Accounting Information Systems, 12th Edition International Student Version Test Bank

Type:

Test Bank

Resource:

Accounting Information Systems

Edition:

12th Edition

Author(s):

Mark G. Simkin Carolyn A. Strand Norman

Chapter 1 Accounting Information Systems and the Accountant True-False Questions 1.

The acronym AIS stands for “Accounting Information Standards.”

2.

Accounting information systems must be computerized to be effective.

3.

It is best to view an AIS as an accounting system that must be computerized.

4.

AISs often create information that is useful to non-accountants.

5.

In order to be useful, raw accounting data must be processed by a computer.

6.

The path that data follow in an AIS, for example from manual source document to completed output report, is called an audit trail.

7.

A company's audit trail is normally easier to follow under a manual data processing system compared to a computerized information processing system.

8.

The starting point for an audit trail of a payroll system might be an employee time card.

9.

The starting point for an audit trail of a production department might be the purchase of raw materials.

10.

The acronym ERP stands for “electronic reporting plan.”

11.

The term information overload refers to providing too much data to management, often resulting in managers ignoring it.

12.

An advantage of computerized AISs is that they do not need to be programmed to catch simple input errors such as entering “4.0” instead of “40.0” for hours worked in a payroll application.

13.

Computers tend to make audit trails easier to follow because everything is computerized.

14.

The acronym ERP stands for “enterprise reporting system.”

15.

The authors consider accountants to be “knowledge workers.”

16.

Predictive analytics use large data warehouses to help organizations improve performance.

17.

As used in this chapter, the acronym SAR stands for “suspicious accounting reports.”

18.

Sections of the Patriot Act mandate suspicious activity reporting.

19.

One of the motivations for SAR is to identify money laundering activities.

TB 1.1

20.

The term “Patriot” is an acronym for “providing appropriate tools required to intercept and obstruct terrorism.”

21.

Section 352 of the Patriot Act requires auditors to verify that their organizations have adequate risk assessment systems.

22.

Accounting systems are useful for performing accounting tasks, but cannot be used for such security purposes as countering terrorism.

23.

The Sarbanes-Oxley Act includes a provision that prohibits corporations from making personal loans to executives.

24.

The Sarbanes-Oxley Act prohibits companies from using the same auditing firms for performing both auditing and management consulting services.

25.

As a result of corporate bankruptcies in 2002, some of the largest public accounting firms are no longer engaged in any consulting work.

26.

A major output of financial accounting is the preparation of financial statements such as an income statement.

27.

The series of steps leading from data recorded in transaction records to the information reported on financial statements is called the accounting cycle.

28.

AISs are only concerned with financial information.

29.

One major difference between financial accounting and managerial accounting is that financial accountants prepare financial statements for external investors while managerial accountants prepare financial statements for internal managers.

30.

In a responsibility accounting system, every person within a company takes responsibility for the performance of every business unit.

31.

One major difference between financial accounting and managerial accounting is that financial accountants use dashboards while managerial accountants do not.

32.

An example of a financial report that would be prepared by a managerial accountant (instead of a financial accountant) is a budget report.

33.

XBRL is a business reporting language that is used to define interactive financial data.

34.

“Cost accounting” tasks are usually performed by financial accountants.

35.

An ABC inventory system refers to an “activity-based costing” system.

36.

As used in chapter 1, the term “dashboard” refers to a quick and easy plan to install a computerized accounting system in an organization.

37.

As used in Chapter 1, a dashboard is an up-to-the-minute graphic depiction of one or more business activities.

TB 1.2

38.

The purpose of the assurance services of an accounting firm is to give a company’s managers moral support when they are audited by the federal or state government.

39.

The purpose of CPA Trust Services is to provide assurance that a company engaged in electronic commerce can provide the goods or services it promises.

40.

An example of a value-added reseller (VAR) is a computer dealer that adds software to the hardware it sells.

41.

Some possible career opportunities for AIS majors or minors include consulting positions, computerized auditing, or system computer auditing positions.

42.

Accountants are usually classified as “line workers” within business organizations.

43.

Today's AIS is an enterprise-wide information system that focuses on interdepartmental business processes.

44.

Managerial accounting principally provides decision-making information to a company's internal managers.

45.

As a result of computerized information processing systems in many organizations today, the need for accountants in these organizations has significantly declined.

46.

Activity-based costing systems focus on allocating overhead on the basis of direct labor hours used.

47.

Because accountants are not normally computer programmers working within the information processing subsystem, it is unnecessary for them to understand the capabilities and limitations of computers.

48.

Within the traditional AIS, a sales order would not be considered an accounting transaction.

49.

Students majoring in AIS are unlikely to assume jobs in traditional accounting positions because they know too much.

50.

There are limited career opportunities available for students who study both accounting and information systems.

51.

One possible career for AIS majors is in the traditional area of financial or managerial accounting.

52.

The CISA is an acronym for a professional accounting certification.

TB 1.3

Multiple-Choice Questions 53.

The “S” in the acronym “AIS” stands for: a) Standard b) System c) Symbol d) none of these

54.

Which of the following is true? a) An AIS must be computerized to be useful b) An AIS always produces useful information c) An AIS always produces financial information d) none of these

55.

The letter “P” in the acronym “ERP” stands for: a) Production b) Planning c) Project d) none of these

56.

Which of the following is true about the terms “data” and “information” within the context of Chapter 1? a) These terms are exactly the same b) These terms are exact opposites c) Some “data” can also be “information” d) none of these

57.

If a manager suffers “information overload”: a) He or she must press the reset button on his or her computer b) It means that this person needs a larger hard drive c) The “information” is really just data d) He or she must forget some facts in order to remember others

58.

Which of the following captures the same idea as the term “GIGO?” a) Computers cannot turn straw into gold b) Too much information is the same as garbage c) Great investments lead to great returns d) Too many cooks spoil the broth

59.

Which of the following best describes a data warehouse as discussed in Chapter 1? a) A repository of historical information from one accounting application b) A repository of historical information from a set of accounting applications c) A repository of information from many business applications—some not accounting d) A repository of information from many businesses in the same industry

TB 1.4

60.

Most AISs perform all of these functions except: a) Collect raw accounting data b) Store accounting data for future uses c) Process data into useful information d) AISs perform all of these functions

61.

As used in the chapter, “knowledge workers”: a) Are blue collar workers in non-managerial positions b) Are the same as delivery clerks c) Include most accountants d) Does not include most accountants

62.

All of the following are possible uses of AIS or accounting personnel that were discussed in the chapter except: a) Countering terrorism b) Foiling future accounting scandals c) Providing assurance services d) Performing monetary exchanges

63.

Suspicious activity reporting: a) Only applies to banking transactions b) Is mandated by state, but not federal, regulations c) Is mostly concerned with embezzlement issues d) Is a requirement under the Sarbanes-Oxley Law of 2002 e) none of these

64.

Which of these would be considered suspicious activities under current SAR rules? a) Money laundering b) Bribing officials c) Transferring money to suspected terrorists d) all of these

65.

Which of these businesses is not required to report suspicious activities under current federal laws? a) Banks b) Money service organizations c) Commodity Traders d) Mutual fund dealers e) Race tracks

66.

Which of these statements best describes the relationship between “AISs” and “countering terrorism?” a) These are completely independent items; there is no relationship b) AISs can help counter terrorism using data warehouses c) AISs can help by denying financial aid to terrorist groups d) AISs can help by identifying international embezzlers

TB 1.5

67.

Bernard Madoff is most closely associated with which of the following terms? a) The father of activity-based costing systems b) SAR c) Ponzi scheme d) Sarbanes-Oxley Act of 2002 e) Key sponsor of the Patriot Act

68.

Many accountants feel that the most important part of the Sarbanes-Oxley Act is: a) Its anti-terrorist provisions b) Its provisions requiring the reporting of suspicious activities c) Section 404 on internal controls d) Section 505 on money laundering

69.

The U.S. Patriot act: a) Requires banks to monitor their accounts in foreign institutions for fraud b) Prohibits companies from lending money to corporate executives c) Only applies to publicly-traded companies d) all of these are correct

70.

A good performance measurement system should evaluate: a) Profitability only b) Customer satisfaction only c) Those aspects of a unit’s performance that are subject to its control d) Those aspects of a unit’s performance whether controllable or not

71.

The managerial accounting component of the accounting subsystem contains all but which one of the following functions: a) Cost accounting b) Financial accounting c) Budgeting d) Systems study

72.

Managerial accounting principally provides information to: a) Stockholders b) Government regulators (e.g., SEC, Federal bank examiners) c) Internal company management d) Potential creditors

73.

The process by which a financial transaction is recorded so that its flow through the system can be followed is called: a) Financial shadowing b) Managerial trace technique c) Concatenation d) An audit trail

74.

Which of the following accounting functions has been automated by most companies' information processing subsystems? a) Posting to ledgers b) Recording journal entries c) Preparing trial balances d) all of the above

TB 1.6

75.

The accounting subsystem must continually interact with the: a) Personnel subsystem b) Information processing subsystem c) Production subsystem d) b and c only e) a, b, and c

76.

What has been the effect on accountants in those organizations which have computerized their data processing functions? a) The need for accountants has disappeared b) The accountants have become "pure" bookkeepers c) The accountants have become involved in more decision-making activities d) The accountants' decision-making activities have drastically declined

77.

What is the first step to be performed by most organizations in their accounting cycles? a) Recording business transactions in a journal b) Preparing a trial balance c) Recording closing entries in a journal d) Preparing transaction source documents e) none of the above

78.

Which of these is a business reporting language often used in recording or transmitting accounting data? a) XBRL b) XFile c) ABC d) Accounting Live

79.

Which of the following is not true regarding professional service firms? a) The SEC is in favor of professional service firms expanding their businesses to include consulting services b) As a result of the corporate bankruptcies and accounting scandals in 2002, professional service firms no longer perform any consulting services c) Professional service firms generally offer a variety of assurance services, including providing assurance over AISs d) In the early 2000's, many large professional service firms sold off the majority of their consulting practices

80

The principal cause for more timely performance reports in the typical modern organization is due to: a) Better educated management b) Adoption of progressive management philosophies which stress participative management (e.g., MBO) c) Information processing systems d) Need for less information

TB 1.7

81.

The P in the acronym KPI stands for: a) Processing b) Performance c) Planning d) Personnel e) none of these

82.

For performance reports to achieve their control objectives, they must: a) Include relevant information so that necessary action may be taken to accomplish organizational goals b) Be timely so that minimal time elapses between an activity's occurrence and the feedback reflecting the activity's efficient or inefficient performance c) Provide subsystem managers with suggestions as to how they can operate their subsystems more efficiently d) all of the above e) a and b only

83.

Which of the following is intended to solve the problem that financial data used in one application is not easily transferable to other applications? a) XMP b) ERP c) XBRL d) XMLP

84.

"Excessive data reporting" can result in: a) Massive quantities of data printed out by a company's computer b) The generation of unnecessary reports c) Subsystem managers' belief that it is a status symbol to receive large numbers of internally generated reports d) Inefficient decision making by subsystem managers due to a lack of relevant information e) all of the above

85.

An example of an assurance service for a company engaged in electronic commerce is: a) XBRL b) Trust US c) CITP d) CPA Trust Services

86.

Which of the following is not a component of the balanced scorecard? a) Customer knowledge b) Internal business processes c) Transaction processing d) Financial performance

TB 1.8

87.

Which of the following best describes assurance services? a) Auditors are desperate to offer assurance services so that they will still have business in the future b) Assurance and auditing are closely related c) Assurance is a guarantee that there is no fraud in a company d) Assurance services usually require expertise in information technology

88.

Information systems auditors are: a) Auditors who are concerned with analyzing risks associated with computerized information systems b) Individuals who often work closely with financial auditors c) Auditors who have a lot of technical expertise related to information technology d) all of the above

89.

Which of these is a certification that accountants can earn that focuses on proficiency in information technology? a) CPA b) CMA c) CISA d) CITP

90.

The designation for a licensed information systems audit professional is: a) CPA b) CMA c) CIA d) CISA

91.

The certified information systems auditor certification is sponsored by: a) ISACA b) AICPA c) IMA d) none of these

92.

Which of the following best describes “predictive analytics”? a) It is a method auditors use to predict when managers might have a weak internal control system b) It is a technique that uses data stored in data warehouses to create systems that allow managers to use their data to improve performance c) It is a method used to prevent managers from overriding internal controls d) none of the above

93.

Which of the following describes “cloud computing”? a) It is a is a way of using business applications over the Internet b) It is an internal business process over the organizations intranet c) It is an internal business process over the organizations extranet d) none of these

TB 1.9

94.

An advantage of cloud computing is that: a) No one understands it, including hackers and would-be fraudsters b) All data inputs, processing, and outputs are hidden c) Users pay only for the services they require d) Smaller businesses or government agencies cannot use it

95.

Which of these is least likely to be an example of a cloud computing service? a) The development of a web site for a retail store b) The remote processing of payroll records for a manufacturer c) The use of computer time on a remote supercomputer by a research firm d) Interviewing candidates for an executive accountant e) all of these are reasonable examples of cloud computing services

96.

Which of these is a drawback of cloud computing? a) Inability to handle periods of peak processing loads b) Users must still invest heavily in computer resources of their own c) Requires users to pay for services, whether they use them or not d) May requires users to trust service provider with sensitive data e) none of these are drawbacks of cloud computing

97.

Which of these terms is most closely associated with cloud computing? a) Data processing b) Outsourcing c) Data communications d) Source programming language e) Compiling

TB 1.10

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are two terms that are not used.

98. _______ OSC 99. _______ SAR 100. _______ CISA 101. _______ ERP 102. _______ XBRL 103. _______ ISACA 104. _______ IT 105. _______ REA 106. _______ KPI 107. _______ SOX

Definitions: A. An international professional association that deals with IT Governance B. Federal legislation passed in response to recent accounting scandals C. An enterprise-wide information system D. Federally-mandated reporting of suspicious accounting activities E. An important database design approach F. Key productivity indicator G. A standardized business reporting language similar to HTML H. An auditing certification I. An acronym often used to describe the computer department of an organization J. A type of knowledge worker K. A federal initiative to thwart terrorists intent on harming cargo transport L. An important performance indicator

Short Answer Questions 108.

Name some business activities that do not require traditional journal entries.

109.

Give three reasons why XBRL formatted documents are useful.

TB 1.11

Chapter 2 Information Technology and AISs True-False Questions 1.

Data transcription in AISs is labor intensive and is prone to introduce errors into accounting data.

2.

A printer is an example of an input device.

3.

A computer mouse is an example of an input device.

4.

Equipment that surrounds a computer and assists it with input and output tasks is called “peripheral equipment.”

5.

An example of a source document is an employee payroll check.

6.

An example of a source document is an employee time card.

7.

“Data transcription” is the same as “data communications.”

8.

Plastic cards with magnetic strips are an example of bar code input.

9.

PDA is an acronym for “personal digital access.”

10.

Equipment that gathers accounting data at the point at which a sale is made are sometimes called POS devices.

11.

The acronym OCR stands for “optical character recognition.”

12.

A Blackberry device is an example of a PDA.

13.

The processing power of a computer is often measured by the power of its CPU.

14.

CPU is an acronym for “computerized peripheral unit.”

15.

The processing power of the CPU in a mainframe computer is greater than in a minicomputer.

16.

RAM is an acronym for “record access machine.”

17.

RAM is an acronym that stands for “read and manipulate.”

18.

RAM is usually measured in megahertz.

19.

A gigabyte of computer storage is equal to one million bytes.

20.

The two components of a microprocessor are the arithmetic-logic unit and the control unit.

TB 2.1

21.

Processor speeds are very important to AIS applications because faster processors automatically lead to greater throughput.

22.

Laser printers and dot-matrix printers produce equal quality output.

23.

In online, real-time systems, hard-copy output may be less desirable than soft-copy video screen display output.

24.

For fast printing, most AIS systems use ink jet printers rather than laser printers.

25.

The opposite of “primary storage” is “secondary storage.”

26.

Magnetic disks and USB flash disks are examples of secondary storage media.

27.

CD-ROM disks and hard disks have about the same capacities.

28.

Accounting data are typically stored on hard disks in groupings called “computer records.”

29.

Each computer record on a hard disk is composed of sub-elements called “data fields.”

30.

The term “ROM” (as in CD-ROM) means “read-only memory.”

31.

The acronym “worm” means that some types of CD-ROMs can be rewritten repeatedly.

32.

A “DVD” disk is read magnetically.

33.

A DVD typically has a greater storage capacity than a CD-ROM medium.

34.

Blu-ray disks can store more than CD-ROM disks.

35.

The term “data communications” primarily refers to the transfer of data from primary memory to hard disks.

36.

The mechanism for transferring data between components of the CPU is called a TRAIN (Transfer Random Accessed Instructions Now).

37.

The term DSL stands for “digital subscriber line.”

38.

The term “enrollment” refers to the initial reading in a biometric authentication.

39.

An example of a “communications channel” is microwave transmission.

40.

LAN is an acronym for “local area network.”

41.

The central computer of a LAN is called a “file server.”

TB 2.2

42.

An advantage of using a LAN is the ability to distribute information among the employees in the same building.

43.

An advantage of using a LAN is the ability to share computer files and equipment.

44.

A computer network spanning a small area such as a single building is a WAN.

45.

A computer network spanning a regional or national area is called a WAN.

46.

Client/Server computing enables businesses to distribute the computer processing of the system between the client computer and the server computer.

47.

The “application-logic” component of a client/server system refers to where the processing logic of the system takes place.

48.

Wireless data communications refers to the ability to transmit data over fiber optic cables instead of twisted pair wires.

49.

Bluetooth is actually a wireless data communications standard that allows unlike communications devices to communicate with one another.

50.

An operating system is a set of computer programs that helps a computer run itself.

51.

Programs such as Windows Vista and Unix are examples of application programs.

52.

Fortran, COBOL, and RPG are examples of computer operating systems.

53.

NFC is an example of cloud computing.

54.

A legacy system is an example of an older computer system, typically running on a mainframe computer.

55.

The terms kilobyte, megabyte, terabyte, and gigabyte are correctly ordered by size or capacity.

56.

The term RFID is an acronym for “registered for information or data.”

57.

The term cloud computing refers to services that organizations can access on the Internet.

58.

The ability to use a tax-preparation program via the Internet for a fee is an example of SaaS.

59.

The acronym ERP stands for “enterprise read-only program.”

60.

A “mom-and-pop” convenience store would be an example of a business that would best utilize an ERP system.

TB 2.3

Multiple-Choice Questions 61.

All of the following are reasons why information technology is important to accountants except: a) IT supports AIS functions such as communications and record keeping b) Accountants must often evaluate AISs for themselves or for clients c) It is important to keep up; if your competitors buy new computers, you should too d) IT is likely to affect the way accountants work in the future

62.

The AICPA regularly conducts a voluntary survey to identify a list of important IT trends or factors called: a) The Top Ten Information Technologies b) The Top Twenty Information Technologies c) IT Information Trends for Tomorrow d) The AICPA IT Information List

63.

The hardware of a computer system includes the computer itself and other devices that help the computer perform its tasks. These “other devices” are commonly also called: a) Helper equipment b) IT devices c) Peripheral equipment d) Secondary equipment e) Accessory equipment

64.

All of the following are examples of peripheral equipment except: a) Input equipment b) Output equipment c) Communications equipment d) Primary memory equipment e) Secondary storage equipment

65.

Which of these is one of the five interacting components of an accounting information system? a) Fuzzy logic b) Testing c) Certification d) Procedures e) Internet

66.

Time cards, airline reservation screens, and bank deposit screens best describe which of the following? a) Data transcription b) Point-of-sale devices c) Source documents d) Turnaround documents e) Data transaction documents

TB 2.4

67.

MICR is most closely associated with: a) The airline industry b) The data communications industry c) manufacturing d) the banking industry

68.

The UPC code is an example of a(n): a) PDA b) MICR c) Bar code d) Biometric input

69.

Which of the following best describes documents initially prepared by a company, then sent to individuals, and finally returned to the organization for data processing? a) Mark-sense media b) Source documents c) Turnaround documents d) MICR documents

70.

A POS device is usually attached to a: a) Printer b) Bank check c) Cash register d) Keyboard e) Computer mouse

71.

POS devices, bar code readers, and OCR devices are examples of: a) Input devices b) Output devices c) Processing devices d) Transaction devices

72.

Minicomputers, mainframe computers, supercomputers, and laptops are examples of: a) Input devices b) Output devices c) Central processing units d) Display devices

73.

Printers and video monitors are examples of: a) Output devices b) Input devices c) Processing devices d) Storage devices

TB 2.5

74.

Which of these is a portable computing device that enables users to maintain personal data like postal addresses, appointment calendars, and check registers? a) PDA b) Minicomputer c) Personal computer d) CPU

75.

A secondary storage device that protects against disk failures and increases storage capacities by using stacks of hard disks best describes which of the following? a) Magnetic disk b) CD-ROM disk c) Flash memory d) WORM (Write-once, Read-many) Disks e) RAID (Redundant Array of Independent Disks)

76.

A 5-inch plastic disk used to store information up to 17 gigabytes describes which of the following? a) CD-ROM b) Flash memory c) Zip disk d) DVD disk

77.

A bar code reader is most likely to be used by which type of system? a) POS system b) MICR system c) Printer/scanner system d) Fax machine system

78.

Which type of company is most likely to use MICR? a) Grocery store b) Bank c) Phone company d) Web site seller

79.

The term “mark sense media” is most-closely related to which of the following? a) POS system b) OCR system c) MICR system d) ABA system

80.

Which of the following is the most important reason to use POS systems, OCR systems, or MICR systems? a) To use the latest information technology b) To avoid data transcription c) To create an extra layer of IT infrastructure d) To decrease dependency on foreign oil

TB 2.6

81.

The term “enrollment” is most closely associated with which of the following? a) ABA system b) Biometric system c) POS system d) Joystick e) PDA

82.

Which of the following is correct? a) A laptop computer is an example of a minicomputer b) Minicomputers are more powerful than microcomputers c) Minicomputers are examples of PDAs d) A mainframe computer is an example of a supercomputer

83.

An older computer system, typically using a mainframe, centralized data processing, and COBOL software, is often called a: a) Supercomputer system b) Primary system c) Legacy system d) Traditional system

84.

The reason why processor speeds are not important to AISs is because: a) Most AIS processing is performed on weekends anyway b) There are so many of them in the world today c) Microcomputers are so inexpensive these days d) Most computers are I/O bound

85.

Which of these is another common name for a printed document? a) A foldable document b) A hard-copy document c) A soft-copy document d) A POS document

86.

Which of these is not an example of a type of printer? a) Dot-matrix printer b) Inkjet printer c) Laser printer d) VGA printer

87.

The speed of a printer is commonly measured in: a) ppm b) crt c) lcd d) Pixels

88.

Within the context of the chapter on IT, which of these is not an acronym? a) ppm b) byte c) pixel d) CD-ROM e) all of these are acronyms TB 2.7

89.

When associated with CD-ROMs, the letters “rw” mean: a) Raw b) Rewind c) Rewriteable d) Regular width

90.

A USB drive that uses flash memory is an example of a(n): a) Input device b) Output device c) Secondary storage device d) Web device

91.

The term “EDRM” is mostly-closely associated with: a) Records management b) Points-of-sale processing c) Banking d) Electronic data recording and merchandising

92.

Which of the following is not an example of a communication channel? a) Twisted-Pair wires b) Coaxial Cables c) Optical Fibers d) Modem

93.

Data communication speeds are typically measured in: a) ppm b) bps c) Pixels d) LANS e) WANs

94.

A computer network spanning regional, national, or global areas best describes which of the following? a) LAN b) WAN c) ESPN d) DSL e) ISDN

95.

Hardware or software that guards organizational information from external sources best describes which of the following? a) Intranets b) Extranets c) Firewalls d) ISDN servers

TB 2.8

96.

Which of the following is a component of a client/server system? a) User component b) Satellite component c) Data-management component d) Output component

97.

The user’s view of a client/server system best describes which component of a client/server system? a) Application-logic component b) Data-management component c) Presentation component d) Data-transmission component

98.

Which of these measures how close a biometric reading is to a prerecorded template? a) PDA reading b) Hamming distance c) Match percentage d) Legacy amount

99.

A system that uses inexpensive or diskless microcomputers instead of more expensive models to save money on system acquisition and maintenance costs describes which component of a client/server system? a) Data-management component b) Application-logic component c) Thin-client system d) Presentation component

100.

The special cards that users can store in their cars to gain access to parking lots and breeze through collection booths on toll roads are examples of: a) RFID systems b) NFC systems c) POS systems d) MICR systems

101.

This is an example of an RFID system with a very limited range (less than 8 inches): a) LAN system b) NFC system c) WAN system d) MICR system

102.

Menus, icons, and other graphical elements are an example of which of the following? a) Utility programs b) Personal productivity software c) Virtual storage d) Graphical user interface (GUI)

TB 2.9

103.

Programs that help users perform such tasks as copying files, converting files from one format to another, compressing files, performing system diagnostics, and building disk directories best describes which of the following? a) Antivirus software b) Utility programs c) Application software d) Operating system software

104.

Application software that enables businesses and government agencies to maintain, transmit and manipulate financial data on an organization-wide basis best describes: a) Communication software b) CAD software c) Enterprise resource planning (ERP) software d) Programming software

105.

Software used for preparing payrolls, maintaining accounts receivable files, or controlling inventory best describes: a) Communication software b) Personal productivity software c) Project management software d) Accounting software

106.

All of the following are programming languages except: a) Java b) HTML c) C++ d) COBOL e) ERP

107.

The translation process of converting source code into machine language (object code) is performed by which of the following? a) Utility program b) System software c) ERP (Enterprise Resource Management) software d) Compiler

108.

This is the process of recording the biometric readings of a legitimate user for the first time: a) Authorization b) Biometric recording c) Compiling d) Digital assisting e) Enrollment

109.

The term DSL is mostly closely associated with: a) PDAs b) Biometrics c) Compiling computer programs d) Digital data transmission

TB 2.10

110.

The term cloud computing refers to: a) Fuzzy computing logic b) Hidden computer data, which are obscured in some way c) Purchasing computing services on the Internet d) Undetected errors in data processing

111.

Which of these is not an example of application software? a) Operating systems b) Spreadsheet packages c) Accounting packages d) Database management systems e) all of these are examples of application software

TB 2.11

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space next to the term. Each definition is used only once – there are two definitions that are not used.

112. ______ Input-processing-output 113. ______ POS system 114. ______ data transcription 115. ______ MICR coding 116. ______ biometric verification 117. ______ legacy system 118. ______ gigabyte 119. ______ terabyte 120. ______ worm 121. ______ RFID

Definitions: A. Automated data recording for input B. Potential bottleneck for processing accounting data C. An older AIS, typically using a mainframe computer D. 1 billion bytes E. The data processing cycle for processing most accounting transactions F. A type of CD encoding G. 1 trillion bytes H. Threshold hamming distance I. Data communications using radio waves J. Used by banks for automated data input K. 1 thousand bytes L. 1 million bytes

Short Answer Questions 122.

What components make up an AIS system?

123.

Why are microprocessor speeds rarely important to an AIS?

124.

What is the difference between mainframe/host computing and microcomputer client/server computing?

TB 2.12

Chapter 3 Data Modeling True-False Questions 1.

The letter “M” in the acronym DBMS stands for “maintenance.”

2.

The letter “M” in the acronym DBMS stands for “management.”

3.

An accounting information system database is a collection of facts and figures that serves the accounting information needs of one or more organizational subsystems.

4.

Given the flexibility and usefulness of computerized accounting databases, a company will always find it cost effective to use them in processing, storing, and retrieving accounting data.

5.

The correct order of elements, from smallest to largest, in the data hierarchy is data field, record, file (table), database.

6.

The correct order of elements, from smallest to largest, in the data hierarchy is data field, file (table), record, database.

7.

The correct order of elements, from smallest to largest, in the data hierarchy is database, data field, record, file (table).

8.

The basic unit of information in an accounting information system database is the debit.

9.

The largest unit of information in an accounting information database is a data field.

10.

The basic unit of information in an accounting information database is a table.

11.

The smallest unit of information in the data hierarchy is a data field.

12.

The largest unit of information in the data hierarchy is a record.

13.

A computer record is used to store all the information about one transaction, but several such records must be used to store the information about one employee, one inventory part, and so forth, on a master file.

14.

The data field that distinguishes one record from another in a database table is called the primary key.

15.

Record keys on computer files are unique only to the extent that they classify computer records by some general category.

16.

A last name such as “Smith” is an example of a useful primary record key.

17.

A Social Security number is a good example of a useful primary record key.

TB 3.1

18.

For a file of employee workers, it would make more sense to use their last name as a primary key rather than their Social Security number because this would better preserve their privacy.

19.

A foreign key is a data field in the records of one file that references a primary key in the records of another file.

20.

Three database concerns when creating large databases are “data integrity,” “processing accuracy,” and “data security.”

21.

A data dictionary is a computer file describing the data items of an accounting database.

22.

The term “transaction control” refers to the requirement that a database system either process a transaction entirely, or not at all.

23.

The “concurrency” control in database operations refers to the need to convert foreign currency amounts into dollar terms before reporting them to subschema viewers.

24.

The idea behind concurrency control is to deny several users access to the same database record at the same time.

25.

Database security is no longer important because DBMSs are already so safe.

26.

The idea behind view controls is to allow users access to only that information that they need to see.

27.

An REA accounting system takes an “enterprise-wide view” of accounting data.

28.

The initials R-E-A in the REA accounting framework refer to “resources, events, and accounting.”

29.

“Protecting privacy” is one of the important goals in data modeling.

30.

“Avoiding data redundancy” is one of the important goals in data modeling.

31.

The E-R model refers to the “entity-relationship” model.

32.

An example of a database cardinality is “one-to-many.”

33.

An example of a database cardinality is “one-to-few.”

34.

An example of a database cardinality is “one-to-one.”

35.

An example of a “one-to-one” relationship is “employee to assigned parking stall.”

36.

An example of a “one-to-many” relationship is “students to classes.”

37.

A relational data structure should never be used for accounting systems.

38.

A disadvantage of relational databases is that they cannot accommodate a variety of file inquiries.

TB 3.2

39.

An advantage of relational databases is that additional indexes can be added at later points of time as new data processing requirements dictate.

40.

Normalizing accounting data refers primarily to eliminating errors and outliers, thus creating “normal data.”

41.

An important reason for normalizing data is to eliminate data redundancy.

42.

There are exactly three normal forms.

43.

Databases cannot store more than one value in the same data field of the same record.

44.

A database is in first normal form if the data it contains is free of errors and outliers.

45.

A database is in second normal form if all of its records are in first normal form, and a second, duplicate record exists for each of them.

46.

A database is in third normal form if all of its records are in second normal form, and there are no transitive dependencies.

47.

An example of a transitive relationship in a parking-tickets application is the one between “ticket code” and “fine amount.”

48.

An example of a transitive relationship in a medical application is the one between “medical procedure code” and “cost of treatment.”

49.

An example of a transitive relationship in a medical application is the one between “doctor number” and “patient name.”

Multiple-Choice Questions 50.

All of these are reasons why databases are important to AISs except: a) AIS databases store valuable information b) Many AISs are large and therefore potentially unwieldy c) The databases of some organizations are very complex d) The hard disk space used to store AIS databases is comparatively expensive e) all of these are reasons why databases are important to AISs

51.

The basic unit of information on a computer file of accounting data is a(n): a) Inventory part number b) Data field c) Computer record d) Bit

TB 3.3

52.

All of the following are items within the data hierarchy except: a) Database b) Data field c) Record d) all of these items are part of the data hierarchy

53.

The data item which uniquely identifies a computer record in an AIS database table is called the: a) Pointer address b) Primary record key c) Employee number d) Header label e) Sort field

54.

All of these are types of record keys except: a) Primary record key b) Foreign record key c) Tertiary record key d) all the above are record key terms

55.

Which of the following creates relationships by linking the data in one file (e.g., customer) to an item in a second file (e.g., a sales order)? a) Foreign key b) Data dictionary c) Relationships link bit d) Index file

56.

The ________ is not necessarily unique for the records in a database table, but is nonetheless often used to locate a particular record: a) Foreign key b) Data dictionary c) Relationships link bit d) Index file

57.

The best choice for the primary key in an “Employees” table would be his or her: a) Last name b) First name c) Phone number d) Employee number

58.

From the following choices, the best example of a primary key for an employee table would be his or her: a) Social Security number b) Phone number c) Last name d) Office number

TB 3.4

59.

The foreign key in one database table will always be a _______ key in a linked table. a) Secondary key b) Domestic key c) Primary key d) all of these are always true

60.

Which of these comes closest in structure to that of a hierarchical database? a) Organization chart b) List of students and their classes c) List of specialty doctors and their patients d) A map of a city

61.

The terms "parent record," "child record," and "sibling record" describe the records in a: a) Hierarchical database b) Network database c) Relational database d) Flat file

62.

This type of database structure enables users to create relationships after the database has been created and implemented: a) Hierarchical b) Network c) Star d) Relational

63.

A major advantage of relational databases is: a) All records are stored together b) No pointers are used c) The ability to add tables and relationships after the database becomes operational d) It closely resembles a flat file

64.

Which of the following is not an objective of a computerized database? a) Minimize data redundancy b) Make efficient use of storage media c) Distribute information to end users d) Eliminate the data-gathering responsibilities of some subsystems within the organization e) Reduce the decision-making functions of subsystem managers

65.

The _________ helps developers document a database: a) Data documentation detailer (DDD) b) Data dictionary c) Database schema system d) Data OLAP system

TB 3.5

66.

A data dictionary: a) Is a book defining computer terms b) Is a reference document describing how accounting data are collected c) Is usually a computer file that maintains descriptive information about the data items of an accounting information system d) all of the above

67.

A data dictionary can help an accountant: a) Prepare tax forms for the IRS b) Establish an audit trail c) Correct clerical mistakes in transaction data d) Perform an audit of the petty cash fund

68.

Controls that require a database to either execute a transaction completely, or not at all, are examples of: a) Data integrity controls b) Corporate ethics c) Concurrency controls d) Privacy controls

69.

Edit tests that catch data entry errors are examples of: a) Data integrity controls b) Transaction controls c) Concurrency controls d) Privacy controls

70.

Controls that do not allow users to update the same database record at the same time are examples of: a) Data integrity controls b) Data processing controls c) Concurrency controls d) Privacy controls

71.

In the REA accounting framework, the letter “R” stands for: a) Resources b) Recording c) Remembering d) Reporting

72.

The REA accounting framework is most closely associated with which of the following? a) SQL b) An enterprise-wide view of accounting processes c) Normalization of accounting data for recording and query purposes d) An example of a data manipulation language

73.

Which of these would be an example of an “agent” in the REA framework? a) Salesperson b) Customer c) Manager d) all of these are possibilities

TB 3.6

74.

Which of these would be an example of a “resource” in the REA framework? a) Equipment b) Inventory c) Cash d) all of these are possible examples of resources

75.

In the REA framework, which of these would be recorded as an “event?” a) Hiring a new president of the company b) Taking an initial sales order from a customer c) Buying a piece of equipment for cash d) all of these would be recorded as events

76.

In the REA framework, an account receivable would be classified as a(n): a) Asset b) Event c) Resource d) none of these

77.

In the REA framework, a database designer should create a ____ for each entity. a) Record b) Table c) Secondary key d) all of these

78.

Assume that an accounts receivable application contains database tables for customer orders, inventory items, customers, and salespersons. All of these would be likely data fields in a customer order table except: a) Customer name b) Customer number c) Date of order d) Order number

79.

Assume that an accounts receivable application contains database tables for customer orders, inventory items, customers, and salespersons. Which of these items would probably be a foreign key in the customer orders table? a) Order number b) Customer name c) Salesperson number d) all of these

80.

The letters “E-R” in the term E-R diagram refers to: a) Entity relationship b) Economic relationship c) Enterprise resource d) none of these

81.

The purpose of the E-R model is to help database designers: a) Identify data redundancies b) Create databases in third normal form c) Design databases and depict data relationships d) Answer structured queries about the data in accounting databases

TB 3.7

82.

All of these are symbols in the E-R model except: a) Star b) Diamond c) Oval d) Rectangle

83.

In the E-R model, this symbol represents a database entity such as a customer: a) Diamond b) Rectangle c) Arrow d) Parallelogram

84.

In the E-R model, an oval denotes a(n): a) Data attribute such as a social security number b) One-to-many relationship c) “is a” characteristic d) Transitive relationship

85.

In the E-R model, the primary record key of a file is indicated by: a) An asterisk b) Underlining c) Using a square d) Printing the term (e.g., part number) in italics

86.

Within a database context, the relationship between “natural parent” and “child” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

87.

Within a database context, the relationship between “military officer” and “private” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

88.

Within a database context, the relationship between “students” and “classes” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

TB 3.8

89.

Within a database context, the relationship between “assigned parking space” and “car” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

90.

Within a database context, the relationship between “doctor” and “patient” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

91 .

Within a database context, the relationship between “military sergeant” and “private” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

92.

Within a database context, the relationship between “president” and “vice president” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

93.

Within a database context, the relationship between “grandparent” and “grandchild” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

94.

Within a database context, the relationship between “general ledger” and “subsidiary ledger” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

95.

Within a database context, the relationship between “sales invoice” and “line item” would most likely be: a) one-to-one b) one-to-many c) many-to-one d) many-to-many

TB 3.9

96.

The process of data normalization refers to: a) Eliminating data errors and other problems from “normal data” b) Scaling data to values between zero and one c) Storing data in normal storage media such as hard disks d) none of these

97.

As described in the chapter, all of these are normalization “forms” except: a) First normal form b) Second normal form c) Third normal form d) Transaction form

98.

The reason why database designers normalize data is: a) To eliminate data errors b) To scale data properly c) To create backup copies of data d) To create efficient database tables

99.

In the context of databases, the term data redundancy refers to: a) Storing the same information in several records b) Repeating data on multiple reports c) Using foreign keys which duplicate the values of primary keys d) all of these are possible examples of data redundancy

100.

A database is in third normal form if it is second normal form and: a) It contains no data redundancies b) It contains no foreign keys c) It contains no transitive dependencies d) all of these

101.

An example of a transitive dependency in a database is: a) Student → grade b) Telephone area code → phone number c) Airline → flight number d) Parking Code → parking fine amount

102.

An example of a transitive dependency in a database is: a) Student → university course number b) Parking ticket code → total of student parking fines c) Product number → product price d) Age → social security number

TB 3.10

Note to Instructor: The following questions are drawn from past AICPA examinations.

103.

In recent years many businesses have formed a common information source within their business organization called a database. One of the advantages of building databases is the simultaneous updating of files with common data elements. Another major advantage of the database concept is that: a) Database systems can be used in microcomputers as well as on large computers b) Database systems are simple to install and maintain c) Database systems are generally less expensive than separate file systems d) More duplication of data occurs with a database system e) Fewer skilled people are required to run a database system than another system

104.

Ander and Company has designed an electronic data processing system utilizing the database systems concept. In this system, transactions are entered into the system only once. In order to accomplish this Ander's files: a) Must utilize magnetic tape b) Must be separated by function (e.g., marketing has a set of files, production has a set, etc.) c) Must be located in an integrated file located in online storage d) Must be updated in a real-time environment e) Must be handled in some other manner than described above

105.

An important data field found in a typical computer record of an inventory file that would be vital to purchasing agents would be the inventory item's: a) Inventory number b) Assembly code c) Vendor code d) Assembly pointer address

The following data apply to items 109-111. The Oxford Corporation has the following eleven master files: * Accounts payable * Accounts receivable * Bill of materials * Finished goods inventory * Open production orders * Open purchase orders 106.

* Raw materials inventory * Sales summary * Vendor history * Work in process inventory * Operations list (labor operations and machine requirements for production)

Master files maintained as part of the sales order processing system are: a) Accounts receivable, bill of materials, sales summary b) Accounts payable, accounts receivable, finished goods inventory c) Accounts receivable, sales summary, operations list d) Accounts receivable, finished goods inventory, sales summary e) Accounts receivable, sales summary, vendor history

TB 3.11

107.

Master files that are maintained as part of the processing of purchase transactions are: a) Accounts payable, bill of materials, finished goods inventory, open purchase orders b) Accounts payable, open purchase orders, raw materials inventory, work in process inventory c) Accounts payable, bill of materials, open purchase orders, vendor history d) Accounts payable, finished goods inventory, open purchase orders, vendor history e) Accounts payable, open purchase orders, raw materials inventory, vendor history

108.

Master files used to plan and report on the resources required for the coming period are: a) Bill of materials, open production orders, work in process inventory, operations list b) Finished goods inventory, open production orders, open purchase orders, work in process inventory c) Finished goods inventory, open purchase orders, raw materials inventory, work in process d) Bill of materials, open production orders, vendor history, operations list e) Accounts payable, bill of materials, open production orders, raw materials inventory

Short Answer Questions 109.

Explain the difference between Primary Record Keys, Secondary Record Keys, and Foreign Record Keys.

110.

Explain the difference between REA and traditional accounting views of data collection and storage.

TB 3.12

Chapter 4 Organizing and Manipulating the Data in Databases True-False Questions 1.

Microsoft Access is an example of a database, not a database management system.

2.

Microsoft Access is an example of a database management system, not a database.

3.

Microsoft Access uses a key symbol to identify the primary record key in a database table.

4.

It is not possible to save a table in Microsoft Access unless you also identify a primary record key.

5.

A good primary record key to use for a table of employee records that you might create in Access is the employee’s last name.

6.

The conventional prefix for the name of a table is “tbl.”

7.

To create a relationship between two tables in Microsoft Access, you should use the Queries window.

8.

To create a relationship between two tables in Microsoft Access, you should use the Relationships window.

9.

An example of a data type for a data field in the record of an Access table is “Text.”

10.

An example of a data type for a data field in the record of an Access table is “Number.”

11.

The inability to delete a parent record if it has subordinate or “child records” in a relational database is enforced by using “Referential Integrity” in Microsoft Access.

12.

The inability to delete a parent record if it has subordinate or “child records” in a relational database is enforced by using “Parental Hierarchy” in Microsoft Access.

13.

A template that you can create in Microsoft Access and that prompts users for expected values is called a “mask.”

14.

A useful guideline to follow when creating data fields containing text is to assign at least 50 characters to it.

15.

A useful guideline to follow when creating data fields containing text is to limit data fields to reasonable lengths.

16.

The guideline recommending that you create “mnemonic names for data fields” means that you should name data fields that rhyme with their data types.

17.

A DBMS is a type of hardware.

TB 4.1

18.

A DBMS is a type of software.

19.

DDL is an acronym for “data definition language.”

20.

Databases are the same thing as database management systems.

21.

A DBMS is an efficient database table in third normal form.

22.

When purchasing a new database management system, managers should focus on the system’s technological capabilities rather than its compatibility with current systems.

23.

An example of a data type for a database record field is “Memo.”

24.

An example of an input mask for an Access data field is “000\-00\-0000.”

25.

Database designers typically store employee Social Security numbers as “Long Integer” data types.

26.

DML stands for “data management logic.”

27.

Database management systems allow their users to create “input masks” which help to prevent input errors.

28.

A database schema is a plan of the entire database.

29.

A database subschema is a plot that can often be discovered with forensic accounting.

30.

SQL is an example of a database query language.

31.

OLAP is notable for its “drill-down capability.”

32.

Online analytical processing enables a computer system to display information that must be computed from the data stored in a database.

33.

Pivot tables are powerful statistical tools, but allow the user little flexibility in selecting what data can be analyzed.

34.

Object-oriented databases are used to archive older data that management no longer needs to process.

35.

Multimedia databases have rendered traditional text databases useless.

36.

It is not necessary for data to be “clean” or accurate if they are stored in a data warehouse.

37.

If creating a data mart is not cost effective, management should consider creating a data warehouse, which typically uses less money and time to design.

38.

Data warehouses are only used for analyzing current accounting data.

TB 4.2

39.

Using Microsoft Access, “referential integrity” enables you to delete a record on the “one” side of a one-to-many relationship.

40.

Using Microsoft Access, you can delete a record from the “many” side of a oneto-many relationship, even if referential integrity is enforced.

41.

A dynaset is the set of records that results from a query.

42.

A dynaset is the total set of records in a database table.

43.

Using Microsoft Access to create a select query with multiple criteria (all of which you want satisfied at the same time), you should specify them on the same Criteria line of the query.

44.

Using Microsoft Access to create a select query with multiple criteria (all of which you want satisfied at the same time), you should specify them on separate Criteria lines of the query.

45.

An OR operation (query) in Microsoft Access requires you to use multiple Criteria lines to create the query.

46.

If you wish to create a select query with alternate criteria using Microsoft Access (e.g., you wish to see a list of all customers living in zip codes 12345 or 12366), you should specify them on separate Criteria lines of the query.

47.

An update query in Microsoft Access is an example of an action query that enables you to increase the prices by ten percent for all those products starting with product code “123.”

48.

An append query in Microsoft Access is an example of an action query that enables you to systematically add the term “Jr.” to individual names in a customer database.

49.

A delete query in Microsoft Access is an example of an action query that enables you to delete all those records in a table satisfying specific criteria.

50.

It is not necessary to spell accurately or correctly when creating queries in Microsoft Access because such matters as case or spelling are corrected automatically by the system’s spell checker.

51.

It is not possible to conduct multi-table queries using Microsoft Access because each table in the system is independent of the others.

TB 4.3

Multiple-Choice Questions 52.

All of the following are data types that you can assign to data fields when creating records in Microsoft Access except: a) Text b) Number c) Memo d) Percent e) all of these are legitimate data types

53.

Microsoft uses this symbol to represent the “many” side of a “one-to-many” relationship: a) & b) N c) √ d) ∞

54.

Using Microsoft Access, you create a “one-to-many” relationship between “Customers” records and “Customer Orders” records. When you view the Customers records in a datasheet view, Access indicates the presence of these customer order records using this symbol: a) & b) N c) √ d) ∞ e) +

55.

_________ is an Access tool that prohibits users from deleting parent records with child records (i.e., records related in a one-to-many relationship). a) Referential integrity b) Mnemonic naming c) Integrative relationships d) Data typing e) none of these is correct

56.

The proper prefix to use when naming a table in Microsoft Access is: a) tab b) table c) tbl d) tb e) none of these

57.

Which one of these is not a good guideline to follow when creating tables in a relational

database? a) b) c) d) e)

Design first, create tables later Name tables systematically, using conventional “tbl” prefixes Use mnemonic names for data fields Assign at least 50 characters to each text field Use consistent data types for primary and foreign key fields

TB 4.4

58.

A database management system is: a) A set of computer files b) A set of one or more computer programs c) A set of data to be processed by a computer d) A manual accounting information system

59.

Database management systems are important to accountants because: a) They automate file storage tasks and enable accountants to generate worthwhile financial reports b) They eliminate data redundancy c) They are unique data structures which accountants have never used before d) They are easy to develop and therefore save money e) They are energy efficient

60.

Database management systems can be implemented on: a) Mainframe computers only b) Mainframe and minicomputers only c) Mainframes, minicomputers, and microcomputers d) Microcomputers only

61.

A disadvantage of database management systems is that: a) They are not flexible b) They cannot be implemented on microcomputers c) They rarely support file inquiries d) They are often machine dependent (e.g., not all DBMSs can run on all types of computers)

62.

Which of these terms is synonymous with the term “combo box?” a) Collection box b) Textbox c) Criteria line d) Drop-down box

63.

An advantage of using a drop-down box in an Access database is that: a) It helps users avoid input errors b) It provides an input mask for data entries c) It automatically screens numeric data for incorrect values d) all of these are correct

64.

All of the following are advantages of drop-down boxes in Access except: a) It limits users to valid input choices b) It takes a small amount of room, even if the number of choices is large c) It always limits users to numeric entries d) The entries for the combo box can be stored in a separate table

65.

You can instruct Access to display a particular error message if you use this property: a) Validation rule b) Validation text c) Validation message d) Validation error TB 4.5

66.

If you require a data entry in an Access database to fall between two dates (rather than between two numeric values): a) You should use a select query using one line b) You should use a select query, using two lines c) You should use a validation rule and the word “between” d) This is impossible to require in Access

67.

A database developer can require Access to display records in an ascending sequence using this data field property: a) Organize b) Index c) Reorganize d) Sequencing

68.

A “default value” for an Access data field is: a) The value of last resort b) A value that Access will assume if the user does not enter one c) A value that Access will take from the last record entered into the system d) none of these

69.

An advantage of defining a default value for an Access data field is that it: a) Assures that the data in all records will be exactly the same for that field b) Eliminates data redundancy c) Helps create subsequent queries on that field d) Saves typing, and probably errors

70.

The purpose of an input mask is to: a) Disguise data when they are first input into a database b) Transform data from alphabetic to numeric formats c) Help users avoid data entry errors d) Hide sensitive data such as passwords onscreen

71.

At the time that a user starts to input data into a database, an “input mask” for a telephone number in an Access database might look like: a) xxx-xxx-xxxx b) abc-def-ghij c) (___) ___-____ d) none of these

72.

The value that a database will use if the user does not provide an alternate value is called a(n): a) Asset value b) Text value c) Control value d) Default value

TB 4.6

73.

To perform a range test of the “hours worked” data field for an employee, you should store the term “Between 0 and 40” in which of these properties in Access? a) Text b) Testing procedure c) Validation rule d) Validation text

74.

To perform a range test on the hours worked data field in an Access database that requires the entry to be at least 0 and no more than 40, you should express this requirement as: a) At least 0; Not more than 40 b) 0<= X <= 40 c) Between 0 And 40 d) none of these

75.

The purpose of using validation tests in the record definition of a database is to: a) Make sure the database works properly b) Avoid data entry errors c) Ensure normalized data d) Verify that the user is authorized to enter data in the database

76.

In Access, a validation rule triggers at the time when: a) The user enters a value that falls outside the allowable range b) The DBMS first uses the data in a report c) The user first requests the database to test data with a menu command d) The user powers up Access and loads that particular database

77.

DML stands for: a) Distributed management logic b) Data management logic c) Data management language d) Data manipulation language

78.

When Access links records to one another in different tables, the foreign key in one record refers to the _______ in another record. a) Primary key b) Secondary key c) Foreign key d) Linkage key

79.

Which tool enables a DBMS to extract only a subset of records from a database? a) Table b) Query c) Validation test d) none of these

TB 4.7

80.

One purpose of a data manipulation language is to: a) Create data fields b) Define the record structure c) Create queries on the data d) all of these

81.

All of these are examples of action queries that you can create in Microsoft Access except: a) Append query b) Update query c) Make table query d) Delete query e) Validation query

82.

You can increase the prices of selected products systematically using Microsoft’s: a) Append query b) Update query c) Make table query d) Delete query e) Select query

83.

You could append the term “Jr.” to selected names in a customer database using Microsoft’s: a) Append query b) Update query c) Make table query d) Select query e) none of these (this is not possible using an action query)

84.

A school administrator wishes to select the names of all students who have taken at least 130 units of credit at your university to see if they qualify for graduation. Which of these is the best type of query to use for this task? a) Append query b) Update query c) Make table query d) Select query e) Make report query

85.

A school administrator wishes to select the names of all students who live in a certain city. That city has exactly two zip codes in it. Which of these would be the best approach to use for this task? a) Perform two separate select queries, using only one zip code for each task b) Perform a single select query, placing the zip codes on the same Criteria line of the query c) Perform a single select query, placing the zip codes on separate Criteria lines of the query d) Perform a single, update query e) none of these (this is not possible using Microsoft Access)

TB 4.8

86.

Which of these is a desirable guideline to follow when creating queries with

Microsoft Access? a) b) c) d)

Spell accurately Don’t worry about capitalization Join each table at least twice to ensure their connectivity Name each query you create “Query”

87.

Which of these is an example of a data query language? a) ABC b) SQL c) DDL d) JPG

88.

Which of these types of databases might also store instructions that indicate how to compute an employee’s net pay? a) Multidimensional database b) Hierarchical database c) Object oriented database d) Data dictionary

89.

These databases can include graphics, audio, and animation: a) Multidimensional databases b) Hierarchical databases c) Object-oriented databases d) Multimedia databases

90.

OLAP stands for: a) Object Language for Access Programming b) Object Level Analytical Programming c) Online Analytical Processing d) none of these

91.

An advantage of a multimedia database is that: a) They can store graphics and pictures as well as numeric data b) They are also object-oriented databases c) They allow users to upload pictures in web applications d) all of these are advantages

92.

Sorting and Indexing database records are similar in that: a) Neither require underlying table records b) Both require the user to first define data validation rules c) Both reorganize the way record data appear in outputs d) none of these

93.

Sorting records are unlike indexing records in that: a) Sorting physically rewrites records on disks whereas indexing does not b) Sorting requires a primary key whereas indexing does not c) Indexing requires a separate database file whereas sorting does not d) none of these

TB 4.9

94.

Which of these is true about finding data in multimedia databases? a) It is not possible to search them because graphics have no text keys for searching b) It is not possible to search them because audio objects have no text keys for searching c) It is possible to search for items in them because such characteristics as “speaker” or “subject” can be used as search parameters d) It is possible to search for items in them if the name of the embedded graphics or audio file is also known

95.

A car parts inventory database that includes a picture of the part itself as a graphic would most likely be stored in which type of database? a) Multidimensional database b) Hierarchical database c) Object oriented database d) Data dictionary

96.

All of these are characteristics of the data stored in a data warehouse except: a) Data are clean of errors b) Data are defined uniformly c) Data are stored in consistent formats d) Data are simplified, and thus cannot be used to answer complex questions

97.

Organizations sometimes pool the historical data from various, separate organizational databases into a common body of information called a(n): e) Data pool f) Data warehouse g) Amazon database h) Franchise database

98.

Another word for “cleaning” the data in preparation for storing it in a data warehouse in order to ensure uniform accuracy is: a) Scrubbing b) Sanitizing c) Validating d) Coding

99.

As a general rule, creating data warehouses is: a) Easy b) Habit forming c) Challenging but often worth the cost d) Challenging, and historically rarely worth the cost

100.

In Access, the terms “size,” “data type,” and “input mask” are mostly closely associated with: a) A table b) A record c) A data field d) A database

TB 4.10

101.

Using Access, which of these terms is not associated with defining a data field within a record? a) Field name b) Data type c) Currency value d) Description

102.

Using Access, which of the following is not a recognized data type? a) yes/no b) Year c) Currency d) Date

Short Answer Questions 103.

What is the difference between a database and a database management system?

104.

Why would an organization allow some users to only view a subschema of a database file instead of the schema?

TB 4.11

Chapter 5 Database Forms and Reports True-False Questions 1.

Forms are the only method of entering data in a database.

2.

Forms do not allow customized organization of the data they display.

3.

It's usually easier to create a database form from scratch.

4.

Using Microsoft Access, the “PgUp” key on the computer’s keyboard can be used to access the previous record in a form.

5.

The Access navigation bar in a form allows access to any stored record.

6.

In Access, forms allow users only to view database information, but not change it.

7.

The changes that a user makes to the data in a form at run time do not alter the data in the underlying database table.

8.

Data field masks help prevent users from entering incorrect values.

9.

Subform data must be in a one-to-one relationship with the data on the main form.

10.

Grouping like data together is a useful guideline to follow when creating usable forms.

11.

Existing paper-based forms can help guide the creation of electronic database forms.

12.

A report can combine the information from various tables in a database.

13.

In Access, you can create a “report” that displays the name and address of only a single vendor.

14.

Modifying a report layout and other properties can be done using the Report Wizard.

15.

A report must contain all the information found in the records of the underlying table on which it is based.

16.

Calculated fields are not possible when creating reports in Access.

17.

Calculated fields in reports use the information in external files exclusively.

18.

The name of a form may contain spaces and capitalized characters.

19.

When referencing data fields in queries using Access, squarebrackets around the field name indicate a reference to an existing data field.

20.

The report wizard can create reports containing grouped data.

TB 5.1

21.

Formatting a report is usually a trivial task in Microsoft Access, requiring little time or effort.

22.

The conventional naming prefix for report is “rept”.

23.

Softcopy reports are unlikely to survive in the near future.

24.

Reports can be modified after they are created.

25.

A report may be created that is based on a query instead of a table.

26.

A report can only reference the data found in a single table—not the data from multiple tables.

27.

The first step in creating a report is actually planning the layout of the report.

28.

When selecting a particular data field to include in a report using the report wizard, you should click on the ► button.

29.

The button with symbol “►│” on the navigation bar gets you to the first form in the table.

30.

If you change an underlying value used in the calculated field of a report, the value of this calculated field in any subsequent copy of the report will also change.

Multiple-Choice Questions 31.

Which of the following is not a part of a form? a) A heading section b) A detail section c) A design section d) A navigation bar

32.

Which of the following is not an advantage of form data entry over datasheet data entry? a) It is fast and efficient for data entry b) Accidental modification of adjacent records is not possible c) In Access, all the fields for a record are usually displayed on the same screen d) The forms are customizable by end users at run time

33.

Which of the following is not a possible way to customize a form? a) Adding information to the Header of a form b) Adding artwork to a form c) Adding control buttons to the Title Bar of the form d) Using more complete names for fields

34.

When using the Form Wizard in Microsoft Access, which of these is not a step in creating a new form? a) Entering design settings such as the layout of the form b) Identifying the underlying table or query to use for the form c) Designing data validation tests for the form to perform for data entries d) Naming the form

TB 5.2

35.

Clicking the ▌◄ button on the navigation bar of a form causes Access to display: a) The last record b) The record with the lowest primary key c) The record with the highest primary key d) The first record

36.

When designing a form for an Access database, the term “Inheritance” refers to: a) The propagation of properties and restrictions from the data field in the underlying table to the field in the form b) The propagation of properties and restrictions from the underlying table itself c) The ability of all the fields of the form to assume the same color d) none of these

37.

A subform is: a) A subordinate form within a form b) A smaller, independent form compared to another form c) A specialized form used to create a report d) none of these

38.

Which of these is an advantage of a subform? a) The ability to display subordinate information b) The ability to be used in the same manner as regular forms c) both of these d) none of these

39.

One way to create a subform is to: a) Simply create a new table b) Identify the subform when you use the Form Wizard c) Utilize MySQL databases d) Add a subform to a printed report

40.

Which of these features is desirable in database form design? a) Use garish colors to attract the user’s attention b) Create forms that require several screens for display purposes c) Use unique fonts for different fields in the same form d) Resize data fields to ensure they display all the data in the underlying table

41.

Manual forms, in terms of database form design, are: a) Archaic b) Used to guide the development of electronic forms c) Used to collect information electronically d) Used by many offices already

42.

Forms are not capable of which of the following? a) Read-only display b) Auto-complete features c) Validating input d) Preventing all entry errors

TB 5.3

43.

A rule of thumb in industry is that the cost to correct an error in a database is approximately how many times the cost of entering the data initially? a) 3 b) 5 c) 7 d) 10

44.

Reports enable users to: a) See a paper output of database information b) Change information in the underlying database tables c) Limit the distribution of the information d) Tab from one data field to another at run time

45.

What is the first step in creating a report? a) Determining what information to display b) Analyzing the available information c) Restructuring the database d) Analyzing the database

46.

Which of these is likely to appear last in a report? a) Page header b) Group header c) Detail lines d) Report header e) any of these could be last

47.

Which of the following cannot be defined when using the Report Wizard in Microsoft Access? a) Data source selection b) Grouping c) Sorting d) Format design e) all of these can be defined by the Report Wizard

48.

Which of these is not an example of a calculated field? a) Unit cost of an item b) Grand total c) Sales tax d) Profit

49.

Which punctuation mark delineates the separation between a calculated field name and the formula for that field? a) Colon b) Space c) Asterisk d) Dash

TB 5.4

50.

If you misspell a field name, Access will: a) Correct you b) Indicate an error c) Assume you are creating a parameter query d) none of these

51.

The point at which a group changes from one type to the next in a report is referred to as: a) Lucky break b) Lunch break c) Choke point d) Control break

52.

Which of these is not an example of a control break? a) Changing a name of a client b) Change in department in an employee listing c) Change in service classification in a phone book listing d) Change in zip code in an address listing e) none of these

53.

Which of the following is an example of a valid calculated field entry? a) MyField = field1\field2 b) MyField = field1/field2 c) My Field: thisField/ThatField d) MyField: thisField\ThatField

54.

The Format menu in Access allows users to: a) Resize objects b) Edit objects c) Align objects d) all of the above

55.

Which of the following is not a guideline for creating professional data reports? a) Plan before you program b) Provide different output formats for different languages c) Avoid garish colors and fonts d) Fit on one sheet of paper

56.

Which of the following would best minimize the vertical space used by a report? a) Reduce vertical space between lines in the report header b) Reduce vertical space between lines in the detail portion c) Use smaller fonts in Text boxes d) all of these are equally efficient for this task

TB 5.5

57.

Suppose an employee’s date of hire is changed in an employee table. When a database user subsequently runs a report showing the number of years the employee has worked for the company (a calculated field), what will happen? a) Nothing. The same value that was calculated in any prior report will continue to show in the new report b) The new report will show a new calculated value c) The new report will show the average of the original value and the new value d) This depends upon other settings not indicated in the statement

58.

Which of these is not a section of a database report? a) Report Header b) Page Header c) Detail lines d) Page Footer e) all of these are common sections of a database report

59.

Which of these sections of a database report is likely to occupy the most room on a report? a) Report Header b) Page Header c) Detail lines d) Page Footer e) Report Footer

60.

Which of the following statements is not correct? a) You can avoid using Access’ Form Wizard and create a form from scratch b) A form can contain a subform c) A total value in a report footer will always be at least as large as any group footer value for the same data field d) A report can contain a subform within it e) You can embed pictures or other icons in a report header

61.

Assume that your manager has asked you to prepare a budget for your firm using data stored in an Access database. The best approach for creating the budget would be to use a: a) Table b) Query c) Form d) Report e) SQL

62.

Assume that salespeople at your firm make many errors when inputting sales data to the firm’s Access database. Your manager has asked you to find a way to reduce data input errors. A good approach for reducing data entry errors would be to create a: a) Table b) Query c) Form d) Report e) SQL

TB 5.6

63.

Assume that your manager has asked you to improve the efficiency and effectiveness of data entry for sales invoices by adding capabilities to the firm’s Access database. In order to allow data entry for each invoice and multiple items on each invoice, you should create a: a) Table b) Query c) Form without a subform d) Form with a subform e) Report

Short Answer Questions 64.

Explain why forms have subforms.

65.

Why is it important to design the layout for a report prior to creating the report?

66.

What is the difference of a report based on a table and a report based on a query?

TB 5.7

Chapter 6 Documenting Accounting Information Systems True-False Questions 1.

Documentation includes everything except narrative descriptions.

2.

A document flowchart describes the physical flow of data through an accounting information system.

3.

The direction of information flow in a document flowchart is represented by arrows.

4.

Document flowcharts are mainly an educational aid and are seldom used in the business world.

5.

A document flowchart is a particular kind of system flowchart.

6.

Flowcharting is a science, with strict rules and procedures.

7.

An example of a system flowcharting symbol is a rectangle, which represents “processing.”

8.

It is better to use connector symbols in flowcharts than to cross lines.

9.

The keying operation that transfers payroll change requests directly to floppy disk is called an off-line job entry system.

10.

A system flowchart represents a flow or job stream of accounting data through the various processing phases of the accounting system.

11.

Process maps are a special kind of flowchart.

12.

Process maps use circles and arrows as their primary symbols.

13.

A data flow diagram represents a physical, rather than logical, view of an accounting information system.

14.

Data flow diagrams are only used to audit an AIS.

15.

Data flow diagrams use more symbols than system flowcharts.

16.

A circle or bubble symbol in a data flow diagram is used to represent a “transformation process.”

17.

Like system flowcharts, data flow diagrams have levels which show varying amounts of detail.

18.

The highest level of a data flow diagram is also called a “context diagram.”

19.

The first level of detail in a data flow diagram is called a “physical data flow diagram.”

TB 6.1

20.

The task of creating more-detailed data flow diagrams is called “decomposition.”

21.

An important guideline to follow when creating data flow diagrams is to avoid drawing temporary files in them.

22

An important guideline to follow when creating data flow diagrams is to show only one system entity even when several of them perform the same tasks.

23

Program flowcharts and decision tables are used primarily by systems analysts and programmers.

24.

The highest level program flowchart is called the “macro program flowchart.”

25.

Decision tables are useful when a data processing task includes a large number of conditions and subsequent courses of action.

26.

A major disadvantage of decision tables is that they are unable to summarize data processing tasks associated with a large number of data conditions into any kind of compact or easily understood format.

27.

Programs such as allCLEAR and Visio are examples of CASE tools.

28.

Documentation is not important when end users create their own computer programs or applications.

29.

Good documentation when creating spreadsheets is to include the name of the original developer and important assumptions made in the model.

30.

Companies should create documentation standards that apply to end-user programs as well as applications created by the IT department.

Multiple-Choice Questions 31.

Documentation includes: a) All flowcharts, narratives, and other written communications associated with the information system b) All written communications associated with an accounting information system except flowcharts and data flow diagrams c) All flowcharts, narratives, and other written communications associated with an accounting information system, except for program flowcharts, decision tables, and pseudocode d) Flowcharts and data flow diagrams only

32.

Which of the following professionals would use a document flowchart? a) Accountants b) Auditors c) System designers d) all of the above

TB 6.2

33.

A reader of a document flowchart is able to distinguish between the preparation of a document in one department and its receipt in another department by: a) Logic b) Arrows c) Column d) Narratives

34.

When an individual prepares a document flowchart, the names of the various organizational departments involved in the accounting information system should be listed: a) Along the right-hand margin of the flowchart b) Along the left-hand margin of the flowchart c) In the title of the flowchart d) In the column headings of the flowchart

35.

The document flowchart symbol for a manual file (such as a file cabinet of accounts receivable invoices) is: a)

36.

d)

b)

c)

d)

This is the document flowcharting symbol used to represent an online file: a)

38.

c)

This is the document flowcharting symbol for a source document such as a purchase order: a)

37.

b)

b)

c)

d)

A system flowchart is a block diagram that: a) Is used only by auditors b) Is used primarily when document flowcharts cannot be used c) Depicts the flow of computer systems in an organization d) Depicts the flow of data through a computerized accounting information system

TB 6.3

39.

Most system flowcharting symbols: a) Have not been standardized b) Have been standardized by the Society of System Analysts c) Have been standardized by the National Bureau of Standards d) Are unique to the organization that uses them

40.

Which of the following symbols represents the standard systems flowcharting symbol for an input/output process? a)

41.

d)

b)

c)

d)

Which of the following symbols represents the standard system flowcharting symbol for a processing operation? a)

43.

c)

Which of the following symbols represents the standard system flowcharting symbol for a screen display? a)

42.

b)

b)

c)

d)

Which of the following symbols represents the standard system flowcharting symbol for a computer-generated document? a)

b)

c)

TB 6.4

d)

44.

Which of the following symbols represents the standard system flowcharting symbol for manual input (such as on a computer terminal)? a)

b)

c)

d)

45.

A system that enables users to input data directly into a computer, typically from a remote site, is conventionally called a(n): a) Remote input system b) On-line job entry system c) Remote site input system d) none of these

46.

When creating system flowcharts, the requirement that a processing symbol should always be placed between an input symbol and an output symbol is known as the: a) Processing rule b) Input/output rule c) Sandwich rule d) Cycle rule

47.

In most process maps, an arrow represents: a) The direction for reading the chart b) The tasks to perform in an accounting task c) The process direction flow d) The flow of money through a cash register

48.

Data flow diagrams: a) Accomplish the same purpose as system flowcharts b) Are different from system flowcharts since they focus on a logical view of the information system c) Are useless for planning a new system d) Are never used in analyzing an existing system

49.

The basic symbols used in data flow diagrams are: a) A circle, square, diamond, and rectangle b) A triangle, circle, square, and open-ended rectangle c) An open-ended rectangle, line and arrow, diamond, and square d) An open-ended rectangle, line and arrow, circle, and square

50.

In a data flow diagram, an open-ended rectangle is used to represent: a) A process b) A data stream c) A data source or destination d) A data store

TB 6.5

51.

All of these are levels of a data flow diagram except: a) Physical data flow diagram b) Process diagram c) Context diagram d) Logical data flow diagram

52.

All of these are terms normally associated with data flow diagrams except: a) Context diagram b) Physical DFD c) Logical DFD d) Pseudocode DFD

53.

The task of providing greater detail in successive levels of data flow diagrams is called: a) Contexting b) Detailing c) Decomposition d) Pyramiding

54.

All of these are guidelines for creating good data flow diagrams except: a) Show the most detail in the highest-level DFD b) Each logical DFD should contain between 5 and 7 processing bubbles c) Even if a file is temporary, include it in your DFD d) Classify most of the final recipients of processed data as external entities

55.

All of the following are likely to be used more often by programmers and system analysts, rather than by accountants, except: a) Program flowcharts b) Document flowcharts c) Decision tables d) Pseudocode

56.

Which of the following is not one of the four parts of a decision table? a) The condition stub b) Condition entries c) Decision symbols d) Action entries

57.

Which of the following is not an advantage of decision tables? a) They document the logic of the computer program b) They show the order in which data conditions are tested and/or processing actions are taken c) They increase computer programmer productivity d) They summarize the data processing tasks to be performed for a large number of data conditions in a compact format

58.

Pseudocode: a) Is sometimes referred to as “imitation code” b) Is another name for structured English c) Is used for security purposes d) Cannot be used to describe the logic in an accounting information system

TB 6.6

59.

Structured programming: a) Is impeded by tools such as decision tables and program flowcharts b) Is used to build computer programs that are organized in a bottom-up modular fashion c) Is used to build computer programs that are organized in a top-down modular fashion d) Causes systems analysts to take longer in developing programs

60.

Well written documentation plays a key role in: a) Reducing system failures b) Increasing time spent correcting errors c) Increasing time spent modifying programs d) Increasing time spent by auditors to follow data flows

61.

Document flowcharts use the following symbol to show movement of goods: a) Pickup truck b) Wheelbarrow c) Hand truck d) any of the above

62.

Most CASE tools: a) Generate modifications with difficulty b) Can detect inconsistencies in system designs c) Rarely generate computer code d) Need word processors to finish the documentation

63.

An example of end-user documentation would most likely be: a) Pseudo-code b) Decision tables c) A document drawn with a CASE tool d) Instructions for using a spreadsheet

64.

All of the following are controls for end-user computing except: a) Formally evaluate large projects b) Formalize documentation standards c) Limit the number of employees authorized to create end-user applications d) all of the above are important controls

65.

Frequent use of process maps is for: a) Designing new AISs b) Documenting the logic in a computer program c) Reengineering business processes d) Increasing employees productivity

66.

The textbook identified nine reasons why documentation of an AIS is important. For which of the following reasons would the user guides, procedure manuals and operating instructions be most important? a) Depicting how the system works b) Training users c) Designing new systems d) Standardizing communications with others

TB 6.7

67.

Which type of data flow diagram depicts what the participants are doing in a system (i.e., what the system is doing)? a) Context diagram b) Physical DFD c) Logical DFD d) Systems flowchart

68.

Which type of data flow diagram illustrates the internal and external entities who are participating in a given system? a) Context diagram b) Physical DFD c) Logical DFD d) Systems flowchart

69.

Which of the following flowcharting symbols is correctly identified?

a. a) b) c) d) 70.

b.

c.

d.

Process Document Decision Display

Which of the following data flow diagram symbols is correctly identified?

a. a) b) c) d)

b.

c.

External entity Internal entity Communication link (e.g., a satellite connection) Data store (file)

71.

Which type of data flow diagram presents a high-level view of a system process? a) Context diagram b) Physical DFD c) Logical DFD d) Systems flowchart

72.

Document flowcharts organize documents and activities by: a) Chronological order b) Departments c) Monetary value d) Complexity

TB 6.8

d.

73.

End-user computing is common in firms because: a) It is free b) It is well-documented c) It allows employees to rapidly develop applications d) It prevents employees from altering systems

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once.

74. ______ CASE (computer-assisted software engineering) tools 75. ______ context diagram 76. ______ data flow diagrams 77. ______ decision table 78. ______ document flowchart 79. ______ documentation 80. ______ end user computing 81. ______ graphical documentation software 82. ______ logical data flow diagram 83. ______ object-oriented software 84. ______ physical data flow diagram 85. ______ process map 86. ______ program flowcharts 87. ______ system flowchart

Definitions: A. Traces the physical flow of documents through an organization B. A high-level data flow diagram C. Concentrates on the computerized data flows of AISs D. Document business processes in easy-to-follow diagrams E. Programs that contain modular, reusable code F. IT professionals create these to help them plan the logic for each processing routine in large programs G. Allows users to automate documentation tasks such as drawing or modifying flowcharts, drawing graphics and screen designs, developing reports, and even generating code from documentation H. A DFD that shows what participants do in a given system I. Describes the logical flow of data within a computer system and the procedures that employees must follow to accomplish application tasks J. Used as an alternative to program flowcharts K. A context diagram that has been decomposed into the first level of detail L. Examples include Microsoft PowerPoint, Word, and Excel M. Refers to the ability of non-IT employees to create computer applications of their own N. Used primarily in the systems development process (i.e., as a tool for analyzing an existing system or as a planning aid for creating a new system)

TB 6.9

Short Answer Questions 88.

What are the four symbols used in a data flow diagram, and what does each of the symbols mean?

89.

What is the purpose of a decision table?

TB 6.10

Chapter 7 Accounting Information Systems and Business Processes: Part I True-False Questions 1.

A ledger is a chronological record of business events by account.

2.

A company’s chart of accounts is used to organize its general ledger.

3.

A cash disbursements journal is an example of a special journal.

4.

Subsidiary ledgers are frequently maintained for accounts receivable and inventory accounts.

5.

The first trial balance produced by an AIS in the accounting cycle, is the adjusted trial balance.

6.

Managerial reports are the primary output of the financial accounting system.

7.

Codes are seldom used in an AIS because they use excess space.

8.

Block codes are commonly used in constructing charts of accounts.

9.

Three major objectives of a data collection process are accuracy, timeliness, and cost-effectiveness.

10.

Debit/credit memoranda are issued when there is a discrepancy about the amount owed or when goods are returned.

11.

Block codes consist of a combination of a sequence code and a mnemonic code.

12.

Group codes are very flexible in identifying accounting data.

13.

A two-digit alphabetic code has many more different combinations of symbols than a two-digit numeric code.

14.

The sales process begins with placing an order with a vendor.

15.

The AIS should bill customers for goods at the time they are ordered.

16.

The purchasing process is complete when goods are received from vendors.

17.

A shipping notice is a source document that accompanies goods sent to a customer.

18.

The purchasing process begins with a request for goods or services and ends with receipt of the goods or services.

TB 7.1

19.

The purchasing process begins with a request for goods or services and ends with payment to the vendor.

Multiple-Choice Questions 20.

Which of the following is not one of the trial balances typically produced as part of the financial accounting cycle? a) Closing trial balance b) Unadjusted trial balance c) Adjusted trial balance d) Post-closing trial balance

21.

A general ledger: a) Is a chronological listing of an organization’s transactions b) Is a listing of an organization’s transactions, organized by account c) Does not include every account in an organization’s chart of accounts d) Is the same thing as a transaction listing

22.

The financial accounting cycle ends with: a) The production of financial statements b) The production of a post closing trial balance c) The production of an adjusted trial balance d) Development of cash forecasts

23.

Which of the following is not a primary objective of coding systems today? a) To compress data b) To uniquely identify objects c) To convey special meanings that are not apparent to the public-at-large d) To use numbers instead of alphabetic characters in order to save on computer data storage costs

24.

The Year 2000 problem was a prime example of: a) Information overload b) A coding problem c) Poorly designed report structures d) The short-sightedness of accountants

25.

Which of the following is not usually a design consideration in coding systems? a) Consistency b) Standardization c) Government regulation d) Plans for future expansion

26.

Well-designed output reports are characterized by all but which of the following? a) They are useful b) They are conveniently formatted c) They never include graphs d) They are easily identifiable

TB 7.2

27.

Information overload: a) Refers to a problem that can result when an AIS produces too many reports b) Refers to the situation that occurs when a company’s database is too large c) Almost always results when an AIS is computerized d) Cannot be avoided in the Information Age

28.

Which of the following is not an example of a source document? a) Receiving report b) Purchase order c) Sales order d) Aging report

29.

Performance reports are: a) Reports that compare budgets with actual performance b) Reports that show any exceptional conditions in an organization c) Never presented in an exception format d) Transaction listings

30.

The sales process begins with: a) Placing an order with a vendor b) A customer order for goods or services c) Production of goods or services d) Delivery of goods or services

31.

The primary objective in processing revenues is to: a) Sell as many goods as possible b) Achieve timely and efficient cash collection c) Maximize an organization’s sales orders d) Only sell goods to customers who can pay their bills

32.

An important input to the sales process is: a) A customer sales order b) The cash forecast c) Aged accounts receivable information d) A receiving report

33.

To forecast cash receipts, information must be collected from: a) The purchasing process b) Payroll processing c) Inventory control systems d) The sales process

34.

Which of the following is not an objective of the purchasing process? a) Inventory control b) Fastest possible processing of payments to vendors c) Maintaining vendor records d) Forecasting cash outflows

TB 7.3

35.

Which source document is used to request goods? a) Purchase order b) Shipping notice c) Purchase requisition d) Sales order

36.

The bill of lading: a) Reflects freight charges on goods shipped b) Signifies release of goods for shipment to customers c) Is sent to the customer with the purchase invoice d) Is used to control inventory

37.

Inputs to transaction processing systems: a) Are always in hard copy b) Are best when input in a graphical format c) May be in an electronic format when an EDI system is used d) May never be audio

38.

Forecasting cash flows: a) Is an objective of transaction processing b) Is never considered an objective of transaction processing c) Is only possible in computerized AISs d) Is considered as a risky activity with which accountants should not be associated

39.

Which of the following is not an objective of the sales process? a) Controlling inventory b) Tracking sales of goods and/or services to customers c) Billing for goods and services d) Forecasting sales and cash receipts

40.

All of the following are inputs (source documents) to the sales process except: a) Sales order b) Shipping notice c) Remittance advice d) all of the above are source documents to the sales process

41.

Business organizations are recognizing the value of sales data and are purchasing software solutions to gather, maintain, and use these data to provide better service and promote customer loyalty. These software solutions are called: a) Customer relations data solutions b) Customer relationship management solutions c) Sales data management solutions d) none of the above

42.

Which of the following outputs (reports) are common to both the sales process and the purchasing process? a) Sales analysis reports b) Financial statement information c) both (a) and (b) d) none of the above TB 7.4

43.

All of the following are inputs (source documents) to the purchasing process except: a) Purchase order b) Vendor listing c) Bill of lading d) all of the above are source documents to the purchasing process

44.

Which of the following is an objective of the purchasing process? a) Collecting information for the financial statements b) Making timely and accurate vendor payments c) Forecasting cash requirements d) Tracking bills of lading

45.

Which of the following statements best describes business process outsourcing? a) A company focuses on its core business processes and contracts with another firm to do the other processes b) Companies frequently outsource core business processes c) Due to networked enterprises and advanced technology, more employees may work from their homes or alternate locations d) Initially, companies engaged in business process outsourcing offered employees more opportunities to travel and more career choices for advancement

46.

Networked enterprises and globalization have enabled a new business model called “business-without-boundaries.” Which of the following statements describes this business model? a) Companies no longer have all of their employees in one location b) It is called offshoring and companies contract with firms in other countries to do such business processes as human resources, payroll, and accounting c) Companies are under a great deal of scrutiny to manage costs and generate revenue so they contract with foreign firms to do various business processes at a lower cost to the company d) all of the above statements describe this model

47.

Which of the following statements best describes a business process? a) It is a collection of activities in an organization that creates value b) The nature and type of processes might vary from industry to industry c) It is an activity that increases and/or decreases dollar amounts on the financial statements d) It is an economic event in the life of an organization

48.

Which of the following Business Process Management (BPM) software solutions is most often associated with the sales process? a) Enterprise resource management b) Integrated management c) Customer relationship management d) Supply chain management e) none of the above

TB 7.5

49.

Much of the input and output related to business processes is now electronic. Which of the following technologies is becoming increasingly popular to manage inventory? a) EDI b) RFID tags c) Magnetic ink characters that can be quickly and easily scanned d) Bluetooth and wireless-enabled laptop computers

50.

The information management wants to see in ______ determines many of the fields in the firm’s ______. a) Subforms, queries b) Reports, database c) Ledgers, journal entries d) Business processes, EDI

51.

In the sales process, in an online environment, ______ occurs before ______. a) Customer payment, customer order b) Customer payment, shipping notice c) Vendor order, vendor payment d) Work in process, finished goods

52.

Why do firms like Walmart and Procter & Gamble create supply chain partnerships? a) These firms are chain stores, and they need supply chains b) Supply chains make inventory management more efficient c) Supply chains make database designs more efficient d) Supply chains allow the firms to be more independent

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are four terms that are not used.

53. ______ business process 54. ______ BPM software 55. ______ BPO 56. ______ business-without-boundaries 57. ______ CRM software 58. ______ off-shoring 59. ______ RFID tags 60. ______ sales process 61. ______ mnemonic codes 62. ______ exception report 63. ______ business event

TB 7.6

Definitions: A. Organizational structure for the general ledger B. Codes that help the user remember what they represent C. A sequential set of numbers used to identify customer accounts, employee payroll checks, customer sales invoices, and so forth D. A list of conditions – for example, a purchase order has an authorization signature but contains some inaccurate or missing information E. A collection of activities and work flows in an organization that creates value F. An activity that does not impact the financial statements, but is nevertheless important to the business G. Maintaining customer records is an important function H. Software to gather, maintain, and use these data to provide better customer service and customer loyalty I. Begins with a request (or an order) for goods or services J. List of differences between quantities or amounts on the purchase order, the receiving report, and the purchase invoice K. A new technology that is used in the sales and the purchasing processes L. This business model is a result of networked enterprises and globalization M. When companies have production or work completed in countries like India, China, Canada, Mexico, or Malaysia N. When companies contract with other companies to do certain tasks, such as human resources, finance and accounting, customer services, training, and IT O. Software that collects corporate knowledge, data, and business rules to improve core processes

Short Answer Questions 64.

What are the purposes of accounting codes?

65.

What is the difference between a data flow diagram for the sales process and a system flowchart describing the sales process?

66.

What does offshoring business processes mean?

TB 7.7

Chapter 8 Accounting Information Systems and Business Processes: Part II True-False Questions 1.

The human resource management process is the same thing as the payroll process.

2.

The production process is only present in service organizations.

3.

The primary objective of the production process is to minimize the use of raw materials in the production process.

4.

An AIS’s cost accounting subsystem is an important part of the production process.

5.

Inputs to the production process include job time cards, material requisition forms, and the master production schedule.

6.

With a job costing system it is not possible to keep track of costs for each item or group of items produced.

7.

With a just-in-time inventory approach, raw material inventories are always zero.

8.

The bill of materials lists the types and quantities of parts needed to assemble each unit of product.

9.

Production cost reports are useful for internal control since they help in calculating budget variances.

10.

The financing process concerns a company’s acquisition and use of financial resources.

11.

Effective cash management is not an objective of the financing process.

12.

Financial planning models are useful to financial managers in helping them to determine an optimal strategy for acquiring and investing an organization’s financial resources.

13.

Deposit slips and remittance advices are examples of source documents associated with the financing process.

14.

A cash budget is a primary output of the financing process.

15.

The term vertical market refers to software distribution processes.

16.

Time and billing features in accounting software are important to engineering, legal, and accounting firms.

17.

One distinguishing feature of organizations in the professional service industry is the difficulty in measuring the quantity and quality of their output.

TB 8.1

18.

Not-for-profit organizations focus primarily on the flow of funds rather than income in their internal accounting systems.

19.

Point-of-sale accounting systems are important in the health care industry.

20.

Third party billing refers to the payment of many health care bills by insurance companies rather than by patients.

21.

The AIS for the health care industry is particularly complex due to third party billing.

22.

The objective of the fixed asset management function is to manage the purchase, depreciation, and disposal of an organization’s fixed assets.

23.

The production process begins with a request for raw materials and ends with the transfer of finished goods to warehouses.

24.

The objective of a manufacturing organization’s production process is to convert raw materials to finished goods as quickly as possible to free up cash resources.

Multiple-Choice Questions 25.

The primary objective of a manufacturing organization’s production process is to: a) Maintain inventories at a zero level b) Convert raw materials into finished goods as efficiently as possible c) Make sure that there are no product defects d) Maintain the documentation and report on an organization’s manufacturing process

26.

The largest expense item on a manufacturing organization’s income statement is most likely to be: a) Salaries for production workers b) The depreciation associated with manufacturing equipment c) The cost of direct materials d) Cost of goods sold

27.

Job costing information systems are most appropriate for: a) Home builders b) Textbook publishers c) Beverage companies d) both a and b are appropriate industries for job costing systems

28.

All of the following are input documents for the production process, except: a) A master production schedule b) A production order c) A material requirements planning document d) A bill of materials

TB 8.2

29.

An organization’s working capital consists of: a) Its checking accounts b) Both checking and savings accounts c) Bank accounts and other liquid assets d) Coin and currency only

30.

Which of the following is not a concern of the financing process? a) Effective cash management b) Optimizing an organization’s cost of capital c) Minimizing an organization’s borrowings d) Projecting cash flows

31.

Inputs to the financing process include: a) Remittance advices, deposit slips, checks, and stock market data b) Remittance advices, deposit slips, checks, and receiving reports c) Deposit slips, checks, receiving reports, and purchase requisitions d) Deposit slips, checks, purchase requisitions, and financial institution profiles

32.

Time and billing systems are most often used by: a) Health care organizations b) Professional service organizations c) Retail organizations d) Not-for-profit organizations

33.

Which of the following statements is not true? a) Time and billing systems are similar to job order costing systems b) Time and billing systems are an important component of an AIS for manufacturing firms c) A difficult problem for professional service organizations Ris tracking staff time d) Time and billing systems are important in the professional service industry

34.

Which of the following is not a characteristic associated with professional service organizations? a) Lack of a profit motive b) Absence of inventories c) Importance of human resources d) Difficulty in measuring the quantity and quality of output

35.

It is generally true of not-for-profit organizations that they: a) Are profit-oriented despite their name b) Are always evaluated using profit measures c) Are not governed by accounting standards d) Emphasize funds rather than income in their internal accounting systems

36.

A major objective of professional service organizations is to: a) Decrease billable hours b) Increase billable hours c) Increase time spent training employees d) Bill customers as frequently as possible

TB 8.3

37.

Which of the following is an example of a not-for-profit organization? a) Consulting firm b) State university c) Public hospital d) both b and c are correct

38.

Third party billing refers to: a) Billing to clients by professional service organizations b) Billing to insurance companies by health care organizations c) The fact that the customer often does not pay directly for goods purchased in the health care industry d) both b and c are correct

39.

Which of the following characteristics are common to both service and not-for-profit organizations? a) Importance of professional employees b) Difficulty in measuring the quality and quantity of output c) Inability to inventory product d) all of the above

40.

Which of the following is normally more important for a not-for-profit organization compared to a profit-oriented organization? a) Long-range goals b) Earning an adequate level of income each accounting period c) Long-range budgetary planning and controlling system d) Short-range budgetary planning and controlling system

41.

Healthcare organizations: a) Are always not-for-profit enterprises b) Do not include nursing homes in their industry segment c) Have great difficulty in measuring outputs d) Do not include patient scheduling functions in their AISs

42.

Business process reengineering: a) Is an incremental approach to redesigning business processes b) Involves redesigning business processes from scratch c) Is rarely successful in cutting an organization’s costs d) Is always welcomed by an organization’s employees

43.

Business process reengineering efforts sometimes fail because: a) Management gets too involved in the process b) Management is too optimistic regarding its expectations from its implementation c) Management support can never overcome employee resistance d) Employees will never accept change

44.

Resource Management Process includes which of the following? a) Human resource management and fixed asset management b) Human resource management, inventory management, and fixed asset management c) Human resource management only d) Personnel management, payroll management, and fixed asset management TB 8.4

45.

According to the text, all of the following are objectives of the human resource management process except: a) Hiring, training, and employing workers b) Counseling employees on retirement and medical benefits c) Maintaining employee earnings records d) Reporting on payroll deductions

46.

According to the text, which of the following is an output of the human resource management process? a) Retired employee roster b) List of training programs for employees c) Employee listings d) none of the above

47.

Which of the following technologies are now used in conjunction with automated production process systems to increase efficiencies? a) Radio frequency technology b) Bar code scanners c) RFIDs and advanced electronic tags d) all of the above e) none of the above

48.

The purpose of Business Process Management is to improve business processes across the organization. Due to advances in technology: a) Managers can streamline these processes b) Human resources managers can automate many routine processes c) It is more costly to manage all processes throughout the organization d) none of the above

49.

Which of the following is most likely the primary reason that organizations are adopting enterprise asset management (EAM) systems? a) To reduce overall operating expenses b) To automate manual operations c) To reduce the number of employees (labor costs) d) none of the above

50.

The most significant difference in the AISs of retail organizations versus other vertical market organizations is the: a) Sophistication of the systems used b) Type of training programs available to employees c) Point-of-sale data capture d) Structure of information that the system provides to managers

51.

AISs can be used to evaluate the performance of not-for-profit organizations by: a) Using various process measures b) Comparing budget goals to actual performance c) Using a number of nonmonetary measures of performance d) all of the above

TB 8.5

52.

Important source documents for the human resource management process do not include: a) Valid vendor lists b) Time sheets c) Payroll deduction authorizations d) Tax withholding forms

53.

Lean manufacturing involves: a) Decreasing production b) Using nonmonetary measures of performance c) Eliminating wasteful processes d) all of the above

54.

RFIDs allow firms to: a) Track inventory more effectively b) Eliminate the use of databases c) Reduce the costs of ERP systems d) all of the above

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are three terms that are not used.

55. ______ enterprise asset management 56. ______ BPM software 57. ______ financing process 58. ______ lean accounting 59. ______ lean production 60. ______ change management 61. ______ business process reengineering 62. ______ value stream management 63. ______ lock-box systems 64. ______ fixed asset management 65. ______ Toyota production systems 66. ______ production process

TB 8.6

Definitions: A. The opposite of “tweaking” a business process B. Used for effective cash management C. The process to help select an optimum strategy for acquiring/investing financial resources D. Performance measures (data) that help managers and team members make wise decisions regarding methods to reduce or eliminate waste E. Bar codes affixed to physical assets make this job easier F. Automates the management of a broad spectrum of assets G. A key success factor for business process reengineering H. Software to gather, maintain, and use these data to provide better customer service and customer loyalty I. A management philosophy that developed through the concepts of JIT and TQM J. Process to improve overall customer value and to increase the profitability of the products or services that the organization offers K. Begins with a request for raw materials and ends with the transfer of finished goods to warehouses L. When companies have production or work completed in countries like India, China, Canada, Mexico, or Malaysia M. An example of this concept is the following: an order fulfillment includes all metrics from the sales/order entry point, through manufacturing, all the way to after-sales support N. Software that collects corporate knowledge, data, and business rules to improve core processes O. This process describes how a company acquires and uses cash, other liquid assets, and investments

Short Answer Questions 67.

Why would some companies choose to have payroll processed by an external service bureau?

68.

What concepts are the "root" of lean production and lean manufacturing?

69.

Identify three vertical market industries and list some unique needs they might have.

TB 8.7

Chapter 9 Introduction to Internal Control Systems True-False Questions 1.

Controls that specifically encourage operating efficiency are often called preventive controls.

2.

Controls that attempt to safeguard asset resources are often called detective controls.

3.

For a specific internal control to be effective, both the preventive and the detective aspect of the control must exist and be interrelated.

4.

Preventive and corrective controls are established solely to discourage fraud and embezzlement by an organization's employees.

5.

A good internal control system will contribute towards detecting accidental errors made by employees.

6.

An organization should always attempt to implement ideal controls into its system.

7.

It is normally considered good organizational design to establish the internal audit function within the accounting subsystem.

8.

The introduction of a computer into an organization's data processing system will normally eliminate problems associated with following the organization's audit trail.

9.

A good audit trail is an important element within a company's internal control system.

10.

An audit trail problem associated with computerized data processing is that certain financial data processed by the computer may never be seen by the company's management.

11.

Operational audits are performed by a company’s internal audit staff.

12.

The separation of duties control would not be violated if a company's cashier was also responsible for recording cash transactions.

13.

The separation of duties control does not completely eliminate the possibility of embezzlement by employees.

14.

The personnel subsystem has the important function of matching job qualifications to people qualifications.

15.

The COSO report failed to define internal control.

16.

An effective approach for maintaining a good audit trail for cash disbursements is to utilize a voucher system with coins and currency issued for each disbursement.

TB 9.1

17.

COBIT extensively examines the internal control area.

18.

Risk assessment is an important component of an internal control system.

19.

A company’s control environment is unimportant when developing an internal control system.

20.

Timely performance reports contribute towards achieving the monitoring component of an internal control system.

21.

Control activities and monitoring are one and the same.

22.

The Basel Committee published a framework for the evaluation of internal control systems in banking organizations.

Multiple-Choice Questions 23.

Three objectives of a company's internal control system should be safeguarding assets, checking the accuracy and reliability of accounting data, and promoting operational efficiency. A fourth objective of a company's internal control system should be: a) Preventing embezzlement of assets b) Encouraging adherence to prescribed managerial policies c) Avoiding the payment of overtime to company employees d) Revising standards for production costs on a weekly basis

24.

The control environment is a component of a company's internal control system that: a) Influences the control awareness of a company's employees b) Stresses the development of control procedures in a company c) Directly affects the accuracy and reliability of a company’s accounting data d) Can be ignored when establishing a company's internal control system

25.

The preventive controls within a company’s internal control system: a) Form the foundation for all of a company's other internal control components b) Focus on management’s philosophy and operating style c) Ignore the risk factor associated with a company's control procedures d) Are controls put by the management to prevent problems from occurring

26.

A general rule that should be followed when developing control procedures for a company's assets is: a) The cost of the control procedure will likely exceed the procedure's benefit b) The procedure should not be designed and implemented unless an asset's cost exceeds $5,000 c) The more liquid an asset is, the greater the risk of its misappropriation d) The procedure should not be designed and implemented in situations where a risk assessment has been previously performed

TB 9.2

27.

Assume that a company designs and implements a control procedure whereby the accountant who is responsible for recording cash receipts transactions does not have access to the cash itself. This control procedure is an example of a: a) Detective control b) Preventive control c) Corrective control d) Feedback control

28.

Control procedures that provide feedback to management regarding the achievement of operational efficiency and adherence to prescribed managerial policies are called: a) Corrective controls b) Preventive controls c) Policy controls d) Detective controls

29.

Control procedures that are designed to remedy problems discovered through detective controls are called: a) Corrective controls b) Preventive controls c) Before-the-fact controls d) Management-by-exception controls

30.

The maintenance of backup copies of a company's important transaction and master files is an example of a: a) Preventive control procedure b) Detective control procedure c) Corrective control procedure d) Management-by-exception control procedure

31.

A control procedure that may be established within the sales department of a company's marketing subsystem is the addition of the sales invoice amounts before these invoices are sent to the information processing subsystem. This control total of invoice amounts is called a: a) Checksum b) Random total check c) Redundant control amount d) Batch control total

32.

Which of the following statements is true regarding preventive control procedures and detective control procedures? a) They should be interrelated b) If preventive controls exist, detective controls are unnecessary c) If detective controls exist, preventive controls are unnecessary d) Preventive controls should be cost effective, but detective controls do not need to be cost effective

TB 9.3

33.

Which of the following statements is true? a) The COSO report failed to define internal control b) The COSO report emphasized that an internal control system is a tool of management c) SAS 78 rejected the definition of internal control provided in the COSO report d) COBIT concluded that a company's management is not responsible for establishing and monitoring a company's internal control system

34.

Regarding the cost-benefit concept, which of the following statements is true? a) Every control procedure that offers benefits to a company should be implemented into the company's system b) An optimal internal control package is developed for a company's system by implementing a standardized package of control procedures c) A control procedure is considered cost effective if it can be determined that the cost of operating the procedure will be lower in the current period than in the previous period d) A control procedure is considered cost effective when its anticipated benefits exceed its anticipated costs

35.

An ideal control is: a) A control procedure that reduces to practically zero the risk of an error or an irregularity taking place and not being detected b) A control procedure that is anticipated to have the lowest possible cost in relation to its benefits c) A control procedure that should always be implemented into a company's system due to the efficiency and effectiveness that will result from its implementation d) A control procedure that is always cost effective

36.

Due to data errors occurring from time to time in processing the Albert Company's payroll, the company's management is considering the addition of a data validation control procedure that is projected to reduce the risk of these data errors from 13% to 2%. The cost of the payroll reprocessing is estimated to be $11,000. If the data validation control procedure is implemented, the cost of this procedure is expected to be $700 per pay period (employees are paid biweekly). Based on the above data, which of the following statements is true? a) The data validation control procedure should be implemented because its net estimated benefit is $1,210 b) The data validation control procedure should be implemented because its net estimated benefit is $510 c) The data validation control procedure should not be implemented because the $700 expected cost per pay period exceeds the procedure's expected benefit d) The data validation control procedure should not be implemented because its net estimated benefit is a negative $1,210, thereby causing the control procedure to fail in terms of being cost effective

TB 9.4

37.

Which of the following frameworks is widely used by managers to organize and evaluate their corporate governance structure? a) COBIT b) COSO c) NIST d) SAS No. 94

38.

Which of the following fundamental concepts is stressed by the COSO report? a) Internal control is not affected by people b) Internal control is geared to the achievement of a company's objectives in the financial reporting area only c) Internal control is designed to detect all errors and irregularities that occur within a company's system d) Internal control is a process

39.

A periodic review by internal auditors that stresses the evaluation of the efficiency and effectiveness of a department's procedures is called a (an): a) Operational audit b) Financial audit c) Management-by-exception audit d) Audit by exception

40.

Regarding the internal audit function, which of the following statements is true? a) Since many internal auditors have accounting backgrounds, the internal audit function should ideally be included within a company's accounting subsystem b) It is not proper for internal auditors to perform a fraud investigation within any part of their company's system c) Because of the independence of external auditors, they should never accept previous work of evaluating controls performed by a company's internal auditors d) Within a company's system, it is preferable to establish the internal audit function as a separate subsystem

41.

Regarding a company's audit trail, which of the following statements is true? a) Because of the complexities involved in establishing an audit trail, a good audit trail normally makes it more difficult for an individual to follow the flow of a company's business transactions through the company's information system b) In actuality, the audit trail established within a company's information system is an unimportant element of the company's internal control system c) When a company's audit trail becomes more difficult to follow, this causes an increase in the risk of errors or irregularities taking place in the processing of accounting transactions and not being detected d) A company's policies and procedures manual should not be part of its audit trail since confidential information is included within this manual

42.

An approach used by many companies to reduce the risk of loss caused by the theft of assets by employees is to: a) Utilize polygraphs b) Acquire arbitrage loss protection TB 9.5

c) d)

Acquire fidelity bond coverage Institute punitive management

43.

If the same employee is responsible for authorizing a business transaction and recording the transaction in the accounting records, this indicates a weakness in which element of a company's internal control system? a) A good audit trail b) Separation of duties c) Internal review of controls d) Competent employees

44.

Which of the following control procedures provides physical protection for a company's cash asset? a) Majority of authorized cash disbursements made by check b) Daily cash receipts deposited intact at bank c) Voucher system for cash disbursements d) all of the above

45.

Which of the following statements is true regarding timely performance reports? a) In many companies, these reports are the major means of providing information to management concerning the actual operations of the companies’ internal control systems b) These reports should only include monetary data c) Since these reports fail to provide feedback to management on the operations of previously implemented internal control procedures, other techniques are needed to provide this feedback to managers d) The complexity that a computer introduces into a company's information system will typically prevent the preparation of timely performance reports for the company's management

46.

A responsibility that should be assigned to a specific employee and not shared is that of: a) Access to the company's safe deposit box b) Placing orders and maintaining relationships with a prime supplier c) Attempting to collect a particular delinquent account d) Custodianship of the petty cash fund

47.

For control purposes, the quantities of materials ordered may be omitted from the copy of the purchase order which is: a) Forwarded to the accounting department b) Retained in the purchasing department's files c) Returned to the requisitioner d) Forwarded to the receiving department

48.

Freije Refrigeration Company has an inventory of raw materials and parts consisting of thousands of different items which are of small dollar value individually but significant in total. A fundamental control requirement of Freije's inventory system is that: a) Perpetual inventory records be maintained for all inventory items b) The taking of physical inventories be conducted on a cycle basis rather than at year-end TB 9.6

c) d) 49.

The storekeeping function not be combined with the production and inventory record-keeping functions Material requisitions be approved by an officer of the company

The sales department bookkeeper has been crediting house-account sales to her brother-in-law, an outside salesman. Commissions are paid on outside sales but not on house-account sales. This might have been prevented by requiring that: a) Sales order forms be prenumbered and accounted for by the sales department bookkeeper b) Sales commission statements be supported by sales order forms and approved by the sales manager c) Aggregate sales entries be prepared by the general accounting department d) Disbursement vouchers for sales commissions be reviewed by the internal audit department and checked to sales commission statements

In each one of the following four questions (questions 50-53), you are given a well-recognized procedure of internal control. You are to identify the irregularity that will be discovered or prevented by each procedure.

50.

The voucher system requires that invoices be compared with receiving reports and express bills before a voucher is prepared and approved for payment. a) Unrecorded checks appear in the bank statement b) The treasurer takes funds by preparing a fictitious voucher charging "Miscellaneous General Expenses" c) An employee in the purchasing department sends through fictitious invoices and receives payment d) A cash shortage is covered by underfooting outstanding checks on the bank reconciliation e) A cash shortage is covered by omitting some of the outstanding checks from the bank reconciliation

51.

Both cash and credit customers are educated to expect a sales ticket. Tickets are serially numbered. All numbers are accounted for daily. a) Customers complain that their monthly bills contain items that have been paid b) Some customers have the correct change for the merchandise purchased; they pay and do not wait for a sales ticket c) Customers complain that they are billed for goods they did not purchase d) Customers complain that goods ordered are not received e) Salesclerks destroy duplicate sales tickets for the amount of cash stolen

52.

At a movie-theater box office, all tickets are prenumbered. At the end of each day, the beginning ticket number is subtracted from the ending number to give the number of tickets sold. Cash is counted and compared with the number of tickets sold. a) The box office gives too much change b) The ticket taker admits his friends without a ticket c) The manager gives theater passes for personal expenses, which is against company policy d) A test check of customers entering the theater does not reconcile with ticket sales

TB 9.7

e)

Tickets from a previous day are discovered in the ticket taker's stub box despite the fact that tickets are stamped "Good on Date of Purchase Only"

TB 9.8

53.

The duties of cashier and accounts-receivable bookkeeper should be separated. a) There are two cashiers. At the end of a certain day, there is a sizable cash shortage; each cashier blames the other and it is impossible to fix responsibility b) A cash shortage is covered by overfooting (overadding) cash in transit on the bank reconciliation c) A cash shortage is covered by charging it to "Miscellaneous General Expenses" d) Customers who paid their accounts in cash complain that they still receive statements of balances due e) The accounts-receivable bookkeeper charges off the accounts of friends to "Allowance for Uncollectible Accounts"

54.

The COSO report stresses that: a) Internal control is a process b) An internal control system, if properly designed, can become a substitute for management c) People only at high levels of an organization are an important part of an internal control system d) An internal control system should consist of three interrelated components: the control environment, risk assessment, and control activities

55.

Regarding COBIT, which of the following statements is true? a) COBIT means Cost Objectives for Information and Related Technology b) COBIT rejects the definition of internal control from the COSO report c) COBIT states that a company’s management should play a minor role in establishing an internal control system d) COBIT classifies people as one of the primary resources managed by various IT processes

56.

The component of an internal control system that concerns itself with the way a company’s management assigns authority and responsibility is called: a) Monitoring b) Control environment c) Risk assessment d) Information

57.

_________________ describes the policies, plans, and procedures implemented by a firm to protect its assets. a) Internal control b) SAS No. 94 c) SOX, Section 404 d) Enterprise risk management

TB 9.9

58.

The 1992 COSO report identifies five components for an effective internal control system. These are: a) Control environment, risk assessment, control activities, information and communication, and monitoring b) Control environment, control procedures, control activities, communication, and monitoring c) Control procedures, control activities, information, communication, and monitoring d) Control procedures, risk assessment, control activities, information and communication, and monitoring

59.

The 1992 COSO report identifies five components for an effective internal control system. Which of those five establishes the tone of a company and influences the control awareness of the company’s employees? a) Control procedures b) Control environment c) Control activities d) Information and communication

60.

The 1992 COSO report identifies five components for an effective internal control system. Which of those five includes the methods used to inform employees about their roles and responsibilities pertaining to internal control? a) Control procedures b) Control environment c) Control activities d) Information and communication

61.

The Enterprise Risk Management (ERM) framework is based on the 1992 COSO report and adds three additional components for an effective internal control system.

Which of the following is not one of those three? a) Objective setting b) Event identification c) Control assessment d) Risk response

62.

Suppose a company established training programs that teach employees to perform their job functions more efficiently and effectively. This is an example of which type of control? a) Detective b) Preventive c) Corrective d) none of the above

63.

Many organizations have an internal audit function that makes periodic reviews of each department within the organization. The focus of these reviews is to: a) Conduct an investigation of each department to be sure fraud is not taking place b) Evaluate the efficiency and effectiveness of the department c) Evaluate the performance of the manager of the department d) Report to the organization’s top managers and board of directors

TB 9.10

64.

Which of the following factors best describes the “control environment” of a firm? a) The integrity, ethical values, and competence of employees b) Management’s philosophy and operating style c) The way management assigns authority and responsibility d) The direction and attention provided by the board of directors e) all of the above

65.

The purpose of ________________ is to identify organizational risks, analyze their potential in terms of costs and likelihood of occurrence, and install those controls whose projected benefits outweigh their costs. a) Internal controls b) A control environment c) Risk assessment d) Management consultants

66.

Which of the following personnel policies would be the most useful in mitigating fraud or embezzlement? a) Fidelity bonds for key employees b) Careful hiring procedures for key employees c) Having a Code of Conduct d) Required vacations for key employees

67.

When assessing a company’s internal control structure policies and procedures, the primary consideration is whether they a) Prevent management override b) Relate to the control environment c) Reflect management’s philosophy and operating style d) Affect the financial statement assertions

68.

Which one of the following functions performed in an organization is a violation of internal control? a) A mail clerk opening the mail compares the check received with the source document accompanying the payment, noting the amount paid, then forwards the checks daily (along with a listing of the cash receipts) to the Cashier for deposit b) A mail clerk opening the mail compares the check received with the source document accompanying the payment, noting the amount paid, then forwards the source documents that accompany the payments (along with a listing of the cash receipts) to Accounts Receivable, on a daily basis, for posting to the subsidiary ledger c) At the end of the week the Cashier prepares a deposit slip for all of the cash receipts received during the week d) The General Ledger clerk compares the summary journal entry, received from the Cashier for cash receipts applicable to outstanding accounts, with the batch total for posting to the Subsidiary Ledger by the Accounts Receivable clerk

TB 9.11

69.

Which one of the following methods, for the distribution of employees’ paychecks, would provide the best internal control for the organization? a) Delivery of the paychecks to each department supervisor, who in turn would distribute paychecks directly to the employees in his/her department b) Direct deposit in each employee’s personal bank account c) Distribution of paychecks directly to each employee by a representative of the Human Resource department d) Distribution of paychecks directly to each employee by the payroll manager

70.

Which one of the following would be most effective in deterring the commission of fraud? a) Policies of strong internal control, segregation of duties, and requiring employees to take vacations b) Policies of strong internal control and punishments for unethical behavior c) Employee training, segregation of duties, and punishment for unethical behavior d) Hiring ethical employees, employee training, and segregation of duties

71.

Which one of the following types of audits would be most likely to focus on objectives related to the efficient use of resources? a) Compliance audit b) Information systems audit c) Independent audit d) Operational audit

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are two terms that are not used.

72. ______ ideal control 73. ______ scenario planning 74. ______ COBIT 75. ______ detective controls 76. ______ SOX, Section 404 77. ______ control activities 78. ______ fidelity bond 79. ______ risk matrix 80. ______ preventive controls 81. ______ Val IT 82. ______ control environment 83. ______ separation of duties 84. ______ corporate governance 85. ______ internal control 86. ______ corrective controls

TB 9.12

Definitions: A. Managing an organization in a fair, transparent and accountable manner to protect the interests of all the stakeholder groups B. A framework for IT governance C. The purpose of this control is to reduce the risk of loss caused by employee theft D. The policies, plans, and procedures management uses to protect company assets E. Software that interfaces with suppliers and customers F. A control procedure that reduces to practically zero the risk of an undetected error or irregularity G. A process whereby management identifies possible events that represent a problem to the firm and then identifies appropriate responses to those problems H. Establishes the tone of a company and influences the control awareness of the company’s employees I. An example of this control is to assign these three functions to different employees: authorizing transactions, recording transactions, and maintaining custody of assets J. An example of this type of control is a firewall to prevent unauthorized access to the company’s network K. An example of this type of control is a change to the company’s procedures for creating backup copies of important business files L. When companies have production or work completed in countries like India, China, Canada, Mexico, or Malaysia M. Examples of this type of control are: log monitoring and review, system audits, file integrity checkers, and motion detection N. The purpose of this procedure is to classify each potential risk by mitigation cost and also by likelihood of occurrence O. The purpose of this framework is to achieve effective governance of IT P. Reaffirms that management is responsible for an adequate internal control structure Q. Includes a combination of manual and automated controls – such as approvals, authorizations, verifications, reconciliations, reviews of operating performance, and segregation of duties

Short Answer Questions 87.

What do the acronyms COSO and COBIT stand for?

88.

Define preventive, detective, and corrective controls. Give an example of each.

TB 9.13

Chapter 10 Computer Controls for Organizations and Accounting Information Systems True-False Questions 1.

All controls available for the computerized accounting information system of a company should be implemented regardless of cost due to the high rate of computer crime.

2.

One of the "fallback" procedures of a computing center is the "grandfather-parentchild" file arrangement.

3.

According to the text, data transcription would only be necessary for a computerized accounting information system.

4.

Edit checks are very rarely used because they are not cost-effective controls.

5.

Information processing personnel usually only use selective edit checks in data processing applications due to the cost of computer time necessary for editing.

6.

Testing processing programs with test data is performed only when a system is first installed due to the high costs of such test runs.

7.

The audit trail is easier to follow in an online computerized system as compared to a batch system.

8.

No record of transactions is made in an online computerized system.

9.

Most computer vandalism is performed by "professional" computer criminals who have no personal contact with the computer centers they disrupt.

10.

The primary function of controls for a computerized accounting information system is to detect computer fraud.

11.

Input controls attempt to assure the validity, accuracy and completeness of the data entered into an AIS.

12.

It is more difficult to safeguard logical computer access than it is to safeguard physical computer access.

13.

Output controls for the computerized accounting information system focus primarily on the security and distribution of print media prepared by the computer center.

14.

Biometric identifications are irrelevant to computer network systems.

15.

Consensus-based protocols contain an odd number of processors.

16.

One of the techniques for controlling batch processing is the use of hash totals.

TB 10.1

17.

A hash total is obtained by counting all documents or records to be processed.

18.

The control of input and output of accounting transactions to and from the information processing subsystem should be performed by an independent control group.

19.

In most companies, contingency planning is unnecessary.

20.

Contingency planning includes the development of a formal disaster recovery plan.

21.

Both external and internal file labels are useful in avoiding the use of the wrong input tape.

22.

An internal label may be used only with magnetic tape systems.

23.

When they are not in use, tape and disk files should be stored apart from the computer room under the control of a librarian.

24.

A limit check in a computer program is comparable to a decision that an individual makes in a manual system to judge a transaction's reasonableness.

25.

A completeness test is an internal equipment control to test whether or not all transactions have been processed.

26.

Because of the integrative nature of database systems, cost-effective controls on these systems are unimportant.

Multiple-Choice Questions 27.

The principal function of an accounting system's computerized controls is: a) Detecting computer frauds b) Preventing computer frauds c) Encouraging programmer honesty d) none of the above

28.

When a company is setting up its accounting information system, it is important for management to select: a) A standard set of computer control mechanisms b) Only those controls which appear to serve its needs c) Controls whose benefits exceed their costs d) b and c only

29.

Which of the following control mechanisms is common to both observation and recording control: a) Confirmation slips b) Dual observation c) Preprinted forms d) Turn around document

TB 10.2

TB 10.3

30.

A very effective ID approach for safeguarding logical computer access bases user recognition on: a) IDA b) Biometric identifications c) Message acknowledgment procedures d) Routing verification procedures

31.

Which of the following is not a major reason for controls in a computerized accounting information system? a) More data are processed b) Often, computerized data are unreadable to the human eye c) With computerized data, there is a higher possibility of computer crime d) all of the above are reasons for controls

32.

Which of the following is not a subcategory of input controls? a) Observation, recording and transcription of data b) Edit tests c) Additional input controls d) Data processing

33.

General controls within IT environments that affect personnel include: a) Use of computer accounts b) Separation of duties c) Identifying suspicious behavior of employees d) all of the above affect personnel

34.

Logical access to the computer system would be best controlled by: a) Intrusion alarm systems b) Complex operating systems c) Restrictions on physical access to online terminals d) Password codes

35.

Which of the following is not a feedback mechanism for observation controls for data collection? a) Confirmation slips b) Turnaround documents c) Dual observation d) Direct, 2-way communication devices

36.

Which of the following is true about control totals? a) Usually expressed in dollars b) Batches normally occur in groups of 200 or more c) Should "make sense" to be useful d) none of the above

37.

Which of the following is not a processing control? a) Record counts b) Control totals c) Hash totals d) Check digits

TB 10.4

38.

Edit checks performed "in tandem" would be defined as: a) Tests of alphanumeric field content b) Tests for valid codes c) Redundant data checks d) Tests of reasonableness

39.

A data field could pass all edit tests and still be invalid. Additional controls to cope with this would include: a) Check digit b) Unfound record test c) Valid code test d) a and b

40.

Check digit control procedure have which of the following attributes? a) Guarantees data validity b) Detects fraudulent data c) Always recommended for accounting information systems d) none of the above

41.

Which of the following types of errors will check digits usually detect? a) Transposition of two digits b) Inaccuracy of one digit c) Double mistakes canceling out each other d) Fraudulent data

42.

Which of the following is not normally used as a control total to check the validity of data processing activities? a) Edit tests b) Batch totals c) Record counts d) Hash totals

43.

From the standpoint of computer fraud, which type of controls would probably be of highest importance? a) Input controls b) Access controls c) Output controls d) Processing controls

44.

Tape and disk output controls are primarily concerned with: a) The storage space problem b) Building control totals c) Validating checksums d) The encoding process

45.

Principal output controls include all but one of the following: a) Validation of processing results b) Character control totals c) Strict regulation of preprinted forms d) all of the above TB 10.5

46.

Which of the following is not a control to ensure the physical safety of a company’s data processing center? a) Strategic placement of the computer center b) The use of password codes c) The use of identification badges d) all of the above are computer facility controls

47.

The least effective physical security control for a computer center is: a) Limited employee access b) Color-coded identification badges c) Insurance d) Strategic placement of computer center equipment

48.

Which of the following is an example of application controls in automated data processing systems? a) Input controls b) Hardware controls c) Documentation procedures d) Controls over access to equipment and data files

49.

An expense report was prepared by a company's cost center. One executive questioned one of the amounts and asked for "the source documents which support the total.” Data processing was not able to routinely do so. The best control procedure would be: a) An error listing b) An audit trail c) Transmittal control d) Documentation

50.

Daylight Corporation's organization chart provides for a controller and an information processing manager, both of whom report to the financial vice-president. Internal control would not be strengthened by: a) Assigning the programming and operating of the computer to an independent control group which reports to the controller b) Providing for maintenance of input data controls by an independent control group which reports to the controller c) Rotating periodically among machine operators the assignments of individual application runs d) Providing for review and distribution of computer output by an independent control group which reports to the controller

51.

Fault-tolerant systems are typically based on the concept of: a) Redundancy b) Consistency c) Materiality d) Fairness

TB 10.6

52.

An apparent error in input data describing an inventory item received was referred back to the originating department for correction. A week later the department complained that the inventory in question was incorrect. Data processing could not easily determine whether or not the item had been processed by the computer. The best control procedure would be: a) Input edit checks b) Missing data validity check c) Transmittal control d) An error log

53.

The basic form of backup used in magnetic tape operations is called: a) Odd parity check b) Dual-head processing c) File protection rings b) The grandfather-parent-child procedure

54.

Control totals are used as a basic method for detecting data errors. Which of the following is not a control figure used as a control total in automated accounting systems? a) Non-financial totals b) Check-digit totals c) Hash totals d) Financial totals

55.

The grandfather-parent-child approach to providing protection for important computer files is a concept that is most often found in: a) Online, real-time systems b) Manual systems c) Magnetic tape systems d) Magnetic disk systems

56.

_____________ permit data to be written on a magnetic tape. a) File protection rings b) Lock out procedures c) Rollback processing d) Fault-tolerant systems

57.

A technique for controlling identification numbers (part number, employee number, etc.) is: a) Self-checking (check) digits b) Echo checks c) Parity control d) File protection

58.

In its automated data processing system, a company might use selfchecking numbers (check digit) to enable detection of which of the following errors? a) Assigning a valid identification code to the wrong customer b) Recording an invalid customer's identification charge account number c) Losing data between processing functions d) Processing data arranged in the wrong sequence TB 10.7

59.

Which of the following would lessen internal control in an automated data processing system? a) The computer librarian maintains custody of computer program instructions and detailed listings b) Computer operators have access to operator instructions and detailed program listings c) The data control group is solely responsible for the distribution of all computer output d) Computer programmers write and debug programs which perform routines designed by the systems analyst

60.

Which of the following best describes a fundamental control weakness often associated with automated data processing systems? a) Automated data processing equipment is more subject to systems error than manual processing is subject to human error b) Automated data processing equipment processes and records similar transactions in a similar manner c) Automated data processing procedures for detection of invalid and unusual transactions are less effective than manual control procedures d) Functions that would normally be separated in a manual system are combined in an automated data processing system

61.

A company uses the account code 669 for maintenance expense. However, one of the company's clerks often codes maintenance expense as 996. The highest account code in the system is 750. What would be the best internal control check to build into the company's computer program to detect this error? a) A check for this type of error would have to be made before the information was transmitted to the data processing center b) Valid-character test c) Sequence test d) Valid-code test

62.

The magnetic tape containing accounts receivable transactions could not be located.

A data processing supervisor said that it could have been put among the scratch tapes available for use in processing. The best control procedure would be a(an): a) Header label b) Trailer label c) External file label d) File protection ring

63.

A sales transaction document was coded with an invalid customer account code (7 digits rather than 8). The error was not detected until the updating run when it was found that there was no such account to which the transaction could be posted. The best control procedure would be: a) Parity checks b) Keypunch verification c) A hash total check d) A check digit

TB 10.8

64.

The operator, in mounting the magnetic tape containing the cash receipts for the processing run to update accounts receivable, mounted the receipts tape from the preceding rather than the current day. The error was not detected until after the processing run was completed. The best control procedure would be a: a) Header label check b) Trailer label check c) Parity check d) Hash total check

65.

The master inventory file, contained on a removable magnetic disk, was destroyed by a small fire next to the area where it was stored. The company had to take a special complete inventory in order to reestablish the file. The best control procedure would be: a) Fire insurance b) Data processing insurance c) A copy of the disk d) Remote storage of a copy of the disk and the transactions since the disk was copied

66.

The master file for inventory did not seem right. The file was printed out and many errors were found. The best control procedure would be: a) Trailer label control totals b) A periodic test against physical count c) A parity check d) Limit tests

67.

Due to an unusual program error which had never happened before, the accounts receivable updating run did not process three transactions. The error was not noted by the operator because he was busy working on another project. There were control totals for the file which were printed out. An examination of the printout would have disclosed the error. The best control procedure would be: a) An error message requiring operator response before processing continues b) Reconciliation of control total by control clerk c) Internal audit review of console log d) Label checking by next computer program

68.

A CPA reviews a client's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for: a) Distributing payroll checks to employees b) Reviewing and approving time reports for subordinate employees c) Hiring subordinate employees d) Initiating requests for salary adjustments for subordinate employees

69.

It would be appropriate for the payroll accounting department to be responsible for which of the following functions? a) Approval of employee time records b) Maintenance of records of employment, discharges, and pay increases c) Preparation of periodic governmental reports as to employees' earnings and withholding taxes TB 10.9

d)

Distribution of paychecks to employees

70.

In designing a payroll system it is known that no individual's paycheck can amount to more than $300 for a single week. As a result, the payroll program has been written to bypass writing a check and printing out an error message if any payroll calculation results in more than $300. This type of control is called: a) A limit or reasonableness test b) Error review c) Data validity test d) Logic sequence test

71.

A weekly payroll check was issued to an hourly employee based on 98 hours worked instead of 38 hours. The time card was slightly illegible and the number looked somewhat like 98. The best control procedure would be: a) A hash total b) A code check c) Desk checking d) A limit test

72.

In preparing payroll checks, the computer omitted 24 of a total of 2,408 checks which should have been processed. The error was not detected until the supervisor distributed the checks. The best control procedure would be: a) A parity check b) A module N check c) Control totals d) Desk checking

73.

When erroneous data are detected by computer program controls, such data may be excluded from processing and printed on an error report. The error report should most probably be reviewed and followed up by the: a) Supervisor of computer operations b) Systems analyst c) Data control group d) Computer programmer

74.

Jonkers, Inc., a large retail chain, is installing a computerized accounts receivable system employing a batch mode of processing with sequential files. The program which will process receipts on account should include an input edit routine to assure: a) Proper sequencing of data b) Header and trailer label accuracy c) The amount received is recorded correctly d) The existence of control totals e) Proper operator intervention

75.

In order to maintain good internal control within the computer department: a) Computer operators need to be good programmers b) Programmers should have control over day-to-day production runs c) Computer operators should be allowed to make changes in programs as needed in order to keep the computer running d) Programmers and computer operators should be in separate departments e) The tape librarian should be able to operate the computer TB 10.10

TB 10.11

76.

Which of the following policies or practices is most likely to represent a weakness in internal controls pertaining to an automated data processing system? a) Computer operators are denied access to the system/program documentation library b) Employees in the data processing department are prohibited from initiating requests for changes to master files c) Computer programmers are permitted to operate the computer for regular processing runs which involve programs that they have written d) Computer operators who run the programs related to inventory are prohibited from making test counts of goods on hand in order to check the accuracy of the computer inventory files e) All corrections of errors in the master file are reviewed and approved by a supervisory-level employee who is independent of the data processing department

77.

A transaction involving a charge to a non-existent customer account was entered into an accounts receivable and billing system that was batch processed. This error should be detected by the computer system and appear in: a) The sort run error printout b) The edit run error printout c) The customer statements printout d) The master file update run error printout e) Some error printout other than those mentioned above

78.

Transactions which were erroneous and had been previously rejected by the computer system apparently were not being reentered and reprocessed once they had been corrected. This erroneous condition is best controlled by: a) Comparing a record count of transactions input into the system b) A comparison of the batch control totals c) Scanning the error log d) Scanning the console log e) Desk checking

79.

For a routine management report produced on the computer, which one of the following control duties is most likely to be the sole responsibility of the user department? a) Scanning the report for garbled output b) Checking input totals against report totals c) Determining that figures in the report are reasonable d) Verifying record count totals e) Checking the console listing for improper operator procedures

80.

In an online, real-time system, which of the following would be most likely to be used as backup for an application's master file maintained on magnetic disk? a) At specified periods the disk files would be dumped to (copied on) magnetic tape along with the period's transactions b) A duplicate disk file would be maintained and all activity would be copied on magnetic tape continuously c) The grandfather-parent-child technique would be employed to retain disk files d) All source documents for transactions would be retained e) The disk files would be copied to magnetic tape continuously TB 10.12

81.

A company's computer facilities and computer room conceivably could be destroyed completely by fire. The most appropriate action a company could take in an attempt to prepare for and protect itself for such a disaster would be: a) To have backup computer facilities at the same site b) To have off-site backup computer facilities c) To have a reconstruction and recovery plan which outlines the procedures for reconstruction of files and use of alternate facilities d) To have a contractual agreement with the manufacturer or another company to use its facilities e) To have the grandfather-parent-child concept implemented for all files stored on magnetic tapes

82.

A company’s disaster recovery site that includes a computer system configured similarly to the system used regularly by the company for data processing purposes is called: a) A cold site b) A recovery site c) A disaster site d) A hot site

83.

The risk of unauthorized access to data through electronic eavesdropping is minimized by using: a) Data encryption b) Routing verification procedures c) Message acknowledgement procedures d) EDC

84.

Within database systems, a control that restricts user access to precisely designated data sets and files is called a(an): a) Layered password b) Open password c) Closed password d) Server password

85.

An example of a check-digit technique that includes “ordering of digits” in the construction of check-digit values is the: a) Odd-even technique b) Modulus 11 technique c) Value-digit technique d) Orion technique

86.

A virtual private network (VPN): a) Is a security appliance that runs behind an organization’s firewall b) Allows remote users to access entity resources by using wireless, hand-held devices c) Is security software that is specifically designed to protect hard-wired local area networks (LANs) d) both (a) and (b) e) none of the above

TB 10.13

87.

The textbook identifies a number of issues that should be considered when developing a security policy. One of the issues is “identify threats”. Which of the following is not an example of this issue? a) What assets need to be protected b) What are the sources of potential security problems c) External threats are viruses, worms, retaliations from former employees d) Internal threats are misuse of assets by employees and embezzlement

88.

Which of the following best describes ISO 17799? a) The international information systems standards that establish information systems best practices b) The international information security standards that establish information security best practices c) The international information systems control standards that establish information systems control best practices d) none of the above

89.

When we say that an organization has an “integrated security policy”, what do we mean? a) The organization is working with suppliers and customers to improve security up and down the supply chain b) Managers in various departments within the firm meet to assess risk and develop security options for top management c) The organization is using a variety of security measures, such as firewalls, virus protection, intrusion detection systems, virtual private networks, etc. d) none of the above

90.

A business continuity plan (BCP) includes which of the following? a) Backups for hardware b) Procedures to follow in the event of an emergency c) Who is in charge during the emergency d) none of the above e) all of the above

91.

A “flying-start site” for disaster recovery purposes is a location that includes: a) A computer system configured similarly to the system normally used b) A computer system configured similarly to the system normally used plus upto-date backup data and software c) Power and environmentally controlled space to install equipment on short notice d) none of the above

92.

Enterprise controls: a) Are controls in Enterprise Resource Planning Systems b) Are controls required by the AICPA c) Affect only application controls d) Affect many general and application controls

TB 10.14

93.

If _____ controls are ineffective, this can cause ____ controls to be unreliable. a) IT general, application b) Application, IT general c) Application, enterprise d) Cross-footing, segregation of duties

94.

An effective control for maintaining the privacy of data stored on a large, networked server would be: a) Security personnel at the building entrance b) Encryption c) Laptop protection policies d) Routing verification

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank provided before the term. Each definition is used only once – there are three terms that are not used.

95. ______ input controls 96. ______ business continuity plan (BCP) 97. ______ edit tests 98. ______ disaster recovery 99. ______ flying-start site 100. ______ virtual private network (VPN) 101. ______ cold site 102. ______ physical security 103. ______ IT general controls 104. ______ red flags 105. ______ data encryption 106. ______ hot site 107. ______ integrated security 108. ______ logical security 109. ______ fault-tolerant systems 110. ______ processing controls 111. ______ output controls 112. ______ security policy 113. ______ electronic vaulting 114. ______ computer facility controls 115. ______ application controls

TB 10.15

Definitions: A. Enable computer systems to deal with errors and keep functioning, and is often based on the concept of redundancy B. This control limits only authorized individuals access to the organization’s systems and information C. The purpose of this control is to backup data and then electronically transmit the data to a remote site D. A disaster recovery site that has a computer system with capabilities similar to the system it will replace and also has up-to-date backup data E. Certain behaviors exhibited by employees that can alert co-workers and supervisors to trouble (i.e., fraud) F. A comprehensive plan that helps protect an enterprise from both internal and external threats G. A process whereby management identifies possible events that represent a problem to the firm and then identifies appropriate responses to those problems H. A disaster recovery site that has a computer system with capabilities similar to the system it will replace I. A comprehensive approach to making sure organizational activities continue normally J. An example of this type of control is a “man trap” K. When organizations combine a number of logical and physical security technologies (i.e., firewalls, intrusion detection systems, virus protection) L. Any measures that an organization uses to protect its facilities, resources, or its proprietary data that are stored on physical media M. The process and procedures that organizations follow to resume business after a disruptive event such as an earthquake, a terrorist attack, or a serious computer virus N. Disaster recovery site that has power, environmentally controlled space, and processing equipment that can be installed on short notice O. The controls at this level are critical so that organizations can rely on application controls P. A security appliance that runs behind a firewall and allows remote users to access entity resources by using wireless, hand-held devices Q. The purpose of this control procedure is to prevent a company’s competitors from electronically monitoring confidential data transmissions R. The purpose of these controls is to prevent, detect, and correct errors and irregularities in processing transactions S. An example of these controls is the use of point-of-sale devices (such as bar code readers) T. These controls examine selected fields of input data and reject those transactions (or other types of data input) whose data fields do not meet the pre-established standards of data quality U. An important objective of these controls is to contribute to a good audit trail V. An example of this type of control is an authorized distribution list W. These controls help ensure that no transactions or messages are routed to the wrong computer network system address X. The purpose of this control is to perform a backup while the database is on-line and available for read/write

TB 10.16

Short Answer Questions 116.

Define and explain BCP and its purpose.

117.

When we talk of convergence of physical and logical security, what do we mean and why is it important?

118.

What is the purpose of the separation of duties control and why is it different between manual systems and computerized systems?

TB 10.17

Chapter 11 Computer Crime, Fraud, Ethics, and Privacy True-False Questions 1.

There is no complete, generally accepted definition of computer crime presently available.

2.

The largest known computer crime of record is the TRW Company Credit Data Case.

3.

Most computer abuse that we have caught so far has been because of good accounting controls.

4.

According to the chapter, a computer virus is an example of a type of computer crime called “denial of service.”

5.

Many types of computer abuse have other, more common names such as "vandalism" or "embezzlement."

6.

In the United States, trafficking in passwords is immoral, but not illegal.

7.

The U. S. Congress passed the first federal computer crime law in 1986 making it illegal to alter or destroy federal information.

8.

No one really knows how much is lost each year as the result of computer abuse.

9.

The absence of good statistics on computer crime is partially explained by the fact that a large proportion of the computer crime committed in private organizations is handled as an internal matter and thus is never publicly divulged.

10.

One conclusion that we can draw about computer crime is that it is growing.

11.

We believe that most computer crimes are not discovered.

12.

There were less than 200 documented cases of computer crime at the time the textbook was written.

13.

Automated accounting information systems are a particularly important potential target of computer crime.

14.

When organizations discover a computer crime, the cost of auditing and investigating the loss often exceeds the actual monetary loss.

15.

The TRW Company Credit Data Case is an example of “valuable information” computer crime.

16.

A paradoxical matter in the TRW Case was that the prosecution had trouble acquiring testimonies because the buyers as well as the sellers of the credit information were technically in violation of the law.

TB 11.1

17.

A conflict exists between providing bona fide AIS users easy access to computer resources and security objectives.

18.

It is generally accepted that hackers are motivated only by greed.

19.

“Shoulder surfing” is a victimless crime.

20.

VoIP refers to a type of antivirus software.

21.

Worm programs are viruses that insert themselves into computer systems and disrupt operations or files.

22.

A computer virus may lie dormant in a system until software is copied and run on non-licensed machines.

23.

Lockout systems disconnect telephone connections if users fail to provide a correct password in a set number of tries.

24.

Dial-back systems help control unauthorized access to computer systems.

25.

According to a recent CSI survey, the most common problem encountered by the respondents is viruses.

26.

The U.S. Patriot Act of 2001 enables the federal government to monitor Internet usage.

27.

One reason why computer crime is important to AISs is because, according to a Computer Security Institute survey, the average cost of a computer-abuse incident is about $500,000.

28.

The term “DDoS” is closely connected with the term “zombie computers.”

29.

When a hacker commits a DDoS attack, he or she uses virus software to infect a single computer.

30.

According to a KPMG survey, companies that stress the importance of business ethics tend to get about the same results as companies that do not stress its importance.

31.

A “strong password” is a password that lasts a long time.

32.

Fortunately, thwarting most forms of computer abuse does not require the support of top management.

33.

Experts suggest that policies on computer abuse are ineffective, and therefore should not be used to help educate employees about computer abuse.

34.

Most computer criminals are individuals of questionable background, little education, and no morals.

35.

Watching for tell-tale signs may help detect computer crime.

TB 11.2

36.

Most computer criminals we have been fortunate enough to catch have had strong, technical backgrounds.

37.

Most computer criminals we have been fortunate enough to catch have had long, criminal backgrounds.

38.

Forensic accountants are to accounting as detectives are to criminal justice.

39.

Cultural standards have no impact on ethical standards.

40.

Computer abuse could still result in computer crime, even though the person realized no personal gain.

Multiple-Choice Questions 41.

Some of the most informative reports of computer abuses are found in which of the following periodicals? a) Dr. Virus b) Hacking Today c) Parade of Perpetrators d) Computerworld

42.

According to the chapter, which of these statements is most accurate? a) Almost all computer crime is committed for personal gain b) Very little computer crime is committed for personal gain c) Most computer crime is just as easily described as “embezzlement” d) We actually know very little about computer abuse

43.

According to the chapter, which of these statements is most accurate? a) Most computer abuses are performed as retaliation against employers b) Very little computer crime is committed for personal gain c) Some computer abuses are performed simply to meet a challenge d) We catch most computer abusers with good accounting controls

44.

Which of these would be an example of “denial-of-service” computer abuse? a) Social engineering b) Salami technique c) Trojan horse computer program d) Embezzlement using computerized data e) none of these

45.

A “logic bomb” is a computer program that: a) Rewrites the instructions of a particular computer program b) Remains dormant until an event triggers it c) Contains an error in it d) “Blows away” (impresses) the boss when he or she sees it

TB 11.3

46.

Which of the following statements is true? a) Most states lack specific computer crime laws b) Most computer crime laws define their terms c) All computer crime laws have only felony provisions d) none of the above statements is true

47.

Which of these terms describes a computer program that remains dormant until triggered by some specific circumstance or date? a) Trojan horse program b) DDoS program c) Logic bomb d) Dial back system

48.

Much of what has been termed computer crime has merely involved the computer but probably would be more accurately classified as other types of crimes. A notable exception to this involves: a) Raiding dormant bank accounts b) Inventory misappropriation c) Embezzlement d) Theft of computer time

49.

The process of changing data before, during, or after they are entered into a computer system is called: a) Data diddling b) Salami technique c) Logic bombs d) Social engineering

50.

__________ describes the technique of stealing small amounts of money from a large number of accounts over time. a) Salami technique b) Buffet system c) Baloney method d) Dialing for dollars

51.

Which of the following best explains why we have incomplete information on computer crime? a) Most companies handle abuse as an internal matter b) Most newspapers no longer have any interest in reporting computer crime c) Documentation of abuses is usually poor d) We believe that most computer crime is not caught

52.

At present, we think that computer crime is: a) Falling b) Random c) Rising d) Flat

TB 11.4

53.

All of these are reasons why we think that computer crime is rising except: a) Some Internet web sites now instruct users how to perform certain types of computer abuse b) More people now know how to use computers c) Computer usage continues to grow d) all of these are reasons

54.

_________ was eventually arrested for computer hacking. a) Robert Tappan Morris Jr. b) Bernard Madoff c) Kenneth Lay d) Barak Obama

55.

According to the chapter, which of these statements is most accurate? a) Today, most computers are safe from computer abuse b) Today, very few computers are completely safe from computer abuse c) Today, “hacking” is no longer possible d) Today, all of these statements are accurate

56.

The TRW Credit Data Case is an example of: a) The round-off trick b) An outsider ripping off a corporate computer c) Valuable information computer crime d) none of the above

57.

The TRW Case is notable because: a) The amount of dollars involved was so large b) No one got caught c) The real victims were TRW customers d) A routine audit was responsible for detecting the fraud

58.

Which of these is an acronym for computer crime legislation? a) ACL b) BART c) CFAA d) DDoS

59.

Hacking involves: a) Stealing carbons of credit cards b) Destroying computer hardware c) Gaining illegal entry to computer files from remote locations d) Inserting a logic bomb in a computer program

60.

A computer virus is: a) A disease that computer programmers are very susceptible to b) A small processing routine that the user accidentally introduces into the system c) A misnomer, since unlike biological viruses, computer viruses cannot reproduce themselves d) Harmless TB 11.5

61.

Computer programs that can scan computer disks for virus-like coding are called: a) Antivirus software b) Virus software c) Detection software d) Friendly applets

62.

All of the following are ways to thwart computer viruses except: a) Acquiring a vaccine or anti-virus program b) Avoiding downloading computer games from questionable sources c) Opening suspicious emails and attachments d) Buying shrink-wrapped software from reputable sources

63.

A small computer program that is stored on a web server and designed to run in conjunction with browser software is called a(n): a) Applet b) Logic bomb c) Worm d) Boot sector

64.

Thwarting computer abuse can be enhanced by all of the following except: a) Enlisting top-management support b) Increasing employee awareness and education c) Allowing only 10% of employees access to computers d) Using strong passwords

65.

In the context of thwarting computer abuse, which of the following is true? a) It is not important to enlist the support of top management b) Many IT managers do not think computer abuse is very important c) Computer crime mostly means controlling computer hardware d) Most computer crime happens because of a failure of controls, not an absence of controls

66.

Almost all computer criminals can be described as: a) Professional criminals b) Technical hackers possessing strong computer skills c) White collar professional criminals d) Amateurs who describe themselves as relatively honest

67.

Most computer criminals who have been caught: a) Have inferior educational backgrounds b) Have superior educational backgrounds c) Work for organized crime d) Are ill suited to their jobs

68.

A forensic accountant is an accountant who: a) Performs autopsies on dead accountants b) Tries to explain why some accounts become inactive c) Investigates suspected fraud d) Performs court-approved accounting tasks for bankrupt companies

TB 11.6

69.

Accounting “ethics” means: a) Whatever the corporate manual says it means b) Acting responsibly as long as no dollars are involved c) Only being honest; everything else is up for grabs d) Acting responsibly, no matter what

70.

An example of a conflict-of-interest situation is: a) Not working for a new company in a job similar to your last job b) Not talking to outsiders about general business concerns c) A decision where personal and corporate goals conflict d) Refusing to use a new computer if your colleagues are not provided similar systems

71.

Which of the following is not a common way to steal personal identity information? a) Altering computer records b) Using key logging software c) Dumpster diving d) Phishing

72.

Which of the following is true? a) Only the AICPA has drafted an ethical code of conduct b) Computer crime only refers to manipulating a computer to dishonestly obtain money, property, or some other advantage of value c) ACM society is an acronym meaning “association of corporate managers” d) Ethical use of computers means realizing that the availability of a system does not convey its unrestricted use

73.

Probably the most important federal legislation governing activities involving computers is: a) CAN-SPAM Act of 2003 b) Federal Privacy Act of 1974 c) Computer Fraud and Abuse Act of 1986 d) Computer Security Act of 1987

74.

Which of the following is a primary reason why accountants should be concerned about computer crime and abuse? a) They might lose their job if they don’t detect computer crime or abuse in their organization b) They might lose their professional credibility and license if computer crime or abuse continues for a long time in their organization and they do not detect it c) They are responsible for designing, implementing, and monitoring the control procedures for AISs d) all of the above are equally important

75.

One of the most effective deterrents to prevent/discourage computer hacking is: a) User education, that is, making potential hackers aware of the ethical issues involved in this sort of behavior b) The USA Patriot Act of 2001 c) The Computer Security Act of 1987 d) none of the above TB 11.7

76.

Which of the following does not destroy data but merely replicates itself repeatedly until the user runs out of internal memory or disk space? a) Computer virus b) Worm program c) Java applet d) Salami technique

77.

It is important to be able to recognize the symptoms of employee fraud. In practice, which of the following might be the best clue that fraud might be occurring? a) Accounting irregularities b) Internal control procedures that managers feel are inadequate c) Anomalies that, together, seem unreasonable d) Trial balances that almost always contain errors

78.

One of the major crimes identified by the Computer Fraud and Abuse Act of 1986 is the intent to illegally obtain information or tangible property through the use of computers.

Which of the following methods might accomplish this type of crime if the perpetrator can change data before, during, or after they are entered into a computer system? a) Salami technique b) Data diddling c) Shoulder surfing d) Trojan horse program

79.

Acts such as dumper diving, phishing, and smishing are all conducted to: a) Conduct a denial of service attack b) Disrupt computer services c) Get food d) Perform identity theft

80.

The term “smishing” means: a) Conducting identify theft by using text messages on cell phones b) Attempting to appear unnoticeable for an illegal act c) Stealing small amounts of monies from several computer accounts d) Masquerading as a corporate manager in order to obtain useful information

81.

A computer virus is different from a “Trojan Horse” because the virus can a) Corrupt data b) Alter programming instructions c) Replicate itself d) Erase executable files

82.

Which of the following best describes computer abuse? a) It’s manipulating a computer or computer data to dishonestly obtain money, property, or some other advantage of value, or cause significant loss b) It’s when someone who is not authorized uses or gains access to a computer for purposes contrary to the wishes of the computer’s owner c) It’s when someone steals money from several computer accounts d) none of the above

TB 11.8

83.

Some firms and governmental organizations use ethical hackers to help find any vulnerabilities that could be exploited by a malicious hacker. Which of the following is also used to refer to ethical hacking? a) Denial of service b) Intrusion service c) Penetration testing d) Executable testing

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are three terms that are not used.

84. _____ shoulder surfing 85. _____ ACL 86. _____ CSI 87. _____ data diddling 88. _____ DDoS 89. _____ dumpster diving 90. _____ Encase 91. _____ CFAA 92. _____ salami technique 93. _____ Trojan horse 94. _____ VoIP 95. _____ worm

Definitions: A. Malicious software similar to a computer virus B. An acronym for security institute that studies computer crime activities C. The act of altering data that are entered into, or used by, a computer D. A software program specifically designed for computer forensic investigations E. Federal legislation aimed specifically at computer crime F. A type of fraud in which the perpetrator steals small amounts from many different accounts G. A technique for luring individuals to reveal their personal identification information H. A technique for transmitting telephone conversations over the Internet I. A malicious software program embedded in another innocent-looking one J. A type of bait used to lure computer users into sending money overseas K. A hacking attack that uses zombie computers L. Stealing personal information from trash cans M. Auditing software often used to test computer data N. Observing users as they enter passwords or other personal information to a computer O. A strong computer password named after a Greek statue

TB 11.9

Short Answer Questions 96.

97.

Define hacking.

Define computer virus.

TB 11.10

Chapter 12 Information Technology Auditing True-False Questions 1.

One problem with internal auditing is that it is akin to self-regulation (i.e., the auditor cannot be impartial because both the auditor and the subsystem being audited work for the same company).

2.

Both the internal audit and the external audit have the same primary objective (i.e., to verify that the financial records of the company have been prepared according to generally accepted accounting principles).

3.

Many of the assurance services auditors offer today involve information technology.

4.

The main objective of information technology auditing is to evaluate the IT’s role in achieving audit and control objectives.

5.

If control procedures over a company’s computerized financial accounting system are particularly strong, auditors will not need to perform any substantive testing.

6.

Computer assisted audit techniques are used primarily when auditing around the computer.

7.

A career in information technology auditing requires both specialized skills and a broad-based set of technical knowledge.

8.

Certified Information System Auditors must have an accounting degree.

9.

The focus in an internal audit should be primarily on business risk rather than on internal control.

10.

An information systems risk assessment is as concerned with errors and accidents as it is with fraud.

11.

When the costs of protecting against a business risk exceed the cost of the risk multiplied by its probability, an auditor will generally recommend against installing the specific control.

12.

Public companies are required to adopt the Control Objectives for Information and Related Technology framework under SOX.

13.

The Electronic Systems Assurance and Control model provides a framework for evaluating controls over email systems.

14.

An auditing around the computer approach pays little or no attention to the control procedures within an IT environment.

15.

Normal transactions rather than exception transactions are of most interest to auditors.

TB 12.1

16.

Embedded audit modules or audit hooks are examples of continuous auditing techniques.

17.

Use of test data is not recommended when evaluating integrated online systems.

18.

The greatest advantage of an integrated test facility is that it enables an auditor to examine both manual and computerized steps companies take to process business transactions.

19.

In auditing through the computer, auditors will want to review systems software documentation.

20.

An ideal program change control process includes required documentation of every request for application program changes as well as the use of a test environment for development and implementation of program changes.

21.

The most important skills needed by information technology auditors are people skills.

22.

Test of program length is one approach to detecting the existence of a Trojan Horse.

23.

Information Technology (IT) governance includes using IT responsibly and efficiently, but not necessarily strategically.

24.

Auditors may use transaction tagging to verify how a system processes certain transactions.

25.

It is relatively easy to prevent hackers from unauthorized access to data and programs.

26.

The three conditions for fraud in the fraud triangle include incentive/pressure, rationalization, and opportunity.

27.

SAS No. 99 – Consideration of Fraud in a Financial Statement Audit guides auditors in being more proactive in detecting fraud than did the predecessor standard, SAS No. 82.

28.

One purpose of generalized audit software packages is to enable an auditor to examine the contents of computer files of interest without having to write a computer program himself/herself.

29.

The AICPA has decided to drop its WebTrust services and replace SysTrust with a general Trust assurance service.

30.

Section 404 of SOX requires that the information technology auditor “sign off” that the financial statements are reliable.

TB 12.2

Multiple-Choice Questions 31.

Which of the following is not true? a) An internal audit is never performed by external auditors b) The primary goals of an internal audit and an external audit are somewhat different c) Both internal and external audits are similar in their insistence upon objectivity in the performance of the audit evaluation d) Both the internal audit and the external audit rely heavily upon the audit trail of transactions in an accounting system

32.

The primary purpose of an internal audit is: a) To verify the accuracy of a firm’s financial statements b) To punish employees for inefficient performance c) To meet the requirements of the accounting profession d) To ascertain employee adherence to organizational policies and procedures

33.

The best educational background for a Certified Information Systems Auditor is: a) A degree in information systems or technology b) A degree which combines the study of accounting with the study of information systems c) No college degree, but work experience in information systems d) An accounting degree

34.

Computer assisted audit techniques: a) Are never used in compliance testing b) May be used for substantive and compliance testing c) Are used primarily when auditing around the computer d) Are good tools for auditors who are lacking in technical computer skills

35.

A computerized AIS is harder to audit than a manual system for all of the following reasons except: a) The file information is not human readable b) The volume of transaction records and master file records is usually much larger in computerized systems than in manual systems c) An audit trail does not exist in a computerized AIS d) Computerized systems often use remote real-time data processing, thus complicating the tracing of transaction records to their sources

36.

Information technology governance: a) Is a component of IT auditing b) Has one objective – to ensure that IT is used strategically to fulfill an organization’s mission c) Is intended to ensure both the strategic use of IT and control over IT resources d) Is primarily intended to deter IT fraud

TB 12.3

37.

Which of the following is not one of the groups of SOX compliance requirements? a) Requirements to use an IT auditor to evaluate controls b) Regulations governing executive reporting and conduct c) Rules about financial statement reporting d) Audit committee/corporate governance requirements

38.

The advantages of around-the-computer auditing include: a) The emphasis which is placed on testing data processing exceptions b) Use of live data c) The minimal disturbance of a company’s records d) both b and c

39.

If an auditor were to audit a payroll application using around-the-computer auditing techniques, the individual would: a) Use test data b) Verify that the output from the computerized processing was correct for the input data used to generate it c) Never use a surprise audit because of the amount of time and work involved d) Prepare a profile of a computer file and check the processed data with the profile thus obtained

40.

Through-the-computer auditing uses all of the following except: a) Confirmation sampling b) Test data c) Tests of program authorization d) Embedded audit modules

41.

The term “test data" is associated with: a) Auditing through-the-computer b) Auditing around-the-computer c) Auditing of manual accounting systems d) Non-auditing procedures performed by a firm’s accounting subsystem employees

42.

Three common techniques auditors use to test computer programs are: a) Test data, integrated test facilities, and parallel simulation b) Test data, edit checks, and integrated test facilities c) Test data, program change control, and parallel simulation d) Program change control, edit checks, and parallel simulation

43.

The most important advantage of an integrated test facility is that it: a) Allows auditors to evaluate transactions in an operational setting b) Can test every exception transaction as opposed to test data which includes only a limited set of such transactions c) Works best at evaluating input controls d) Has no disadvantages

TB 12.4

44.

Which of the following audit techniques is likely to require the most technical expertise on the part of an auditor? a) Test data b) Integrated test facility c) Evaluation of program change control d) Parallel simulation

45.

Which of the following is not typically checked by an auditor in a review of a responsibility system of computer program development and maintenance? a) Documentation of all program changes on proper change-request forms b) Proper costing of all program change requests c) A review of each program change request by an internal auditor d) Matches between program documentation and the production version of a computer program

46.

The four approaches to through-the-computer auditing include all but which of the following: a) Use of embedded audit modules b) Testing of outputs to verify processing c) Computer program testing d) Validation of computer programs

47.

The auditor’s role in reviewing the system of computer program development: a) Does not include checking to see that all program changes are properly documented b) Does not include a check of librarian functions c) Does not include checking to see that program change requests are properly costed d) Includes a cross-check of program changes against in-use programs

48.

Which of the following is not a condition for fraud as identified in the fraud triangle? a) Incentives or pressures b) Greed c) Opportunity d) Rationalization

49.

An integrated test facility is used to: a) Test only the computer programs of an AIS b) Test only the manual operations of an AIS c) Test both the programs and the manual operations of an AIS in an operational setting d) Test the computer programs, the manual operations, and the auditing procedures of a company using a computerized AIS

50.

The greatest drawback of an integrated test facility is that: a) It requires the construction of a high volume of test data b) It introduces artificial transactions into the transaction stream c) It produces overkill in the audit function

TB 12.5

d)

It is not broad enough to cover the entire spectrum of activities involved in the AIS

TB 12.6

51.

All of the following are true concerning embedded audit modules except: a) They provide for continuous auditing of application processing b) The auditor does not have to be involved in the development of these programs c) Once implemented, the system can capture information that is useful to the auditor on an ongoing basis d) With this approach, the application program incorporates subroutines for audit purposes

52.

Which of the following statements is not true regarding people skills for IT auditors? a) People skills are more important than technical skills b) An example of people skills would be the ability to work as a team c) In the case of protecting against computer viruses, technical skills matter more than people skills d) Many internal controls evaluated by auditors concern human behavior

53.

All of the following are examples of parameters that might be used to set passwords except: a) A minimum password length of six digits b) Restriction of passwords to alphanumeric characters only c) Required use of words that can be found in a dictionary d) A requirement for a minimum interval (such as one day) before a password may be changed

54.

SQL is: a) An example of an integrated test facility b) A generalized audit software program c) A tool used for continuous auditing d) A tool used by auditors to retrieve and manipulate data

55.

Prewritten computer programs used for audit purposes are called: a) Sequential access program systems b) Positive confirmation audit systems c) Embedded audit modules d) Generalized audit software packages

56.

When an auditor audits with the computer, the auditor: a) Uses the computer to process transaction data under normal processing conditions b) Uses the computer as a tool to assist in various other auditing tasks c) Relies heavily upon test data to evaluate the presence or absence of specific computer controls d) Must also use an integrated test facility

57.

Information Technology governance includes all of the following except: a) A decentralized approach to IT acquisition b) Using IT strategically to carry out the objectives of an organization c) Ensuring effective management of an organization’s IT resources d) Control over IT-related risks

TB 12.7

58.

Under which audit technique is the way transactions are processed examined? a) Exception reporting technique b) Transaction tagging technique c) Snapshot technique d) Parallel simulation technique

59.

Which section of SOX requires CEOs and CFOs to “sign off” on their company’s financial statements? a) Section 404 b) Section 201 c) Section 103 d) Section 302

60.

Which of the following services is not prevented by SOX for an auditor to perform for their own client? a) Internal auditing outsourcing services b) Expert services related to the audit c) Actuarial services d) Implementation of a financial information system

61.

All of the following are reasons why SOX was enacted, except: a) Enron’s CEO, Jeffrey Skilling, claimed he did not know about the company’s financial shenanigans because he was not involved in their accounting b) Public perception was that auditors were having conflicts of interest with respect to the auditing and consulting services they provided c) The FASB has long been thought to be ineffective d) Congress wanted to restore investor confidence in the wake of a rash of corporate scandals

62.

Which of the following is not a principle of the AICPA’s Trust Services? a) Maintainability b) Availability c) Online privacy d) Processing integrity

63.

Risks of using an integrated test facility include: a) Failure to remove fake transactions from the client’s system b) High costs of building the facility c) Discovery of many control weaknesses d) none of the above

64.

Controls over access to IT systems are particularly important because: a) Weak access controls prevent unauthorized use of systems b) Access controls allow auditors to employ continuous auditing techniques c) Access controls make test data more effective d) Weak access controls can allow users to bypass many other controls

TB 12.8

65.

Continuous audit techniques can improve the effectiveness of the audit by: a) Focusing most of the audit effort near the year-end b) Alerting auditors to potential problems when the problems occur c) Protecting the privacy of the auditors d) Facilitating parallel simulation

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank provided before the term. Each definition is used only once.

66. ______ automated workpaper software 67. ______ Certified Information Systems Auditor (CISA) 68. ______ computer-assisted audit techniques (CAATs) 69. ______ continuous auditing 70. ______ COBIT 71. ______ fraud triangle 72. ______ generalized audit software 73. ______ general-use software 74. ______ information technology (IT) auditing 75. ______ information systems risk assessment 76. ______ integrated test facility 77. ______ IT governance 78. ______ parallel simulation 79. ______ penetration testing 80. ______ program change control 81. ______ Sarbanes-Oxley Act 82. ______ third party assurance services

TB 12.9

Definitions: A. Involves evaluating the computer’s role in achieving audit and control objectives B. The use of computer processes or controls to perform audit functions, such as sorting data to detect duplicate accounts payable invoice numbers C. A certification given by the Information Systems Audit and Control Association D. Method by which an auditor can evaluate the desirability of IT-related controls for a particular aspect of business risk E. To evaluate risk and design controls to protect against unauthorized access F. Provides auditors and businesses with guidance in managing and controlling for business risk associated with IT environments G. A productivity tool used by auditors to improve their work H. These programs enable auditors to review computer files without continually rewriting processing programs I. These programs can help auditors create common-size income statements and balance sheets that show account balances as percentages J. A more comprehensive test technique that is used to audit an AIS in an operational setting K. The auditor uses live input data, rather than test data, in a program actually written or controlled by the auditor L. A set of internal control procedures developed to protect against unauthorized program changes M. XBRL can support this concept N. The process of using IT resources effectively to meet organizational objectives O. Usually refers to motive, opportunity, and rationalization of inappropriate behavior in organizations P. An important feature of this legislation is commonly referred to as Section 404 Reviews Q. Specialized audits of Internet systems and Web sites

Short Answer Questions 83.

Discuss the elements of the Sarbanes-Oxley Act of 2002 that affect auditing.

84.

IT auditors need people skills as well as technical skills. Discuss some techniques and skills that assist the auditor during interviews.

TB 12.10

Chapter 13 Developing and Implementing Effective Accounting Information Systems True-False Questions: 1.

The first stage in the systems development life cycle is analyzing the company’s current system.

2.

The first stage in the systems development life cycle is planning the systems study itself.

3.

Most systems development life cycles consist of mutually exclusive activities, with little overlap between the stages.

4.

Accountants do not have to worry much about systems studies—they are rarely affected by them.

5.

The search for more efficient ways to serve customers is an important reason why business organizations perform systems studies.

6.

One way to help ensure a systems study uses a “broad point of view” is to assemble an interdisciplinary study team.

7.

A study team should approach a systems study with a narrow point of view in order to focus directly on the system and not be distracted by peripheral issues.

8.

The members of a systems study team should be from the same discipline or area so that they can work together well.

9.

An important first step in the systems analysis phase of a systems study is a preliminary investigation of the system under study.

10.

Top management involvement is critical to the success of a systems study.

11.

When a waitress delivers food late to a customer because the kitchen is backed up, the “late food” is an example of a symptom while the “kitchen being backed up” is the real cause of the problem.

12.

“Analysis paralysis” means “analyzing a system to death” at the expense of reaching a conclusion.

13.

The three major types of organizational goals discussed in the chapter are (1) general systems goals, (2) computer goals, and (3) salary goals.

14.

It is not important to satisfy top management goals when creating a new information system because most such systems are used by operating employees, not top managers.

TB 13.1

15.

The information needs of top managers tend to be the most detailed, and focus on short range planning and budgeting.

16.

The information needs of operating managers are normally easier to determine than those of top managers because their decision making tends to be better defined and narrower in scope.

17.

Studies of AIS outputs should not be concerned with non-monetary figures—these are mostly irrelevant to accountants.

18.

Employee behavioral problems are rarely important in systems analysis and design work because most systems are computer-based, not human-based.

19.

Systems survey work include gathering data on an existing information system or observing the current system in operation.

20.

An important deliverable from the analysis portion of a systems study is the final systems analysis report, which should be sent to the company’s steering committee.

21.

An example of “legal feasibility” is whether or not a proposed computer system can comply with state and federal statutes.

22.

A “schedule feasibility” evaluation is not conducted by a study team if a company already has an automated system.

23.

“Schedule feasibility” refers to whether or not computer vendors can provide bids in a timely manner.

24.

Unless the human element of a systems change is considered, the best designed system "on paper" will often be an operational failure when it is implemented.

25.

In designing an AIS, system developers should design the outputs of the system first, not the inputs.

26.

The term “cost/benefit” is most closely associated with the economic feasibility of a proposed accounting information system.

27.

For a system to be totally feasible, all feasibility areas must be considered in the process.

28.

Prototyping is an approach to systems design whereby a design team develops a simplified shell of working software for a proposed information system.

29.

An advantage of prototyping is that models are usually developed without the aid of a computer.

30.

When comparing computer vendor proposals, the reputations of these vendors should also be evaluated.

31.

In selecting a vendor finalist, a steering committee can use a point-scoring analysis to evaluate the proposals of alternate computer vendors.

TB 13.2

32.

Systems study work ends when the follow-up analysis shows that no further adjustments need to be made to the newly implemented system.

33.

The implementation and initial operation phase of a systems study is also known as the "action" phase of a systems study.

34.

One implementation problem is installing a new system that is not adequately documented or tested.

35.

PERT is an acronym for “Project Expert and Resource Technique.”

36.

The purpose of PERT is to coordinate the activities in a project, such as a systems implementation project.

37.

One thing that can go wrong during systems implementation is implementing a system that has not been completely tested.

38.

A PERT network diagram reflects the logical sequence of systems implementation activities.

39.

The “slack time” for a PERT activity represents the amount of time the activity can be delayed without delaying the entire project.

40.

The critical path represents the longest path through a PERT network diagram.

41.

Gantt charts are the same as PERT charts.

42.

Project management software allows users to perform “what-if” analysis⎯for example, to determine how different work schedules might lower the time to install a new computer system.

43.

Controls are rarely established during the implementation of a new computer system—this must wait for the first audit of the system.

44.

During systems implementation, “converting computer files” is only necessary if the files are currently in manual formats.

45.

A “turnkey” computer system is a complete set of computer hardware and software that allows the user to avoid technical decisions and to begin operating quickly.

46.

The terms “parallel conversion” and “direct conversion” are different terms for the same thing.

47.

As part of the systems follow-up work, an implementation team can watch employees perform their work activities to ascertain whether the employees are executing their assigned job functions correctly.

48.

At the conclusion of the initial follow-up study, the implementation team will prepare a report called a post-implementation review report.

TB 13.3

49.

The tasks involved in “system maintenance” are normally performed by external vendors, and rarely by a company’s internal information systems department.

50.

When using outsourcing, a company needing data processing services hires an outside organization to handle all or part of these services.

51.

A possible advantage of outsourcing is that it frees corporate assets for other projects.

52.

Outsourcing can help a company avoid seasonal fluctuations in its business.

53.

Outsourcing facilitates downsizing.

54.

A disadvantage of outsourcing is that a company can lose control of its IT systems and data processing.

Multiple-Choice Questions: 55.

An intensive investigation of a company's present information system in order to discover systems weaknesses is termed a: a) Systems study b) Systems follow-up c) Systems design d) Systems survey

56.

Which of these is not a phase in the life cycle of an information system? a) Planning b) Analysis c) Control d) Implementation

57.

The four phases of the systems development life cycle end with this phase: a) Analysis b) Design c) Implementation, follow-up, and maintenance d) Development

58.

Which of these is most likely to be the first task in a systems study? a) Systems analysis b) Systems design c) Preliminary investigation d) any of these are possible—it depends upon the system under study

59.

According to the chapter, which of these comes closest in meaning to the term “systems approach?” a) Narrow point of view b) Broad point of view c) Focus on achieving those goals important to computerized systems d) Focus first and foremost on computerization

TB 13.4

60.

Which of the following is least likely to be a member of a study team? a) CEO of a company b) Internal auditor or accountant c) IT specialist d) Middle-level manager who uses the system

61.

Which of these statements is true? a) Accountants need not bother with systems studies—they are mostly performed by IT specialists b) System studies enable bright accountants to express ideas for improving a system c) Systems studies rarely involve accounting information systems d) all of these are true

62.

A poorly-planned information system can result in: a) Employee resistance and even sabotage b) Inflexible systems which are hard to maintain or modify c) Systems that solve the wrong problems d) all of these are true

63.

A waitress brings cold food to a customer, who complains. Which of these is most likely to be the cause of the problem and not a symptom of this problem? a) The angry customer b) An irritable waitress c) The cold food itself d) The inability of the kitchen staff to keep up with many orders at once

64.

A student fails a course at his university. Which of these is most likely to be the cause of the problem and not a symptom of this problem? a) An angry student b) The student gets placed on probation c) The student’s mother pays an angry visit to the dean of students d) The student did not study for the course

65.

Which of these should come first when performing a systems study? a) Systems analysis b) Systems design c) Preliminary investigation d) Systems audit

66.

The systems goals of a company's operating management include: a) Cost awareness b) Relevant output c) Flexible structure d) all of the above e) none of the above

TB 13.5

67.

Which of these is not a general systems goal? a) Relevant output b) Cost awareness c) Flexible structure d) Higher salaries

68.

Compared to top management's system information goals, obtaining the information needs of operating management is normally: a) Easier b) More difficult c) No different d) Not required

69.

One mistake that a study team can make when performing a systems analysis is to: a) Perform a preliminary investigation first b) Have employees participate in the systems study work c) Utilize a "systems approach" in performing the systems study d) Ignore the strong points of the present system

70.

Which of the following is an objective of a systems survey? a) To understand management information needs b) To understand the human element and gain cooperation from people involved with the system c) To enlist management participation and cooperation d) all of the above are objectives of a systems survey

71.

The steering committee in a systems study: a) Consists entirely of outside consultants b) Represents management in a systems study c) Should include staff auditors d) Is typically composed entirely of end users

72.

Which of the following types of survey instrument best allows employees to answer in their own words? a) Open-ended questionnaire b) Closed-ended questionnaire c) Multiple-choice questionnaire d) Fill-in-the-blank questionnaire

73.

________ is a common method of reviewing a company's internal control procedures: a) Using an informant b) Consulting historical records c) Getting top management's opinions d) Checking samples of system inputs and outputs

TB 13.6

74.

Which of these is not a logical procedure that is followed in the systems analysis phase of a systems study? a) Defining the problem(s) in the current system b) Identifying the company's goals c) Performing a systems survey to acquire information about the current system d) Suggesting possible solutions to solve the company's problem(s) e) all of the above are systems analysis procedures

75.

Once all facts and data have been collected in the systems survey, which of the following activities can begin? a) The preliminary investigation b) Appointment of a steering committee c) Performing the data analysis d) Performing the systems implementation

76.

Systems design usually comes after: a) Systems analysis b) Systems funding c) Systems deletion d) Systems implementation

77.

Which of these is not a common dimension in a feasibility study? a) Technical b) Operational c) Schedule d) all of these are common dimensions

78.

Which of the following is not a general objective in the design of an information system? a) A system should provide information that is timely and relevant for decision making by management and operating personnel b) The output of a system should be highly accurate c) A system should have sufficient capacity to accommodate levels of normal activity; any additional capacity proves too costly in the long run d) A system should be as simple as permitted so that its structure and operation can be easily understood and its procedures easily accomplished e) A system should be flexible to accommodate changes of a reasonable magnitude when required

79.

The most important factor in planning for a major change in a computer-based system is: a) The organization of the IT department b) The ability of the systems programmers to write appropriate software c) The selection of the most advanced computer equipment d) Giving the systems people a free hand in all changes e) The participation of top management in the planning process

TB 13.7

80.

In conducting a feasibility study, operational feasibility refers to whether: a) A proposed system is attainable given the existing technology b) A manager can coordinate and control the activities of the systems department c) An adequate computer site exists for the proposed system d) The proposed system will produce economic benefits that exceed its costs e) The system can be used effectively within the operating environment of an organization

81.

Which of these are the five feasibility areas that a design team should examine? a) Technical, legal, social, economic, schedule b) Economic, software, legal, hardware, schedule c) Organizational, hardware, operational, legal, economic d) Schedule, economic, operational, technical, legal

82.

Which one of these design feasibility areas is typically performed by accountants? a) Economic b) Organizational c) Hardware d) Schedule e) Social

83.

Converting to a new computerized system will typically entail large dollar expenditures to make the new system operative. These monetary expenditures normally are incurred for: a) Transferring a company's financial data from its present storage media to computerized storage media b) Testing the operations of the new system before it replaces the old system c) Establishing good internal controls for the new computerized system d) all of the above

84.

Which of these is true when designing control procedures for a computer system? a) Control procedures are irrelevant b) Control procedures should be designed and implemented after the proposed system is functioning properly c) Control procedures should be built into the system as it is designed d) Control procedures should be implemented regardless of their costs

85.

All of these are examples of typical benefits that a company might enjoy when switching to a new computer system except: a) Reduced clerical costs b) Enhanced sales c) Better customer service d) Lower hardware and software costs

TB 13.8

86.

All of these are examples of typical costs that a company will usually incur when switching to a new computer system except the costs of: a) New computer hardware and software b) Hiring additional employees c) Operating the new system d) Site preparation e) Lost customers

87.

When designing a computer-based information system, the initial step in the systems design process is to determine: a) The required outputs b) The source documents that serve as the basis for input c) The processing required d) The computers that will be used e) The file information required during processing

88.

A complete, ready-to-go system of computer hardware and software is also sometimes called a(n): a) Turnkey system b) Canned system c) Kitchen-sink system d) All-in-one system

89.

Which of these best describes prototyping as used in practice? a) Reiterative process b) One-time trial c) Top management exercise d) all of these describe prototyping

90.

All of these are advantages of prototyping except that: a) It involves end users and therefore obtains a better definition of user needs b) It involves top management and therefore better achieves strategic goals c) It requires a comparatively short period of time d) all of these are typically advantages of prototyping

91.

Which of these is a disadvantage of prototyping? a) It requires inputs from end users b) It requires inputs from top management c) It requires an iterative testing process that takes some time and patience d) all of these are common disadvantages with prototyping

92.

All of these are common selection criteria for choosing a final software package from a vendor except: a) Evaluating the performance capabilities of each proposed system b) Weighing the costs and benefits of each proposed system c) Evaluating the maintainability of each proposed system d) all of these are common selection criteria for selection

TB 13.9

93.

When using a point-scoring system, the winner is usually the choice with: a) The lowest score b) The highest score c) The median score d) The vendor with the most resources

94.

All of the following are things that might go wrong when implementing a new system except: a) An untested system is installed anyway b) Complete documentation is lacking c) Not enough resources are allocated for subsequent maintenance d) all of these are common missteps in systems implementation

95.

After successfully implementing a new system, what activities should the implementation team normally perform in their follow-up work? a) Evaluate the control procedures of the new system b) Determine if output schedules for reports are being met under the new system c) Observe some of the employees’ work performances under the new system d) all of the above activities should normally be performed

96.

The most time-consuming path in a PERT network is called the: a) Slack path b) Completion path c) Critical path d) none of the above

97.

In a PERT network diagram, the amount of delay time that can occur in a non-critical activity and still not delay the estimated completion time of a systems implementation project is called: a) Slack time b) Noncritical time c) Critical time d) none of the above

98.

A simple diagram that shows estimated completion times versus actual completion times for the various activities in a systems implementation project is a(n): a) E-R diagram b) PERT chart c) Gantt chart d) Data flow diagram

99.

With the use of ________, a company hires an outside organization to handle all or part of its data processing services. a) Turnkey system b) Gantt chart c) Slack time d) Outsourcing

TB 13.10

100.

Which of these is not generally a reason to outsource? a) Retain control over data b) Attractive business solution c) Lower data processing costs d) Avoid seasonal fluctuations

Questions 101 – 110 refer to the following chart. Numbers to the right of equal signs are in “weeks.”

C=4 2

A=2

5

H=2

D=5

1

4

7 G=2

E=4 B=3

I=3 3

6 F= 4

101.

This diagram is an example of a: a) PERT chart b) Gantt chart c) System flowchart d) Waterfall model

102.

In this chart, the letters represent: a) Activities b) Milestones c) Employees d) Data values e) Position numbers

103.

In this chart, the circles represent: a) Activities b) Milestones c) Employees d) Data values e) References to other charts

104.

In this chart, note that two arrows point to circle 5. This means that: a) Activity E requires two subsequent activities b) Activity H requires two precedent activities c) Both activities C and D require activity H to be completed first d) none of these

TB 13.11

105.

In PERT diagrams the shortest completion time of the entire project is equal to: a) The shortest path through the network b) The longest path through the network c) The easiest path through the network d) The most difficult path through the network e) The path of least resistance

106.

Which of the following is the critical path in this network? a) ACH b) BFI c) EG d) EDH e) ABDG

107.

The latest starting time for activity H is the beginning of week: a) 2 b) 4 c) 6 d) 9 e) none of these

108.

The earliest starting time for activity G is the beginning of week: a) 2 b) 4 c) 5 d) 9 e) none of these

109.

The slack time for activity D is: a) 2 b) 4 c) 6 d) 9 e) none of these

110.

If the project leader now believes that C should be 6 (not 4), the critical path is now: a) EG b) ACH c) BFI d) ABC e) none of these

111. The information in PERT charts are commonly summarized in a second, bar chart called a: a) Gantt chart b) Organization chart c) Control chart d) Data flow diagram e) Scatter chart

TB 13.12

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are two terms that are not used.

112. ______ modular conversion 113. ______ direct conversion 114. ______ legal feasibility 115. ______ scope creep 116. ______ applications portfolio 117. ______ feasibility evaluation 118. ______ critical path 119. ______ operational feasibility 120. ______ prototype 121. ______ slack time 122. ______ technical feasibility 123. ______ change management 124. ______ parallel conversion 125. ______ Gantt chart 126. ______ benchmark test 127. ______ economic feasibility 128. ______ PERT 129. ______ preliminary investigation 130. ______ schedule feasibility 131. ______ turnkey system

TB 13.13

Definitions: A. Computer experts typically work on this phase of the feasibility evaluation because a thorough understanding of IT is essential B. The design team attempts to assess whether the anticipated benefits of the system exceed its projected costs C. Systems work where the design team determines the practicality of alternative proposals D. This phase of a systems study requires the design team to estimate how long it will take a new or revised system to become operational E. Software that interfaces with suppliers and customers F. Software from independent vendors that comes bundled (i.e., combined) with hardware G. Includes an enterprise system, any specialized information systems, or other separate systems for functional areas such as accounting, marketing, and human resources H. The longest-path to project completion and also the shortest completion time of the entire project I. Conversion to a new system where the new system is implemented in stages J. A scaled-down, experimental version of a nonexistent information system that a design team can develop cheaply and quickly for user-evaluation purposes K. A new or revised system should comply with all applicable federal and state statutes about financial reporting requirements, as well as the company’s contractual obligations L. For this phase of the system study, the design team must analyze the capabilities of current employees to perform the specific functions required by each proposed system and determine to what extent employees will require specialized training M. A project leader first prepares a list of systems implementation activities, identifies the prerequisite activities that must be completed before others can start, and estimates the amount of time required to complete each activity N. The most difficult issue in implementing a new system O. The phrase used to describe delays in meeting the schedule for delivering a systems project P. Conversion to a new system where the organization operates both the new and the old system for some period of time Q. Conversion to a new system where the organization immediately discontinues use of the old system and uses the new system R. The amount of delay time that can occur in each non-critical activity and still not delay the project S. Useful for both scheduling and tracking the activities of systems implementation projects because actual progress can be contrasted with the planned progress T. One way to examine the operating efficiency of a particular system U. One important part of this work is to separate symptoms from causes V. One of the four stages in the SDLC

TB 13.14

Short Answer Questions 132.

What is the purpose of a Systems Steering Committee if an outside consultant is hired to perform the system study?

133.

Name several conditions when prototyping a system should be used.

134.

What is a PERT chart and why is it helpful in planning a project?

TB 13.15

Chapter 14 Accounting on the Internet True-False Questions 1.

The domain address of a web page is equivalent of its universal resource locator (URL).

2.

The Internet Protocol address is a numerical translation of the text-based domain address.

3.

Most accountants believe that auditors do not need to concern themselves with IP addresses.

4.

Intranets do not use the same software as the Internet.

5.

An extranet is a network that a business might establish with its trading partners.

6.

The World Wide Web is the text portion of the Internet.

7.

Groupware is the technology that enables knowledge sharing and knowledge management among employees.

8.

XBRL is not related to XML.

9.

XBRL allows users to extract and compare financial data from many different companies.

10.

HTML tags describe how data and graphics should be presented by a web browser.

11.

The SEC will not accept XBRL formatted data in electronically filed financial reports.

12.

All electronic commerce takes place over the Internet.

13.

XBRL is an acronym for “extensive business reports and liabilities.”

14.

XBRL is a type of XML.

15.

A set of XBRL tags identifies the data it contains as well as indicates how to display that data.

16.

An advantage of XBRL is its ability to express semantic meaning—i.e., to express such relationships as “assets = liabilities + equity.”

17.

IDEA is a computer system used by the Securities and Exchange Commission (SEC).

18.

IDEA uses XBRL-coded data of corporate financial statements.

19.

An advantage of XBRL is that the tags have been completely standardized by the XBRL International Consortium and these standards are now fixed.

TB 14.1

20.

An advantage of XBRL is that it can save companies the cost of rekeying financial data from one computer application to another.

21.

An important disadvantage of XBRL is that most accounting packages cannot read or write documents in XBRL format.

22.

E-wallets store customer data to facilitate online purchases. They do not store dollars.

23.

Use of electronic procurement systems typically raises purchasing costs.

24.

To date, e-commerce has had less impact on accounts payable and accounts receivable than on procurement and inventory tracking.

25.

EDI automates the exchange of business information, particularly with respect to source documents.

26.

EDI can only be used by private, for-profit businesses.

27.

A major issue impacting e-business is the trade-off between accessibility and vulnerability.

28.

Firewalls are virtually unbreachable and offer assurance against any viruses.

29.

Proxy servers can act as firewalls and can also limit employee Internet access to approved web addresses only.

30.

Data encryption renders a text message unreadable during data transmission, even if intercepted.

31.

Public key encryption requires the use of a pair of public/private encryption keys.

32.

Digital signatures can never be as secure as written signatures.

33.

Digital time stamping authenticates the time and sometimes the place a transmission or transaction occurred.

34.

For all its exposure in the popular press media, identity theft affects a relatively small number of people and, in total, involves a small amount of losses per year.

35.

Three types of access security are (1) what you have, (2) what you know, and (3) who you are.

36.

Spam is annoying, but not a particularly costly or bothersome, to most businesses or government agencies.

37.

The term “phishing” refers to the use of web pages or other means to trick viewers into revealing their passwords or other personal information.

38.

Worldwide, the total annual financial losses resulting from all phishing activities were

TB 14.2

less than $1 billion in 2010.

39.

Two types of firewall policies are protection by (1) inclusion, and (2) exclusion.

40.

An advantage of a proxy server is the ability to store commonly-requested web pages in memory, thereby enabling it to respond quickly to internal user requests for them.

41.

The term “B2B” is Internet slang for “back to basics.”

42.

BASF is one of the world’s largest telephone companies.

43.

EDI is an acronym standing for “electronic delayed interface.”

44.

The term “SaaS” is an acronym standing for “software as a service.”

45.

When a cloud service company hosts a client’s website, this is an example of “platform as a service.”

46.

For most businesses, cloud computing is an example of outsourcing.

47.

The heaviest demands on book publishing websites come in the weeks just prior to the start of a fall or spring semester.

48.

MozyHome is a cloud provider of backup services.

49.

One important personal category of cloud computing for accountants is educational services.

50.

The Department of Justice prosecutes identity theft under the ITADA Act of 1998.

51.

An example of a social networking site is eBay.

52.

An example of a social networking site is FaceBook.

53.

Businesses can use social networking sites to better understand the reactions to new products or services.

54.

Social networks do not pose privacy concerns.

55.

The most common reason businesses outsource is to increase control over their data and data processing tasks.

TB 14.3

Multiple-Choice Questions 56.

An example of an Internet service provider is: a) General Electric b) AOL c) PeachTree d) ISP e) none of these

57.

Another name for an Internet domain address is its: a) URL b) ISP c) email address d) IETF

58.

An example of a URL is: a) .gov b) 100.100.100.100 c) www.wiley.com d) <B>Title</B>

59.

In the Internet address www.Name.com.X, the term X usually stands for: a) A country b) A city c) An abbreviation such as “gov” d) A transmission protocol

60.

Which of these is not a component of an IP address? a) A geographic region b) An organization number c) A computer group d) A specific computer number e) A specific user number

61.

An advantage of an extranet is that: a) It can disseminate information corporate-wide b) It can be accessed by selected trading partners c) Users can employ common web browsers to access information in them d) all of the above

62.

The letter “p” in the acronym http stands for: a) Page b) Provider c) Protocol d) Parity

63.

All of the following are normally associated with the Internet except: a) IP addresses b) URL addresses c) http

TB 14.4

d)

MICR coding

64.

These allow a user to access alternate web pages from an existing page: a) Hyperlinks b) Golf links c) html titles d) The XBRL tag <Web Address>

65.

This language allows its users to create web pages on the Internet: a) HTTP b) HTML c) URL d) COBOL

66.

The “X” in the term XBRL stands for: a) Extra b) Extensible c) X-rated d) Exante

67.

Which of the following is true about XBRL? a) It is a business application of XML b) It uses tags such as <b> like HTML c) It is used by the SEC to collect and store financial information about companies d) all of the above are true about XBRL

68.

One advantage of XBRL tags is that: a) They always contain links to other web pages b) Optional entries allow users to specify units of currency, such as Euros c) They are now fixed standards d) They cannot be used by hackers

69.

IDEA is used by the Securities and Exchange Commission (SEC) to: a) Store the financial data of public companies b) Collect lists of bankrupt companies c) Store the URL’s of member firms d) Collect data on individuals victimized by identity theft hackers

70.

All of the following are true about XBRL tags except: a) Tags are “extensible” b) Tags describe the data c) Tags tell how to display data d) Tags are now permanently standardized across industries

71.

All of the following are benefits of XBRL except: a) Companies can file financial information in one format, avoiding the errors that may come from reentering data multiple times b) The SEC accepts XBRL-format for electronic filing of financial statement reports c) XBRL permits the automatic and reliable exchange of financial information across many software formats and technologies, including the Internet d) all of the above are benefits of XBRL

TB 14.5

e)

none of the above are benefits of XBRL

72.

The “A” in the term IDEA (used by the SEC) stands for: a) Accounting b) Association c) Addition d) Applications e) Access

73.

Which of these is not an advantage of XBRL? a) It often enables businesses to avoid rekeying data downloaded from corporate websites b) It constrains companies to particular formats, thus ensuring consistency c) It helps standardize the storage and therefore presentation of financial information d) all of these are advantages of XBRL

74.

Which of these is the official website of the XBRL International Consortium? a) www.xbrl.com b) www.xbrl.org c) www.xbrl.gov d) www.xbrlic.com

75.

Which of these best describes the current state of XBRL? a) It now lacks standards, but the hope is that we will get some soon b) The language is completely standardized c) The language is dynamic and standards are still being developed d) The language now awaits official sanction by the United Nations before being released for use

76.

Retail sales on the Internet: a) Are growing rapidly b) Were growing at first, but are now declining c) Are not possible on the Internet d) Have only been achieved by major retailers such as Wal-Mart

77.

________ is one of the largest “auction houses” on the web: a) Wal-Mart b) Sears, Roebuck c) eBay d) Forester

78.

An important characteristic of E-wallets is that: a) It is exactly the same as regular cash b) It is the same as EDI c) It contains the identity of the user d) Users must also supply a credit card number when using it

TB 14.6

79.

An advantage of E-wallets is that: a) Users do not need to re-enter personal information each time they make an online purchase b) Most E-wallet information is maintained on vendor file servers c) They ensure the completion of a purchase transaction over the Internet d) none of the above is an advantage of E-wallets

80.

All of the following are examples of EDI “documents” except: a) Purchase orders b) Sales invoices c) Customs documents d) Bar codes

81.

Which of these is correct about the terms “e-business” and “e-commerce”? a) They are exact synonyms b) They are exact opposites c) e-business is a subset of e-commerce d) e-commerce is a subset of e-business

82.

The acronym B2B stands for: a) Back to basics b) Baltimore or bust c) A non-existent public broadcasting system d) Business to business

83.

In recent years, the most common complaint related to identify theft is: a) Alteration of personal information b) Imbalances in financial statements c) Credit card fraud d) Deletions of the personal information maintained by banks and insurance companies

84.

According to the textbook, which of the following statements is true about identity theft? a) Most personal identities are stolen by dumpster diving b) There is little individuals can do to protect themselves from identify theft; this is a corporate problem c) There is much that individuals can do to protect themselves d) Accountants are more vulnerable to identity theft than non-accountants

85.

One form of access security is determining authentic users by “who they are.” Which of the following is an example of such authentication? a) Verifying a password b) Biometric tests such as retina scans c) Requesting that the user provide his or her mother’s maiden name d) Requiring the user to show a valid driver’s license

TB 14.7

86.

One form of access security is determining authentic users by “what they have.” Which of the following would be an example of such authentication? a) Verifying a password b) Biometric tests such as retina scans c) Requesting that the user provide his or her mother’s maiden name d) Requiring the user to show a valid driver’s license

87.

One form of access security is determining authentic users by “what they know.” Which of the following would be an example of such authentication? a) Verifying a password b) Biometric tests such as retina scans c) Requesting that the user provide an employee identification card d) Requiring the user to show a valid driver’s license

88.

What is the main reason for companies to prefer VANs to the Internet for implementing EDI? a) Cost - VANs are cheaper than the Internet b) Speed - VANs are faster than the Internet c) Security - VANs are thought to be more secure d) Convenience - VANs are everywhere

89.

The letter “N” in VPN stands for: a) Network b) Notice c) Nanosecond d) Nothing

90.

The term “spoofing” refers to: a) Computer hijacking b) Kidding c) Posing as a legitimate computer user d) Distributing junk mail

91.

The purpose of a company firewall is to: a) Guard against spoofing b) Assist the IETF c) Deny computer hackers access to sensitive data d) all of the above

92.

A proxy server is: a) A type of computer network often used by companies with many employees b) An alternate for a company mainframe computer c) A substitute for a good waiter at a restaurant d) A computer dedicated to Internet access and transfers

93.

The term data encryption refers to: a) Storing data in safe places called “crypts” b) Transforming data into secret codes c) Scrambling data in random ways that cannot be unscrambled d) none of these

TB 14.8

94.

All of the following are associated with data encryption except: a) Plaintext b) Cyphertext c) DES d) URL

95.

The term key in the context of data encryption refers to: a) A physical key similar to a house key b) A logical key similar to the primary key of a data file c) A mathematical function used for encryption purposes d) A computer function key that can be found on keyboards

96.

An interesting dimension of public key encryption is that: a) It actually requires two keys b) It only requires one key c) Everyone can decode a message written in it d) none of these

97.

A digital signature: a) Is the same as a hand-written signature b) Is a bitmapped representation of a hand-written signature c) Is encrypted data that authenticates a transmitted message d) none of these

98.

Third party assurance: a) Provides online purchasers with some assurance regarding the security and privacy of a web site b) Is unlikely to concern auditors c) Is a service offered only by the American Institute of Certified Public Accountants d) Is a service offered only by the Better Business Bureau

99.

Which of the following is not true regarding user authentication? a) One level of authentication is who you know b) An information system may require more than one level of authentication for access c) One level of authentication is what you know d) An example of authentication would be use of a password

100.

Because Internet software is so convenient to use, many companies also create ________ for internal communications purposes. a) Intranets b) Extranets c) Firewalls d) Domain address

TB 14.9

101.

Which of the following is a group collaboration tool that allows anyone with a Web browser and some easy-to-use software to publish a personalized diary online? a) Electronic conferencing b) Blogs c) Firewalls d) e-mail

102.

Which of these is not an acronym normally associated with cloud computing? a) Saas b) PaaS c) IDEA d) all of these are cloud computing acronyms

103.

Utilizing tax preparation software from a cloud service provider is an example of: a) Saas b) PaaS c) IDEA d) XML

104.

All of the following are advantages of cloud computing except: a) The client only pays for resources that it actually uses b) The client gains additional control over its data c) The provider, not the client, handles changes in processing volume d) all of these are advantages of cloud computing

105.

Which of these is not an example of a cloud service provider? a) A company that performs backup services over the Internet b) A company that performs payroll processing over the Internet c) A company that provides janitorial services d) all of these are examples of cloud service providers

106.

Companies such as Backblaze, Drop Box, and MozyHome are examples of companies that perform this type of cloud service: a) Backup services b) Payroll processing c) Janitorial services d) Tax preparation services e) Web hosting

107.

Which of these is not an Internet search engine? a) Google b) Bing c) Yahoo d) MySpace

108.

Obtaining a complete educational degree online is: a) Not yet possible today b) Only available from Harvard University c) Is now possible from a wide variety of educational institutions d) Illegal

TB 14.10

109.

Social networking sites such as Twitter or Facebook: a) Have only social uses, not commercial ones b) Have both social and commercial uses c) Have only commercial uses d) May have future commercial uses that have not been realized to date

110.

Which of these is a concern regarding social networks? a) They pose privacy issues b) They are inconvenient for communicating with target audiences c) none of them identify the author of a particular comment d) none of these are social-networking concerns

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are three terms that are not used.

111. _____ click fraud 112. _____ DES 113. _____ EDI 114. _____ HTML 115. _____ phishing 116. _____ proxy server 117. _____ TCP/IP 118. _____ virtual PBX 119. _____ VoIP 120. _____ XBRL 121. _____ XML

Definitions: A. B. C. D. E. F. G. H. I. J. K.

A computerized phone system using cloud computing services A digital time-stamping service A local area network file server typically devoted to providing Internet service A markup language designed specifically for businesses and financial reporting A transmission protocol enabling users to send voice-grade messages over the Internet A transmission protocol used to send email messages sent over the Internet An activity designed to steal a person’s financial identity An authenticating document issued by a third party called a certification authority An encryption standard used by the U.S. government An extension of HTML that allows users to create their own markup tags Reporting an inflated number of users of a link to an alternate website, on which the owner pays fees L. Software typically used for web conferencing M. The exchange of electronic documents such as contracts N. The markup language typically found in the files used to display web pages in a web browser

TB 14.11

Short Answer Questions 122.

What does "html" stand for and what is it used for?

123.

Why would buyers prefer using E-payments when making purchases over the web?

124.

What is the difference between secret key encryption and public key encryption?

TB 14.12

Chapter 15 Accounting and Enterprise Software True-False Questions 1.

Middle range accounting software programs can cost as much as $100,000 when you include the costs of customizing the software for a particular organization.

2.

SAP R/3 is a good example of a middle-range AIS software program.

3.

Internet connectivity is a software feature that is available only in enterprise resource planning software.

4.

Supply chain management concerns an organization’s ability to interface with its customers and suppliers.

5.

Integrated accounting software programs process accounting transactions only.

6.

Low-end accounting software is unlikely to include features such as sample charts of accounts and flexible reporting.

7.

Two important features of enterprise systems are integration and a centralized database.

8.

MRP I and MRP II systems were forerunners to enterprise information systems.

9.

Traditional ERP systems are mostly back-office systems; ERP II systems are front-office information systems.

10.

Supply chains are a new phenomenon.

11.

PRM stands for Personnel Relationship Management.

12.

Business intelligence tools have no relationship with CRM.

13.

The best-of-breed approach to software selection is never a good idea.

14.

Extended application interfaces are middleware that allow different software applications to share data and information.

15.

An e-business portal is a gateway to outside web sites and services.

16.

A business implementing an enterprise system should always conduct business process reengineering before putting in the new system.

17.

It is not possible to implement an enterprise information system in less than one year.

TB 15.1

18.

Software and consultant selection precedes formulation of the project team in an enterprise system implementation.

19.

Change management activities are nice to include in an enterprise system implementation, but they aren't necessary.

20.

The benefits of an enterprise system may include reduced inventory investment and improved cash management.

21.

It is relatively easy to determine the costs of an ERP system.

22.

Today’s ERP systems provide integration among all of an organization’s major business processes.

23.

Extended enterprise systems bring customers, suppliers, and other business partners together.

24.

It is rarely external forces that cause an organization to need new AIS software.

25.

The approach to purchasing accounting software is the same, regardless of software complexity or price range.

26.

The Internet can be a great tool in learning about specialized accounting software options.

27.

A Value-Added Reseller can help install and customize software, along with selling it.

Multiple-Choice Questions 28.

Vertical market accounting software packages typically: a) Will cost more than generic accounting software b) Requires a company to have software pre-designed to fit their special needs c) Are available for all types of organizations d) all of the above are correct

29.

Which of the following software packages is not an example of a middle-range AIS? a) Dynamics GP b) MAS 90 c) Quickbooks d) Solomon

30.

Integrated accounting software programs generally include all of the following, except: a) Graphic reporting capabilities b) Internet connectivity c) One standardized chart of accounts d) The ability to handle multiple companies

TB 15.2

31.

Enterprise-wide AISs: a) Almost never pay for themselves b) Do not include any more features than middle-range accounting software packages c) Are seldom used by multinational organizations d) Integrate an organization’s financial functions with its other functional areas

32.

Which of the following is not an important feature of an enterprise system? a) Multiple databases b) Centralized database c) Functional integration d) Back-office functionality

33.

Which of the following is not true regarding customer relationship management (CRM) systems? a) CRM does not require data from multiple applications b) CRM can help managers to better understand customer purchasing behavior c) CRM requires the collection of customer demographic data d) Business intelligence tools can enhance CRM

34.

Components of an ERP's architecture typically include: a) A centralized database and application interfaces b) Internet portals and multiple databases c) A centralized database running on a mainframe computer d) A UNIX operating system

35.

Which of the following business processes or functions is unlikely to be part of an enterprise system? a) Accounting/financing b) Human resources c) Manufacturing d) Sales or distribution e) all of the above are likely to be included in an enterprise system

36.

Business process reengineering, as it relates to an enterprise system implementation: a) Always precedes the implementation b) May precede or be concurrent with implementation depending on the need to conform with industry best practices c) May precede or succeed an implementation depending on the need to conform with industry best practices d) Always succeeds the implementation

TB 15.3

37.

Training and change management activities: a) Take place just before the go live stage of implementation b) Are most effective when conducted throughout design, go live, and postimplementation follow-up c) Include technical training only d) Do not include the design of user interfaces

38.

Which of the following is true regarding ERP costs? a) Enterprise systems tend to be less costly than integrated accounting software b) Enterprise systems are always less costly than best of breed software solutions c) Costs associated with reassigned employees have nothing to do with the true cost of an enterprise system d) There may be many costs that continue after systems implementation

39.

When we talk about a Value-Added Reseller, in the context of accounting and enterprise software, we are referring to an individual or business that: a) Usually assists small businesses select entry-level, small business software b) Is a qualified installer of mid-level or high-end accounting software c) Makes special arrangements with software vendors and is able to train customers d) both (b) and (c) e) none of the above

40.

An application service provider (ASP): a) Owns the software and processes your data on the ASPs computers b) Hosts the software and processes your data on your computer system c) Is an outsourcing company that processes your data, prepares reports that you specify, and then mails the results on a weekly basis d) none of the above

41.

Which of the following is considered an integrated software system? a) Material requirements planning systems (MRP I) b) Manufacturing resource planning systems (MRP II) c) Enterprise resource planning systems (ERP) d) all of the above

42.

When we talk about “front-office” capabilities of today’s ERP systems, we are referring to which of the following? a) The payroll functions b) The human resource functions c) The administrative functions d) none of the above

TB 15.4

43.

Extended enterprise resource planning systems facilitate: a) Supply chain management b) Partner relationship management c) Advanced planning and scheduling d) all of the above e) none of the above

44.

Which of the following is not a sign that indicates the need for a new AIS? a) A new vendor has just announced an AIS package with several features your system does not have b) A slowdown in inventory turnover c) The owner is concerned about cash flows and profitability d) It is taking longer to collect on receivables e) It is taking longer to close the books

45.

Which of the following is not true regarding a software package at the entry-level, such as Peachtree: a) It is likely to cost a few thousand dollars to implement it fully b) It is scalable c) It is unlikely to incorporate Internet connectivity d) It is suitable for many businesses with less than $5 million in revenues e) It will include sample, customizable Charts of Accounts

46.

Which of the following is not true regarding selecting a new AIS? a) For large companies, it is usually cheaper to build a new AIS software program than to purchase it b) It is much easier today to learn about software options because of the Internet c) It is always a good idea to get expert help in choosing an ERP system d) Middle-range and high-end AIS software are not available in shopping malls

47.

Successful implementation of ERP systems typically involves: a) Substantial planning b) Review of business processes c) Support from management d) all of the above

48.

How are ERP systems and databases related? a) ERP systems are configured around a central database b) ERP systems eliminate the need for databases c) ERP systems and databases are not related d) ERP systems employ small, simple databases

TB 15.5

Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space provided before the term. Each definition is used only once – there are four terms that are not used.

49. ______ scalable 50. ______ enterprise mashups 51. ______ hosted solution 52. ______ supply chain management (SCM) software 53. ______ bolt-ons 54. ______ ERP 55. ______ business application suites 56. ______ portals 57. ______ value-added reseller (VAR) 58. ______ business intelligence (BI) tools 59. ______ integrated accounting software programs 60. ______ Internet connectivity 61. ______ PRM software 62. ______ enterprise application integration

TB 15.6

Definitions: A. Technology that allows extended ERP systems to interface with individuals inside and outside an organization B. Describes a situation where an organization chooses to use cloud computing services rather than buy software outright C. Allows companies with legacy applications and databases to integrate and continue to use those systems D. Dashboard that collects data from several sources – both inside and outside the firm E. Software that interfaces with suppliers and customers F. Enables businesses to create web sites and to engage in e-commerce G. A key success factor for business process reengineering H. Software to gather, maintain, and use data to provide better customer service and customer loyalty I. Two important features of this type of technology are its integration and a central database J. Process to improve overall customer value and to increase the profitability of the products or services that the organization offers K. This is the concept that an organization’s software can grow as the business grows L. When companies have production or work completed in countries like India, China, Canada, Mexico, or Malaysia M. Another term for enterprise-wide information system software N. Software that processes all types of accounting transactions O. Software that helps managers get the most information from their CRM P. Software that enhances the working relationship of a company with its strategic partners Q. When a company has an ERP and they choose to add a module from another vendor R. Offers a broader array or services for more software programs than a qualified software installer

Short Answer Questions 63.

What can an ERP systems do that a middle-market accounting software cannot?

64.

List some consequences to a company that makes a poor decision in selecting an AIS.

TB 15.7

AIS - 12th Edition TEST BANK KEY Chapter 1 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

F F F T F T T T T F T F F F T T F T T T T F T T T T T F T F F T T F T F T F T

40

T

41 42 43 44 45 46 47 48 49 50 51 52

Multiple Choice T F T T F F F T F F T T

53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92

B D B C C A C D C D E D E C C C A C B C D D E C D A D C B A C B D C B D D D A

B

Test Bank Key - Page 1

93 94 95 96 97

Matching D C D D B

98 99 100 101 102 103 104 105 106 107

K D H C G A I E F B

AIS - 12th Edition TEST BANK KEY Chapter 2 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

T F T T F T F F F T T T T F T F F F F T F F T F T T F T T T F F T T F F F T T T

41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Multiple Choice T T T F T T T F T T F F F T F F T F F F

61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

C A C D D C D C C C A C A A E D A B B B B B C D B D A B C C A D B B C C C B C A

101 102 103 104 105 106 107 108 109 110 111

Test Bank Key - Page 2

Matching B D B C D E D E D C A

112 113 114 115 116 117 118 119 120 121

E A B J H C D G F I

AIS - 12th Edition TEST BANK KEY Chapter 3 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

F T T F T F F F F F T F F T F F T F T T T T F T F T T F T T T T F T T F F F T

41 42 43 44 45 46 47 48 49

Multiple Choice T F T F F T T T F

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88

Test Bank Key - Page 3

D D D B C A A D A C A A D C E B C B B A C A B D D D D B A C A C A B A B B B D

90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108

D B B D B B D D D A C D C

A C C D E A

40

F

89

Test Bank Key - Page 3

A

AIS - 12th Edition TEST BANK KEY Chapter 4 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

F T T F F T F T T T T F T F T F F T T F F F T T F F T T F T T T F F F F F F F

41 42 43 44 45 46 47 48 49 50 51

Multiple Choice T F T F T T T F T F F

52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

Test Bank Key - Page 4

E D E A C D B A C D D A C B C B B D C C D C C B A D A B C C B E D C A B C D C

92 93 94 95 96 97 98 99 100 101 102

C A C C D B A C

C C B

40

T

91

Test Bank Key - Page 4

D

AIS - 12th Edition TEST BANK KEY Chapter 5 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

F F F T T F F T F T T T T F F F F T T T F F F T T F T F F T

Multiple Choice 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63

C D C C D A A C B D B D D A A C E A A C D A C D B B B E C D D C D

Test Bank Key - Page 5

AIS - 12th Edition TEST BANK KEY Chapter 6 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

F T T F F F T T T T T F F F F T T T T T F T T T T F T F T T

Multiple Choice 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

A D B D B A C D C C B A C C B A C B D C B D C A B C B A C A C B D D D B B B D D

71 72 73

Test Bank Key - Page 6

A B C

MATCHING 74 G 75 B 76 N 77 J 78 A 79 I 80 M 81 L 82 H 83 E 84 K 85 D 86 F 87 C

AIS - 12th Edition TEST BANK KEY Chapter 7 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

F T T T F F F T T T F T T F F F T F T

Multiple Choice 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

A B B D B C C A D A B B A D B C A C A A D B C D B A D A C B B B B

Test Bank Key - Page 7

Matching 53 54 55 56 57 58 59 60 61 62 63

E O N L H M K G B D F

AIS - 12th Edition TEST BANK KEY Chapter 8 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

F F F T T F F T T T F T T T F T T T F T T F T F

Multiple Choice 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54

B D D C C C A B B A D B D D D C C B B A B C D B A C D A C A

Test Bank Key - Page 8

Matching 55 56 57 58 59 60 61 62 63 64 65 66

F N O D I G A M B E J K

AIS - 12th Edition TEST BANK KEY Chapter 9 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

F F T F T F F F T T T F T T F F T T F T F T

Multiple Choice 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

B A D C B D A A D A B D A B B D A D C C B D A C D C B C E C D A D B A A B D C

63 64 65 66 67 68 69 70 71

Test Bank Key - Page 9

Matching B E C D D C B A D

72 73 74 75 76 77 78 79 80 81 82 83 84 85 86

F G O M P Q C N J B H I A D K

62

C

Test Bank Key - Page 9

AIS - 12th Edition TEST BANK KEY Chapter 10 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

F T T F F F F F F F T T T F T T F T F T T F T T F F

Multiple Choice 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66

D D B B D D D D C D D C D D B A A D B B C A B A A D D B C A A B B D D C D A D B

67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94

Test Bank Key - Page 10

Matching B A C A D C C A D C D C C A C D A A B D A B C E B D A B

95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115

S I T M D P N L O E Q H K B A U V F C J R

AIS - 12th Edition TEST BANK KEY Chapter 11 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

T F F F T F T T T T T F T T T T T F F F T T T T T T T T F F F F F F T F F T F T

Multiple Choice 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80

D D C E B B C D A A D C D A B C C C C B A C A C B D B C D C A D C C A B C B D A

81 82 83

Matching C B C

Test Bank Key - Page 11

84 85 86 87 88 89 90 91 92 93 94 95

N M B C K L D E F I H A

AIS - 12th Edition TEST BANK KEY Chapter 12 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Multiple Choice F F T T F F T F T T T F F T F T T F T T T T F T F T T T T F

31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

A D B B C C A C B A A A A D C B D B C B B C C D D B A C D B C A A D B

Test Bank Key - Page 12

Matching 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82

I C B M F O H G A D J N K E L P Q

AIS - 12th Edition TEST BANK KEY Chapter 13 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

F T F F T T F F T T T T F F F T F F T T T F F T T T T T F T T F T T F T T T T T

41 42 43 44 45 46 47 48 49 50 51 52 53 54

Multiple Choice F T F F T F T T F T T T T T

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94

A C C C B A B D C D C D D A D D C A D B C A D C E E D A D C D E A A D D C D B D

Test Bank Key - Page 13

95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111

Matching D C A C D A A A B B B D D C E E A

112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131

I Q K O G C H L J R A N P S T B M U D F

AIS - 12th Edition TEST BANK KEY Chapter 14 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

T T F F T F T F T T F F F T T T T T F T F T F T T F T F T T T F T F T F T F T T

41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Multiple Choice F F F T T T F T T T F T T F F

56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95

B A C A E D C D A B B D B A D D D B B C A C C A D D D C C B D A C A C C D C D C

96 97 98 99 100 101 102 103 104 105 106 107 108 109 110

Test Bank Key - Page 14

Matching A C A A A B C A B C A D C B A

111 112 113 114 115 116 117 118 119 120 121

K I M N G C F A E D J

AIS - 12th Edition TEST BANK KEY Chapter 15 True-False 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Multiple Choice T F F T T F T T T F F F F T T F F F F T F T T F F T T

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

D C C D A A A E B B D D A D D D A A A D A

Test Bank Key - Page 15

Matching 49 50 51 52 53 54 55 56 57 58 59 60 61 62

K D B E Q I M A R O N F P C