on A) machine hours.

B) utilities consumed.

C) direct labor hours or direct labor costs.

D) depreciable lives of machinery and equipment.

Answer: C Diff: 2 Page Ref: 367 107) The predetermined overhead application rate is computed as A) budgeted overhead cost divided by budgeted activity.

B) total labor cost divided by total machine hours.

C) budgeted activity divided by budgeted overhead cost.

D) total machine hours divided by total labor cost.

Answer: A Diff: 2 Page Ref: 367 108) CIM affects manufacturing overhead primarily by A) increasing direct materials costs and decreasing direct labor hours.

B) decreasing manufacturing overhead overall.

C) increasing manufacturing overhead overall.

D) increasing machine costs and decreasing direct labor hours.

Answer: D Diff: 3 Page Ref: 367 109) Activity-based costing (ABC) systems allocate overhead differently than traditional cost accounting systems. The difference between an ABC and a traditional cost accounting system is that A) traditional systems calculate several overhead rates, one for each manufacturing activity.

B) an ABC system uses a single allocation overhead rate.

C) ABC systems calculate several overhead rates, one for each manufacturing activity.

D) a traditional cost accounting system uses two overhead allocation rates: one for actual activity, and one for estimates (or standards).

Answer: C Diff: 1 Page Ref: 367

16 .

110) Which of the following is a way to identify cost drivers for activity-based costing?

A) Analytical review B) Time-in-process measures C) Volume measures D) Regression analysis Answer: D Diff: 2 Page Ref: 368 111) The bill of material module in the MRP II system is used to communicate the structure of a product, as it is in MRP. The MRP II system extends this module's capability to include A) maintenance of engineering or product drawings from a CADD system.

B) the sequence of operations required to manufacture a component or assembly.

C) maintaining the assembly schedules for specific configurations.

D) creating a packet that contains order, material list, routing, and drawing information.

Answer: A Diff: 3 Page Ref: 369 112) Which of the following is a common consequence of implementing JIT in an MRP II/CIM environment?

A) Increase in setup costs B) Reduction in the size of each production lot C) Longer lead time needed to schedule production D) Increase in buffer stocks of raw materials Answer: B Diff: 2 Page Ref: 370 113) Totally computerized systems such as a quick response systems A) eliminate traditional internal control problems.

B) still require human intervention in the transaction processing cycle.

C) intensify certain internal control problems.

D) still require paper documents in EDI applications.

Answer: C Diff: 2 Page Ref: 370 114) In a quick response manufacturing system, internal controls A) should be established after the information system is designed and tested.

B) must be included within the design and development of the system.

C) should be based on existing manual controls.

D) can be excluded in such a system because there is so little human intervention in processing transactions.

Answer: B Diff: 2 Page Ref: 371

17 .

115) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Advanced integration technologies (AIT) ________ 2. Bill of materials ________ 3. Solids modeling ________ 4. Job time cards ________ 5. Cost driver ________ 6. Vendor-based coding ________ 7. Process costing ________ 8. EOQ ________ 9. Routings ________ 10. Inventory status report A. Lists the raw materials that are necessary to produce a product B. The optimum order amount that minimizes total inventory cost C. Consists of EDI, automatic identification, and distributed processing D. An element that influences the total cost of an activity E. A summary that detail the resources available in inventory F. Used to document the amount of labor time that is spent working on each production project G. The mathematical representation of a part as a solid object in computer memory H. Having a purchaser (i.e., retailer) utilize a vendor's product codes as its own product codes for the same products I. Production costs are compiled by department rather than by job J. Documents that indicate the sequence of operations required to manufacture a product Answer: 1. C 6. H 2. A 7. I 3. G 8. B 4. F 9. J 5. D 10. E Diff: 2 Page Ref: 371-372

18 .

116) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. RTGs ________ 2. Job costing ________ 3. Reorder point ________ 4. MAN ________ 5. Just-in-time production ________ 6. Computer-integrated manufacturing ________ 7. Flexible manufacturing system (FMS) ________ 8. Finite element analysis ________ 9. Job ________ 10. Fixed asset register A. A synonym for production order B. Documents that indicate the sequence of operations required to manufacture a product C. A system in which items are only produced as they are required in subsequent operations D. A system designed with the objective of minimizing inventory E. A systematic list of assets such as land, buildings, machines, and equipment that is maintained for control purposes F. A CAM system that incorporates programmable production processes that can be quickly reconfigured to produce different types of products G. A mathematical model used to determine mechanical characteristics, such as stresses of structures under load H. Integrates the physical manufacturing system and the manufacturing resource planning (MRP II) systems I. The level of inventory at which it is desirable to order or produce additional items to avoid an out-of-stock condition J. Production costs are assigned to production orders Answer: 1. B 6. H 2. J 7. F 3. I 8. G 4. D 9. A 5. C 10. E Diff: 2 Page Ref: 372

19 .

117) Presented below is a list of computer file names found in quick-response manufacturing systems, followed by definitions of the terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Completed production-order file ________ 2. Master operations file ________ 3. Production data file ________ 4. Inventory file ________ 5. Routing file ________ 6. Resource usage file ________ 7. Master production plan file ________ 8. Bill of materials file ________ 9. Production status file ________ 10. Production-loading file A. Contains information about the work center, length of time, and tooling required to complete each production task B. Contains production requirements associated with open production orders C. Lists all cost data for completed production orders D. Shows actual and standard material, labor, and operation costs for work completed E. Contains a record for each product manufactured, detailing its components F. Contains both materials requisition and routing data to input into the cost accounting program G. Contains a record for each product, detailing the machine and labor sequences required for its production H. Contains a record for each open production order I. Updated by the completed production order file J. Processed against the bill of materials, production status, and master operations files in the production planning program Answer: 1. C 6. D 2. G 7. J 3. F 8. E 4. I 9. H 5. A 10. B Diff: 3 Page Ref: 363-365

20 .

118) The following production information has been gathered from the records of the New Processes Manufacturing Company: Product:

Alpha

Zeta

Units Produced Direct material cost / unit Direct labor cost / unit Direct labor hours / unit Production machine setup Engineering changes

1,500 $ 10 14 1 3 times 1 time

7,500 $ 22 28 2 3 times 2 times

Additional production information is as follows: • • • •

Total setup costs (a part of total manufacturing overhead) = $21,500 Total engineering changes (a part of total manufacturing overhead) = $9,500 Total annual overhead cost = $288,750 Total annual direct labor hours = 16,500

Required: A. Calculate the ABC overhead allocation rate using the cost drivers given above.

B. Calculate the total cost per unit for each product using activity-based costing for the overhead allocation.

Answer: A. $288,750 - $129,000 (setup costs) - $28,500 (engineering changes) = $131,250 remaining overhead cost to be allocated by direct labor hours $129,000 setup costs / 6 annual setups = $21,500 per setup $28,500 engineering costs / 3 annual changes = $9,500 per engineering change $131,250 / 16,500 hours = $7.9545 per direct labor hour for remaining overhead B.

Total cost for product Alpha: Direct material Direct labor Setup costs Engineering Overhead

= = = = =

1,500 × $10 1,500 × 1 × $14 $21,500 × 3 setups $9,500 × 1 change 1,500 × $7.9545

= = = = =

$ 15,000 21,000 64,500 9,500 11,932

Total manufacturing cost for Alpha = $15,000 + $21,000 + $64,500 + $9,500 + $11,932 = $121,932 / 1,500 units = $81.29 per unit

21 .

Total cost for product Zeta: Direct material = 7,500 × $22 Direct labor = 7,500 × 2 × $28 Setup costs = $21,500 × 3 setups Engineering = $9,500 × 2 changes Overhead = 7,500 × 2 × $7.9545

= = = = =

$ 165,000 420,000 64,500 19,000 119,318

Total manufacturing costs for Zeta = $165,000 + $420,000 + $64,500 + $19,000 + $119,318 = $787,818 / 7,500 units = $105.04 per unit

Diff: 3

Page Ref: 367-369

22 .

119) The following production information for the Murray Manufacturing Company has been gathered for part number AB7 (which is used in the manufacture of one of its products); •

Murray Manufacturing buys part AB7 from a supplier.

Murray estimates that it will need 5,400 parts this month (which has 30 days).

• Each part costs $6.89, and it cost Murray $750 to place an order for part AB7.

• It takes 8 days to receive an order of part AB7 from Murray's supplier.

• All parts orders are received, inspected, and checked into inventory the same day shipment is received.

• Inventory carrying costs are 20% of the inventory value for the month.

•

Required: A. Compute the economic order quantity in units (rounded to the nearest unit) for part AB7.

B. Compute the reorder point (rounded to the nearest unit) for part number AB7.

Answer: A. EOQ = = = 2,424 units (rounded down to the nearest unit) B. 5,400 units used on average in 30 days this month = 180 units per day (5,400 / 30) 180 units per day × 8 days' lead time = 1,440 units remaining is the reorder point Diff: 2 Page Ref: 354-355 120) World Voice is a long-distance telephone service provider that is in the process of overhauling its fixed-asset applications system.

Required: Identify the individual data items that should be included in the database for each of the company's fixed assets.

Answer: The new fixed asset database should include the following items: Name of asset Manufacturer Model and serial number Asset class code Company-assigned asset number General ledger account number Diff: 2 Page Ref: 356-357

Location of asset Acquisition date Original cost Data for book depreciation Data for tax depreciation Maintenance data (i.e., dates and dollar amounts)

23 .

121) Southwestern Pride is a company that processes and packs vegetables for sale in retail stores. Southwestern Pride uses a CIM environment in its facility. Sensors on its production lines automatically record data regarding materials used (processed vegetables, added ingredients, jars, lids, labels, boxes, etc.) and the progress of production lots. Employees also input data from workstations in the various production areas (receiving, cleaning, cooking, and canning).

Required: Assuming that the company's databases utilize direct-access organization, what files and records could be updated directly from the production floor?

Answer: Files and records that could be updated directly from the production floor are: • • • • • • • • •

Diff: 3

Raw materials inventory records Work-in-process inventory records Finished goods inventory records Production order records (or production status file) Production scheduling records (or production loading file) Factor availability records Resource usage records Employee time sheets Summary expense distribution records Page Ref: 352-354

122) Explain how activity-based costing differs from traditional overhead allocation techniques.

Answer: Suggested answer: The main difference between traditional overhead allocation techniques and activity-based costing is the number of bases used to allocate manufacturing overhead costs to products.

Traditional allocation techniques use only one base, while ABC uses a number of bases to more finely allocate costs to those products responsible for the cost incurred. Also, traditional allocation bases were often based on direct labor hours or direct labor cost, which are less prominent components in highly automated production systems.

Diff: 2 Page Ref: 367-368 123) Distinguish between MRP and MRP II. Answer: Suggested answer: MRP is an acronym for "materials requirements planning" and refers to the use of computers in production planning and control systems. These systems encompass all types of inventories and are used to plan and schedule material usage requirements. MRP II is an acronym for "manufacturing resource planning" and encompasses MRP as well as related systems for sales, billing, and purchasing. In addition, MRP II may include a number of extensions of the basic capabilities found in MRP systems.

Diff: 2 Page Ref: 369

24 .

124) Why is it important to design control systems in a quick-response manufacturing system before the manufacturing system is implemented?

Answer: Suggested answer: Controls should be included in the design of a quick-response manufacturing system for two reasons. First, quick-response manufacturing systems must frequently be designed "from scratch," as few turnkey systems are available. Adding control systems after the system is designed is impractical from a cost standpoint, because the initial design itself is quite costly.

Including controls with other system features during the design phase is far less expensive, and will provide better internal control.

Second, the organization itself should test all controls before implementing them. The design phase provides an opportunity to review the programming and operation of controls before they are implemented.

Diff: 2 Page Ref: 370-371 125) Describe RFID including the benefits and drawbacks of this technology. Also compare this technology to that of bar codes.

Answer: Suggested answer.

Radio-frequency identification is an automatic identification technology that uses low power radio waves to send and receive data between RFID tags and readers.

Bar code scanners require a direct line of sight in order to function. Radio signals, RFID eliminates the need for direct line of sight to the RFID tag.

RFID tagging is not widely used because RFID are more costly than printed bar codes and there is a much higher error rate in RFID than in scanning printed bar codes.

Diff: 2 Page Ref: 361 126) What elements are involved in determining what products should be manufactured? How does the transaction cycle controls assist in such a decision?

Answer: Suggested answer: The decision to manufacture a certain product over another requires the integration of three criteria: the demand for a product; the product requirements; and the production resources available to the firm. If the product is manufactured for inventory purposes (as opposed to a specific job order), production requirements depend on a sales forecast. This is because sales forecasts are directly related to the amount of a product held in inventory at any time.

Transaction cycle controls that provide useful information in the decision about what product to manufacture include inventory status reports and factor availability reports. The inventory status report provides details about material resources in inventory that are available to production. The factor availability report provides information about the availability of labor and machine resources. Sales forecasts are also based on information provided by a finished goods status report, which lists the quantities of products in current inventory.

Diff: 2 Page Ref: 351-353 25 .

127) Discuss the financial benefits of just-in-time production systems.

Answer: Suggested answer: Using a JIT production system cuts a number of costs. The main financial benefit of using such a system come primarily from the overall reduction in inventory levels, since a goal of JIT is to minimize inventory levels. The firm's total investment in inventory is reduced. Specifically, costs such as handling and storing materials, obsolescence, warehouse space, and financing charges to carry inventory are reduced significantly. Other possible reductions in costs would accrue from lower labor costs from the re-design of production processes, quantity discounts from vendors interested in maintaining long-term relationships with the manufacturer, and an increased emphasis on quality production, which may decrease the cost of rework, spoilage, and waste.

Diff: 2 Page Ref: 356

26 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 10 Systems Planning and Analysis 1) The implementation stage of a systems development project can be minimized when it involves an upgrade to an existing system.

Answer: FALSE Diff: 2 Page Ref: 383 2) Systems analysis is the first step in the systems development life cycle.

Answer: FALSE Diff: 1 Page Ref: 385 3) The role played by the systems developer is much like that of a doctor with regard to a patient.

Answer: TRUE Diff: 1 Page Ref: 386 4) The steering committee needs to approach systems development from a "long-run" view.

Answer: TRUE Diff: 2 Page Ref: 387 5) Subsidiary to tactical systems development objectives are the strategic objectives.

Answer: FALSE Diff: 2 Page Ref: 387 6) Key success factors are characteristics of an organization that distinguishes it from competitors.

Answer: TRUE Diff: 1 Page Ref: 387 7) The systems development strategic plan should identify specific areas to be given the highest priority.

Answer: TRUE Diff: 1 Page Ref: 387 8) One objective of a systems survey is to find ways to automate tasks that have been performed manually.

Answer: FALSE Diff: 2 Page Ref: 388 9) Customers should be viewed as vital components of a system and should be included in any analysis.

Answer: TRUE Diff: 2 Page Ref: 389

1 .

10) A good approach to use with a manager when performing an information needs analysis is to ask the manager, "What kind of problems do you have here?"

Answer: FALSE Diff: 2 Page Ref: 390 11) Information requirements of a production control system might include quality control specifications.

Answer: TRUE Diff: 1 Page Ref: 391 12) A large portion of the systems analyst's job is to collect and organize facts.

Answer: TRUE Diff: 1 Page Ref: 392 13) An closed-ended questionnaire is the same as a depth interview.

Answer: FALSE Diff: 2 Page Ref: 392 14) Structured systems analysis begins with computer program code and then, through a number of steps each decreasing in detail, ends with a general description of a particular system.

Answer: FALSE Diff: 2 Page Ref: 393 15) Document and analytic flowcharts are optional tools in systems analysis.

Answer: FALSE Diff: 2 Page Ref: 394 16) Determining access methods involves defining primary and secondary access keys.

Answer: TRUE Diff: 2 Page Ref: 395 17) The systems development life cycle, including the design phase, is a finite process terminating in a completed system.

Answer: FALSE Diff: 2 Page Ref: 399 18) Systems design problems are much like other problems in life because there is no single solution which perfectly solves the problem.

Answer: TRUE Diff: 1 Page Ref: 400 19) As an organization increases in its complexity and the number of products manufactured or sold, it becomes easier to find an appropriate turnkey software system that adequately meets the organization's needs.

Answer: FALSE Diff: 2 Page Ref: 400 2 .

20) Management is typically responsible for selecting the best major system design from among several design alternatives.

Answer: TRUE Diff: 1 Page Ref: 402 21) The document that includes everything necessary to actually implement the design project is the detailed design proposal.

Answer: TRUE Diff: 1 Page Ref: 402 22) The use of prepackaged business process blueprints is seldom used in system design specifications or proposals.

Answer: FALSE Diff: 2 Page Ref: 403 23) It is important to design system reports that have appropriate titles and captions.

Answer: TRUE Diff: 1 Page Ref: 404 24) Regarding general systems design considerations, implementing adequate controls is too often emphasized.

Answer: FALSE Diff: 2 Page Ref: 405 25) Systems design is a creative activity and can be viewed somewhat as an art.

Answer: TRUE Diff: 1 Page Ref: 405 26) File analysis sheets show the relationships between the various kinds of files.

Answer: FALSE Diff: 2 Page Ref: 406 27) One type of business process blueprint is CASE. Answer: FALSE Diff: 2 Page Ref: 406 28) Computer professionals love the freedom of designing and building a new system from the ground up.

Answer: TRUE Diff: 1 Page Ref: 407 29) A dedicated software package is intended for a large and diverse number of users.

Answer: FALSE Diff: 2 Page Ref: 407

3 .

30) A good question to ask when evaluating "canned" software is "Are source programs supplied?"

Answer: TRUE Diff: 2 Page Ref: 408 31) Most deficiencies in a systems plan become obvious during the planning and analysis phases of the systems development life cycle.

Answer: FALSE Diff: 2 Page Ref: 384 32) Iterative or agile approaches to systems development require constant communication and require all phases of the systems life cycle to be carried on simultaneously.

Answer: TRUE Diff: 2 Page Ref: 384 33) The whole concept of service-oriented architectures relies on small independent pieces of software called services.

Answer: TRUE Diff: 2 Page Ref: 384 34) RAD is an iterative development technique using prototype designs.

Answer: TRUE Diff: 2 Page Ref: 396 35) RUP is an iterative development technique using prototype designs.

Answer: FALSE Diff: 2 Page Ref: 396 36) RUP is development framework involving 4 phases to help with iterative approaches to systems development.

Answer: TRUE Diff: 2 Page Ref: 396 37) Object-oriented design and analysis relies on the identification of services and their attributes.

Answer: FALSE Diff: 2 Page Ref: 397 38) Object-oriented design focuses on defining objects and their actions as well as the data they use and how they collaborate with each other.

Answer: TRUE Diff: 2 Page Ref: 397 39) In object-oriented design, objects are said to possess attributes, and attributes possess methods.

Answer: FALSE Diff: 2 Page Ref: 397 4 .

40) In object-oriented design, objects possess methods and attributes.

Answer: TRUE Diff: 2 Page Ref: 397 41) Ruby and Python are pure, native object-oriented languages.

Answer: TRUE Diff: 2 Page Ref: 397 42) UML diagrams are used to document objects and classes and how they communication with each other.

Answer: TRUE Diff: 2 Page Ref: 397 43) UML diagrams are ideal for OO development however, they are difficult to use to create source code.

Answer: FALSE Diff: 2 Page Ref: 397 44) Model driven architecture is the main architecture used in traditional systems design approaches.

Answer: FALSE Diff: 2 Page Ref: 398 45) BPEL is an executable computer language that facilitates interactions between business processes and web services.

Answer: TRUE Diff: 2 Page Ref: 398 46) OASIS stands for Organization for the Assessment of Structured iterative Standards.

Answer: FALSE Diff: 2 Page Ref: 398 47) It is crucial that all major systems development efforts have the support of ________ ________.

Answer: top management Diff: 2 Page Ref: 386 48) General systems development objectives include the overall ________ objectives relating to the company's long-run planning.

Answer: strategic Diff: 2 Page Ref: 387 49) Prioritizing systems development projects should be done in the same way as in ________ ________.

Answer: capital budgeting Diff: 2 Page Ref: 387 5 .

50) A small change in an area of weakness that may result in major improvements is called a(n) ________.

Answer: bottleneck Diff: 2 Page Ref: 390 51) ________ requirements for one subsystem will, in turn, specify ________ requirements for another subsystem.

Answer: Input; output Diff: 2 Page Ref: 391 52) Warnier-Orr methodology uses the basic constructs of sequence, ________, and ________.

Answer: selection; repetition Diff: 2 Page Ref: 392 53) Structured systems analysis and structured systems design are very ________ processes.

Answer: similar Diff: 1 Page Ref: 394 54) Adding error conditions and data file access to structured English results in documentation that is sometimes referred to as ________.

Answer: pseudocode Diff: 2 Page Ref: 396 55) The primary rule in developing design specifications is that the designer should work from ________ to ________.

Answer: outputs; inputs Diff: 2 Page Ref: 402 56) One area in which the accountant can play a critical role while working on a design team is implementing adequate ________.

Answer: controls Diff: 2 Page Ref: 405 57) Two special problems that relate to information systems design are problems involving ________ and ________ design.

Answer: forms or documents; database Diff: 2 Page Ref: 405 58) ________ design focuses on producing documents that provide effective interfaces between managers and the information system.

Answer: Forms Diff: 1 Page Ref: 405 59) A(n) ________ ________ diagram shows the various data fields within a record.

Answer: record layout Diff: 2 Page Ref: 406 6 .

60) The decision as to whether the computer software is to be built from scratch or purchased should be made at the end of the ________ phase.

Answer: analysis Diff: 2 Page Ref: 407 61) Hardware that is chosen for use in a system design implementation should be ________ compatible for future uses.

Answer: upwardly Diff: 2 Page Ref: 408 62) The four enterprise architectural domains are ________, ________, ________, and ________.

Answer: business, information, application, technical Diff: 2 Page Ref: 384 63) Another name for the traditional approach to the systems development life cycle is the ________ method.

Answer: waterfall (also correct is "big-design-up-front") Diff: 2 Page Ref: 384 64) Each domain within the enterprise architecture is subject to ________, ________, ________, and ________ phases.

Answer: analysis, planning, design, implementation Diff: 2 Page Ref: 384 65) Agile or ________ approaches to systems development involve carrying on all phases of the life cycle simultaneously.

Answer: iterative Diff: 2 Page Ref: 384 66) Service-oriented architecture has greatly facilitated working in smaller projects, since the whole concept of SOA relies on small independent pieces of software called ________.

Answer: services Diff: 2 Page Ref: 384 67) RUP development framework has four phases called the ________, ________, ________, and ________ phases.

Answer: inception, elaboration, construction, transition Diff: 2 Page Ref: 396 68) Milestones corresponding to ________ of each phase must be achieved before it is accepted by the management.

Answer: deliverables Diff: 2 Page Ref: 396

7 .

69) Object-oriented approach focuses on defining ________.

Answer: objects Diff: 2 Page Ref: 397 70) In OO, objects are said to possess ________ and ________.

Answer: methods, attributes Diff: 2 Page Ref: 397 71) ________ are the things objects do and ________ are the data related to objects.

Answer: Methods, attributes Diff: 2 Page Ref: 397 72) ________ diagrams are used to document objects and how they communicate in OO design.

Answer: UML Diff: 2 Page Ref: 397 73) ________ ________ architecture was created by OMG to standardize and refine the process of object-oriented design by developing a model in UML and then automatically generating the software code from the design.

Answer: Model driven Diff: 2 Page Ref: 398 74) OO analysis produces a ________ model of what the system is functionally required to do.

Answer: conceptual Diff: 2 Page Ref: 398 75) OO analysis produces a conceptual model which is typically represented in UML by ________, ________, and ________ diagrams.

Answer: use-case, class, interaction Diff: 2 Page Ref: 398 76) From a cost standpoint, the phase of systems development in which more money is spent than any other area is ________.

A) systems analysis B) systems design C) systems implementation D) systems planning Answer: C Diff: 2 Page Ref: 385

8 .

77) From a cost standpoint, the phase of systems development in which major errors can become quite costly in later stages of development is ________.

A) systems analysis B) systems design C) systems implementation D) systems planning Answer: A Diff: 2 Page Ref: 385 78) Which of the following is not a goal of developing an overall systems plan and strategy?

A) Duplication and wasted effort will be minimized.

B) The systems analysis phase will be minimized in favor of design and implementation when budget constraints are present.

C) Systems development in the organization will be consistent with the overall strategic plan of the organization.

D) Resources will be targeted to the subsystems where the needs are greatest.

Answer: B Diff: 2 Page Ref: 386 79) A system planning and feasibility analysis involves several phases and operates in a "topdown" fashion. This type of analysis is composed of how many phases?

A) Three B) Five C) Six D) Seven Answer: D Diff: 1 Page Ref: 386 80) Which of the following planning activities is performed after the other activities?

A) Deciding that all system changes must be completed within five years B) Naming the individuals to the systems analysis and design team C) Appointing a steering committee D) Deciding that a reliable file backup system is more important than new factory workstations Answer: B Diff: 3 Page Ref: 386 81) The purpose of a systems development steering committee is to A) inquire of top management as to the problems encountered with current systems.

B) oversee the work of the systems analysts.

C) focus on the overall current and future information needs of the company.

D) provide a positive image of the development of new systems and to keep criticism within the organization to a minimum.

Answer: C Diff: 2 Page Ref: 387

9 .

82) The main responsibility of the systems development steering committee is A) overall planning and control of the systems development effort within the organization.

B) to oversee the work of systems analysts.

C) to become involved in the details of specific development projects.

D) to provide a positive image of the establishment of systems development Answer: A Diff: 2 Page Ref: 387 83) A major output of a systems development steering committee or the individual in charge of systems development is a written document outlining short- and long-term goals relating to the company's development effort. This document is called A) "Key Systems Development Success Factors."

B) "The Systems Development Life Cycle."

C) "Objectives of Systems Analysis."

D) "Strategic Systems Plan."

Answer: D Diff: 2 Page Ref: 387 84) Which of the following describes the point at which systems project costs should be quantified?

A) Identifying and prioritizing potential projects for systems development B) Developing a strategic information systems plan C) Assembling the project team D) Preparing the systems proposal Answer: A Diff: 2 Page Ref: 387 85) Which of the following is often the key motivation for the system developers to establish good relationships with current and future users of the system?

A) The users' expertise is essential to designing the technical specifications of the new system.

B) The success or failure of the new system will depend heavily on the support of the eventual users.

C) Users often are responsible for the subsequent evaluation of the developers.

D) Users often determine budgets and timetables for systems project.

Answer: B Diff: 1 Page Ref: 388 86) The company should inform users that a new system is being developed A) as late as possible, to eliminate the possibility that some employees might oppose the new system.

B) after the design plan is complete, to avoid employee interference and confusion.

C) as soon as possible, to maximize user acceptance of the new system.

D) as soon as the users seem ready to accept the new system.

Answer: C Diff: 2 Page Ref: 388

10 .

87) Which of the following would be an appropriate source of information to obtain during the survey of the current system?

A) Professional journals and industry publications B) Minutes of board meetings, financial statements, and charts of accounts C) Organization charts, job descriptions, and policy manuals D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 389 88) An analysis of the systems survey contains a A) summary of the system's strengths and weaknesses.

B) cost comparison of different software packages.

C) review of information needs.

D) listing of input requirements.

Answer: A Diff: 2 Page Ref: 390 89) Any bottlenecks in a company's current operations would most likely be discovered A) when the technical specifications of a system are being decided.

B) when the information obtained during the system survey is analyzed.

C) during the document review.

D) None of these answers are correct.

Answer: B Diff: 1 Page Ref: 390 90) The second major phase of systems analysis is information needs analysis. This phase A) focuses on the general information needs of particular applications.

B) concentrates of the report formats that the new systems will output.

C) is concerned with specific managerial decisions and their inputs.

D) None of these answers are correct.

Answer: A Diff: 2 Page Ref: 390 91) Which of the following is most relevant in gaining an understanding of a manager's decisions and information needs?

A) Information about the major problems the manager normally deals with B) Knowledge about the manager's self-assessment criteria C) Details concerning the manager's job responsibilities D) Knowledge of the criteria used to evaluate the manager's job performance Answer: D Diff: 2 Page Ref: 390

11 .

92) The third phase of systems analysis results in decisions regarding A) input requirements for the new system.

B) output requirements for the new system.

C) both input and output requirements for the new system.

D) priorities for ranking the different subsystems projects, but not specific system requirements.

Answer: C Diff: 1 Page Ref: 391 93) Which of the following elements is contained in the systems analysis report?

A) Specific timetables for project completion B) Descriptions of any overall problems in the specific subsystem being studied C) A summary of the current system's strengths and weaknesses D) A systems proposal to serve as the framework for the project Answer: B Diff: 2 Page Ref: 391 94) The Warnier-Orr methodology is a technique used for A) flowcharting.

B) document review.

C) evaluating work distributions.

D) analyzing information flows.

Answer: D Diff: 1 Page Ref: 392 95) A formal technique used by the systems analyst to summarize related data inputs and outputs is ________.

A) matrix analysis B) work measurement C) flowcharting D) decision analysis Answer: A Diff: 2 Page Ref: 393 96) One benefit of using the Warnier-Orr methodology as a fact-gathering technique is that it A) is easy to understand and use.

B) can be used to document any type of system.

C) forces a top-down, structured approach to analysis.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 392

12 .

97) In the Warnier-Orr methodology, how would the repetitions associated with the input of batches of customer checks be shown?

A) Use a bracket with the number 2.

B) Use the subscript (n).

C) Use 2 brackets.

D) Use the subscript (2).

Answer: B Diff: 2 Page Ref: 392 98) At the first level of structured systems analysis, documentation begins with A) matrix analysis.

B) an analytic flowchart.

C) a logical flow diagram.

D) functional analysis.

Answer: C Diff: 2 Page Ref: 393 99) A flowchart differs from a logical flow diagram because it A) provides a physical description of the system.

B) provides a logical description of the system.

C) does not specify certain input/output devices.

D) does not specify certain storage devices.

Answer: A Diff: 2 Page Ref: 394 100) In structured systems analysis, the data dictionary describes A) data structure.

B) physical layout.

C) data structure and physical layout.

D) data structure and data elements.

Answer: D Diff: 2 Page Ref: 395 101) A special language describing processing logic that uses key words such as IF, THEN, ELSE IF, and SO is called A) Warnier-Orr English.

B) structured English.

C) analytic flowchart notation.

D) structured assembler.

Answer: B Diff: 2 Page Ref: 396

13 .

102) When conducting structured systems analysis of a particular system, defining the processing logic A) should always be done using structured English.

B) is the same thing as writing actual program code.

C) may be done with decision trees or decision diagrams.

D) is useful only to technical systems personnel.

Answer: C Diff: 3 Page Ref: 396 103) Systems design follows the "top-down approach." This means A) going from the general to the specific.

B) beginning with the needs and desires of top management and then considering other users' needs down to the "factory-floor" level.

C) going from specific program code to general descriptions of the system.

D) starting with a central computer system and then implementing systems for individual departments.

Answer: A Diff: 1 Page Ref: 399 104) Certain turnkey software packages can sometimes meet the specific needs of an individual situation with minimal design work. Which of the following companies would least likely be able to use a turnkey system?

A) A doctor's office B) An attorney C) A petroleum refining company D) A construction company Answer: C Diff: 3 Page Ref: 400 105) Which of the following design alternatives is the most difficult to evaluate?

A) Deciding whether reports should be generated automatically or on-demand B) Deciding whether processing should be in batch mode or online C) Deciding whether the alternatives meet all major objectives for the system D) Deciding whether existing personnel can manage the system Answer: D Diff: 3 Page Ref: 401 106) Once system design alternatives have been laid out and documented, they must be evaluated. The primary criteria for selecting the alternative for implementation purposes should be A) cost versus benefits.

B) simplicity versus complexity.

C) user acceptance of the alternative.

D) feasibility.

Answer: A Diff: 3 Page Ref: 401 14 .

107) In the preparation of design specifications, which of the following activities is undertaken after all of the others have been completed?

A) Database design B) Specifying inputs C) Specifying processing steps D) Designing management reports Answer: B Diff: 2 Page Ref: 402 108) A design proposal explains that the system will include both manual and computer procedures for reconciling batch totals. This explanation A) shows internal control effectiveness exists at the cost of some efficiency.

B) is not accurate.

C) should not be included in the design proposal.

D) should be included in both the systems analysis report and the design proposal.

Answer: A Diff: 3 Page Ref: 403 109) Items that should be provided in any detailed design proposal are A) the resumes and qualifications of systems analysts and designers.

B) discussions of similar systems that competitors have implemented.

C) specific volume and cost information.

D) critiques of problems encountered with the prior (or existing) system.

Answer: C Diff: 2 Page Ref: 403 110) The most important consideration for output design is ________.

A) relevance B) integration C) uniformity D) cost-effectiveness Answer: D Diff: 1 Page Ref: 403 111) Which of the following design considerations applies to report or document outputs?

A) relevance B) integration C) uniformity D) accuracy Answer: A Diff: 1 Page Ref: 403

15 .

112) The design criterion concerned with avoiding the collection and maintenance of the same data items in more than one place in the organization is ________.

A) uniformity B) flexibility C) integration D) standardization Answer: C Diff: 1 Page Ref: 404 113) The design criterion concerned with using the same format and name for data items used in more than one place is ________.

A) uniformity B) flexibility C) integration D) standardization Answer: D Diff: 1 Page Ref: 405 114) Probably the most difficult design consideration in designing the data input system is ________.

A) uniformity B) accuracy C) integration D) organization Answer: B Diff: 1 Page Ref: 405 115) Which of the following database design techniques shows the interrelationships between various kinds of records?

A) Data structure diagrams B) Record layouts C) File-related matrices D) File analysis sheets Answer: A Diff: 2 Page Ref: 406 116) Which of the following database design techniques shows the interrelationships between files, their contents, and their uses?

A) Data structure diagrams B) Record layouts C) File-related matrices D) File analysis sheets Answer: C Diff: 2 Page Ref: 406

16 .

117) A file-related matrix reveals that a file's data item A is used in six different reports, while data item B in the same file is not used in any report. The systems designer should consider A) using both data items A and B. B) deleting data item B and using only data item A. C) using neither data item A nor B. D) deleting data item A and using only data item B. Answer: B Diff: 2 Page Ref: 406 118) Prepackaged design systems have both advantages and disadvantages in assisting the designer with the systems development cycle. A disadvantage of such prepackaged design methodologies is that they do not A) specify desired outputs.

B) provide assistance in structuring a particular problem.

C) adequately deal with the problem of response time.

D) Answers A and C are correct.

Answer: D Diff: 2 Page Ref: 406 119) A company should decide whether to develop software independently or purchase software A) when preparing the detailed design proposal.

B) at the end of systems analysis.

C) at the end of systems planning.

D) when preparing design specifications.

Answer: B Diff: 1 Page Ref: 407 120) Which of the following is not an advantage of using purchased or "canned" software packages?

A) They are less expensive.

B) They seldom meet all of a company's needs precisely.

C) They are already debugged.

D) The company can "test drive" the product before making a substantial investment.

Answer: B Diff: 2 Page Ref: 407 121) When evaluating purchased software it is often helpful to use a decision table format to consider various issues and potential problems with the software. A question (or questions) to be asked in a decision table which might uncover any "skeletons in the closet" regarding a software package is, " A) How many other installations that are "second-reference organizations" have used the software, and for how long?"

B) How stable is the software vendor?"

C) How closely does the software fit the needs of the company?"

D) How flexible is the software?"

Answer: A Diff: 3 Page Ref: 407 17 .

122) When a company is purchasing software, it should choose hardware A) before choosing software.

B) at the end of systems analysis.

C) after choosing software.

D) at any time either before or after choosing software.

Answer: C Diff: 2 Page Ref: 408 123) One reason to put off the purchase of computer hardware or software is A) the price of hardware and software will drop shortly.

B) a new version of hardware or software will be available soon.

C) the company wants the latest "state-of-the-art" system.

D) None of these answers is a good reason to put off the purchase of computer hardware or software.

Answer: D Diff: 2 Page Ref: 408 124) Actively involving the ultimate users in the development of a system might help to limit A) communications problems.

B) unrealistic or vague requirements during the analysis phase.

C) disillusionment and confusion during the design phase.

D) All of these answers are correct.

Answer: D Diff: 2 Page Ref: 408-409 125) It is normal for deficiencies in a systems plan to only become obvious during the A) design and implementation phases.

B) planning and analysis phases.

C) planning and design phases.

D) If the systems plan is correctly executed, deficiencies will not be present.

Answer: A Diff: 2 Page Ref: 384 126) The more complicated, unfamiliar, or innovative business and information environments become, the more it becomes necessary to A) plan and analyze upfront.

B) use an iterative design approach.

C) employee a project manager.

D) use the waterfall method correctly.

Answer: B Diff: 2 Page Ref: 384

18 .

127) Systems development means defining, shaping, and reshaping the four enterprise architectural domains of A) business, information, application, and technical architectures.

B) business, software, implementation, and training architectures.

C) software, hardware, training, and maintenance architectures.

D) software, information, hardware, and reporting architectures.

Answer: A Diff: 2 Page Ref: 384 128) Each domain in the enterprise architecture is subject to A) cost overruns if planning is not carefully completed upfront.

B) government review if the company is publicly traded.

C) the four phases of RUP development.

D) analysis, planning, design, and implementation.

Answer: D Diff: 2 Page Ref: 384 129) In iterative or agile approaches to systems development, A) each phase of the life cycle is completed prior to moving to the next phase.

B) phases can be started in any order the project manager deems appropriate.

C) all phases of the life cycle are carried on simultaneously.

D) the systems development life cycle is not appropriate to implement.

Answer: C Diff: 2 Page Ref: 384 130) Service-oriented architecture relies on developing small independent pieces of software called ________.

A) groups B) services C) units D) prototypes Answer: B Diff: 2 Page Ref: 384 131) An iterative approach using prototypes is called A) service-oriented development.

B) waterfall development.

C) object oriented design.

D) rapid application development.

Answer: D Diff: 2 Page Ref: 396

19 .

132) The phase of the Rational Unified Process where the project is documented in detail using UML and prototypes is the ________ phase.

A) inception B) elaboration C) construction D) transition Answer: B Diff: 2 Page Ref: 396 133) The phase of the Rational Unified Process where the software is deployed to end users for testing and training is the ________ phase.

A) inception B) elaboration C) implementation D) transition Answer: D Diff: 2 Page Ref: 396 134) Rational Unified Process relies on an A) iterative approach.

B) traditional approach.

C) object oriented approach.

D) Does not use any of these approaches.

Answer: A Diff: 2 Page Ref: 396 135) The object-oriented approach focuses on defining ________.

A) objects B) services C) units D) All of the above are a part of the object-oriented approach.

Answer: A Diff: 2 Page Ref: 397 136) Data related to objects are called ________.

A) items B) methods C) attributes D) characteristics Answer: C Diff: 2 Page Ref: 397

20 .

137) The things objects do are called ________.

A) items B) methods C) attributes D) characteristics Answer: B Diff: 2 Page Ref: 397 138) ________ diagrams are used to document objects (and classes of objects) and how they communicate with each other.

A) UML B) ER C) Conceptual D) Data flow Answer: A Diff: 2 Page Ref: 397 139) UML diagrams directly match objects in computer programs which greatly facilitate communication between the analysts, designers, and programmers A) forcing objects to be defined in numerous languages.

B) forcing all objects to be identified.

C) eliminating the need for an iterative approach.

D) eliminating a language gap between DFDs and programming code.

Answer: D Diff: 2 Page Ref: 397 140) MDA stands for A) Model Diagram Assurance.

B) Methods, Development, Assessment.

C) Model Driven Architecture.

D) Method Driving Assessment.

Answer: C Diff: 2 Page Ref: 398 141) The approach of MDA is to A) develop a model and then use iteration so programmers can develop a prototype.

B) develop a model and then transform the model into computer software.

C) develop methods that can then be organized into object classes.

D) develop methods that can then be modeled into computer software.

Answer: B Diff: 2 Page Ref: 398

21 .

142) An example of a transformation language that can be used with MDA is ________.

A) OMG B) QVT C) UML D) OO Answer: B Diff: 2 Page Ref: 398 143) Object-oriented design and analysis is based on objects and relies on A) UML diagrams.

B) MDA models.

C) BPEL diagrams.

D) None of the above aid OO analysis.

Answer: A Diff: 2 Page Ref: 398 144) BPEL is an executable computer language that facilitates interactions between A) objects and services.

B) objects and methods.

C) business processes and data diagrams.

D) business processes and Web services.

Answer: D Diff: 2 Page Ref: 398 145) BPEL is supported by the internationally recognized and supported by the leading IT open standards organization called ________.

A) OASIS B) OMG C) MDA D) QVT Answer: A Diff: 2 Page Ref: 398

22 .

146) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Forms design ________ 2. Systems planning ________ 3. Upwardly compatible ________ 4. Integration ________ 5. Dedicated software package ________ 6. Pseudocode ________ 7. Feasibility ________ 8. Cost effectiveness ________ 9. Standardization ________ 10. Turnkey system A. Design criteria that means the avoidance of collecting and maintaining the same data items in more than one place.

B. Design criteria that all data items be entered in a basic format and assigned a common name when used in more than one place.

C. The process of planning and creating specific forms D. Structured-English type of system documentation that includes provisions for error conditions and data file access E. A computer package that meets the specific needs of an individual situation with minimal design work F. Identifying subsystems within the information system that need special attention for development G. A commercially available software package that is intended for a narrow audience.

H. Design criterion that states that it must be possible to actually implement the design specifications I. A concept that states that the benefits of a system must exceed its costs J. Computer hardware that can easily be upgraded to a larger or faster model without losing existing data or programs Answer: 1. C 6. D 2. F 7. H 3. J 8. I 4. A 9. B 5. G 10. E Diff: 2 Page Ref: 412-413

23 .

147) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Detailed design proposal ________ 2. Steering committee ________ 3. Systems analysis ________ 4. Bottleneck ________ 5. "Canned" software package ________ 6. Key success factors ________ 7. Information needs analysis ________ 8. Structured English ________ 9. Systems development life cycle ________ 10. Warnier-Orr A. A special language for describing process logic that uses several key words including IF, THEN, ELSE IF, and SO. B. A software package purchased from a vendor C. A methodology and diagramming technique for analyzing the outputs of an application and factoring the application into a hierarchical structure of modules to accomplish the necessary processing D. Everything necessary to actually implement a design project E. A weakness in the system where small changes can result in major improvements in performance F. Characteristics that distinguish a company from its competitors and are integral to its success G. The concept that every systems development project goes through essentially the same process or life cycle of systems analysis, design, and implementation.

H. Group representing top management and all major functional areas within the organization which is charged with guiding the overall systems development effort I. The process of understanding existing systems and problems, describing information needs, and establishing priorities for further systems work J. Analysis of specific decisions made by managers in terms of the information inputs Answer: 1. D 6. F 2. H 7. J 3. I 8. A 4. E 9. G 5. B 10. C Diff: 2 Page Ref: 412-413

24 .

148) Presented below are three lists. The first list contains design considerations for system elements. The second list contains the system elements, and the third list contains the definitions of the design considerations.

Required: Insert the Roman numeral of the system element(s) that apply to the design consideration in the first column. Insert the letter of the correct definition for each design consideration in the second column. The Roman numerals will be used more than once. Each letter will be used only once.

System element(s)

Design consideration definition

Design consideration

________ ________ ________ ________ ________ ________ ________ ________ ________ ________

________ ________ ________ ________ ________ ________ ________ ________ ________ ________

1. Cost effectiveness 2. Integration 3. Efficiency 4. Security 5. Relevance 6. Accuracy 7. Comprehensiveness 8. Flexibility 9. Clarity 10. Standardization

System elements: I. Outputs (report or document) II. Database III. Data processing IV. Data input V. Controls and security measures Design consideration definitions: A. Speedy data retrieval for queries is an example B. Information making a difference in one's decision, with no unneeded or missing information C. Addresses multiple areas of concern D. Avoidance of collecting and maintaining the same data items in more than one place E. Data are correct F. Information is understandable to a variety of parties G. All data items are entered in the same format and assigned a common name when used in more than one place H. Data are protected from unauthorized changes, additions, and deletions I. Benefits exceed the costs J. Ability to handle a variety of questions

25 .

Answer:

System element(s)

1. all 2.

II, III, IV 3.

II 4.

II 5.

I 6.

II, III, IV 7.

V 8.

II 9.

I 10.

II Diff: 2 Page Ref: 403-405

Design consideration definition I D A H B E C J F G

26 .

149) A small manufacturer of custom-made sports equipment has hired you as a systems consultant. You have completed a systems survey and found that the company is experiencing wide-ranging problems in its manufacturing and delivery systems, including bottlenecks in production and shipping, and quality control concerns because customer feedback indicates jobs are not conforming completely to their specifications. You are ready to begin the second phase of systems analysis, identifying information needs.

Required: Explain what information needs analysis is, and describe two techniques you would use to identify information needs.

Answer: Information needs analysis concerns the study of decisions made by managers. By identifying the managers' information requirements, the analyst can decide the needed system inputs. The analyst can use any of four different techniques to perform information needs analysis (The problem requires two techniques).

• Identify each manager's primary job responsibilities. The consultant should develop an understanding of the requirements of each manager's position. The consultant would need to get to know the managers in various departments such as production and shipping. After understanding the duties performed by managers, the consultant can determine the information each manager need to carry out his or her responsibilities.

•

Identify the means by which each manager is evaluated. Evaluation requirements are the basis for the manner in which many managers approach day-to-day responsibilities.

Managers need certain types of information to meet evaluation requirements. The consultant should be especially aware of evaluation requirements in the areas identified as bottlenecks.

Managers making decisions related to the bottlenecks may currently be using inadequate information that should be the focus of improvement in a systems project.

•

Identify some the of problems managers face. Rather than asking the mangers pointblank about their problems, the consultant should ask the managers many questions about what they do, and listen carefully to the answers. The consultant should work toward developing a good working relationship with the managers. Managers who trust the consultant are more likely to reveal their "take" on problems in the system. In this case, the consultant will learn more about the bottlenecks with this approach.

• Identify the means by which the manager evaluates personal output. How does the manager know when his or her work is acceptable? What are the data sources the manager uses to complete work? Answers to these questions will allow the consultant to identify additional system inputs needed on a regular basis.

Diff: 2 Page Ref: 390-391

27 .

150) Ace Fasteners is a small manufacturing company. The controller has been preparing aging schedules and found that company's invoices are not being sent out in a timely manner. The accounts receivable department has told the controller that it is not getting information when orders are completed and shipped due to its computer system. The computer system is slow and cannot keep pace with production. As a result, the computer system crashes frequently. The accounts receivable department often must type invoices when the computer system is malfunctioning, resulting in backlogs and delays in billing. When the controller brings up the issue to the president of the company at a weekly management meeting, the president states, "Just get the problem fixed so we can send out the bills on-time. What is the next item on the agenda?"

Required: From a standpoint of systems planning and feasibility analysis, how would you as a consultant (hired by the controller of Ace Fasteners to "fix the problem") advise the controller and management to proceed to remedy this systems problem?

Answer: It appears that the president does not understand the nature of the computer system problem or what may possibly be involved to solve it. A consultant should first advise the president, controller, and other managers of the steps involved in undertaking a system planning and feasibility study. The controller may have to educate the president and managers about what is involved in such a study. Specifically, the consultant should discuss the following phases to the study: • Discussion and planning by top management. The consultant may have a difficult "sales job" in this area, as the president is obviously unaware of how to go about systematically solving the company's computer system problem. The consultant should discuss the need for management to support the systems development effort, and ask for their understanding that to properly fix the problems management needs to support the development effort. The consultant should present his or her case and emphasize that any "quick fix" for the accounts receivable billing problem may lead to further problems in the immediate future.

• Steering committee. When the consultant has gained the support and understanding of top management, the consultant should then ask management to form a steering committee for the project. The consultant should urge the committee to focus on the overall current and future information needs of the company, and that the committee is responsible for the overall planning and control of the development effort. The consultant should also point out that the committee is not responsible for the details of the current this specific development project or for future projects.

• Establish objectives and constraints. The consultant, in conjunction with management, should establish overall objectives for the project as well as constraints. Key success factors for the company should be identified and incorporated into the design of the system.

• Develop a strategic systems plan. The consultant, in conjunction with management, should then develop a strategic systems plan for Ace Fasteners. It should be a formal, written document that identifies short- and long-term goals. The plan should identify and discuss: key success factors; describe the systems within the company; and provide a statement of priorities, an outline of required resources, and a timetable for developing the specific system.

28 .

•

Prioritizing the project. The strategic plan should prioritize the areas that should be given highest priority. Since Ace is in critical need of a new production and accounts receivable billing system, it is likely that this project will be given highest priority. The consultant should also help management to prioritize other projects that may have been identified for future exploration and possible development.

• Systems development proposal. The consultant should prepare a system proposal to provide a basis for analysis and a preliminary design for the proposed system. If possible, the consultant should work with management and staff in developing such a proposal, and get management to agree to and support it.

• Establishing the system analysis and development team. At this point the consultant should create a team of individuals from within the company (and likely other consultants from outside of the company) to conduct the analysis and preliminary design of the system.

Diff: 3 Page Ref: 386-388 151) A company president has been told by the chief information officer that a certain systems analysis and design project is at the stage of having "design specifications prepared."

Required: Identify what systems design phases have occurred and what phases need to take place to complete this project?

Answer: Systems design proceeds from the general to the specific. The "prepare design specifications" phase is in the "center" of a systems design project when moving from the general to the specific. This means that the "systems planning and analysis" and "evaluate various designs" phases should have occurred (both of which are more general or "high-level" in nature).

After the "prepare design specifications" phase is complete, the project should generate a "systems design specifications" document, and then proceed to the actual "systems implementation" stage. Problems during in design specifications may be encountered during the implementation phase, and may result in the earlier phases "being revisited" to make necessary changes.

After the actual "systems implementation" stage, a "systems review and control" phase should occur to ensure that the system is properly functioning and meets users' needs. It should be pointed out that the development cycle is not static, but rather it is a dynamic process that is ongoing and may seem to "never end."

Diff: 2 Page Ref: 398-402

29 .

152) Briefly discuss some behavioral considerations that are of major importance to the systems planning and analysis phase.

Answer: Suggested answer: A major behavioral consideration is communication at various stages: communication between top management and the systems development team, communication within the team, and communication between the team and managers/users. First, it is essential that top management clearly explain its overall strategic plans for the organization and its vision of what it expects from the systems development effort. Secondly, the team must communicate well so that the planning phase will be thorough and efficient, it will obtain the data it needs to make recommendations, and it will ensure that all important views are aired. Finally, the team (with the assistance of management) should take special efforts to communicate their objectives to managers and other affected users so that unnecessary resistance, uncertainty, and anxiety can be avoided.

Diff: 2 Page Ref: 389 153) What individuals should be involved in systems planning?

Answer: Suggested answer: The key individuals who should be directly involved in systems planning are: • the members of the steering committee, which should include representatives of top management, all affected user groups, and a high-level manager from the information systems function • a systems development team, ideally composed of top management, user departments, accountants, programmers, and other technical systems people More generally, top management and all affected individuals should be involved, by providing input regarding their needs, assisting the development team, and staying informed of the team's progress and recommendations.

Diff: 2 Page Ref: 386-387 154) What are some important factors to consider when evaluating "canned" software?

Answer: Suggested answer: When evaluating purchased "off-the-shelf" or "canned" software, the company should consider the following questions: • How well the does the software appear to meet the company's needs?

• Is the software vendor is likely to remain in business in the future?

• Does the vendor provide technical support and if so, how?

• How do previous and current users (particularly second-reference users) of the software feel about it?

• Is the software "user-friendly"?

• Is the software "well-documented"?

• Are error messages adequately explained either on the screen or in the documentation?

• Is source code available for custom modifications?

Diff: 2 Page Ref: 407-408 30 .

155) How is the Warnier-Orr methodology used to organize facts in systems analysis and design projects?

Answer: Suggested answer: The Warnier-Orr methodology is based on analyzing the outputs of an application. The method uses a diagramming technique to divide the application into a hierarchical structure of processing modules. The methodology uses brackets or braces to denote hierarchy. In a Warnier-Orr diagram, the highest level is to the left of the diagram, while the lowest is to the right.

A Warnier-Orr diagram is drawn using only three basic constructs: sequence, selection, and repetition. Any processes included in a sequence are enclosed using brackets and would be executed from top to bottom. The selection construct is necessary when there are two or more alternatives. Mutually exclusive alternatives are enclosed in a bracket and separated by a plus sign enclosed in a circle (which is the "exclusive" symbol). The repetition construct is indicated by subscripts. When the process is repeated only once, the subscript "(1)" is used. If repeated more than once, the subscript "(n)" is used. When no processing is required, the words "null" or "skip" are used in the diagram.

The methodology is easy to understand and use. It can be used to document any type of system, from a general overview to detailed program logic. Using the Warnier-Orr method forces the analyst or designer to pattern the system in a structured, top-down approach.

Diff: 2 Page Ref: 392 156) What are the differences between logical flow diagrams and analytic flowcharts?

Answer: Suggested answer: The primary difference between a logical flow diagram and an analytic flowchart is that analytic flowcharts provide a physical description of a system while logical flow diagrams give a logical view of a system.

The text referred to the use of logical flow diagrams in structured systems analysis. Practically speaking, either logical flow diagrams or analytic flowcharts can be incorporated for documentation purposes. Logical flow diagrams are useful because the analyst can document logic without committing to any particular physical implementation. A logical flow diagram allows an analyst to separate data flow from physical implementation, which may be useful in solving problems in either area. Analytic flowcharts are necessary tools to document a system's physical implementation, and should also be used to provide this important view of a system.

Diff: 2 Page Ref: 393-394

31 .

157) What is the Rational Unified Process and what are the four phases incorporated in its framework?

Answer: Suggested answer: RUP was developed after analyzing failures in many software development projects took place.

The development framework breaks down project life cycles into four phases. They include the following: 1. Inception Phase - project is defined, described, and justified in terms of expected costs and benefits, risks, core requirements, and constraints.

2. Elaboration Phase - project documented in further detail using Unified Modeling Language (UML) diagrams and prototypes that deal with the identified risk.

3. Construction Phase - actual software is coded.

4. Transition Phase - software is deployed to end users for testing and training.

Diff: 2 Page Ref: 396 158) Describe object oriented design and analysis and how UML diagrams will aid OO. Also describe what effect transformation will have on the process of design.

Answer: Suggested answer: OO approach differs from the classic approach in that it focuses on objects and the actions the object performs, the data they use and how they collaborate with each other.

Objects are said to possess METHODS (things they do) and ATTRIBUTES (data related to objects). UML diagrams are created to document these objects and how they communication with each other. The UML diagrams can then be directly "fed" into matching objects in computer programs. This greatly facilitates communication between the analysts, designers, and programmers, who essentially work in the same language of the objects. This is very different from the classical approach in which there is a language GAP between DFDs and programming code.

OO analysis relies on UML diagrams. OO analysis produces a conceptual model of what the system is functionally required to do. This conceptual model is typically represented in UML by use case diagrams, class diagrams, and interaction diagrams. The conceptual model is then transformed directly into computer program code.

Diff: 2 Page Ref: 397-398

32 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 11 Systems Implementation, Operation, and Control 1) Delays are routine during implementation because it is impossible to anticipate all potential problems during the systems design process.

Answer: TRUE Diff: 1 Page Ref: 425 2) Gantt charts can be very helpful because they show the order in which activities must be performed.

Answer: FALSE Diff: 2 Page Ref: 426 3) Selecting and training personnel is one of the implementation activities that are carried out based on the design plan.

Answer: TRUE Diff: 2 Page Ref: 428 4) The degree of success for a new system development project is affected by the adequacy of training given to employees.

Answer: TRUE Diff: 2 Page Ref: 428 5) It is a good assumption that employees will learn to use a new system by themselves.

Answer: FALSE Diff: 1 Page Ref: 428 6) One training method that makes use of current technological advances is computer-assisted training.

Answer: TRUE Diff: 1 Page Ref: 429 7) New computer equipment generally does not require special provisions for complex wiring schemes.

Answer: FALSE Diff: 1 Page Ref: 429 8) One powerful means of testing computer programs involves processing test data.

Answer: TRUE Diff: 2 Page Ref: 429 9) The test data approach should not be designed to "break" the computer program.

Answer: FALSE Diff: 2 Page Ref: 429

1 .

10) The cutoff point is the point at which individual segments of the new system are phased in according to a specific time schedule.

Answer: FALSE Diff: 2 Page Ref: 430 11) A project is a specific application that has been approved for development.

Answer: TRUE Diff: 1 Page Ref: 431 12) An important criterion used in selecting projects for development is the project's expected return on investment.

Answer: TRUE Diff: 2 Page Ref: 431 13) The basic resource in any systems project is time.

Answer: FALSE Diff: 2 Page Ref: 431 14) The project leader uses a project accounting system to fulfill his or her project control responsibilities.

Answer: TRUE Diff: 2 Page Ref: 432 15) The task completion schedule, based on task time estimates, should be maintained without revision if at all possible.

Answer: FALSE Diff: 2 Page Ref: 433 16) Time estimate standards developed in-house generally are less effective than standards or estimates available in current project management literature.

Answer: FALSE Diff: 2 Page Ref: 435 17) Purposely or inadvertently submitting unreasonably low time or cost estimates is known as low-balling.

Answer: TRUE Diff: 2 Page Ref: 436 18) Typically 30 to 40 percent of total project time is spent in the analysis phase of the systems development life cycle.

Answer: TRUE Diff: 2 Page Ref: 436 19) Timely project cost data is useful, but not essential, to track the costs incurred to date on a project.

Answer: FALSE Diff: 2 Page Ref: 436 2 .

20) Almost all project accounting systems are automated.

Answer: FALSE Diff: 1 Page Ref: 436 21) A weekly cost report that is available three weeks after the report date is still an effective tool for overall project control purposes.

Answer: FALSE Diff: 1 Page Ref: 436 22) If data are input into the project accounting system that is both accurate and timely, it can produce revised cost estimates that are both accurate and timely.

Answer: TRUE Diff: 1 Page Ref: 437 23) The level of detail produced in a project accounting system is proportionate to the overhead cost of running the system.

Answer: TRUE Diff: 2 Page Ref: 437 24) The appropriate level of detail to be obtained from a project accounting system is generally decided by the chief information officer.

Answer: FALSE Diff: 2 Page Ref: 437 25) From a control point of view, virtually all factors that relate to information systems are measured in terms of dollars.

Answer: FALSE Diff: 2 Page Ref: 441 26) The ratio of actual CPU time used to CPU time available is one measure of system utilization.

Answer: TRUE Diff: 1 Page Ref: 441 27) Audits of information systems often focus on internal control.

Answer: TRUE Diff: 1 Page Ref: 441 28) The amount of testing of a system by an auditor is directly proportional to the degree to which adequate internal controls exist and are operating effectively.

Answer: FALSE Diff: 2 Page Ref: 441

3 .

29) All modifications to a system's software and data schema should be formally reviewed and approved.

Answer: TRUE Diff: 2 Page Ref: 442 30) Programmers making changes to system software should use the operational copy of the software to test the changes in a "real world environment."

Answer: FALSE Diff: 2 Page Ref: 442 31) ISO 15504 (SPICE) is a process based development approach that focuses on the "maturity" of the process being developed.

Answer: TRUE Diff: 2 Page Ref: 427 32) The SPICE approach categorizes processes into five broad areas and scores "capability level" on a 10 point scale.

Answer: FALSE Diff: 2 Page Ref: 427 33) A project development environment refers to the tools and technologies used to implement a given project.

Answer: TRUE Diff: 2 Page Ref: 437 34) Within the project development environment the project collaboration platform serves to optimize management of the implementation of a systems development life cycle.

Answer: FALSE Diff: 2 Page Ref: 438 35) Within the project development environment the software application framework provides a structured environment in which to develop software.

Answer: TRUE Diff: 2 Page Ref: 438 36) A Web application framework that has received considerable attention is Ruby on Rails.

Answer: TRUE Diff: 2 Page Ref: 439 37) In service-oriented architecture (SOA), an important part of the application development framework is the business process execution language (BPEL) service engine.

Answer: TRUE Diff: 2 Page Ref: 439

4 .

38) The BPEL service engine needs a roadmap which is a set of visual diagrams based on the Unified Modeling Language and/or Business Process Modeling Notation.

Answer: TRUE Diff: 2 Page Ref: 439 39) The integrated development environment is a software platform for diagrams and models.

Answer: FALSE Diff: 2 Page Ref: 439 40) Software versioning system keeps only the current version of software source code available so version control issues are minimized.

Answer: FALSE Diff: 2 Page Ref: 440 41) Two major software versioning systems are Subversion (SVN) and Current Version System (CVS).

Answer: FALSE Diff: 2 Page Ref: 440 42) To determine the activities that are critical to keeping a project on schedule, ________ ________ must be obtained for each individual activity of the project.

Answer: estimated times Diff: 2 Page Ref: 426 43) An announcement by management regarding project execution will have the benefit of minimizing ________.

Answer: rumors Diff: 1 Page Ref: 428 44) Any successful systems implementation requires that considerable attention be given to employee ________.

Answer: training Diff: 2 Page Ref: 428 45) In the design and implementation of a system, it is almost always necessary to do additional work during the ________ phase.

Answer: implementation Diff: 2 Page Ref: 429 46) Good testing should do everything possible to ________ computer programs before they are implemented.

Answer: break Diff: 2 Page Ref: 429 47) The development of computer software without ________ is an almost worthless exercise.

Answer: documentation Diff: 1 Page Ref: 430 5 .

48) A major drawback of the ________ ________ process is that it can involve a greatly extended check-out period.

Answer: modular conversion Diff: 2 Page Ref: 430 49) An expensive, time-consuming problem in systems implementation is ________ ________.

Answer: file conversion Diff: 2 Page Ref: 430 50) ________ is necessary to ensure that the new system operates as planned.

Answer: Follow-up Diff: 2 Page Ref: 431 51) ________ ________ should be submitted to the steering committee in writing.

Answer: Project proposals Diff: 2 Page Ref: 431 52) ________ is a successive refinement to the project plan.

Answer: Scheduling Diff: 2 Page Ref: 432 53) A ________ chart is an ideal way to factor a project into phases and tasks and to document such a plan.

Answer: HIPO Diff: 2 Page Ref: 433 54) Regarding project costs, project resources tend to be spent at a(n) ________ rate as a project proceeds toward completion.

Answer: increasing Diff: 2 Page Ref: 436 55) A project accounting system operates much like a conventional ________ accounting system.

Answer: cost Diff: 2 Page Ref: 436 56) A major problem with a system that is down too much is ________ ________ for the company.

Answer: lost business Diff: 2 Page Ref: 441 57) ________ ________ Environment refers to the tools and technologies used to implement a given project.

Answer: Project Development Diff: 2 Page Ref: 437 6 .

58) The Project ________ Platform serves to optimize management of the communication chain.

Answer: Collaboration Diff: 2 Page Ref: 438 59) The ________ ________ Framework provides a structured environment in which to develop a software.

Answer: Software Application Diff: 2 Page Ref: 438 60) Many experts believe that eventually, in the future, all end-user software will run in ________-browsers.

Answer: Web Diff: 2 Page Ref: 438 61) The BPEL service engine needs a roadmap which is a set of ________ diagrams based on Unified Modeling Language and/or Business Process Modeling Notation.

Answer: visual Diff: 2 Page Ref: 439 62) ________ ________ Environment is a software platform for actually writing program code which provides specialized tools for testing and debugging programs and deploying them to servers for testing or release.

Answer: Integrated Development Diff: 2 Page Ref: 439 63) A list of activities that is strategic to the project to keep it on schedule is called A) the critical path.

B) a PERT diagram.

C) a Gantt chart.

D) the manager's priority matrix.

Answer: A Diff: 1 Page Ref: 427 64) Good project management uses plans for implementing a system. The plans should provide A) specific budget information.

B) a breakdown of the project into various phases.

C) specific timetables for completion.

D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 425

7 .

65) The first major step in systems implementation is A) review the systems design.

B) establish plans and controls.

C) evaluate the new system.

D) execute activities.

Answer: B Diff: 1 Page Ref: 425 66) The second major step in systems implementation is A) review the systems design.

B) establish plans and controls.

C) execute activities.

D) evaluate the new system.

Answer: C Diff: 1 Page Ref: 425 67) One way to get a comprehensive picture of the activities involved in implementing a systems plan and the order in which the activities should occur is to use a A) Gantt chart.

B) network diagram.

C) PERT diagram.

D) Gantt chart and a network diagram.

Answer: D Diff: 2 Page Ref: 426-427 68) The document that graphically shows the actual and planned times for the major activities of a systems implementation project is the A) Gantt chart.

B) network diagram.

C) PERT diagram.

D) HIPO chart.

Answer: A Diff: 2 Page Ref: 426 69) The document that shows the order in which activities may be performed and may be expanded to include estimated times for each individual activity is the A) Gantt chart.

B) network diagram.

C) PERT diagram.

D) CPM diagram.

Answer: B Diff: 2 Page Ref: 427

8 .

70) Which of the following groups of individuals should be on the special project team that executes the implementation of the design plan?

A) Systems technical personnel B) Accountants and auditors C) Individuals who also participated in the design D) Design team members and affected managers Answer: D Diff: 1 Page Ref: 428 71) The execution of the systems implementation should begin with A) conversion.

B) a formal announcement to employees.

C) employee training.

D) programming.

Answer: B Diff: 1 Page Ref: 428 72) Perhaps the most important step regarding the success of a systems development project is A) employee training.

B) conversion.

C) detailed system design.

D) operational training.

Answer: A Diff: 2 Page Ref: 428 73) When implementing a new system, management often has to decide whether to train existing employees or hire new employees. Many times it is best to retain and retrain current employees because A) current employees are already familiar with the firm's operations.

B) overall employee morale is enhanced.

C) current employees are already familiar with the firm's operations and overall employee morale is enhanced.

D) None of these answers are correct.

Answer: C Diff: 2 Page Ref: 428 74) To provide the proper environment for computer equipment operations, the company must control A) security.

B) wiring.

C) access.

D) temperature and humidity.

Answer: D Diff: 1 Page Ref: 429

9 .

75) Which of the following activities occurs during the detailed systems design phase?

A) Computer programming B) File conversion C) Documentation D) Evaluation Answer: A Diff: 1 Page Ref: 429 76) The design specifications for a computer program are determined by ________.

A) top management B) users C) the design team D) the computer programmer Answer: C Diff: 1 Page Ref: 429 77) One of the most important parts of systems implementation that is often overlooked or minimized is ________.

A) testing B) documentation C) data conversion D) evaluation Answer: B Diff: 1 Page Ref: 430 78) Which of the following can serve as both a training tool for new employees and a help for future computer programming?

A) Testing B) Evaluation C) Systems analysis D) Documentation Answer: D Diff: 1 Page Ref: 430 79) What standard should be used to evaluate the quality of documentation produced by a programmer?

A) The number of pages produced B) The number of logical flow diagrams and analytic flowcharts produced C) The amount of time spent to produce the documentation D) Whether a different programmer can use the documentation at a later date to modify the program Answer: D Diff: 2 Page Ref: 430

10 .

80) The process of changing input data into a format readable by the new system hardware is called ________.

A) testing B) file conversion C) evaluation D) documentation Answer: B Diff: 1 Page Ref: 430 81) The testing approach in which the old system is abandoned and the processing is switched to the new system is called ________.

A) parallel operation B) modular conversion C) the direct approach D) the file conversion approach Answer: C Diff: 1 Page Ref: 430 82) The testing approach in which the new system is phased in a segment at a time is ________.

A) parallel operation B) modular conversion C) the direct approach D) the file conversion approach Answer: B Diff: 1 Page Ref: 430 83) The most expensive approach to final systems testing is ________.

A) parallel operation B) modular conversion C) the direct approach D) the file conversion approach Answer: A Diff: 1 Page Ref: 430 84) The Weapons Testing Laboratory is implementing a new computer system. It desires to use the safest final system testing approach. It should choose ________.

A) the direct approach B) parallel operation C) the cutoff approach D) modular conversion Answer: B Diff: 2 Page Ref: 430

11 .

85) The Northwest Savings Bank is implementing a new computer system. It requires that the final testing systems approach is both safe and cost-effective. The bank has planned to implement the new system over the course of the next 18 months. The bank should choose ________.

A) parallel operation B) the direct approach C) modular conversion D) the cutoff approach Answer: C Diff: 2 Page Ref: 430 86) The selection of projects for development is usually the responsibility of A) the chief information officer.

B) the board of directors of the organization.

C) the chief financial officer.

D) the steering committee or other organization-wide unit.

Answer: D Diff: 2 Page Ref: 431 87) For an applications system project, the individual who should be included in the project team because he or she has the best working knowledge of how the application should function in the actual work environment is ________.

A) an analyst B) the chief information officer C) a computer programmer D) a representative from the user department for which the application is being developed Answer: D Diff: 2 Page Ref: 431 88) A system development project leader's direct responsibility regarding a project is to A) the user department.

B) the steering committee.

C) the information systems department.

D) the department of which the leader is a member.

Answer: B Diff: 2 Page Ref: 432 89) The individual who formally approves a system design and implementation project at its completion is the A) the project team leader.

B) the chairperson of the steering committee.

C) the manager of the department for which the application has been developed.

D) the chief information officer.

Answer: C Diff: 2 Page Ref: 432

12 .

90) In addition to project team organization, the project leader has several other primary responsibilities. Which of the following would not be a primary responsibility of the project leader?

A) Database administration B) Allocation of resources C) Task assignment D) Status reporting Answer: A Diff: 2 Page Ref: 432 91) The major problem faced by any project team is ________.

A) scheduling B) uncertainty C) resources D) managerial support Answer: B Diff: 1 Page Ref: 432 92) The guiding philosophy behind factoring a project into detailed activities is A) top-down design with successive refinement.

B) to schedule all activities according to CPM methodology.

C) to use analytic flowcharts to factor a project into modules.

D) to allow individual personnel to choose their own assignments.

Answer: A Diff: 3 Page Ref: 433 93) The operational principle behind factoring a project into phases and tasks is A) top-down design with successive refinement.

B) to schedule all activities according to CPM methodology.

C) that each specific task or phase should provide a deliverable at its completion.

D) to use analytic flowcharts to factor a project into modules.

Answer: C Diff: 3 Page Ref: 433 94) One goal of factoring a project into detailed activities is to A) decrease the total project cost.

B) decrease the total amount of time devoted to the project.

C) assist in organizing the project's documentation.

D) assist in assigning individual employees to tasks.

Answer: D Diff: 3 Page Ref: 433

13 .

95) The best standard to use in developing estimates for the completion time of systems development projects in an organization is A) a vendor-developed standard.

B) an industry-average standard.

C) a standard recommended by a consultant.

D) a standard developed by the organization's experience.

Answer: D Diff: 2 Page Ref: 433 96) There is no general agreement of standard project phases and tasks in current project management literature and therefore there are no commonly accepted time estimates or standard processing rates. However, there is agreement as to several points related to the estimation process. Which of the following is not an agreed-upon point in the estimation process?

A) Estimates are only estimates no matter how well thought out.

B) Initial estimates regarding time and costs are almost always too high.

C) The accuracy of estimation improves considerably as a project proceeds toward completion.

D) Costs are frequently higher than originally estimated.

Answer: B Diff: 3 Page Ref: 435 97) Which of the following is not an aspect of good project control?

A) Setting measurable goals for each phase and task in the overall project B) Reporting actual performance against the established project goals C) Establishing and revising estimates of system utilization D) Evaluating any significant deviations from the project plan Answer: C Diff: 2 Page Ref: 436 98) An accounting system in which costs are assigned to individual projects as the projects proceed through their environment is known as a ________.

A) project accounting system B) cost accounting system C) managerial accounting system D) financial accounting system Answer: A Diff: 1 Page Ref: 436 99) Materials costs in system application development projects primarily consist of A) computer use charges for program development and testing.

B) wages and salaries paid to project team members.

C) supplies used by the project team during the course of the project.

D) pro-rated amounts for temporary office space used by the project team.

Answer: A Diff: 2 Page Ref: 437

14 .

100) A key input that is needed for the project accounting program to estimate future costs to complete projects are A) computer usage reports.

B) overhead rates.

C) time sheets.

D) progress reports.

Answer: D Diff: 2 Page Ref: 437 101) Certain performance measures for hardware, software, and personnel are important from a control point of view. Which method listed below is not used to evaluate these items?

A) processing time B) dollars C) performance D) quality of documentation or quantity of program code produced Answer: B Diff: 2 Page Ref: 441 102) The percentage of the time an application is unavailable for use is known as A) the bottleneck interval.

B) cutoff points.

C) downtime.

D) the minimal resource allocation period.

Answer: C Diff: 2 Page Ref: 441 103) Most firms engage auditors to conduct an examination of an information system. The focus of such an audit should be A) the information system itself.

B) system utilization and performance after the implementation is complete.

C) the validity and accuracy of the data processed by the system.

D) the information system itself and the validity and accuracy of the data processed by the system.

Answer: D Diff: 2 Page Ref: 441 104) Which tools would an auditor engaged in examining an information system use in conducting the audit?

A) Internal control questionnaires B) Compliance and specific transaction tests C) Internal control questionnaires and compliance and specific transaction tests D) None of these answers are correct.

Answer: C Diff: 2 Page Ref: 441

15 .

105) In all operational systems, it becomes necessary to make changes. A change made because of a computer programming error not detected until the system begins operation is typically caused by a(n) ________.

A) bug B) virus C) worm D) unexpected design contingency Answer: A Diff: 1 Page Ref: 441 106) Modifications to the system may be necessary as environmental conditions and information needs change. A systems modification that has been completed should always be A) approved by the organization's steering committee.

B) carefully documented.

C) low on the system development priority list since new system requests take priority.

D) paid for by the user group who made the initial request.

Answer: B Diff: 2 Page Ref: 442 107) Examples of "all-in-one" and Integrated Platforms application suites are A) Casewise and Netweaver Developer Studio.

B) Ruby on Rails and Perl.

C) Java and PHP. D) None of the above are integrated platform suites.

Answer: A Diff: 2 Page Ref: 440 108) A web-server is part of a/an ________.

A) IDE B) DB system C) application solution stack D) None of the above includes a web-server.

Answer: C Diff: 2 Page Ref: 440 109) Regarding Web application coding, one could correctly say that A) server-side scripting is more popular than client-side scripting.

B) server-side scripting is less popular than client-side scripting.

C) server-side scripting and client-side scripting are equally popular.

D) None of the above are correct.

Answer: A Diff: 2 Page Ref: 438

16 .

110) Which is an example of client-side scripting?

A) Java B) PHP C) Ruby D) None of the above are client-side scripting.

Answer: D Diff: 2 Page Ref: 438 111) Which of the following is not true of versioning software?

A) It can keep old copies of application software.

B) It can be used to rollback mistakes after they are made.

C) It works mainly as stand alone software.

D) All of the above are true of versioning software.

Answer: C Diff: 2 Page Ref: 440 112) Software project collaboration platforms focus on ________.

A) implementing IDEs B) debugging projects C) communications D) generating code automatically Answer: C Diff: 2 Page Ref: 438 113) Under the SPICE approach, the processes are categorized into the below EXCEPT A) communicating.

B) customer-supplier.

C) engineering.

D) supporting.

Answer: A Diff: 2 Page Ref: 427 114) Under SPICE a process is scored based on a 6-point A) difficulty level.

B) capability level.

C) scale of intelligence.

D) management rating.

Answer: B Diff: 2 Page Ref: 427 115) The tools and technologies used to implement a given project is in the A) the physical design.

B) the conceptual framework.

C) enterprise architecture.

D) project development environment.

Answer: D Diff: 2 Page Ref: 437 17 .

116) The project development environment includes the following EXCEPT A) project collaboration platform.

B) integrated development environment.

C) software versioning system.

D) customer-supplier stacks.

Answer: D Diff: 2 Page Ref: 437 117) In the project development environment, serving to manage the communication chain is the A) project collaboration platform.

B) software versioning system.

C) integrated development environment.

D) application solution stack.

Answer: A Diff: 2 Page Ref: 438 118) A typical project collaboration platform is a ________ application in which all the project participants are able to access and create/review a project's organization, specification, milestones, checklists, tasks, shared document, work-time logs and software code.

A) Perl 2.0 B) Ruby 2.0 C) Web 2.0 D) PHP 2.0 Answer: C Diff: 2 Page Ref: 438 119) In the project development environment, providing a structured environment in which to develop a software is the A) project collaboration platform.

B) software versioning system.

C) software application framework.

D) integrated development environment.

Answer: C Diff: 2 Page Ref: 438 120) Individual server-side development frameworks tent to be related to specific programming languages such as ________.

A) Java B) PHP C) PERL D) All of the above pertain to server-side development.

Answer: D Diff: 2 Page Ref: 438

18 .

121) The general trend is toward more ________ development, and some feel that eventually in the future, all end-user software will run in Web-browsers.

A) client-side B) server-side C) end-user D) object oriented Answer: A Diff: 2 Page Ref: 438 122) A Web application framework and object oriented programming language that is based on the Model-View-Controller structure is A) OO collaboration.

B) Web 2.0.

C) PERL. D) Ruby on Rails.

Answer: D Diff: 2 Page Ref: 439 123) In service-oriented architecture (SOA), an important part of the application development framework is the A) BPEL. B) IDE. C) UML. D) OMG. Answer: A Diff: 2 Page Ref: 439 124) Integrated Development Environment (IDE) is a software platform A) for storing old versions of code and communication software.

B) for writing program code and providing specialized tools for testing and debugging programs.

C) for Web servers identified for program planning and analysis.

D) All of the above are examples of what an IDE will do.

Answer: B Diff: 2 Page Ref: 439 125) The Software Versioning System keep both current and historical versions of the A) deployment services already coded.

B) objects already designed.

C) software source code.

D) UML diagrams.

Answer: C Diff: 2 Page Ref: 440

19 .

126) A group of software components needed to deliver a workable application is called a/an A) solution assessment package.

B) finalized deliverable set.

C) database system.

D) application solution stack.

Answer: D Diff: 2 Page Ref: 440 127) The application solution stack for a web application typically include the following EXCEPT A) subversion software.

B) target operating system.

C) Web server.

D) programming languages.

Answer: A Diff: 2 Page Ref: 440

20 .

128) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Network diagram ________ 2. Gantt chart ________ 3. Parallel operation ________ 4. Modular conversion ________ 5. Project management ________ 6. Cutover point ________ 7. Downtime ________ 8. Bug ________ 9. Critical path ________ 10. Lowballing A. A moment in time under the direct approach to implementation where the switch to a new system is made B. Involves running the new and old systems simultaneously before final conversion C. The percentage of time that equipment is unavailable for use D. A scheduling technique that depicts the order in which the activities must be performed E. Purposely or inadvertently submitting unreasonably low time or cost estimates to obtain a contract F. Tools used to track progress and manage resources for a systems development project G. Computer programming error that is not detected until the program is in use H. A list of activities that are crucial in that if any one of them is delayed, the entire project will be delayed I. An approach to implementation that involves phasing in a new system in segments J. A scheduling technique that graphically depicts both the actual and planned times for activities, but does not show the relationships between various activities Answer: 1. D 6. A 2. J 7. C 3. B 8. G 4. I 9. H 5. F 10. E Diff: 2 Page Ref: 442

21 .

129) Presented below is a list of terms related to project leader responsibilities.

Required: For each term, insert the letter for the project leader responsibility to which the term relates. Use P for planning, S for scheduling, and C for control. Each letter will be used more than once. ________ 1. Progress and time reporting ________ 2. Uses Gantt charts or PERT network charts ________ 3. Resource allocation ________ 4. Status reports to management ________ 5. Uses a project accounting system ________ 6. Project breakdown ________ 7. Task assignment ________ 8. Related to successive refinement of the project plan ________ 9. Activity/task scheduling ________ 10. Its objective is to facilitate resource assignment and control Answer: 1. C 6. P 2. S 7. S 3. P 8. S 4. C 9. S 5. C 10. P Diff: 2 Page Ref: 432

22 .

130) Presented below is a list of different performance measures for hardware, software, and systems personnel. The second list contains the items or personnel relating to the performance measures.

Required: Match the appropriate letter to the performance measure. All letters will be used at least once, and some more than once. ________ 1. Survey of system users ________ 2. Tape drive utilization statistics ________ 3. Mean time between failures ________ 4. Quality of documentation written ________ 5. On-time rate for job runs ________ 6. Number of data records entered per hour ________ 7. Downtime ________ 8. Average length of time per repair job ________ 9. Ratio of CPU time used to CPU time available ________ 10. Number of keystrokes per hour A. Computer hardware performance B. Computer software performance C. Programmer performance D. Data entry specialist performance E. System operator performance F. Hardware repair person performance Answer: 1. B 6. D 2. A 7. A 3. A 8. F 4. C 9. A 5. E 10. D Diff: 2 Page Ref: 441

23 .

131) The estimated time to complete a portion of a systems development project is 20 employeehours. Use the adjustment factors below to calculate the revised time estimate to reflect that (a) the task is judged to be simple, (b) the task will be assigned to a high-competency junior employee, and (c) the task requires a low level of knowledge.

Complexity factors: Simple 0.5 Average 1.0 Complex 2.0

Knowledge required: Much 1.0 Average 0.7 Little 0.3

Personnel competence/experience factors: Competence level: Experience: Low High Senior 1.0 0.7 Intermediate 1.8 1.1 Junior 2.8 1.9 Answer: Adjusted time estimate: 20 hours × 0.5 × (1.9 + 0.3) = 22 hours Diff: 2 Page Ref: 434-435 132) The estimated time to complete a portion of a systems development project is 50 employeehours. Use the adjustment factors below to calculate the revised time estimate to reflect that (a) the task is judged to be complex, (b) the task will be assigned to a high-competency senior employee, and (c) the task requires a high level of knowledge.

Complexity factors: Simple 0.5 Average 1.0 Complex 2.0

Knowledge required: Much 1.0 Average 0.7 Little 0.3

Personnel competence/experience factors: Competence level: Experience: Low High Senior 1.0 0.7 Intermediate 1.8 1.1 Junior 2.8 1.9 Answer: Adjusted time estimate: 50 hours × 2.0 × (0.7 + 1.0) = 170 hours Diff: 2 Page Ref: 434-435

24 .

133) The Arnold Steel Company controller is concerned about the dollar costs associated with recent system problems. Specifically, she has mentioned what seems to be a lot of system downtime, lack of responsiveness to user queries and report requests, and the fact the data entry department's keying times have risen over the last two months.

Required: a. Are the controller's concerns of a totally financial nature? Explain your answer. b. Identify from a systems implementation, operation, and control point of view what aspects the controller is dealing with, and what possible managerial controls could be established in this situation.

Answer: a. The controller's concerns about the information system are not immediately (or easily) quantifiable in dollars and cents because she has identified three nonfinancial aspects of the information systems function. In the long run, if these problems are not controlled or eliminated, the company will begin to suffer financially. b. Such concerns about these examples of nonfinancial aspects of the information system can be addressed through establishing managerial controls. The three major nonfinancial aspects of the information systems function are as follows: • The hardware's performance: Examples: Measure system utilization, system downtime, and system responsiveness.

Correct problems when measurement falls below an established threshold.

• The software's performance:

Examples: user friendliness and functionality. In this situation a modification may be necessary to make the system more responsive to user queries and generation of reports. This could also possibly be a capacity problem, and/or hardware performance oriented. This potentially could become an excellent systems development project for the company to undertake.

• The personnel's performance:

Examples: the efficiency of data entry personnel, system operators, and hardware repair personnel. Again, measurement and setting benchmarks will provide needed feedback as to the possible problem with slow keying times. This situation may be personnel oriented as well as either hardware and/or software oriented. The problem should be further investigated to determine the causes of the slow keying times.

Diff: 2 Page Ref: 441

25 .

134) Name five options available to organizations to train employees when a system is newly installed or modified.

Answer: Suggested answer: Training options available to organizations include: • hiring outside consultants • using training manuals • using videotape presentations • using audiotape presentations • using training seminars • using individualized hands-on instruction • using computer-assisted training Diff: 2 Page Ref: 429 135) What are some of the reasons why time estimates are often inaccurate?

Answer: Suggested answer: Major causes of inaccurate time estimates are: • the uncertainties inherent in systems development, such as final user preferences and needs • lack of personnel experienced in systems development • undue pressure to complete a project • the desire on the part of participants (employees or contractors) to appear more efficient • failure to consider nonproductive time, such as time lost due to sickness • failure to consider the productive capabilities of different people Diff: 2 Page Ref: 433-436

26 .

136) Briefly describe the following three methods of converting from an old system to a new system, and give the advantages and disadvantages of each: • direct approach • parallel operation • modular conversion Answer: Suggested answer: The direct approach involves switching to the new system at once and discontinuing the old system at a certain point in time called a cutoff point (such as a possible weekend conversion).

This method may be used when incompatible or relatively minor changes are being implemented. An advantage to this approach is that it is relatively inexpensive. The drawback to this approach is that it allows for the possibility of major system problems impairing the actual operation of the company.

Parallel operation involves using both the old system and the new system simultaneously for a period of time while the new system is being "debugged." The results of operations of both systems are compared. If discrepancies are found, it probably indicates problems in the new system. The advantage to this approach is that it is extremely safe. The disadvantage is that it is very expensive and may not be cost effective in all applications.

Modular conversion involves a gradual phase-out of the old system on a module-by-module or segment basis. Some aspects of operation are switched over to the new system while the old system is used for other aspects. An advantage of this system is that it is very safe, as any new module or segment which proves to be defective can be temporarily replaced with the old module or segment. The disadvantage of such a conversion is that it can involve a greatly extended checkout period.

Diff: 2 Page Ref: 430 137) What is the ultimate objective of breaking down an overall new systems development project into phases? How is this process accomplished?

Answer: Suggested answer: The overall objective of breaking down a project into distinct phases is to maintain control over the project. This is accomplished best by subdividing the project into separate phases (or factoring). If a total project is suitably factored into the smaller components of a system life cycle, the project becomes easier to control and understand. Factoring involves defining specific tasks, assigning tasks to particular individuals, estimating the time and costs required at each phase, requiring documentation to be produced at each phase, and having high-level management review after each phase is completed. There is no standard method for factoring a project into detailed activities; however, the guiding philosophy here is to incorporate top-down design with successive refinement.

Diff: 2 Page Ref: 433

27 .

138) What is a project accounting system, and how does it function?

Answer: Suggested answer: A project accounting system is actually a cost accounting system. The system is used to assign costs to individual projects as they proceed through their development cycle. A properly operating project accounting system can keep track of costs incurred to date on a project and provide a summary cost report at the project's completion. Such a system can be either manual or automated.

There are six major components of a project accounting system as follows: • overhead rates • time sheets • computer usage summaries • progress reports • costs to date • revised cost estimates Inputs into the system must be timely and accurate. The final input which must be input on a timely basis is the progress report, which details the amount of progress to date on each project.

Project accounting systems can be as detailed as necessary to provide timely and accurate information, but care must be taken to not require too much detail. If too much detail is required, the costs of running the system may well outweigh the benefits derived from the system's output reports.

Diff: 2 Page Ref: 436-437

28 .

139) What is the project development environment and explain the major components within this environment.

Answer: Suggested answer: The project development environment refers to the tools and technologies used to implement a given project. This includes the 1. project collaboration platform, 2. software application framework, 3. integrated development environment, 4. software versioning system, and 5. the development and deployment application solution stacks.

The project collaboration platform serves to optimize management of the communication chain.

Typically, project collaboration platform is a Web 2.0 application in which all the project participants are able to access and create/review projects, organize project specifications, milestones, checklists, tasks, shared documents, work-time logs, and software code.

The software application framework provides a structured environment in which to develop a software. The framework may include specific programming languages, development tools and aids, and libraries of software that provide ready made functionality.

The integrated development environment is a software platform for actually writing program code, provides specialized tools for testing and debugging programs and deploying them to servers for testing or final release. Most IDEs support third party plug-ins to support different programming languages.

The software versioning system keeps current and historical versions of the software source code (i.e., the programs as they are written by programmers). Such version control permits programmers (and managers) to logically retain a complete updated copy of the software as often as every time it is saved by the programmer during development. This permits not only an historical record (and audit trail) of the development, it also permits the software to be rolled back to an earlier version in case of a problem in the current version.

An application solution stack (APS) is a group of software components needed to deliver a workable application. The APS for a web application typically includes the target operating system, the web server, the database system, and the programming language(s) and any other needed component of the application software framework.

Diff: 2

Page Ref: 437-440

29 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 12 File Data Processing and Data Management Concepts 1) The terms field, data item, attribute, and element are synonyms.

Answer: TRUE Diff: 1 Page Ref: 449 2) A field would be composed of "customer name" and "customer account number."

Answer: FALSE Diff: 1 Page Ref: 449 3) Variable-length records are easier to manipulate than fixed-length records because the size of the variable-length record is generally smaller than the fixed-length record.

Answer: FALSE Diff: 2 Page Ref: 449 4) Occurrences are also known as instances.

Answer: TRUE Diff: 1 Page Ref: 449 5) Related groups of fields that repeat themselves in variable-length records are called repeated groups.

Answer: TRUE Diff: 1 Page Ref: 451 6) It is useful to sort the records in a file so that they are either in ascending or descending order relative to the sort key.

Answer: TRUE Diff: 2 Page Ref: 452 7) The entity-relationship data model is perhaps the most promising modeling technique.

Answer: FALSE Diff: 2 Page Ref: 455 8) The tree database structure corresponds to the data structure supported by COBOL and other widely-used programming languages.

Answer: TRUE Diff: 2 Page Ref: 456 9) Network systems are pointer-based systems that allow users to browse through databases in random fashion by selecting keywords or objects.

Answer: FALSE Diff: 2 Page Ref: 457 10) Relational databases use relational algebra to create tables.

Answer: TRUE Diff: 1 Page Ref: 459 1 .

11) Nominalization is the process of applying rules to normal forms in relational database structures.

Answer: FALSE Diff: 2 Page Ref: 459 12) In the first normal form, repeated groups are allowed.

Answer: FALSE Diff: 2 Page Ref: 460 13) An index file is fully inverted when indexes exist for all of its fields.

Answer: TRUE Diff: 2 Page Ref: 463 14) Sequential-access files are often referred to as ISAM files.

Answer: FALSE Diff: 1 Page Ref: 463 15) Using the direct-access method, the only thing needed to locate a record is its key value.

Answer: TRUE Diff: 2 Page Ref: 465 16) Using the direct-access method, congestion results when two or more records yield the same address.

Answer: FALSE Diff: 2 Page Ref: 466 17) The length of time the user must wait for the system to complete an operation is known as downtime.

Answer: FALSE Diff: 1 Page Ref: 468 18) Records are contiguous when they are physically next to each other on a disk.

Answer: TRUE Diff: 2 Page Ref: 469 19) The logical structure of a database is called a schema.

Answer: TRUE Diff: 2 Page Ref: 471 20) DBMS is a user-friendly computer language or interface that allows the user to request information from the database.

Answer: FALSE Diff: 2 Page Ref: 472 21) SQL is a non-procedural programming language.

Answer: TRUE Diff: 2 Page Ref: 473 2 .

22) In SQL, WHERE must be used to determine which records from the tables listed in the FROM clause will appear in the results of the SELECT statement.

Answer: FALSE Diff: 2 Page Ref: 473 23) Individual logical expressions may be combined in a FROM clause with the Boolean operator AND in SQL. Answer: FALSE Diff: 2 Page Ref: 474 24) In some respects the word "file" loses its meaning in a database environment.

Answer: TRUE Diff: 1 Page Ref: 477 25) Database software primarily deals with the physical aspects of file use, while accounting application software deals with the logical aspect of file use.

Answer: FALSE Diff: 1 Page Ref: 477 26) A major advantage of DBMS is its ability to construct special database files quickly and efficiently.

Answer: TRUE Diff: 2 Page Ref: 477 27) A data dictionary can only be used with a DBMS. Answer: FALSE Diff: 1 Page Ref: 478 28) A database alias can also arise because the same data item is called different things in different programs written in different languages.

Answer: TRUE Diff: 1 Page Ref: 478 29) When a DBA is present and active within an organization, users are almost always willing to give up their responsibility for data elements.

Answer: FALSE Diff: 2 Page Ref: 479 30) A database is a structured collection of data stored in a computer system or network.

Answer: TRUE Diff: 2 Page Ref: 448 31) A database together with database software is database agnosticity.

Answer: FALSE Diff: 2 Page Ref: 448

3 .

32) A database management system is independent of the application software therefore permitting upgrading or modifying the eBusiness application without changing data or database software. This is referred to as database agnosticity.

Answer: TRUE Diff: 2 Page Ref: 449 33) Software tools such as Casewise are used to visually represent the E-R models.

Answer: TRUE Diff: 2 Page Ref: 469 34) Database drivers , NOT database connectors, can be used to connect the business application to the DBMS. Answer: FALSE Diff: 2 Page Ref: 469 35) Object oriented modeling can be easily transformed into OO program code.

Answer: TRUE Diff: 2 Page Ref: 470 36) The move to object oriented design is due to the fact that OO databases outperform relational databases in a wide range of common tasks that are typically performed in a business environment.

Answer: FALSE Diff: 2 Page Ref: 470 37) OLAP is a multi-dimensional generalization of the 3-dimensional relational table.

Answer: FALSE Diff: 2 Page Ref: 470 38) An advantage of OLAP is its fast response time.

Answer: TRUE Diff: 2 Page Ref: 470 39) OLAP uses simple multidimensional "indexes" called aggregations in data mining applications.

Answer: FALSE Diff: 2 Page Ref: 470 40) A petabyte is 1015 bytes (characters).

Answer: TRUE Diff: 2 Page Ref: 470 41) In-memory database differs from conventional databases in that the entire database is loaded into computer-internal high-speed random access memory or other highspeed electronic storage device.

Answer: TRUE Diff: 2 Page Ref: 470 4 .

42) ACID is used to prevent database fraud.

Answer: FALSE Diff: 2 Page Ref: 471 43) The smallest block of data that can be stored and retrieved in an information system is a(n) ________.

Answer: field or data item or attribute or element Diff: 1 Page Ref: 449 44) ________ are one of the fundamental building blocks used to construct databases.

Answer: Segments Diff: 2 Page Ref: 451 45) The term ________ ________ order applies to a field on which the file is not sorted.

Answer: relative random Diff: 2 Page Ref: 453 46) In the E-R conceptual model, the term ________ is used instead of segment, and the term ________ is used to refer to individual fields or data items.

Answer: entity; attribute Diff: 2 Page Ref: 453 47) ________ fields cross-link segments in tree and network database structures.

Answer: Pointer Diff: 2 Page Ref: 457 48) A row in a relational database table is called a ________.

Answer: tuple Diff: 2 Page Ref: 461 49) In an ISAM file organization, the portion of the disk on which the actual records are written is the ________ area.

Answer: prime Diff: 2 Page Ref: 465 50) A file that allows an individual to almost instantaneously retrieve records without the use of an index is a(n) ________-access file.

Answer: direct Diff: 1 Page Ref: 465 51) The computer language that allows a DBA to define the logical structure of the database is called ________.

Answer: DDL Diff: 2 Page Ref: 471

5 .

52) The first word usually found in an SQL statement intended to extract data from a database is ________.

Answer: SELECT Diff: 2 Page Ref: 473 53) A database ________ is a collection of all data item names in a database, along with a description of the standardized representation form of the data items.

Answer: dictionary Diff: 1 Page Ref: 477 54) An invaluable benefit of DBMSs is their ability to provide ________ for databases.

Answer: security Diff: 1 Page Ref: 477 55) One primary objective of a data dictionary is to eliminate data ________ to the extent feasible.

Answer: redundancies Diff: 2 Page Ref: 479 56) ________ refers to the physical form that data will be stored in such as BCD or EBCDIC. Answer: Encoding Diff: 2 Page Ref: 478 57) Database ________ permits the upgrading or modifying the eBusiness application without changing data or database software.

Answer: agnosticity Diff: 2 Page Ref: 449 58) A software database ________, also called a database connector, can be used to connect the business application to the DBMS. Answer: driver Diff: 2 Page Ref: 469 59) OLAP is multi-dimensional generalization of the 2-dimensional ________ table.

Answer: relational Diff: 2 Page Ref: 470 60) When the entire database is loaded into computer-internal high-speed random access memory or other high speed electronic storage device it is called ________ database.

Answer: in-memory Diff: 2 Page Ref: 470 61) The "A" in ACID stands for ________.

Answer: atomicity Diff: 2 Page Ref: 471

6 .

62) ________ in ACID means a transaction is not undone if the system fails after it is completed.

Answer: Durability Diff: 2 Page Ref: 471 63) Fields associated with other fields in a logical grouping are known as ________.

A) elements B) records C) data items D) attributes Answer: B Diff: 1 Page Ref: 449 64) In the CUSTOMER record, the field NAME contains the word "Jones" along with 20 spaces after the last character. This is an example of a ________.

A) variable-length record B) data item C) fixed-length record D) trailer Answer: C Diff: 2 Page Ref: 449 65) In data management terminology, a record occurrence is a A) secondary sort key.

B) trailer record containing additional data.

C) method of specifying variable-length records.

D) specific example of a record structure.

Answer: D Diff: 1 Page Ref: 449 66) A trailer record is an extension of a(n) ________.

A) master record B) attribute C) segment D) transaction record Answer: A Diff: 1 Page Ref: 450 67) Variable-length records have characteristics that are not found in fixed-length records. An example of such a characteristic is (are) A) The field width can be adjusted for each data occurrence.

B) Because of their size, most records stored on DASD are variable-length records.

C) The actual number of fields can vary from one data occurrence to another.

D) The field width can be adjusted for each data occurrence and the actual number of fields can vary from one data occurrence to another.

Answer: D Diff: 2 Page Ref: 450 7 .

68) In the record format STORE (STORE_NO, CITY, VEND#1,VEND#2) which field is repeated?

A) STORE B) CITY C) VEND D) STORE_NO Answer: C Diff: 2 Page Ref: 451 69) In the record format STORE (STORE_NO, CITY, VEND#1,VEND#2) which field is the parent?

A) STORE B) CITY C) VEND D) STORE_NO Answer: A Diff: 2 Page Ref: 451 70) In the record format STORE (STORE_NO, CITY, VEND#1,VEND#2) which field is the key?

A) STORE B) STORE_NO C) VEND D) CITY Answer: B Diff: 2 Page Ref: 452 71) The difference between segments and simple records is that A) simple records have parents and children.

B) segment are collections of fields.

C) segments have parents and children.

D) segments have no fields.

Answer: C Diff: 2 Page Ref: 451 72) A data item or combination of data items that uniquely identify a particular record in a file is called a(n) ________.

A) key B) occurrence C) attribute D) variable-length field Answer: A Diff: 1 Page Ref: 452 8 .

73) Four records have the record structure: PART (PART_NO, WARHSE).

PART (101,1) PART (101,2) PART (103,1) PART (106,1) Which of the following would be appropriate to use as a record key?

A) PART B) PART_NO C) WARSHE D) Answers B and C combined would form a record key.

Answer: D Diff: 1 Page Ref: 452 74) To process and locate records in files, it is necessary to use a(n) ________.

A) attribute B) key or record key C) parent D) element Answer: B Diff: 1 Page Ref: 452 75) Four records have the record structure: EQUIPMENT (EQUIP#, LOCATION).

EQUIPMENT (204,1) EQUIPMENT (204,2) EQUIPMENT (208,1) EQUIPMENT (209,1) When sorting these records, which field is the primary sort key and which field is the secondary sort key?

A) EQUIPMENT is primary; no secondary sort key is required B) EQUIP# is primary; no secondary sort key is required C) EQUIP# is primary; LOCATION is the secondary key D) LOCATION is primary; EQUIP# is the secondary key Answer: C Diff: 3 Page Ref: 452 76) A database is defined in terms of the kind of information it includes and the purposes for which it is to be used. This is an example of defining database architecture at the ________.

A) logical level B) conceptual level C) physical level D) relational level Answer: B Diff: 2 Page Ref: 453

9 .

77) An analyst has identified a certain database as "indexed-sequential." This is an example of defining database architecture at the ________.

A) physical level B) conceptual level C) logical level D) relational level Answer: A Diff: 2 Page Ref: 453 78) A database has a hierarchical data structure. This is an example of defining database architecture at the ________.

A) physical level B) conceptual level C) sequential level D) logical level Answer: D Diff: 2 Page Ref: 453 79) In an entity-relationship data model, the concepts of part number, type, and cost are known as ________.

A) entities B) attributes C) relations D) objects Answer: B Diff: 2 Page Ref: 454 80) In the object-oriented modeling technique, related groups of fields are known as ________.

A) objects B) parents C) children D) object classes Answer: D Diff: 2 Page Ref: 454 81) In the entity-relationship model a diamond shape in a diagram represents ________.

A) a relationship B) an entity C) an attribute D) an object Answer: A Diff: 2 Page Ref: 454

10 .

82) In the object-oriented database modeling technique, an object class divided into subclasses represents an ________.

A) object B) entity C) inheritance relationship D) object class Answer: C Diff: 2 Page Ref: 454 83) In the object-oriented modeling technique, an object class has the following structure: PAPER_INVENTORY (SUPPLIER_NO, DISCOUNT) What is the structure of the subclass COPY having the unique attributes QUANTITY and TYPE? A) COPY (QUANTITY, TYPE) B) COPY (SUPPLIER_NO, QUANTITY, TYPE) C) COPY (SUPPLIER_NO, DISCOUNT, QUANTITY, TYPE) D) COPY (PAPER_INVENTORY, QUANTITY, TYPE) Answer: C Diff: 3 Page Ref: 454 84) Network, tree, and relational models are examples of database structure at which level?

A) Physical level B) Logical level C) Conceptual level D) Hierarchical level Answer: B Diff: 1 Page Ref: 455 85) The database structure which allows a child segment to have more than one parent is the ________.

A) network B) sequential C) tree D) object Answer: A Diff: 2 Page Ref: 456 86) The logical structure most commonly used in business today is the ________.

A) tree structure B) network structure C) hierarchical structure D) relational structure Answer: D Diff: 1 Page Ref: 458

11 .

87) Pointer fields are not used in A) relational structures.

B) list structures.

C) hypertext models.

D) semantic data networks.

Answer: A Diff: 2 Page Ref: 458 88) Tables without repeating groups in a relational database are said to be A) unnormalized.

B) in the first normal form.

C) in the second normal form.

D) in the third normal form.

Answer: B Diff: 2 Page Ref: 460 89) In a relational database, tables that do not have any nonkey fields determining the values of other nonkey fields are said to be A) in the first normal form.

B) in the second normal form.

C) in the third normal form.

D) unnormalized.

Answer: C Diff: 2 Page Ref: 460 90) In a relational database, tables in which no key field is allowed to determine the values of any nonkey field are said to be A) unnormalized.

B) in the third normal form.

C) in the first normal form.

D) in the second normal form.

Answer: D Diff: 2 Page Ref: 460 91) Sequential-access files are useful A) when only a small number of records need to be accessed in a file containing a large number of records.

B) in batch processing.

C) when files are unsorted.

D) when a large accounts receivable master file is in random account number order.

Answer: B Diff: 3 Page Ref: 462

12 .

92) What data are stored in the index of an indexed file?

A) The keys and the disk addresses of the individual records B) The disk addresses of the individual records C) All essential fields for the individual records D) The keys for the individual records Answer: A Diff: 1 Page Ref: 463 93) The processing time required to maintain a fully inverted file A) is fast since the entire index can be loaded into primary memory.

B) is almost instantaneous because long indexes can be factored into subindexes.

C) is fast when two processors are used simultaneously to process the data and index files at the same time.

D) can be high since the indexes require more disk storage and must be updated whenever records are added, deleted, or changed.

Answer: D Diff: 3 Page Ref: 463 94) The processing and inquiry objectives of file usage are both addressed by A) sequential-access file organization.

B) fully inverted index file organization.

C) indexed-sequential file organization.

D) direct-access file organization.

Answer: C Diff: 2 Page Ref: 464 95) Which of the following is characteristic of the indexed-sequential access method?

A) Processing is direct-access; queries are sequential.

B) Processing is sequential; queries are handled through an index.

C) Processing and queries are both handled through an index.

D) Processing and queries are both sequential.

Answer: B Diff: 2 Page Ref: 464 96) An indexed-sequential file contains A) an index, a prime area, and an overflow area.

B) an index, a parent file, and a child file.

C) an index, an access area, and a hierarchical file.

D) an index, an overflow area, and a fully inverted file.

Answer: A Diff: 1 Page Ref: 464

13 .

97) The purpose of the index in an ISAM file is to A) increase the time needed to write records on the prime area.

B) bump records to the overflow area when no prime space is available.

C) link the record key to the address.

D) search tracks for the desired record.

Answer: C Diff: 2 Page Ref: 464 98) A widely used method of storing and locating records in a direct-access file is A) when a record's key field corresponds directly to the coding scheme used by the computer itself.

B) to store physical device addresses as a field within a file's records.

C) to convert a key to a storage location address using an index.

D) to convert a key to a storage location address using a randomizing transformation.

Answer: D Diff: 2 Page Ref: 465 99) The use of a randomizing transformation to process transactions against a direct-access master file is based on A) comparing the master record key and the transaction record key for equality.

B) converting the transaction record key to a storage area location address by using a mathematical algorithm.

C) searching a list structure for the associated master file record.

D) searching an index for the associated master file record.

Answer: B Diff: 2 Page Ref: 465 100) Overflow in a directly-accessed file means A) hashing a record to an address.

B) vacant storage space created by the hashing results.

C) extra storage space is required because the hashing results in more than one record being assigned to the same address.

D) a separate section of the disk is allocated for file additions.

Answer: C Diff: 2 Page Ref: 466 101) The basic economics of file processing are largely determined by the activity ratio, which is the A) number of times a master file is accessed during a period.

B) average number of transactions contained in a transaction file.

C) number of accessed records times the number of records in the file.

D) number of accessed records divided by the number of records in the file.

Answer: D Diff: 1 Page Ref: 467

14 .

102) A high activity ratio A) is typical of batch processing, such as a payroll application.

B) is characteristic of all file processing activities in a large corporation.

C) spreads the fixed costs of sequential processing over fewer transactions.

D) makes ISAM processing more economical if the files are not processed in low activity situations.

Answer: A Diff: 3 Page Ref: 468 103) The cost of processing per transaction in a high-activity environment is the lowest in which of the following file organization techniques?

A) Indexed B) Sequential C) Direct D) Indexed-sequential Answer: B Diff: 2 Page Ref: 467 104) Response time is affected by A) disk access time.

B) how data records are physically distributed on the disk.

C) the database management system but not the operating system.

D) disk access time and how data records are physically distributed on the disk.

Answer: D Diff: 3 Page Ref: 469 105) In a database management system, defining an individual user view of the database is known as defining the A) subschema.

B) name of a data element.

C) schema.

D) number of positions of the data element.

Answer: A Diff: 2 Page Ref: 471 106) The database computer language that consists of commands for updating and extracting data is ________.

A) DDL B) DBA C) DML D) DQL Answer: C Diff: 1 Page Ref: 471

15 .

107) The basic DML statement used to modify the rows of tables in SQL is ________.

A) SELECT B) DELETE C) UPDATE D) INSERT Answer: C Diff: 1 Page Ref: 473 108) In SQL, the query to extract a customer name from a table identified as company is A) SELECT name, company.

B) SELECT name FROM company.

C) SELECT company, name.

D) SELECT FROM company, name.

Answer: B Diff: 2 Page Ref: 473 109) In an SQL query, the comparison operator used to specify "greater than" is ________.

A) >= B) => C) > D) =>> Answer: C Diff: 1 Page Ref: 474 110) The command used in an SQL query to combine fields from several tables is: ________.

A) GROUP BY B) ORDER BY C) WHERE INSTR D) INNER JOIN Answer: D Diff: 2 Page Ref: 474 111) Database management systems have the ability to integrate separate data files for various accounting applications. In the absence of integration, each type of accounting application will maintain its own independent data files. Which of the following is an advantage of maintaining separate files for accounting applications?

A) Maintaining separate files is simple.

B) Using independent files, accounting data must be fed into each application file numerous times.

C) Since files are defined early in the implementation process, the evolving needs of applications may be constrained by the existing file structure.

D) Independence among files often leads to different structures for the same data.

Answer: A Diff: 2 Page Ref: 476

16 .

112) The essential characteristics of the database approach to data processing of accounting data requires that A) data storage is integrated into a single database.

B) separate processing routines are required for separate files.

C) all access to integrated files is through a single software system.

D) data storage is integrated into a single database and all access to integrated files is through a single software system.

Answer: D Diff: 3 Page Ref: 477 113) Database dictionaries are defined and controlled by A) a DBA. B) a DBMS. C) the SQL DML component.

D) the organization's steering committee.

Answer: A Diff: 1 Page Ref: 477 114) Which of the following is an alias?

A) A file whose records consist of data item descriptions B) The use of more than one name for the same field C) The user having the final responsibility for a data item D) The physical form in which data are stored in a database Answer: B Diff: 2 Page Ref: 478 115) An example of a data dictionary item occurrence that would fall under the category of "characteristics" is ________.

A) Name B) Owner C) Definition D) Range of values Answer: D Diff: 2 Page Ref: 479 116) The proper administration of the data dictionary in a database helps to establish A) standards and conventions.

B) documentation of the data resource.

C) standards and conventions and the documentation of the data resource.

D) better security by assigning codes to data items and their processing attributes.

Answer: C Diff: 2 Page Ref: 479

17 .

117) Many of the problems a database administrator faces within an organization are A) internal-control related.

B) political.

C) software and hardware related.

D) data-integrity related.

Answer: B Diff: 2 Page Ref: 479 118) A database, together with database software is a ________.

A) database objects B) database agnosticity C) database management system D) database logical structure Answer: C Diff: 2 Page Ref: 448 119) ________ permit(s) the data to be physically stored apart from the application which facilitates a client-server, tiered architecture environment, in which multiple client users access a shared database.

A) Database objects B) Database agnosticity C) Database management system D) Database logical structure Answer: B Diff: 2 Page Ref: 449 120) ________ connect(s) the business application to the database management system.

A) Database driver B) Database agnosticity C) CASEwise D) Database objects Answer: A Diff: 2 Page Ref: 469 121) Object oriented modeling can be ________ easily into object oriented program code.

A) moved B) translated C) uploaded D) transformed Answer: D Diff: 2 Page Ref: 470

18 .

122) In practice, ________ databases outperform ________ databases in a wide range of common tasks that are typically performed in a business environment.

A) object oriented, relational B) conceptual, relational C) relational, object oriented D) object oriented, conceptual Answer: C Diff: 2 Page Ref: 470 123) ________ is a multi-dimensional generalization of the 2-dimensional relational table which provides incredibly fast response times.

A) OLAP B) UML C) RUP D) RAD Answer: A Diff: 2 Page Ref: 470 124) OLAP uses complicated multidimensional "indexes" called ________.

A) data mining B) aggregations C) drivers D) transformers Answer: B Diff: 2 Page Ref: 470 125) What defines an entire database being loaded into computer-internal high-speed random access memory or other high-speed electronic storage device?

A) Internal database B) In-resident database C) RAM database D) In-memory database Answer: D Diff: 2 Page Ref: 470 126) ACID A) ensures reliability of processing database transactions.

B) makes sure development of databases are thorough.

C) ensures a complete design is implemented.

D) makes processing data extremely fast and reporting error free.

Answer: A Diff: 2 Page Ref: 471

19 .

127) The "C" in ACID stands for ________.

A) completeness B) consistency C) conventional D) conceptual Answer: B Diff: 2 Page Ref: 471 128) High level query languages include the below EXCEPT ________.

A) QBE B) NLDQ C) OQL D) SQL Answer: D Diff: 2 Page Ref: 476 129) Third party reporting solutions can provide end users the ability to easily extract reports and queries from the application database. Examples of these reporting solutions include A) Crystal Reports.

B) MicroStrategy.

C) OLAP. D) Crystal Reports and MicroStrategy are both examples of 3rd party reporting solutions.

Answer: D Diff: 2 Page Ref: 476

20 .

130) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. DBA ________ 2. Inheritance ________ 3. Occurrence ________ 4. Branch ________ 5. Database model ________ 6. Record ________ 7. Fully inverted file ________ 8. Trailer record ________ 9. Record key ________ 10. Field A. The connection between children and parent(s) in a tree structure B. Individual who has overall responsibility for database administration C. The smallest block of data that will be stored and retrieved in the information system D. A synonym for schema E. A relationship created when an object class is divided into subclasses F. A file in which all fields are indexed G. A specific set of data values for a record H. A logical grouping of fields (data items) that concern a certain entity I. A data item or combination of data items that uniquely identify a particular record in a file J. A fixed-length extension of a master record Answer: 1. B 6. H 2. E 7. F 3. G 8. J 4. A 9. I 5. D 10. C Diff: 2 Page Ref: 480-482

21 .

131) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Ring structure ________ 2. Alias ________ 3. ISAM ________ 4. Relational algebra ________ 5. Tuple ________ 6. Activity ratio ________ 7. Variable-length record ________ 8. Normalization ________ 9. Disk access time ________ 10. Randomizing transformation A. A row in a relational table B. Both the number of fields and the length (character size) of each field are variable C. A list organization in which the last record in the ring points back to the first record D. Operations used to extract information from relational tables E. A widely used method of storing and locating records in a direct-access file F. The process of applying normal form rules in the relational database model G. A synonym for indexed-sequential file organization H. The length of time required for the CPU to retrieve a single block of data from the disk I. Different users call the same field different names J. The number of active records divided by the number of records in the file Answer: 1. C 6. J 2. I 7. B 3. G 8. F 4. D 9. H 5. A 10. E Diff: 2 Page Ref: 480-482

22 .

132) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Logical data structure ________ 2. Key ________ 3. Node ________ 4. DQL ________ 5. Element ________ 6. Hypertext systems ________ 7. DML ________ 8. SELECT ________ 9. First normal form ________ 10. DDL A. Defines the logical structure of the database (schema) B. A synonym for field C. A synonym for record key D. Systems that allows users to browse through databases in random fashion by selecting key words or objects E. The rational manner in which records and fields in the database are structured and organized F. Almost all statements in SQL begin with this word G. The commands for updating, editing, manipulating, and extracting data from a database H. A user-friendly language or interface that allows the user to request information from the database I. Relational tables that do not contain any repeating groups J. A synonym for repeated group Answer: 1. E 6. D 2. C 7. G 3. J 8. F 4. H 9. I 5. B 10. A Diff: 2 Page Ref: 480-482

23 .

133) Listed below are ten examples of file organization.

Required: From the following three choices, match the file organization technique with each of the ten examples listed. All techniques will be used more than once.

S = Sequential IS = Indexed-sequential D = Direct access ________ 1. A large manufacturing company pays all employees once a week. ________ 2. The inventory system of a 24-hour grocery store automatically orders merchandise from vendors when the inventory level is low. ________ 3. A bank customer checking account file is online in an ATM network. The bank also uses the file each month to produce customer statements. ________ 4. An Internet retailer sells children's toys online. ________ 5. An airline reservation system answers customer inquiries about available flights and seats and makes customer reservations. ________ 6. Bookstore employees use an inventory file each week to prepare purchase orders for books. ________ 7. A plant assets file for a small manufacturer is used to prepare quarterly depreciation reports. It is used once a year to prepare a report for insurance purposes. ________ 8. Employees use a vendor application at a trucking company daily to answer questions and accrue accounts payable. The company writes checks to vendors once a week. ________ 9. A file of payables due to actors and writers is processed monthly to prepare royalty checks; it is also used once a year to prepare tax reports. ________ 10. A metropolitan branch library scans books to check them out, answers patron inquiries about available books, and mails monthly statements to patrons having overdue books.

Answer: 1. S 6. S 2. D 7. S 3. IS 8. IS 4. D 9. S 5. D 10. IS Diff: 2 Page Ref: 461-468

24 .

134) A database contains the following data: Student Schedule (Student#, Student_name, Major, Course#1, ClassTime1, Location1, Course#2, ClassTime2, Location2, Course#3, ClassTime3, Location3) Required: Normalize this relation through the third normal form.

Answer: Student Schedule (Student#, Course#1, Course#2, Course#3) Student (Student#, Student_name, Major) Course Schedule (Course#, ClassTime, Location) Diff: 3 Page Ref: 459-461 135) Assume that the customer master file and the transaction file consist of the record numbers shown in the following sequence: Master file Transaction file

3, 7, 23, 76, 79, 99 3, 4, 23, 23, 7, 76, 99

The record number 99 denotes the logical end of the file. The program processes records in ascending order.

Required: On the lines below, indicate the numbers of records affected as described. a. Master records which were updated ________ b. Master records which were not updated ________ c. Transaction records which were posted ________ d. Transaction records which were not posted (an error condition) ________ Answer: a. Master records which were updated 3, 23, 76 b. Master records which were not updated 7, 79 c. Transaction records which were posted 3, 23, 23, 76 d. Transaction records which were not posted (an error condition) 4, 7 Diff: 2 Page Ref: 461-462

25 .

136) Below are three situations in which the Data Definition Language (DDL), the Data Manipulation Language (DML), or the Data Query Language (DQL) of a database management system will be used. Indicate on the line beside each situation which of the languages would likely be used. ________ A. A programmer uses COBOL to make revisions to the company's payroll application. ________ B. The zip code file in a customer master file is expanded to accommodate the nine digit "zip plus 4" zip codes. ________ C. The personnel director requests a special report regarding the number of employees in the company with a post-secondary education.

Answer: A. DML B. DDL C. DQL Diff: 2 Page Ref: 471-472

26 .

137) Below are four situations in which the DML component of SQL can be used to manipulate and/or extract data. Indicate on the line beside each situation the letter(s) of the SQL statement, command, or condition which will allow a user to manipulate and/or extract the requested data and information. An answer may be used more than once, but not all answers will be used.

A. SELECT B. WHERE C. ON D. OR E. COUNT AS F. GROUP BY G. ORDER BY H. FROM I. INNER JOIN J. IN ________ 1. The query calls for selecting certain names and zip codes, sorted by zip code. ________ 2. The query calls for selecting certain companies found in the USA and Canada tables and grouping them by country ________ 3. The query calls for appending the company name for company 12 to the topics located in the notes table. ________ 4. The query calls for summarizing the count of companies by country.

Answer: 1. A, H, G 2. A, H, B, D, F 3. A, H, I, C, B 4. A, E, H, F Diff: 3 Page Ref: 473-475

27 .

138) Discuss the relative benefits and drawbacks of the following file organization methods: a. sequential b. indexed-sequential c. direct Answer: Suggested answer: a. Sequential: This method has the advantage of utilizing storage space on a disk or tape most efficiently, which is especially crucial for very large files. The method's main disadvantages are the requirement for all files to be sorted (or in sorted order) prior to processing and to access each record in sequence. The latter can be time-consuming, thus making quick response impossible. b. Indexed-sequential: This method has the advantage of sequential organization discussed above. In addition, due to the use of an index to locate files, this method also allows for accessing individual records quickly. The index is useful when a quick response time is needed or a low-activity application is used. This method is most appropriate when both high-activity and low-activity uses. Indexed-sequential organization uses more storage space then sequential organization because the indexes take up extra space. c. Direct: This method has the fastest response time due to the use of a randomizing transaction to locate individual records. However, this method also can lead to large amounts of wasted storage space depending on the particular algorithm that is used.

Diff: 2 Page Ref: 461-468 139) Describe the duties of the database administrator (DBA) regarding the data dictionary.

Answer: Suggested answer: A database administrator is responsible for establishing standards, conventions, and documentation for the database and maintaining the data dictionary. The DBA controls both the contents of the data dictionary and its use. By controlling the data dictionary, the DBA can control the data entering the database and reduce the amount of redundant and incompatible data.

The DBA, rather than the user, is responsible for the data resource. Consequently, the DBA must effectively coordinate the usage of the data and communicate with users who may be willing to give up their data to the database.

Diff: 2 Page Ref: 479

28 .

140) Describe the index, prime area, and overflow area in an ISAM file structure.

Answer: Suggested answer: The index is a map that links the key fields of records to their addresses in the prime area. Each index entry shows the range of key fields on a particular track of the disk on which the file is stored. The computer searches the index to find the track where the record is found. The computer then searches the track sequentially to locate the record. The prime area is the portion of the disk on which the records are written. The overflow area is a separate area of the disk allocated to the file to allow additions with minimal processing. When a record is added to the file, the computer places it in its correct position in the prime area. If extra space is not available in the prime area, the new record bumps an existing record off the track being updated, and the computer moves the record to the overflow area. If a record is not found on the track referenced in the index, the computer automatically searches the overflow area.

Diff: 2 Page Ref: 464-465 141) Describe how list organization and multilist organization work in tree and network databases. Also, distinguish between a list structure and a ring structure in the implementation of tree and network structures. How does the list organization make database maintenance difficult?

Under what circumstances is the list organization effective?

Answer: Suggested answer: In a list organization, each record contains one or more pointers showing the address of the next logical record with the same attribute(s). A record containing more than one pointer belongs to more than one list. The multiple lists are called multilist organizations. The list structure shows the records according to the list organization, or the multilist organization. An indicator shows the end of the list. The ring structure differs from the list structure because the last record in the ring points back to the first record. Also, all records may point backward and forward by using additional pointer fields. The list organization makes database management difficult because the pointers require additional storage space and must be updated every time a record is added or deleted. Pointers in tree and network database structures work best when records are seldom added or deleted.

Diff: 2 Page Ref: 457

29 .

142) Discuss the conceptual level of architecture relevant to databases and their management.

Answer: Suggested answer: At the conceptual level of architecture, databases are collections of various elements of information to use for assorted purposes. A database may be defined at this level in terms of the kinds of information it includes and the purposes for which it is to be used. Specific data fields and records must be defined to implement a database defined at the conceptual level. The ways in which the data records and fields will be viewed (as well as related to each other) must also be specified. There is no one standard approach for developing a conceptual data model. There are two popular approaches used: the entity-relationship (E-R) model and the object-oriented modeling technique (OMT). The E-R model depicts relationships between segments. E-R terminology uses "entity" instead of segment and "attribute" to indicate individual fields or data items. The object-oriented model (OMT) was originally developed for object-oriented programming (OO). This model works by viewing the components of the system being modeled as object classes (with object classes corresponding to segments, and objects corresponding to particular instances). OMT also defines relationships between segments, with the basic relationship created when an object class is divided into subclasses (this is called inheritance).

Diff: 2 Page Ref: 453-455 143) What is ACID? Provide a description of each part.

Answer: Suggested answer: ACID ensures reliability of processing database transactions.

"A" stands for atomicity which means the entire transaction is completed or NO part of it is completed. "C" is consistency which means only valid data will be written to the database. "I" is isolation, where other operation cannot interfere with a transaction that is in the middle of being processed. "D" is durability where a transaction is not undone if the system fails after it is completed - any finished transactions are stored.

Diff: 2 Page Ref: 471

30 .

Accounting Information Systems, 10e (Bodnar/Hopwood) Chapter 13 Auditing Information Technology 1) Auditing activities undertaken during substantive testing of account balances can be described as "auditing through the computer."

Answer: FALSE Diff: 1 Page Ref: 492 2) The external auditor serves the firm's stockbrokers, the government, and the general public.

Answer: TRUE Diff: 1 Page Ref: 492 3) Total audit cost is increased significantly when some audit resources are directed at reviewing and verifying the internal controls that exist in a system.

Answer: FALSE Diff: 2 Page Ref: 493 4) With the advances in technology today, the "around-the-clock" approach to auditing is no longer widely used.

Answer: TRUE Diff: 2 Page Ref: 494 5) Application controls are related to specific computer application systems.

Answer: TRUE Diff: 1 Page Ref: 494 6) Basic auditing standards may be altered by the technology employed in the system to be audited.

Answer: FALSE Diff: 2 Page Ref: 494 7) Using information technology in auditing reduces the time spent on clerical tasks and may improve the overall morale and productivity of auditors.

Answer: TRUE Diff: 1 Page Ref: 495 8) ITF is the one universal auditing approach used in information system audits.

Answer: FALSE Diff: 1 Page Ref: 496 9) The test data technique requires minimal computer expertise and is usually inexpensive to implement.

Answer: TRUE Diff: 1 Page Ref: 496

1 .

10) ITF does not involve the input of test data into the master files of the computer system being audited.

Answer: FALSE Diff: 1 Page Ref: 497 11) ITF is a powerful information system audit technology.

Answer: TRUE Diff: 1 Page Ref: 499 12) Parallel simulation processes test data through real programs.

Answer: FALSE Diff: 1 Page Ref: 499 13) Parallel simulation is appropriate where transactions are sufficiently important to require a 100 percent audit.

Answer: TRUE Diff: 2 Page Ref: 499 14) GAS has a long history of usage because public accounting firms developed it in the 1960s.

Answer: TRUE Diff: 1 Page Ref: 500 15) Some embedded audit routines use automated collection language (ACL) to embed specially programmed modules as in-line code with regular programs.

Answer: FALSE Diff: 2 Page Ref: 500 16) Embedded audit routines are more easily added to a program as a modification rather than being added as a program is developed.

Answer: FALSE Diff: 2 Page Ref: 500 17) Snapshot technology is generally incorporated into extended records for later review by auditors.

Answer: FALSE Diff: 2 Page Ref: 501 18) A trace can produce thousands of output records if an excessive number of transactions are tagged.

Answer: TRUE Diff: 2 Page Ref: 501 19) The degree of independence that auditors can maintain while developing embedded audit routines will depend largely on the level of technical expertise that they possess.

Answer: TRUE Diff: 1 Page Ref: 502 2 .

20) One type of tracing is to verify a hash total of the object code of software to detect modifications to the software.

Answer: FALSE Diff: 2 Page Ref: 502 21) Specific documentation showing the nature of application controls in a system is known as control flowcharting.

Answer: TRUE Diff: 1 Page Ref: 502 22) Most information system audits follow a four-phase structure, which is followed by analysis and reporting of results.

Answer: FALSE Diff: 2 Page Ref: 503 23) An audit program is a detailed list of the audit procedures to be applied on a particular audit.

Answer: TRUE Diff: 1 Page Ref: 503 24) An information systems application audit focuses almost exclusively on the testing of processing controls.

Answer: FALSE Diff: 2 Page Ref: 504 25) Development standards are major general controls in computerized systems.

Answer: TRUE Diff: 2 Page Ref: 504 26) Project management controls are concerned with the maintenance of application programs.

Answer: FALSE Diff: 1 Page Ref: 504 27) One very common program change control is to periodically compare actual copies of object code with duplicate copies retained in the past.

Answer: FALSE Diff: 2 Page Ref: 505 28) Information system development audits are more common to large organizations because they often have a formal development process.

Answer: TRUE Diff: 2 Page Ref: 505 29) An audit of an organization's computer service center is normally undertaken before any information system application audit.

Answer: TRUE Diff: 2 Page Ref: 505 3 .

30) PCAOB has encouraged a risk-based approach to testing the effectiveness of internal controls as they relate to financial audits.

Answer: TRUE Diff: 2 Page Ref: 496 31) Audits of computer service centers do not require as high a degree of technical expertise as do audits of computerized applications.

Answer: FALSE Diff: 2 Page Ref: 506 32) Risk-based auditing provides assurances relating to the effectiveness of an organization's enterprise risk management process.

Answer: TRUE Diff: 2 Page Ref: 495 33) In RBA, the subject of the audit is how well the management prevents fraud.

Answer: FALSE Diff: 2 Page Ref: 495 34) IT governance has the objective of enhancing and ensuring the efficient application of IT resources as a critical success factor.

Answer: TRUE Diff: 2 Page Ref: 506 35) COBIT is an IT governance framework that is critical in ensuring proper control and governance over information and the system that creates, stores, manipulates, and retrieves that information.

Answer: TRUE Diff: 2 Page Ref: 507 36) COBIT contains 34 IT processes and organizes them into 8 domains.

Answer: FALSE Diff: 2 Page Ref: 507 37) Each COBIT IT process should have its own navigation diagram.

Answer: TRUE Diff: 2 Page Ref: 507 38) Maturity models are used to evaluate an organization's relative level of achievement of IT governance on a scale from 1-10.

Answer: FALSE Diff: 2 Page Ref: 509 39) CISA, CISM, and CGEIT are professional certifications in system security.

Answer: FALSE Diff: 2 Page Ref: 512 4 .

40) ________ auditors commonly undertake audits that are reviewed and relied upon by ________ auditors.

Answer: Internal; external Diff: 2 Page Ref: 493 41) When batch processing was the dominant method used in computerized data processing, the ________ approach provided an adequate audit.

Answer: around-the-computer Diff: 1 Page Ref: 493 42) A clear and obvious benefit is obtained from the ________ analysis capability provided by information technology.

Answer: data Diff: 2 Page Ref: 495 43) The ________ ________ technique may be used to verify input transaction validation routines.

Answer: test data Diff: 2 Page Ref: 496 44) Test data used in ITF are identified by special ________ and must be excluded from normal system outputs.

Answer: codes Diff: 2 Page Ref: 498 45) Using an integrated-test-facility approach, ________ testing is appropriate to ________, realtime processing technology.

Answer: concurrent; concurrent Diff: 2 Page Ref: 499 46) Auditors with little computer expertise can use ________ to perform audit-related data processing functions.

Answer: GAS or generalized audit software Diff: 2 Page Ref: 500 47) A comprehensive ________ ________ can be established by collecting, in an extended record, supplementary data concerning processing not normally collected.

Answer: audit trail Diff: 2 Page Ref: 501 48) All embedded audit routine techniques require a(n) ________ level of technical expertise to set up, and at least a(n) ________ level of knowledge to use them effectively.

Answer: moderate; moderate or high Diff: 2 Page Ref: 502

5 .

49) In ________ checking, an auditor manually processes test or real program data through the logic of a program.

Answer: desk Diff: 2 Page Ref: 502 50) ________ can be effectively used in conjunction with a test data technique.

Answer: Mapping Diff: 2 Page Ref: 503 51) Application controls are divided into ________ general areas.

Answer: three Diff: 1 Page Ref: 504 52) The primary audit technique used in an information systems development audit is the review and testing of related ________.

Answer: documentation Diff: 2 Page Ref: 504 53) Documentation governing the design, development, and implementation of application systems is known as systems ________ ________.

Answer: development standards Diff: 2 Page Ref: 504 54) The concentrations of a computer service center audit are ________ ________.

Answer: environmental controls Diff: 2 Page Ref: 505 55) ________ is an IT governance professional certification for individuals who manage, design, oversee, and assess an enterprises information security program.

Answer: CISM Diff: 2 Page Ref: 512 56) An organization's current status, current status compared to benchmarks and international standards, as well as an organization's strategy for improvement is called a ________ model.

Answer: maturity Diff: 2 Page Ref: 509 57) ________ is an open standard which provides "good practices" across a domain and process framework and presents activities in a manageable and logical structure.

Answer: COBIT Diff: 2 Page Ref: 507 58) In RBA, the subject of the audit is how well the management manages ________.

Answer: risk Diff: 2 Page Ref: 495

6 .

59) RBA provides assurances relating to the effectiveness of an organization's ________ ________ ________ processes.

Answer: enterprise risk management Diff: 2 Page Ref: 495 60) "Auditing with the computer" A) is only performed by external auditors.

B) involves activities related to compliance testing.

C) is only performed by internal auditors.

D) involves activities related to substantive testing of account balances.

Answer: D Diff: 1 Page Ref: 492 61) "Auditing through the computer" refers to A) substantive tests.

B) compliance tests.

C) transaction tests.

D) application control tests.

Answer: B Diff: 1 Page Ref: 492 62) An interim audit A) consists only of substantive testing of account balances.

B) has the objective of verifying financial statement figures to render a professional opinion of the financial statements.

C) has the objective of establishing the degree to which the internal control system can be relied upon.

D) None of these answers are correct.

Answer: C Diff: 2 Page Ref: 493 63) Confirming the existence, assessing the effectiveness, and checking the continuity of the operation of the internal controls upon which reliance is placed is called A) compliance testing.

B) financial statement auditing.

C) auditing "around-the-computer."

D) substantive testing.

Answer: A Diff: 2 Page Ref: 493

7 .

64) A financial statement audit A) consists only of compliance testing of account balances.

B) has the objective of verifying financial statement figures to render a professional opinion of the financial statements.

C) has the objective of establishing the degree to which the internal control system can be relied upon.

D) None of these answers are correct.

Answer: B Diff: 1 Page Ref: 493 65) External auditors typically conduct compliance testing because A) the main goal of a financial statement audit is to ensure that internal controls are operating effectively.

B) compliance tests yield more reliable evidence than substantive tests.

C) compliance tests determine how much reliance can be placed on the internal controls in substantive tests.

D) compliance testing can be conducted solely by the internal auditors.

Answer: C Diff: 3 Page Ref: 493 66) The comparison of input to output is known as auditing A) around-the-computer.

B) through the computer.

C) with the computer.

D) without the computer.

Answer: A Diff: 1 Page Ref: 494 67) The verification of controls in a computer system is known as auditing A) around-the-computer.

B) through the computer.

C) with the computer.

D) without the computer.

Answer: B Diff: 1 Page Ref: 494 68) The use of information technology to perform audit work is known as auditing A) around-the-computer.

B) through the computer.

C) without the computer.

D) with the computer.

Answer: D Diff: 1 Page Ref: 494

8 .

69) Information system audits to verify compliance with internal controls are performed by A) internal auditors only.

B) external auditors only.

C) outside third-party consultants only.

D) both internal and external auditors.

Answer: D Diff: 1 Page Ref: 494 70) Information technology is used to perform some audit work that otherwise would be done manually. The use of information technology by auditors is A) essential.

B) mandatory under AICPA Statements of Auditing Standards.

C) optional.

D) at the sole discretion of the manager in charge of the audit.

Answer: A Diff: 1 Page Ref: 494 71) An external auditor conducts an information systems audit using the professional standards promulgated by the A) Institute of Internal Auditors.

B) American Institute of Certified Public Accountants.

C) Institute of Management Accountants.

D) Information Systems Audit and Control Association.

Answer: B Diff: 1 Page Ref: 494 72) An internal auditor conducts an information systems audit using the professional standards promulgated by the A) Institute of Internal Auditors.

B) American Institute of Certified Public Accountants.

C) Institute of Management Accountants.

D) Information Systems Audit and Control Association.

Answer: A Diff: 1 Page Ref: 494 73) Which of the following is a possible benefit of using information systems technology in the conduct of an audit?

A) Increased independence from information systems personnel B) Elimination of most manual calculations, footing, and cross-footing C) Standardization of audit working papers and correspondence D) All of these answers are correct.

Answer: D Diff: 1 Page Ref: 495

9 .

74) The first (and oldest) technique used to audit through the computer is A) the integrated test facility.

B) parallel simulation.

C) the test data approach.

D) generalized audit procedures.

Answer: C Diff: 1 Page Ref: 496 75) Which of the following procedures uses only auditor-prepared test transactions?

A) The test data approach B) Integrated test facility C) Parallel simulation D) Embedded audit routines Answer: A Diff: 2 Page Ref: 496 76) The information systems auditing technique that uses special software to monitor the execution of a program is called ________.

A) embedded audit routines B) mapping C) a snapshot D) tracing Answer: B Diff: 2 Page Ref: 503 77) The information systems auditing technique that uses software that has been specifically designed to allow auditors to perform audit-related data processing functions is called ________.

A) mapping B) tracing C) generalized audit software D) embedded audit routines Answer: C Diff: 2 Page Ref: 500 78) Which of the following statements is an advantage to using the test data technique in information systems auditing?

A) The test can be run only on a specific program at a specific point in time.

B) The test must be announced.

C) Test data is limited to certain combinations of processing conditions.

D) The technique is used for testing programs in which calculations such as interest or depreciation are involved.

Answer: D Diff: 3 Page Ref: 496

10 .

79) Which of the following statements is a disadvantage to using the integrated-test-facility (ITF) approach in information systems auditing?

A) When carefully planned, the costs of using ITF are minimal.

B) No interruption of normal computer activity is involved in using ITF. C) Fictitious data must be excluded from output reports.

D) ITF is used in large computer application systems that use real-time processing.

Answer: C Diff: 3 Page Ref: 498 80) Which of the following should be developed when the related application system is developed?

A) Test data approach B) Integrated test facility C) Parallel simulation approach D) Artificial intelligence software Answer: B Diff: 2 Page Ref: 499 81) Which of the following processes real data through a test program?

A) Test data approach B) Integrated test facility C) Parallel simulation approach D) Artificial intelligence software Answer: C Diff: 2 Page Ref: 499 82) An audit technique not requiring the use of the client's computer facilities is A) the use of snapshots.

B) the test data approach.

C) the integrated test facility.

D) parallel simulation.

Answer: D Diff: 2 Page Ref: 499 83) An advantage of generalized audit software is that A) it can select a sample of accounts receivable for confirmation and help the auditor prepare confirmation requests.

B) the auditor avoids having to review systems documentation.

C) it eliminates the need for any coding by the auditor.

D) the client's staff can use it to perform audit-related tasks.

Answer: A Diff: 1 Page Ref: 500

11 .

84) Which of the following is correct regarding the ACL audit software package?

A) ACL can only be used in a mainframe environment.

B) ACL enables the field auditor to connect a PC to a client's accounting system.

C) ACL is used primarily for administrative audit activities.

D) Most client files must be converted to the ACL language format before processing.

Answer: B Diff: 3 Page Ref: 500 85) The technology that involves the modification of actual computer programs for audit purposes is called A) generalized audit software (GAS).

B) ACL. C) embedded audit routines.

D) record extension.

Answer: C Diff: 2 Page Ref: 500 86) Using embedded audit routine technology, an auditor may program a module so that the test limits can be altered as desired. This approach has been termed A) sample audit review file.

B) in-line coding.

C) system control audit review file.

D) off-line auditing.

Answer: A Diff: 2 Page Ref: 500 87) The extended record technique provides a way to reconstruct an audit trail by A) adding specific "dummy" test data processed by the system in the extended record for examination by the auditor after processing is complete.

B) processing real data through a test program and comparing the simulated and regular output after processing is complete.

C) capturing a detailed-listing of the sequence of program statement execution in the extended record that would not normally be saved.

D) tagging specific transactions and capturing intervening processing steps in the extended record that would not normally be saved.

Answer: D Diff: 3 Page Ref: 501 88) The snapshot technique involves capturing and dumping A) selected transaction data.

B) the program code itself.

C) selected master file contents.

D) selected memory contents.

Answer: D Diff: 2 Page Ref: 501

12 .

89) Which two information system auditing technologies are very similar?

A) Snapshot and extended records B) ITF and ACL C) Snapshot and ACL D) Extended records and ITF Answer: A Diff: 3 Page Ref: 501 90) Which of the following information system auditing technologies produces a printed audit trail of computer processing?

A) Extended records B) Snapshot C) Sample audit review file D) System control audit review file Answer: B Diff: 2 Page Ref: 501 91) Tracing of a program's execution provides A) programmed edits for input data items.

B) test data for subsequent processing.

C) a detailed listing of the sequence of program statement execution.

D) a comprehensive audit trail which can be reviewed by auditors after processing ends.

Answer: C Diff: 2 Page Ref: 501 92) Probably the oldest (and still widely used) information systems auditing technique is A) test data.

B) review of systems documentation.

C) generalized audit software.

D) ACL. Answer: B Diff: 3 Page Ref: 502 93) The auditor performs a review of systems documentation A) during the initial audit phase.

B) throughout the audit at the beginning of each audit phase.

C) during the intermediate phase, after becoming familiar with the basic approach to be taken.

D) during the final audit phase, giving the auditor a chance to first become familiar with all of the company's operations.

Answer: A Diff: 1 Page Ref: 502

13 .

94) Routines that collect and summarize statistics concerning program resource utilization are called A) embedded audit routines.

B) mapping.

C) job accounting routines.

D) tracing.

Answer: C Diff: 2 Page Ref: 502 95) The information system auditing technology that originated as a technique to assist in program design and testing is A) tracing.

B) parallel simulation.

C) snapshot.

D) mapping.

Answer: D Diff: 2 Page Ref: 503 96) Which of the following information system auditing technologies would be the best to monitor the execution of a computer program?

A) Integrated test facility B) Parallel simulation C) Mapping D) Embedded audit routine Answer: C Diff: 3 Page Ref: 503 97) The phase of an information systems audit in which an audit program is created is the ________.

A) first phase B) second phase C) third phase D) fourth phase Answer: A Diff: 1 Page Ref: 503 98) Compliance testing is the key activity performed in which phase of an information systems audit?

A) Second phase B) First phase C) Fourth phase D) Third phase Answer: D Diff: 1 Page Ref: 504

14 .

99) The phase of an information systems audit in which effort is placed on fact-finding in the areas selected for audit is the ________.

A) first phase B) second phase C) third phase D) fourth phase Answer: B Diff: 1 Page Ref: 504 100) Information systems application audits differ from information systems audits because application audits A) are divided into four general areas, each of which has three phases.

B) involve reviewing input, processing, and output controls.

C) are directed at the activities of systems analysts and programmers.

D) focus primarily on fact-finding in the areas selected for audit.

Answer: B Diff: 2 Page Ref: 504 101) An audit that examines the controls governing the systems process and which directly affect the reliability of the application programs created is called a(n) A) general information system audit.

B) information system applications audit.

C) application systems development audit.

D) information system computer service center audit.

Answer: C Diff: 1 Page Ref: 504 102) Which of the following controls would not be examined in the audit of a computer service center?

A) Environmental controls B) Physical security controls C) Management controls D) Process application controls Answer: D Diff: 2 Page Ref: 505 103) Reviewing PERT/CPM charts, Gantt charts, schedules and time and status reports is an activity undertaken in which of the following phases of an application systems development audit?

A) Project management controls B) Systems development controls C) Program change controls D) Management controls Answer: A Diff: 3 Page Ref: 504

15 .

104) In the program change control phase of an application systems development audit, an element that may represent a major loss exposure in terms of fraud and access to sensitive data is A) program development.

B) program auditing.

C) program testing and quality control.

D) program maintenance.

Answer: D Diff: 3 Page Ref: 505 105) ________ provides assurances relating to the effectiveness of an organization's enterprise risk management processes.

A) RBA B) OMB C) REA D) UML Answer: A Diff: 3 Page Ref: 495 106) The goal of RBA to auditing is to apply audit efforts to areas in proportion to their likelihood to A) to reduce exposures in areas of high risk.

B) to reduce the exposure and occurences of fraud.

C) to significantly impact the auditor's overall audit conclusions.

D) All of the above is a goal of RBA. Answer: C Diff: 3 Page Ref: 495 107) IT governance has the objective of enhancing and ensuring the efficient application of IT resources A) to ensure success in the development of systems and processes.

B) as a critical success factor.

C) to gain a competitive advantage.

D) as a major component to IT security.

Answer: B Diff: 3 Page Ref: 506 108) The Public Company Accounting Oversight Board (PCAOB) has encouraged a risk-based approach to test the effectiveness of ________ ________ as they relate to financial audits.

A) internal controls B) security processes C) financial misstatements D) fraud exposure Answer: A Diff: 3 Page Ref: 496

16 .

109) Risks associated with implementing new technologies include A) IT strategies not aligned with business strategies.

B) control framework for IT does not exist.

C) IT performance is not measured and evaluated.

D) All of the above are risks associated with new technologies.

Answer: D Diff: 3 Page Ref: 506 110) An IT governance framework such as ________ can be a critical element in ensuring proper control and governance over information and the system that create, store, manipulate, and retrieve that information.

A) CISA B) SOA C) COBIT D) RBA Answer: C Diff: 3 Page Ref: 507 111) COBIT has four domains that include A) plan and organize, acquire and implement, deliver and support, and monitor and evaluate.

B) analysis, design, implement, and feedback.

C) plan, build, implement, and evaluate.

D) analysis, build, train, and implement.

Answer: A Diff: 3 Page Ref: 507 112) ________ models are used to evaluate an organization's relative level of achievement of IT governance and shows what has to be done to improve.

A) RBA B) Maturity C) Visibility D) Navigation Answer: B Diff: 3 Page Ref: 509 113) ________ is for IS audit, control, assurance and/or security professionals.

A) CISA B) CISM C) C GEIT D) COBIT Answer: A Diff: 3 Page Ref: 512

17 .

114) ________ is for individuals who manage, design, oversee, and assess an enterprise's information security program.

A) CISA B) CISM C) C GEIT D) COBIT Answer: B Diff: 3 Page Ref: 512 115) ________ is the most recent certification programs and for individuals interested in Governance of Enterprise IT. A) CISA B) CISM C) CGEIT D) COBIT Answer: C Diff: 3 Page Ref: 512

18 .

116) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Mapping ________ 2. Compliance testing ________ 3. Extended records ________ 4. Substantive testing ________ 5. Interim audit ________ 6. Snapshot ________ 7. Parallel simulation ________ 8. Audit software ________ 9. Desk checking ________10. Tracing A. Modification of programs to collect and store additional data of audit interest B. Computer programs that permit the computer to be used as an auditing tool C. Special software that is used to monitor the executing of a program D. The first stage of a financial statement audit which has the objective of establishing the degree to which the internal control system can be relied upon E. Provides a detailed audit trail of the instructions executed during a program's operation F. Modification of programs to output data of audit interest G. Direct verification of balances contained in financial statements H. The auditor manually processes test or real data through the logic of a computer program I. Testing to confirm the existence, assess the effectiveness, and check the continuity of operation of internal controls J. The processing of real data through audit programs, with the simulated output and the regular output compared for control purposes Answer: 1. C 6. F 2. I 7. J 3. A 8. B 4. G 9. H 5. D 10. E Diff: 2 Page Ref: 513

19 .

117) Presented below is a list of terms relating to accounting information systems, followed by definitions of those terms.

Required: Match the letter next to each definition with the appropriate term. Each answer will be used only once. ________ 1. Audit program ________ 2. System control audit review file ________ 3. Auditing around-the-computer ________ 4. In-line code ________ 5. Financial statement audit ________ 6. Control flowcharting ________ 7. Test data ________ 8. Embedded audit routines ________ 9. Sample audit review file ________10. PC software A. The second stage of a financial statement audit which uses substantive testing for direct verification of financial statement figures B. Software that allows the auditor to use PCs to perform audit tasks C. Information systems auditing approach in which the processing portion of a computer system is ignored D. A detailed list of the procedures to be applied on a particular audit E. Analytic documentation or other graphic techniques used to describe the controls in a system F. The use of in-line code to randomly select transactions for audit analysis G. Auditor-prepared input containing both valid and invalid data H. Special auditing routines included in regular computer programs so that transaction data can be subjected to audit analysis I. An application program performs an embedded audit routine such as data collection as the same time as it processes data for normal use J. Auditor-determined programmed edit tests for audit transaction analysis are included in a program as it is initially developed Answer: 1. D 6. E 2. J 7. G 3. C 8. H 4. I 9. F 5. A 10. B Diff: 2 Page Ref: 513

20 .

118) Below are listed four procedures typically performed during an audit of accounts payable: Audit procedures: a. Test the mathematical accuracy of the accounts payable subsidiary ledger. b. Select samples of vouchers to examine in detail. c. Determine whether cash discounts were properly applied. d. Stratify accounts by value.

Required: Briefly state a generalized audit software technique that could be used to perform each procedure, assuming that the accounts payable application is computerized.

Answer: a. Use GAS to independently verify extensions and footing of the ledger. b. Use GAS to select a random, stratified, or other sample of vouchers or voucher numbers (depending on how extensively the records are computerized). c. Use GAS logic functions to determine when the company was eligible to take cash discounts; use GAS mathematical functions to recalculate discounts and net payables. d. Use GAS logic functions to determine which accounts fall within the desired value ranges.

Diff: 2 Page Ref: 500

21 .

119) Listed below are five examples of auditing situations and five information systems auditing techniques.

Required: First, match the letter of the information system auditing technique which best identifies the example. Then, in the space below each item, write a brief explanation of how the technique works in the situation.

A. Parallel simulation B. Test data approach C. Mapping D. PC software E. Extended records ________ 1. An auditor performs an inexpensive test of a cash disbursements program without modifying the client's program. Explanation: ________ 2. Audit team members communicate with each other in separate locations during an audit by exchanging Word and Excel files electronically. Explanation: ________ 3. An auditor inputs test sales order data to find out whether a sales order program executes the program statements needed to produce a shipping notice document. Explanation: ________ 4. An internal auditor modifies a newly-designed accounts receivable program to randomly select sales transactions and save each transaction's complete processing audit trail.

Explanation: ________ 5. During substantive testing, an auditor tests a client's loan interest accrual program by submitting the client's data to a program running on a computer at the auditor's office.

Explanation:

22 .

Answer: 1. D (or B) Explanation: Test data is an inexpensive test to verify an application program's input validation routines, logic, and computations. The auditor prepares valid and invalid test transactions and submits them for processing against the client's application program. PCs can be used to conduct the test.

2. D Explanation: Virtually all PCs have Web browser/Internet software that can connect the user with others through the World Wide Web virtually anywhere. One invaluable feature of e-mail communication is the capability of sending and receiving files over the Internet.

3. C Explanation: Mapping occurs when an auditor uses special software to monitor an application program's execution. The software counts how often the program executes each program statement. Mapping, however, does not show whether the statements were executed in the correct sequence.

4. E Explanation: An application program modification creates an extended record, which is used to collect all processing data on selected "tagged" transactions. The extended record contains the complete audit-processing trail for the selected transactions. Transactions may be chosen randomly, by special code, or as exceptions to edit tests.

5. A Explanation: Parallel simulation uses real client data to process against a test program. The auditor in this case would compare the simulation results against the actual output of the cash disbursements program.

Diff: 2 Page Ref: 496-503

23 .

120) Listed below are five examples of auditing situations and five information systems auditing techniques.

Required: First, match the letter of the information system auditing technique which best identifies the example. Then, in the space below each item, write a brief explanation of how the technique works in the situation.

A. Integrated test facility B. Generalized audit software C. Tracing D. Review of systems documentation E. Embedded audit routines ________ 1. An auditor uses software to select and evaluate a statistical sample of loan payments at a bank in a substantive test. Explanation:

________ 2. An internal auditor assists systems personnel to modify a newly-developed accounts payable program so that it will tag and save a statistical sample of each month's transactions for further review. Explanation:

________ 3. An auditor with a high level of technical experience requests a dump of the object code of an Internet retailer's purchasing program. Explanation:

________ 4. An auditor inputs special program statements to provide a listing of the sequence of a general ledger application program's execution. The auditor inputs test data and reviews the listing to learn whether the internal controls executed as expected. Explanation:

________ 5. An auditor works with systems personnel as a real-time account receivable application is developed. When completed, the application can incorporate the auditor's test data in regular processing runs. Explanation:

24 .

Answer: 1. B Explanation: Generalized audit software is specifically designed to assist auditors in using information technology. GAS can perform audit-related functions such as the statistical sample selection and evaluation and preparation of confirmation request.

2. E Explanation: The accounts payable program can be modified through an embedded audit routine to collect the transactions in a sample audit review file.

3. D Explanation: An object code dump is included in a review of systems documentation. Object code is the machine-language version of an applications program. This review provides assurance that the program is working as expected.

4. C Explanation: A trace is executed using an option in the program source code language. It provides a detailed list of the sequence of program statement execution.

5. A Explanation: In an integrated test facility, an auditor can include test data in the application's processing runs. Test and real transactions update live master files. Output is designed to report test transaction results separately, and to delete the test data from the master files.

Diff: 2 Page Ref: 496-502 121) Why are most audits now performed by auditing through and with the computer?

Answer: Suggested answer: Factors that have led to auditors adopting audit techniques for auditing through and with the computer include: • Most data that are now audited are in computerized formats.

• PCs are now very portable, powerful, and relatively inexpensive.

• Software for the PC and software specifically designed for auditing are widely available.

• Competitive pressures force auditors to adopt more efficient audit procedures.

Diff: 2

Page Ref: 494-495

122) Explain why external auditors perform compliance testing when a main objective of a financial statement audit is to express an opinion regarding the fairness of the monetary balances in a company's financial statements.

Answer: Suggested answer: Even though substantive tests are specifically designed to test the monetary balances, and thus are more directly related to the audit objective, relying exclusively on substantive testing is often too expensive to be feasible. Compliance tests are often less expensive to perform. If the client's internal controls are effective and operating reliably, then the accounting records are more likely to be reliable, and the auditor is justified in reducing substantive testing.

Diff: 2 Page Ref: 492-493 25 .

123) How have personal computers likely affected information systems audits?

Answer: Suggested answer: Personal (and notebook or laptop) computers have become highly portable, very powerful, relatively inexpensive, and quite versatile. A large variety of software has been developed for use in auditing which has automated many formerly tedious and time-consuming audit tasks. Much of this software is available in a Windows or Linux format, and it can be loaded and used on PCs. In many cases, a relatively low level of computer expertise is required to effectively operate such software. In other situations, using special software, the PC can often interface directly with the client's mainframe or other computer system. This allows for downloading and testing of data and perhaps even program routines using special audit software. Another feature of using portable PCs is the availability of the Internet. Through e-mail auditors can communicate with other off site, and through the World Wide Web auditors can access data and research information from Web sites such as the AICPA, SEC, IRS, NYSE, and etc. PC software, such as Excel and Word, is used in an audit to build documentation and worksheets. From another perspective, the use of PCs has become very widespread in businesses and auditing and accounting is no exception. It is almost a necessity to incorporate and use PCs in audit engagements today. The consequence of all of these factors has been the widespread use of PCs in audits and accounting related activities.

Diff: 2 Page Ref: 494-495 124) Because resources are usually limited, not all applications can be audited each year. What factors should an internal or external auditor consider when deciding which applications to audit?

Answer: Suggested answer: Factors which should influence the selection of application areas to audit include the following: • How critical the application is to the successful operation of the company • How subject the application is to fraud or some serious financial error • How critical the application is in terms of its effect on balances in the financial statements (application areas may also be critical in terms of appropriate disclosures in the financial statements) • Has there been audit involvement in the development of application (do ITF or embedded audit modules exist in the program code of the application from its development phase) • The results of the last audit of the application • The length of time elapsed since the last audit of the application • The availability of cost-effective audit techniques to audit the application Frequently a rotating system of application selection is used to select audit areas, with each application being audited according to some multiyear schedule. This allows for the majority of applications, if not all, to be examined over a given period of time.

Diff: 2 Page Ref: 504-505

26 .

125) Briefly describe the three phases of an information systems audit.

Answer: Suggested answer: In the initial phase, the auditor decides which areas will be investigated, how much audit labor will be required, the audit technology to be used, and the development of time or cost budgets.

The initial phase concludes with the preparation of the audit program, which is a list of procedures to be applied on the audit.

Detailed review and evaluation occur in the second phase of an information systems audit.

Auditors review documentation of the application area, conduct interviews, administer questionnaires, and observe operations. Auditors also examine transaction files, control logs, and program listings to design procedures to use in the testing phase (the third phase).

The testing phase includes compliance testing based on the findings of the detailed review and examination. The compliance tests help the auditor know, with reasonable assurance, whether internal controls exist and are functioning as shown in systems documentation.

Diff: 2 Page Ref: 503-504 126) Describe three areas that an auditor could examine in an audit of a computer service center.

Answer: Suggested answer: The areas that could be examined in an audit of a computer service center are: • Environmental controls: The audit would review special temperature and humidity requirements and the status of the air conditioning system used in the building housing the computer and other related equipment.

• Physical security: The audit would address controls regarding a stable power source, alternative power sources in case of emergency, protection from fire and water damage, casualty insurance, and business interruption service. An audit would also examine controls over physical access and over the release of data, reports, and computer programs.

• Disaster recovery plan: The plan should identify managers' responsibilities, the emergency action plan, alternative facilities, and backup and recovery plans. Malfunction reporting and preventative maintenance: The auditor should review failure logging and reporting, the preventative maintenance schedule, and correction of malfunctions.

• Operation controls: The auditor would examine equipment load factors, project usage statistics, budgeted staffing requirements, and expected equipment acquisitions. The auditor could also review billing procedures.

• Compliance tests: The auditor would review documentary evidence and conduct interviews with users, managers, and systems personnel. The auditor could also observe operations and make inquiries.

Diff: 2 Page Ref: 505-506

27 .