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317 Cards in this Set

  • Front
  • Back
1. A set of two or more interrelated components that interact to achieve a goal is:
a) A system
b) An accounting information system
c) Data
d) Mandatory information
a) A system
2. This results when a subsystem achieves its goals while contributing to the organization's overall goal.
a) Goal conflict
b) Goal congruence
c) Value of information
d) Systems congruence
b) Goal congruence
3. Goal conflict may result when
a) A decision or action of a subsystem is inconsistent with the system as a whole.
b) A subsystem achieves its goals while contributing to the organization's overall goal.
c) Duplicate recording, storage and processes are eliminated.
d) The data exceeds the amount the human mind can absorb and process.
a) A decision or action of a subsystem is inconsistent with the system as a whole.
4. Facts that are collected, recorded, stored and processed by an information system
a) Information
b) Data
c) Systems
d) Mandatory information
B
5. Information is
a) What happens when the data exceeds the amount the human mind can absorb.
b) The benefit produced by the information minus the cost of producing it.
c) Facts that are collected, recorded, stored, and processed by an information system.
d) Data that have been organized and processed to provide meaning to a user.
D
6. Data are
a) facts entered, stored, and processed by an information system.
b) processed output that is useful to decision makers.
c) another word for information.
d) quantitative facts that are not qualitative by nature.
A
7. Which of the following statements below shows the contrast between data and information?
a) Data is the output of an AIS.
b) Information is the primary output of an AIS.
c) Data is more useful in decision-making than information.
d) Data and information are the same.
B
8. Information is
a) basically the same as data.
b) raw facts about transactions.
c) potentially useful facts when processed in a timely manner.
d) data that have been organized and processed so that it's meaningful.
D
9. Humans can absorb and process only so much information. Information __________ occurs when those limits are passed.
a) overload
b) excess
c) anxiety
d) discretion
A
10. The value of information can best be defined as
a) how useful it is to decision makers.
b) the benefits produced by possessing and using the information minus the cost of producing it.
c) how relevant it is.
d) the extent to which it maximizes the value chain.
B
11. The benefit produced by the information minus the cost of producing it.
a) Goal congruence
b) Information
c) Information overload
d) Value of information
D
12. An accounting information system (AIS) processes __________ to provide users with __________.
a) data; information
b) data; transactions
c) information; data
d) data; benefits
A
13. How many components are found in an AIS?
a) three
b) four
c) five
d) six
D
14. An accounting information system in part consists of
a) People, hardware and programs.
b) Information, programs and computers.
c) People, procedures, data, software and information technology infrastructure.
d) Internal controls and accounting records.
C
15. Information that reduces uncertainty, improves decision makers' ability to make predictions, or confirms or corrects their prior expectations, is said to be
a) Complete
b) Relevant
c) Reliable
d) Timely
B
16. Information that is free from error or bias and accurately represents the events or activities of the organization is
a) Relevant
b) Reliable
c) Verifiable
d) Timely
B
17. Information that does not omit important aspects of the underlying events or activities that it measures is
a) Complete
b) Accessible
c) Relevant
d) Timely
A
18. When two knowledgeable people acting independently each produce the same information, this information is said to be
a) Complete
b) Relevant
c) Reliable
d) Verifiable
D
19. Data must be converted into information to be considered useful and meaningful for decision-making. There are six characteristics that make information both useful and meaningful. If information is free from error or bias and accurately represents the events or activities of the organization, it is representative of the characteristic of
a) Relevancy
b) Timeliness.
c) Understandability
d) Reliability
D
20. The primary consideration when producing this type of information is that its benefits exceeds its costs.
a) Discretionary information
b) Essential information
c) Mandatory information
d) Value of information
A
21. An AIS is a system of six interrelated components that interact to achieve a goal. One of these components, which includes both manual and automated activities that involve collecting, processing, and storing data, is known as
a) Information or data
b) Procedures and instructions
c) Software
d) Information technology infrastructure
B
22. An accounting information system must be able to perform which of the following tasks?
a) collect transaction data
b) process transaction data
c) provide adequate controls
d) all of the above
D
23. Which of the following is not an example of a common activity in an AIS?
a) buy and pay for goods and services
b) sell goods and services and collect cash
c) summarize and report results to interested parties
d) recording of sales calls for marketing purposes
D
24. Which of the following is not one of the components of an AIS?
a) Internal controls and security measures
b) People
c) Procedures and instructions
d) Software and hardware
D
25. An AIS must be able to fulfill three important functions in any organization. One such function is the collecting and storing of data about activities performed by the organization. One group that relies on both the adequate collection and transformation of data for decision-making purposes for an organization is
a) management.
b) interested outsiders.
c) competitors.
d) the government.
A
26. The primary objective of accounting is to
a) implement strong internal controls.
b) provide useful information to decision makers.
c) prepare financial statements.
d) ensure the profitability of an organization.
B
27. The Financial Accounting Standards Board (FASB), in its Statement of Financial Accounting Concepts No. 2, has defined accounting as
a) an information identification, development, measurement, and communication process.
b) a way to provide adequate controls to safeguard an organization's assets.
c) being an information system.
d) a way to collect and transform data into useful information.
C
28. Which activity below would not be considered to be a "top" accountant work activity?
a) process improvement
b) input into future product marketing initiatives
c) long-term strategic planning
d) computer systems and operations
B
29. The American Institute of Certified Public Accountants (AICPA) has recognized the importance of AIS and the major impact information technology has on the area of accounting. To recognize individual CPAs who have met educational and experiential requirements in this area, the group formally created the designation known as
a) the Certified Management Accountant.
b) the Certified Information Technology Professional.
c) the Certified Internal Auditor.
d) the Certified Data Processing Professional.
B
30. An analysis conducted by the Institute of Management Accountants shows that the most important activities performed by corporate accountants relate to
a) customer and product profitability.
b) internal consulting.
c) process improvement.
d) accounting systems and financial reporting.
D
31. The primary focus of an AIS course, as opposed to other IS courses, is on
a) application of information technology.
b) use of accounting software.
c) understanding how information technology can be used to improve AIS processes.
d) preparation of financial statements.
C
32. The AIS must include controls to ensure
a) safety and availability of data.
b) marketing initiatives match corporate goals.
c) information produced from data is accurate.
d) both A and C
D
33. A change in the AIS that makes information more easily accessible and widely available within an organization is most likely to first influence the
a) organizational culture.
b) customer base.
c) external financial statement users.
d) production activity.
A
34. The process of creating value for customers is the result of nine activities (five primary and four support) that taken together form a
a) value chain.
b) profitable operation.
c) successful business.
d) support system.
A
35. The value chain concept is composed of two types of activities known as
a) primary and support.
b) primary and secondary.
c) support and value.
d) technology and support.
A
36. Which of the following is a primary activity in the value chain?
a) infrastructure
b) technology
c) purchasing
d) marketing and sales
D
37. In value chain analysis, what is the activity of arranging the delivery of products to customers called?
a) outbound logistics
b) inbound logistics
c) shipping
d) delivery
A
38. An AIS provides value by
a) improving products or services through information that increases quality and reduces costs.
b) providing timely and reliable information to decision makers.
c) creating new products.
d) both A and B
D
39. In Chapter 1, Figure 1-2 shows the factors that influence the design of AIS. The diagram shows a bi-directional arrow between the organizational culture and the AIS. The reason for this two-way interchange between organizational culture and AIS is
a) that the AIS should not influence the values of the organizational culture.
b) because the organization's culture influences the AIS, and likewise the AIS influences the organization's culture by controlling the flow of information within the organization.
c) due to the transfer of managers between the two corporate elements.
d) the AIS impacts the organization's key strategies.
B
40. The objective of the majority of organizations is to provide value to their customers. The activities that support such an objective can be conceptualized as forming a value chain. Within this value chain, logistics plays an important role. Logistics is both inbound and outbound in nature. An example of inbound logistics would consist of
a) the activities that transform inputs into final products or services.
b) the activities that help customers to buy the organization's products or services.
c) the activities that provide post-sale support to customers.
d) the activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells.
D
41. A good example of how an AIS is used to share knowledge within an organization is
a) the use of an expert system to help staff identify the relevant experts who can help with a particular client.
b) the use of laptop computers to access a network for messaging worldwide.
c) the monitoring of production equipment to watch for defects.
d) the use of point-of-sale data to determine hot-selling items.
A
42. Within the value chain conceptual framework, organizations also perform a number of other support activities that enable the five primary value chain activities to be performed efficiently and effectively. One such support activity is research and development. This activity can be identified as a
a) firm infrastructure activity.
b) human resources activity.
c) technology activity.
d) purchasing activity.
C
43. Within the value chain conceptual framework, AIS is shown as a support activity. The AIS is of value to an organization when it provides accurate and timely information to help support the five primary value chain activities. When the AIS provides information in a timely and accurate manner, it stands as an example of
a) improved decision making.
b) improving the quality and reducing the costs of products or services.
c) improving efficiency.
d) All of the above
D
44. A decision situation that is non-routine and for which no established framework exists for making the decision is called a(n) __________ decision.
a) structured
b) semistructured
c) unstructured
d) strategic
C
45. A decision that is repetitive, routine and well understood is
a) structured
b) semistructured
c) unstructured
d) strategic
A
46. Which of the following is an example of a strategic planning decision?
a) setting financial and accounting policies
b) conducting a performance evaluation
c) budgeting
d) developing human resource practices
A
47. Decisions about the effective and efficient execution of specific tasks are concerned with
a) operational control.
b) management control.
c) strategic planning.
d) tactical planning.
A
48. Budgeting and human resource practices are examples of
a) operational control
b) management control
c) strategic planning
d) tactical planning
B
49. Accounting information plays major roles in managerial decision making by
a) identifying situations requiring management action.
b) reducing uncertainty.
c) providing a basis for choosing among alternative actions.
d) all of the above
D
50. Business activities that pertain to product pricing, discount and credit terms, and identifying the most and least profitable items are part of the __________ activity in the organization's value chain.
a) service
b) marketing and sales
c) operations
d) inbound logistics
B
51. A principal focus of AIS is to assist with the decision-making function of an organization. The degree of support AIS can provide depends on the type of decision being made. Decisions are categorized in terms of the degree of existing structure or the effect of their scope. From the items below, select the description that is an example of a semi-structured decision.
a) selecting basic research projects to undertake
b) setting a marketing budget for a new product
c) extending credit to an established customer
d) hiring a senior manager
B
52. Regarding decision scope, which statement below is true?
a) Operational control is concerned with the effective and efficient use of resources for accomplishing organizational objectives.
b) Management control is concerned with the effective and efficient performance of specific tasks.
c) Strategic planning is concerned with establishing organizational objectives and policies for accomplishing those objectives.
d) There is no real correlation between a manager's level in an organization and his or her decision-making responsibilities.
C
53. A well-designed AIS can improve the decision-making function within the organization. Which statement below would describe a limitation, rather than a benefit, of an efficient AIS?
a) An AIS reduces uncertainty, and therefore accounting information can provide a basis for choosing among alternative courses of action.
b) An AIS identifies situations requiring management action.
c) An AIS provides to its users an abundance of information without any filtering or condensing of such information.
d) An AIS provides information about the results of previous decisions which provides decision makers with feedback that can be used in future decision making.
C
54. A strategic position is important to the success and growth of any organization. Harvard professor Michael Porter has identified three basic strategic positions. Which statement below is false regarding these basic strategic positions?
a) The three basic strategic positions are mutually exclusive of each other.
b) Part of a needs-based strategic position is to identify a target market.
c) An access-based strategic position involves serving a subset of customers who differ from other customers in terms of geographic location or size.
d) A variety-based strategic position involves producing or providing a subset of the industry's products or services.
A
55. A strategic position is important to the success and growth of any organization. Harvard professor Michael Porter has identified two basic business strategies. Which statement below is false regarding these basic strategies?
a) A product differentiation strategy entails adding features or services not provided by competitors to a product so customers can be charged a premium price.
b) A low-cost strategy entails striving to be the most efficient producer of a product or service.
c) Sometimes a company can succeed in both producing a better product and achieving low costs.
d) The two basic strategic positions are mutually exclusive.
D
56. According to Michael Porter, to be successful in the long run, a company must
a) deliver greater value to customers and/or create comparable value at a lower cost.
b) maximize profits.
c) maximize shareholder value.
d) both B and C
A
57. A variety-based strategic position involves
a) trying to serve most or all of the needs of a particular group of customers.
b) serving a subset of customers who differ from other customers.
c) providing a subset of the industry's products or services.
d) serving all needs of all customers.
C
58. A needs-based strategic position involves
a) trying to serve most or all of the needs of a particular group of customers.
b) serving a subset of customers who differ from other customers.
c) providing a subset of the industry's products or services.
d) serving all needs of all customers.
A
59. An access-based strategic position involves
a) trying to serve most or all of the needs of a particular group of customers.
b) serving a subset of customers who differ from other customers.
c) providing a subset of the industry's products or services.
d) serving all needs of all customers.
B
60. The Internet has changed the way many processes are performed in business today. The Internet has had a material effect on the five primary characteristics in the value chain and on the strategy adopted by businesses that incorporate use of the Web into their business systems. Which statement below is true regarding the Internet relative to a strategic position that a business may adopt?
a) Use of the Internet has reduced the power of buyers.
b) The Internet has increased the barriers to entry in many industries.
c) Use of the Internet reduces pressure to compete on price.
d) The most important effect of the development of the Internet in business is the increased importance of adopting a viable business strategy.
D
61. "Tasa Mamaq!" is a New York restaurant that specializes in the cuisine of Greenland. In addition to prawns, seal, and halibut prepared in the traditional style, the restaurant offers a signature dish of braised sea urchin with fermented herring that is truly unique. Which of the following best describes the strategy and strategic position of this business?
a) Product differentiation strategy combined with a variety-based strategic position.
b) Product differentiation strategy combined with a needs-based strategic position.
c) Product differentiation strategy combined with an access-based strategic position.
d) Low-cost strategy combined with a variety-based strategic position.
e) Low-cost strategy combined with a needs-based strategic position.
f) Low-cost strategy combined with an access-based strategic position.
A
62. Clint Smith operates a machine shop in Burbank, California. He places bids on small lot production projects submitted by firms throughout the Los Angeles area. By using the latest automation technology, Smith is able to keep prices low enough to ensure a backlog of projects and steady growth. Which of the following best describes the strategy and strategic position of this business?
a) Product differentiation strategy combined with a variety-based strategic position.
b) Product differentiation strategy combined with a needs-based strategic position.
c) Product differentiation strategy combined with an access-based strategic position.
d) Low-cost strategy combined with a variety-based strategic position.
e) Low-cost strategy combined with a needs-based strategic position.
f) Low-cost strategy combined with an access-based strategic position.
E
63. Balcony Landscaping markets its unique services to condominium residents in West Palm Beach, Florida, who want to maintain gardens on their balconies. The service includes watering, trimming, weeding, feeding, pest control, and, of course, the design and installation of balcony gardens. Which of the following best describes the strategy and strategic position of this business?
a) Product differentiation strategy combined with a variety-based strategic position.
b) Product differentiation strategy combined with a needs-based strategic position.
c) Product differentiation strategy combined with an access-based strategic position.
d) Low-cost strategy combined with a variety-based strategic position.
e) Low-cost strategy combined with a needs-based strategic position.
f) Low-cost strategy combined with an access-based strategic position.
C
64. Sneezle Industries, Inc., is an Erie, Pennsylvania, firm that specializes in the mass production of injection-molded plastic components for the automobile industry. Because of product liability issues, these components must be subjected to carefully documented quality assurance testing. Which of the following best describes the strategy and strategic position of this business?
a) Product differentiation strategy combined with a variety-based strategic position.
b) Product differentiation strategy combined with a needs-based strategic position.
c) Product differentiation strategy combined with an access-based strategic position.
d) Low-cost strategy combined with a variety-based strategic position.
e) Low-cost strategy combined with a needs-based strategic position.
f) Low-cost strategy combined with an access-based strategic position.
F
65. Companies often purchase an off-the-shelf software package and then hire a programming firm to add additional capabilities specific to their particular needs. Bodhisattva Software has a partnership agreement with the manufacturer of a well-known accounting information system for medium-sized businesses. This relationship provides Bodhisattva with unique access to the system's functionality that allows it to provide services not available from other programming firms. Based on this relationship, Bodhisattva hopes to dominate the software customization market for the system. Which of the following best describes the strategy and strategic position of this business?
a) Product differentiation strategy combined with a variety-based strategic position.
b) Product differentiation strategy combined with a needs-based strategic position.
c) Product differentiation strategy combined with an access-based strategic position.
d) Low-cost strategy combined with a variety-based strategic position.
e) Low-cost strategy combined with a needs-based strategic position.
f) Low-cost strategy combined with an access-based strategic position.
B
66. Designer Dry Cleaning of Chicago only cleans designer clothing created using unique materials (including latex) and having unusual cleaning requirements. It competes on price with other dry cleaning establishments, including several local chains, that offer similar cleaning services. The owner of DDS asserts that, since they don't try to do it all, they do what they do better and that they don't have customers, they have clientele. Which of the following best describes the strategy and strategic position of this business?
a) Product differentiation strategy combined with a variety-based strategic position.
b) Product differentiation strategy combined with a needs-based strategic position.
c) Product differentiation strategy combined with an access-based strategic position.
d) Low-cost strategy combined with a variety-based strategic position.
e) Low-cost strategy combined with a needs-based strategic position.
f) Low-cost strategy combined with an access-based strategic position.
D
67. Jill Fredson is in charge of the mail room at Gammon University. Every Friday morning she receives a report via email that summarizes the number of outgoing and incoming pieces of mail by source and destination department. Every Friday afternoon, Jill deletes the report without reading it because it has no bearing on mail room operations. Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
A
68. Inventory information is provided in real time by a firm's accounting information system. The accuracy of this information is questionable, however, since the production manager often reports stock outs of components that the system indicates are in stock. Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
B
69. Joe Marzetti has been the controller of Fairview Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Marzetti. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
F
70. In 2003, Custer Manufacturing implemented a Web-based information system that allows all employees to access mission-critical information. The intention was to increase production efficiency. Unfortunately, it had the opposite effect, as deliveries fell behind schedule and costs increased. Jeff Akspen, the director of information technology services, asked Joyce Jenkins to come in and talk with him about the system. Joyce is a long-time employee of Custer, and her opinion is valued by her peers and by her supervisor.
"So Joyce, how's it going down there in the shop?"
"Not so good, Jeff. Used to be we got a weekly pick list so we knew how to plan production. Now, we got that computer system. Most of us can't figure out how to use it to do our jobs. Is there some way to print out a pick list?"
Jeff thought for a while before responding. "Well, Joyce, to tell you the truth, I'm not so sure how to do it myself, but there must be a way. We'll bring in the consultants that helped us build the system. Maybe they can help."
Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
E
71. Razzmataz, Wisconsin, is a popular tourist destination. During the winter months, the population dwindles to a meager few, but when summer comes, the size of the town surges. Chuck Hewitt is the town sanitation engineer. When the size of the town surges, so do his responsibilities. Among them is management of the sewage processing volume.
In an interview with the local paper, Chuck complained that a report on tourist population that he uses to adjust processing volume refers to data that was collected five days ago and it takes him a week to make adjustments.
Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
D
72. A frantic Stro Frinzel called the home office from Des Moines.
"You have got to help me. I am about to close a great sale, but I have to be able to guarantee delivery by the fourteenth. I can't get through to the company Web site to verify delivery!"
"Thank you for calling. Your call is very important to us. However, all of our lines are currently in use. Please try again later."
Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
G
73. Message left on an answering machine: "Hi Bob! Just got into town. How about dinner this evening if you're available. Call me!"
Which of the following characteristics of useful information is absent in the situation described above?
a) Relevant
b) Reliable
c) Complete
d) Timely
e) Understandable
f) Verifiable
g) Accessible
C
74. Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.
Which of the following functions in the value chain is Monday performing?
a) Inbound logistics
b) Operations
c) Outbound logistics
d) Marketing and sales
e) Service
A
75. Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.
Which of the following functions in the value chain is Friday performing?
a) Inbound logistics
b) Operations
c) Outbound logistics
d) Marketing and sales
e) Service
B
76. Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.
Which of the following functions in the value chain is Wednesday performing?
a) Inbound logistics
b) Operations
c) Outbound logistics
d) Marketing and sales
e) Service
C
77. Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.
Which of the following functions in the value chain is Thursday performing?
a) Inbound logistics
b) Operations
c) Outbound logistics
d) Marketing and sales
e) Service
D
78. Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.
Which of the following functions in the value chain is Tuesday performing?
a) Inbound logistics
b) Operations
c) Outbound logistics
d) Marketing and sales
e) Service
E
80. Tri-Anything, Limited, is a British company operating in New York state. It offers stylized, boutique public relations services to upscale retailers in quaint New England towns. A major source of revenue is a weekly newsletter that reports on current and projected tourist travel and spending patterns. Preparation of the newsletter requires study and analysis of weather conditions, economic activity, and travel costs. It is available at an annual subscription rate of $299.99. There are currently 190 subscribers. Preparation and distribution of the newsletter costs $12,000 annually. The value of information to subscribers is:
a) $236.83
b) $44,998.10
c) Less then $63.16
d) At least $300.00
D
1. An agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization is
a) give-get exchange
b) transaction
c) revenue
d) processing cycle
B
2. Groups of related business activities such as the acquisition of merchandise and payment of vendors are called
a) transaction cycles.
b) economic cycles.
c) business events.
d) transactions.
A
3. The transaction cycles approach leads to efficient processing of large number of transactions because
a) transaction cycles are easier to computerize.
b) a large number of transactions within a given cycle can be categorized into a relatively small number of distinct types.
c) the transaction cycle approach represents the natural order of business.
d) transaction cycles are easy to understand.
B
4. The basic "give and take" functions of a business have been grouped into transaction cycles. The cycle that includes the events of hiring employees and paying them is known as the
a) revenue cycle.
b) expenditure cycle.
c) human resources cycle.
d) financing cycle.
C
5. What is the major difference between the revenue and the expenditure cycle?
a) The revenue cycle includes marketing activities; the expenditure cycle does not.
b) In the revenue cycle, cash is received; in the expenditure cycle cash is paid out.
c) The expenditure cycle includes paying employees.
d) The revenue cycle includes the activity of obtaining funds from investors.
B
6. The business owners obtain financing from outside investors, which results in an inflow of cash into the company. This transaction is considered to be part of which cycle?
a) the revenue cycle
b) the payroll cycle
c) the production cycle
d) the financing cycle
D
7. Which of the following is not a transaction cycle?
a) revenue
b) expenditure
c) human resources
d) general ledger and reporting
D
8. All transaction cycles feed information directly into the
a) financial statements.
b) governmental reports.
c) general ledger and reporting system.
d) financing operations.
C
9. Transaction cycles can be summarized on a high level as "give-get" transactions. An example of "give-get" in the expenditure cycle would be
a) give cash, get cash.
b) give cash, get goods.
c) give cash, get labor.
d) give goods, get cash.
B
10. Transaction cycles can be summarized on a high level as "give-get" transactions. An example of "give-get" in the revenue cycle would be
a) give cash, get goods.
b) give goods, get cash.
c) give cash, get labor.
d) give cash, get cash.
B
11. The transaction cycles relate to one another and interface with this to generate information for both management and external parties.
a) general ledger and reporting system
b) accounting information systems
c) computer processor
d) human resources cycle
A
12. Many modern accounting software packages offer separate transaction cycle modules. What is the reason for this?
a) Every organization does not need to implement all of the available transaction cycle modules.
b) Most businesses do not need the revenue cycle module as part of their AIS.
c) The nature of a given transaction cycle is the same irrespective of the type of organization.
d) A properly designed AIS does not use the concept of separate business transaction cycles to process transactions.
A
13. Which of the following statements is false?
a) Retail stores do not have a production cycle.
b) Financial institutions have installment-loan cycles.
c) A service company does not have an inventory system.
d) Every organization should implement every transaction cycle module.
D
14. The operations performed on data to generate meaningful and relevant information are referred to as
a) general ledger and reporting system
b) accounting information system
c) financial reporting
d) data processing cycle
D
15. One of the steps in the data processing cycle is data input. What is the catalyst for data input into a system?
a) The production transaction system automatically checks each hour to see if any new data is available for input and processing.
b) The performance of some business activity generally serves as the trigger for data input.
c) A general ledger program is queried to produce a trial balance at the end of an accounting period.
d) Data is only input when an authorized party permits the input to occur.
B
16. A typical source document could be
a) in some paper form.
b) a computer data entry screen.
c) a notepad entry.
d) both A and B
D
17. Which step below is not considered to be part of the data processing cycle?
a) data input
b) feedback from external sources
c) data storage
d) data processing
B
18. Data must be collected about three facets of each business activity. What are they?
a) the business activity, the resources it affects, the people who participate
b) the business activity, the transactions it creates, the impact on the financial statements
c) the inputs, outputs and processes used
d) who is involved, what was sold, how much was paid
A
19. Certain documents or forms are generated and/or processed with each transaction cycle. The issuing of a purchase order is part of which transaction cycle?
a) the revenue cycle
b) the production cycle
c) the human resources cycle
d) the expenditure cycle
D
20. Certain documents or forms are generated and/or processed with each transaction cycle. The collection of job time tickets or time sheets is part of which transaction cycle?
a) the revenue cycle
b) the production cycle
c) the human resources cycle
d) the expenditure cycle
C
21. Common source documents for the revenue cycle include all of the following except
a) sales order.
b) receiving report.
c) delivery ticket.
d) credit memo.
B
22. Which of the following documents would be found in the expenditure cycle?
a) delivery ticket
b) time card
c) journal voucher
d) purchase order
D
23. Businesses usually use some type of documents in the data input step of the data processing cycle. Documents that are sent to customers or suppliers and then sent back to the organization in the course of a business transaction are known as
a) turnaround documents.
b) source documents.
c) source data automation.
d) rubber or bounce-back documents.
A
24. What is a primary example of source data automation?
a) a utility bill
b) POS (point-of-sale) scanners in retail stores
c) a bill of lading
d) a subsidiary ledger
B
25. Pre-numbering of source documents helps to verify that
a) all transactions have been recorded since the numerical sequence serves as a control.
b) no inventory has been misplaced.
c) documents have been used in order.
d) all cash has been collected.
A
26. Source documents generally help to improve accuracy in transaction processing because
a) they specify which information to collect due to their structure.
b) standard information is preprinted on the document.
c) they provide directions and steps for completing the form.
d) All of the above are correct.
D
27. When the sum of all entries in the subsidiary ledger equals the amount in the corresponding general ledger account, it is assumed that (select all that apply)
a) the recording and posting processes are accurate.
b) all of the transaction cycles have been completed.
c) since the ledgers are in balance, adjusting entries are not required.
d) no errors exist in the subsidiary ledger and corresponding general ledger account.
A,D
28. The general ledger account that corresponds to a subsidiary ledger account is known as a
a) dependent account.
b) attribute account.
c) entity account.
d) control account.
D
29. The systematic assignment of numbers or letters to items to classify and organize them is known as
a) coding
b) chart of accounts
c) data input
d) pre-numbered documents
A
30. Pre-numbered checks, invoices and purchase orders are examples of
a) sequence codes
b) block codes
c) group codes
d) hierarchical codes
A
31. A chart of accounts is an example of (select all that apply)
a) sequence codes
b) block codes
c) group codes
d) hierarchical codes
B,C
32. Inventory items are often coded with these
a) sequence codes
b) block codes
c) group codes
d) hierarchical codes
C
33. A listing of general ledger accounts by account number is called the
a) chart of accounts.
b) listing of accounts.
c) trial balance.
d) subsidiary accounts.
A
34. Regarding codes, which of the following is false?
a) The code should be consistent with its intended use.
b) Codes should allow for growth in the number of items to be coded.
c) Coding systems should be as simple as possible.
d) Coding systems need not be consistent across divisions of an organization.
D
35. To be effective, the chart of accounts must
a) be as concise as possible.
b) contain only five account categories.
c) limit account codes to 10 digits or less.
d) contain sufficient detail to meet the information needs of the specific organization's AIS.
D
36. The chart of accounts for a manufacturing corporation would include
a) retained earnings.
b) common stock.
c) raw materials inventory.
d) all of the above
D
37. The chart of accounts of a corporate retail bookstore would probably include
a) work-in-process inventory.
b) a drawing account.
c) retained earnings.
d) both A and C
C
38. In a chart of accounts using three digits for each account, each numeric digit has meaning to users of the AIS. For example, a numeric digit may represent either a major category of accounts, a primary financial subaccount within each category, or a specific account into which transaction data will be posted. Using this example, which digit position would best represent a primary financial subaccount within an account category?
a) first
b) second
c) third
d) fourth
B
39. In transaction processing, generally which activity comes first?
a) recording data in a journal
b) posting items to special journals
c) capturing data on source documents
d) posting data to a ledger
C
40. The efficiency of recording numerous business transactions can be best improved by the use of
a) prenumbered source documents.
b) specialized journals.
c) posting references.
d) segregation of duties.
B
41. A general journal
a) is used to record infrequent or non-routine transactions.
b) simplifies the process of recording large numbers of repetitive transactions.
c) records all detailed data for any general ledger account that has individual sub-accounts.
d) contains summary-level data for every account of the organization.
A
42. The general ledger
a) is used to record infrequent or non-routine transactions.
b) simplifies the process of recoding large numbers of repetitive transactions.
c) records all detailed data for any general ledger account that has individual sub-accounts.
d) contains summary-level data for every account of the organization.
D
43. A subsidiary ledger
a) is used to record infrequent or non-routine transactions.
b) simplifies the process of recoding large numbers of repetitive transactions.
c) records all detailed data for any general ledger account that has individual sub-accounts.
d) contains summary-level data for every account of the organization.
C
44. A specialized journal
a) is used to record infrequent or non-routine transactions.
b) simplifies the process of recording large numbers of repetitive transactions.
c) records all detailed data for any general ledger account that has individual sub-accounts.
d) contains summary-level data for every account of the organization.
B
45. An audit trail
a) provides the means to check the accuracy and validity of ledger postings.
b) is provided by the ledger and the general journal.
c) is automatically created in every computer-based information system.
d) is a characteristic of interest.
A
46. Something about which information is stored is
a) attribute
b) database
c) entity
d) record
C
47. Characteristics of interest that need to be stored are
a) attribute
b) database
c) entity
d) record
A
48. Computers store data by organizing smaller units of data into larger units, which have meaning to users. Data values that are stored in a physical space are called a
a) field.
b) record.
c) file.
d) database.
A
49. Related records grouped together form a(n)
a) field.
b) entity.
c) file.
d) database.
C
50. The set of fields that contain data about various attributes of the same entity forms a
a) entity
b) record.
c) file.
d) database.
B
51. Concerning a master file, which of the following statements is false?
a) It is conceptually similar to a ledger in a manual AIS.
b) It stores cumulative information about an organization's resources.
c) It exists across fiscal periods.
d) Its individual records are not changed.
D
52. Basic data storage concepts define both entities and attributes. An entity is something about which information is stored. Which item below would not be considered an entity?
a) a customer address
b) a customer
c) an employee
d) an inventory item
A
53. Which of the following is conceptually similar to a journal in a manual AIS?
a) database
b) master file
c) record
d) transaction file
D
54. Which of the following is not one of the four types of file processing?
a) changing
b) updating
c) deleting
d) altering
D
55. Periodic updating of the data stored about resources and agents is
a) On-line processing
b) real-time processing
c) batch processing
d) data processing
C
56. Concerning processing, which of the following statements is true?
a) Batch processing ensures that stored information is always current.
b) Batch input is more accurate than on-line data entry.
c) On-line batch processing is a combination of real-time and batch processing.
d) Batch processing is almost never used.
C
57. Federal Express stated in one of its mission statements that "positive control of each package will be maintained by utilizing . . . electronic tracking and tracing systems." This is an example of which type of data processing?
a) real-time processing which features immediate updating as to the location of packages
b) batch processing which features updating at fixed time periods
c) real-time processing which features updating at fixed time periods such as at the end of an accounting period
d) batch processing which features immediate updating as to the location of packages
A
58. Documents generated at the end of transaction processing activities are called
a) financial statements
b) operational documents
c) reports
d) source documents
B
59. Which of the following is not a type of report provided to decision makers by the typical AIS?
a) financial statements
b) customer satisfaction surveys conducted by third parties
c) managerial reports
d) All of the above reports are important to decision makers.
B
60. Which statement below regarding the AIS and managerial reports is false
a) The AIS must be able to provide managers with detailed and operational information about the organization's performance.
b) Both traditional financial measures and operational data are required for proper and complete evaluation of performance.
c) Most source documents capture both financial and operational data about business transactions.
d) Traditionally, most AIS systems have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.
D
61. A formal expression of goals and objectives in financial terms is called a(n)
a) mission statement.
b) strategic plan.
c) budget.
d) operational plan.
C
62. A projection of an organization's cash inflows and outflows is known as a(n)
a) performance budget.
b) operating budget.
c) management budget.
d) cash budget.
D
63. Identify an example of external source data that is important to an organization.
a) customer satisfaction as gauged by surveys
b) staff salaries as a percentage of sales
c) satisfaction of employees with their work environment
d) sales revenue divided by the number of hours worked by the sales staff
A
64. Some information will have to be collected from __________ sources to determine, for example, customer satisfaction.
a) external
b) internal
c) regulatory
d) competitive
A
65. Performance reports are primarily used for
a) financial control.
b) cash planning.
c) forecasting.
d) financial planning.
A
66. A report which shows actual results, budgets, and variances is called a
a) financial plan.
b) cash budget.
c) performance report.
d) managerial report.
C
67. Variances to the budget should be interpreted by using the principle of
a) management by exception.
b) management by objectives.
c) management by exemption.
d) exceptions to variances.
A
68. One of the most important assumptions about how managers will act in a budget-controlled environment is that:
a) managers will largely ignore budgets.
b) budgets must be too tight to encourage high aspirations.
c) budget slack will exist in almost every budget and is negotiated by all managers.
d) measurement affects behavior.
D
69. Which managerial tool below is used to provide the organization with financial control?
a) a cash budget
b) a performance report
c) a sales budget
d) a customer satisfaction survey
B
70. Callow Youth Clothing is a boutique retailer located in Estes Park, Colorado. During the peak tourist season, it has average daily cash and credit card sales in excess of $5,000. What is the best way for this business to ensure that sales data entry is efficient and accurate?
a) Well-designed paper forms
b) Source data automation
c) Turnaround documents
d) Sequentially numbered forms
B
71. In Petaluma, California, electric power is provided to consumers by the Power To The People Electrical Company, a local co-op. Each month PTTP mails bills to 70,000 households and then processes payments as they are received. What is the best way for this business to ensure that payment data entry is efficient and accurate?
a) Well-designed paper forms
b) Source data automation
c) Turnaround documents
d) Sequentially numbered forms
C
72. In an effort to measure and evaluate the productivity of word processing specialists, the office manager at Four-Q Consulting acquired a software package that counts the number of keystrokes per day by each employee. Some weeks later, the manager observed several of the employees sitting at their workstations during lunch and randomly punching keys. This is an example of:
a) employee innovation.
b) on-line, real-time processing.
c) a lack of management controls.
d) the reporting system leading to dysfunctional behavior.
D
73. Callow Youth Clothing is a boutique retailer located in Estes Park, Colorado. It is a sole proprietorship that stocks an inventory of between 80 and 160 different items, each of which is tracked in real time by the AIS. In designing a chart of accounts for this business, what is the minimum number of digits necessary to represent the account codes, including subsidiary ledgers?
a) 4
b) 6
c) 7
d) 9
B
74. The quality assurance department at a large manufacturing business enters data into the AIS that is used to produce a weekly report that summarizes the proportion of defective units in each product line. This is an example of:
a) internal financial information.
b) internal nonfinancial information.
c) external financial information.
d) external nonfinancial information.
B
75. The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store's database system was designed to make detailed information about each individual action figure's characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, the price of a figure is a(an)
a) entity.
b) attribute.
c) field.
d) record.
B
76. The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store's database system was designed to make detailed information about each individual action figure's characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, the data about an individual figure is a(an)
a) entity.
b) attribute.
c) field.
d) record.
D
77. The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store's database system was designed to make detailed information about each individual action figure's characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, an individual figure is a(an)
a) entity.
b) attribute.
c) field.
d) record.
A
78. The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store's database system was designed to make detailed information about each individual action figure's characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, the data about an individual figure's price is stored in a(an)
a) entity.
b) attribute.
c) field.
d) record.
C
79. Phlogiston Pharmaceuticals, Ltd., is a manufacturer of generic drugs with a worldwide market for its products. In order to determine the amount of each drug to produce, it is essential that the following be available on a timely basis:
a) Cash flow projections
b) Pro-forma income statements
c) Demand forecasts
d) Accounts receivable records
C
80. Hector Sanchez works in the accounting department of a multinational manufacturing firm. A large part of his job involves updating accounts receivable based on sales reports and payments received. His responsibilities are part of the firm's
a) revenue cycle.
b) expenditure cycle.
c) financing cycle.
d) production cycle.
A
81. Many small businesses choose to outsource their payroll activities to firms that specialize in providing payroll services. Dolores Yu operates a payroll processing business in Calabasas, California. When she prints and delivers payroll checks to her clients, her work is part of her firm's
a) revenue cycle.
b) expenditure cycle.
c) financing cycle.
d) production cycle.
D
82. Hector Sanchez works in the accounting department of a multinational manufacturing firm. A large part of his job involves updating accounts payable based on purchase reports and payments made by the firm. His responsibilities are part of the firm's
a) revenue cycle.
b) expenditure cycle.
c) financing cycle.
d) production cycle.
B
83. Many small businesses choose to outsource their payroll activities to firms that specialize in providing payroll services. Dolores Yu operates a payroll processing business in Calabasas, California. When she sends bills out to her clients, her work is part of her firm's
a) revenue cycle.
b) expenditure cycle.
c) financing cycle.
d) production cycle.
A
84. The coding method used for checks and receipts is called a
a) group code.
b) block code.
c) data code.
d) sequence code.
D
85. Once data are entered into files, the files are processed. File processing includes all of the following except
a) verifying.
b) updating.
c) deleting.
d) changing.
A
86. Which of the following is an example of an ERP system?
a) Alex uses a sophisticated information system to keep track of all the financial data generated by her bakery. She is considering opening a new bakery on the east side of town.
b) Betty has a system that keeps track of the accounts payable and receivable for her plumbing business. At the end of the year, it allows her to prepare her taxes in two hours.
c) Charlie keeps records of all his business expenses in a shoe box. Each week he enters all of the data into spreadsheets that automatically generate orders based on preset inventory triggers. Production quotas for the coming week are also automatically generated by customer orders.
d) Doug is a free-lance photographer. He keeps records of all expenses and revenues on his cell phone and then emails them to himself every month. The files are stored on his personal computer and backed up to CD quarterly.
C
87. A specialized journal would be most likely to be used to enter
a) sales transactions.
b) depreciation adjustments.
c) end-of-year closing transactions.
d) annual mortgage payments on land and structures.
A
88. The Cape Fear Rocket Club heads out to the dunes of Kittyhawk, North Carolina, every August to pierce the sky with their fiery projectiles. An enterprising seller of t-shirts has devised a series of products that capture the spirit of the event in silk-screened splendor. His employees can be found on many of the major intersections hawking his wares out of the backs of station wagons and pickup trucks. What is the best way for this business to ensure that sales data entry is efficient and accurate?
a) Well-designed paper forms
b) Source data automation
c) Turnaround documents
d) Sequentially numbered forms
D
89. Which of the following types of reports would most likely be reviewed by management on an exception basis?
a) Cash flow
b) Quality assurance
c) Pro forma balance sheet
d) Income statement
B
1. The narratives, diagrams, charts, and other written materials that explain how a system works are collectively called
a) documentation.
b) data flows.
c) flowcharts.
d) schema.
A
2. One popular means of documenting a system is to develop diagrams, flowcharts, tables, and other graphical representations of information. These are often supplemented by
a) product specifications.
b) narrative descriptions.
c) logic charts.
d) oral descriptions from management.
B
3. The graphic description of the flow of data within an organization is called a
a) systems flowchart.
b) data flow diagram.
c) context diagram.
d) document flowchart.
B
4. A graphical representation of the flow of documents and information between departments or areas of responsibility within an organization is called
a) a data flow diagram.
b) a document flowchart.
c) a system flowchart.
d) a program flowchart.
B
5. A graphical representation of the relationship among the input, processing and output in an information system is called
a) a data flow diagram.
b) a document flowchart.
c) a system flowchart.
d) a program flowchart.
C
6. A graphical description of the sequence of logical operations that a computer performs is called
a) a data flow diagram.
b) a document flowchart.
c) a system flowchart.
d) a program flowchart.
D
7. SAS No. 94 requires that independent auditors be able to
a) draw computerized flowcharts.
b) prepare flowcharts and decision tables before conducting an audit.
c) understand a client's system of internal controls before conducting an audit.
d) prepare and understand any type of system documentation.
C
8. The passage of the Sarbanes Oxley Act
a) Made documentation skills even more important.
b) Requires public companies to prepare an annual internal control report.
c) Means that auditors must be able to prepare, evaluate and read documentation tools such as flowcharts.
d) All of the above.
D
9. Which of the following is not a true statement?
a) Documentation tools save an organization both time and money.
b) Documentation tools are used extensively in the systems development process.
c) Data flow diagrams and flowcharts are the two most frequently used systems development documentation tools.
d) Data flow diagrams and flowcharts are difficult to prepare and revise using software packages.
D
10. A data flow diagram
a) is a graphical description of the source and destination of data that shows how data flow within an organization.
b) is a graphical description of the flow of documents and information between departments or areas of responsibility.
c) is a graphical description of the relationship among the input, processing, and output in an information system.
d) is a graphical description of the sequence of logical operations that a computer performs as it executes a program.
A
11. In a DFD, a square box represents
a) data sources and destinations.
b) data flows.
c) transformation processes.
d) data stores.
A
12. In a DFD, a "data sink" is also known as
a) data stores.
b) transformation processes.
c) data flows.
d) data destinations.
D
13. In a DFD, an arrow represents
a) data sources and destinations.
b) the direction of data flows.
c) transformation processes.
d) data stores.
B
14. In a DFD, a circle represents
a) data sources and destinations.
b) the direction of data flows.
c) transformation processes.
d) data stores.
C
15. In preparing a DFD, when data are transformed through a process, the symbol used should be
a) a circle.
b) an arrow.
c) a square.
d) two horizontal lines.
A
16. In a DFD, lines that are horizontal and parallel to each other represent
a) data sources and destinations.
b) data flows.
c) transformation processes.
d) data stores.
D
17. In a DFD, a "bubble" is also known as
a) data stores.
b) transformation processes.
c) data flows.
d) data destinations.
B
18. An entity that sends or receives data used or produced by the system is called a
a) data source or destination.
b) data store.
c) data flow.
d) data transformation.
A
19. A data flow diagram (or DFD) has four basic elements. The flow of data between processes, data stores, and data sources and destinations is known as
a) data sources and destinations.
b) data flows.
c) transformation processes.
d) data stores.
B
20. A data flow diagram (or DFD) has four basic elements. The altering of data from inputs to outputs is known as
a) data sources and destinations.
b) data flows.
c) transformation processes.
d) data stores.
C
21. A data flow diagram (or DFD) has four basic elements. The people and organizations that send data to and receive data from the system are known as
a) data sources and destinations.
b) data flows.
c) transformation processes.
d) data stores.
A
22. In general, a data destination will be shown by
a) an arrow pointing away.
b) an arrow pointing in.
c) arrows pointing both ways.
d) no arrows, only two horizontal lines.
B
23. In the data flow diagram of the customer payment process, "update receivables" will appear in
a) a square.
b) a circle.
c) two horizontal lines.
d) none of the above
B
24. In the data flow diagram of the customer payment process, "Customer" will appear in
a) a square.
b) a circle.
c) two horizontal lines.
d) none of the above
A
25. In the data flow diagram of the customer payment process, "Customer payment" will appear above or in
a) a square.
b) a circle.
c) two horizontal lines.
d) an arrow.
D
26. Most processes on a DFD can be identified by
a) data in-flows only.
b) data out-flows only.
c) data flows both into or out of a process.
d) always being followed by a data store.
C
27. Data flows between two symbols on a DFD have more than one data item. More than one arrow is needed if
a) data elements always flow together.
b) data elements flow at different times.
c) data elements flow to different locations.
d) there is no guideline on use of single or multiple arrows.
B
28. The transformation of data in a DFD is represented as a
a) process.
b) data dictionary.
c) data stores.
d) data source and destination.
A
29. The storage of data on a DFD is shown by
a) circles.
b) arrows.
c) squares.
d) two horizontal lines.
D
30. Creating a DFD is an iterative process. Each DFD iteration helps the designer to refine the diagram and identify the fine points. A DFD created at a high-level or summary view is referred to as a
a) data process diagram.
b) data dictionary diagram.
c) content diagram.
d) context diagram.
D
31. In creating DFDs, a context diagram
a) Includes major transformation processes.
b) Depicts systems boundaries.
c) Is not necessary.
d) Is very detailed.
B
32. In a payroll processing DFD, the "prepare reports" activity will be represented by __________, the "employee payroll file" will be represented by __________, and the "bank" will be represented by __________.
a) a circle; two horizontal lines; a square
b) a circle; two horizontal lines; two horizontal lines
c) a rectangle; a square; a circle
d) a square; two horizontal lines; a circle
A
33. How should control processes and control actions be represented in a data flow diagram?
a) using a square to represent a data source and destination
b) using a circle to represent a transformation process
c) using two horizontal lines to represent a data store
d) control processes and actions should be ignored in a DFD
D
34. The term used to refine a high-level or summary view data flow diagram into successively lower levels to provide greater amounts of detail is
a) expand.
b) explode.
c) implode.
d) enlarge.
B
35. An analytical technique that uses standard symbols to graphically represent an information system in a clear, concise, and logical manner is called a
a) data flow diagram.
b) flowchart.
c) schema.
d) narrative.
B
36. Flowcharts are created using a standard set of symbols. These symbols can be divided into four basiccategories. A square denotes an auxiliary operation and is found in which flowchart symbol category?
a) input/output
b) processing
c) storage
d) flow and maintenance
B
37. What should be the first thing the creator of a flowchart does before beginning a flowchart?
a) understand the system to be flowcharted
b) identify the entries to be flowcharted
c) design the flowchart so that it proceeds from left to right and top to bottom
d) use standard flowcharting symbols
A
38. When designing either a DFD or a flowchart, a good rule to follow is
a) to proceed from left to right.
b) to proceed from top to bottom.
c) to proceed from left to right and top to bottom.
d) to identify exception procedures by using a rectangle.
C
39. Which is a true statement regarding the use of the manual processing symbol in a flowchart?
a) If a document is moved from one column to another, show the document only in the last column.
b) Each manual processing symbol should have an input and an output.
c) Do not connect two documents when moving from one column to another.
d) Each manual processing symbol should have an off-page connector.
B
40. Which is a true statement regarding the document flowchart?
a) It illustrates the sequence of logical operations performed by a computer.
b) It is particularly useful in analyzing the adequacy of internal control procedures.
c) It should ignore control processes and actions.
d) It is not normally used in the systems design process.
B
41. Which symbol would be used in a flowchart to represent a computer process?
a) #1
b) #2
c) #5
c
42. Which symbol would be used in a flowchart to represent a decision?
a) #10
b) #16
c) #9
d) #6
A
43. Which symbol would be used in a flowchart to represent an invoice sent to a customer?
a) #2
b) #6
c) #1
d) #15
C
44. Which symbol would be used in a flowchart to represent a general ledger?
a) #2
b) #1
c) #3
d) #5
A
45. Which symbol would be used in a flowchart to represent a manual process?
a) #5
b) #6
c) #10
d) #11
B
46. Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on the same page?
a) #4
b) #13
c) #14
d) #15
C
47. Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on a different page?
a) #4
b) #13
c) #14
d) #15
D
48. Which symbol would be used in a flowchart to represent a file of paper documents?
a) #7
b) #8
c) #9
d) #15
C
49. Which symbol would be used in a flowchart to represent a general ledger master file kept on magnetic disk?
a) #2
b) #5
c) #7
d) #8
C
50. Which symbol would be used in a flowchart to represent employee time cards sent by department managers to the payroll department?
a) #1
b) #4
c) #11
d) #16
A
51. Which symbol would be used in a flowchart to represent the display of a report on a computer screen?
a) #1
b) #2
c) #3
d) #11
C
52. Which symbol would be used in a flowchart to represent the addition of information about a step represented in another symbol on the flowchart?
a) #1
b) #5
c) #11
d) #15
C
53. Which symbol would be used in a flowchart to represent a payroll master file kept on magnetic tape?
a) #4
b) #7
c) #8
d) #9
C
54. Which symbol would be used in a flowchart to represent a beginning, an ending, or a connection to another procedure?
a) #9
b) #14
c) #15
d) #16
D
55. Which symbol would be used in a flowchart to represent a flow of data or documents?
a) #12
b) #13
c) #14
d) #15
A
57. In a document flowchart of a manual payroll processing system, "update employee file" will be shown by a(n) __________ symbol, and "prepare payroll check" will be shown by a(n) __________ symbol.
a) input; output
b) input; manual operation
c) manual operation; output
d) manual operation; manual operation
D
58. A flowchart is an analytical tool used to describe some aspect of an information system. A flowchart that depicts the relationships among the input, processing, and output of an AIS is
a) an internal control flowchart.
b) a document flowchart.
c) a system flowchart.
d) a program flowchart.
C
59. Which type of flowchart is an excellent vehicle for describing information flows and procedures within an AIS?
a) a program flowchart
b) a document flowchart
c) an internal control flowchart
d) a system flowchart
D
60. In a program flowchart comparison of one or more variables, the transfer of flow to alternative logic paths is represented by
a) a terminal.
b) data/information flow.
c) computer operation.
d) decision diamond.
D
61. The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent donors?
a)

b)

c)

d)
A
62. The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the processing of donations?
a)

b)

c)

d)
B
63. The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the storage location of data in the system?
a)

b)

c)

d)
D
64. The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the process of updating inventory records in the system?
a)

b)

c)

d)
B
65. The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the flow of data from the donor into the system?
a)

b)

c)

d)
C
66. Chuck and Jill Scruggs are partners in both life and business. They travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent eBay in a context diagram of this process?
a)

b)

c)

d)
A
67. Chuck and Jill Scruggs are partners in both life and business. They travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent the preparation of data for submission to eBay in a context diagram of this process?
a)

b)

c)

d)
B
68. Chuck and Jill Scruggs are partners in both life and business. They travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell within a week is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent the transfer of data to eBay in a context diagram of this process?
a)

b)

c)

d)
C
69. Chuck and Jill Scruggs are partners in both life and business. They travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent the remote server that is used to store data while the Scruggs are traveling?
a)

b)

c)

d)
D
70. Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the exiting accounting information system in preparation for making recommendations for improvements. He decides to begin with a description of the information stored in paper records, their sources, and their destinations. The documentation tool that he should employ for this purpose is a
a) data flow diagram.
b) document flowchart.
c) system flowchart.
d) program flowchart.
B
71. Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the exiting accounting information system in preparation for making recommendations for improvements. He decides to begin with a summary description of the sources and uses of data in the organization and how they are processed by the system. The documentation tool that he should employ for this purpose is a
a) data flow diagram.
b) document flowchart.
c) system flowchart.
d) program flowchart.
A
72. Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the exiting accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order develop an understanding of the program logic used by the system. The documentation tool that he should employ for this purpose is a
a) data flow diagram.
b) document flowchart.
c) system flowchart.
d) program flowchart.
D
73. Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the exiting accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order develop an understanding of the overall operation of the AIS, including data entry, storage, and output. The documentation tool that he should employ for this purpose is a
a) data flow diagram.
b) document flowchart.
c) system flowchart.
d) program flowchart.
C
74. When a sale is made, the data are entered into a cash register and stored on a floppy disk for later uploading to the accounting system. Which one of the following diagrams represents this activity?
A
76. A check is returned for insufficient funds and the accounts receivable file, stored on magnetic disk, is updated. Which one of the following diagrams represents this activity?
C
78. A report is generated from data stored on magnetic disk. Which one of the following diagrams represents this activity?
C
79. An employee receives a paycheck prepared by the payroll process. Which one of the following diagrams represents this activity?
B
1. What is one reason why AIS threats are increasing?
a) LANs and client/server systems are easier to control than centralized, mainframe systems.
b) Many companies do not realize that data security is crucial to their survival.
c) Computer control problems are often overestimated and overly emphasized by management.
d) Many companies believe that protecting information is a strategic requirement.
B
2. Which of the following is not a reason for the increase in security problems for AIS?
a) Confidentiality issues caused by interlinked inter-company networks
b) Difficult to control distributed computing networks
c) Increasing efficiency resulting from more automation
d) Increasing numbers of information systems and users
C
3. One reason why many organizations do not adequately protect their systems is because
a) control problems may be overestimated by many companies.
b) productivity and cost cutting cause management to forgo implementing and maintaining internal controls.
c) control technology has not yet been developed.
d) all of the above
B
4. Any potential adverse occurrence or unwanted event that could be injurious to either the AIS or the organization is referred to as a(n)
a) threat.
b) exposure.
c) risk.
d) phenomenon.
A
5. The potential dollar loss that could result if an unwanted event occurs is called a(n)
a) threat.
b) exposure.
c) risk.
d) extraordinary loss.
B
6. The likelihood that an adverse or unwanted event could occur is referred to as a(n)
a) threat.
b) exposure.
c) risk.
d) loss.
C
7. Accountants must try to protect the AIS from threats. Which of the following would be a measure that should be taken?
a) take a proactive approach to eliminate threats
b) detect threats that do occur
c) correct and recover from threats that do occur
d) All of the above are proper measures for the accountant to take.
D
8. The plan of organization that a business uses to safeguard assets, provide accurate and reliable information, and promote and improve operational efficiency is known as
a) a phenomenon.
b) internal control.
c) an AIS threat.
d) a preventive control.
B
9. Safeguarding assets is one of the primary purposes of internal control. Which of the following is not one of the other primary purposes?
a) providing accurate and reliable accounting records
b) promoting operational efficiency
c) ensuring that no fraud has occurred
d) encouraging adherence to management policies
C
10. Internal control is often referred to as a(n) __________, because it permeates an organization's operating activities and is an integral part of basic management activities.
a) event
b) activity
c) process
d) system
C
11. Which of the following control classifications does not fit with the others listed below?
a) preventative
b) detective
c) administrative
d) corrective
C
12. Which of the following is accomplished by corrective controls?
a) identify the cause of the problem
b) correct the resulting errors
c) modify the system to prevent future occurrences of the problem
d) All of the above are accomplished by corrective controls.
D
13. Duplicate checking of calculations is an example of a __________ control, and adherence to appropriate procedures to resubmit rejected transactions is an example of a __________ control.
a) corrective; detective
b) detective; corrective
c) preventive; corrective
d) detective; preventive
B
14. There are different types of internal controls available to an organization. The type of controls that deters problems before they arise are called
a) detective controls.
b) corrective controls.
c) exposure controls.
d) preventive controls.
D
15. Corrective controls remedy problems discovered with detective controls. What is not a corrective control procedure?
a) identify the cause of a problem
b) deter problems before they arise
c) correct resulting errors or difficulties
d) modify the system so that future problems are minimized or eliminated
B
16. __________ controls are designed to make sure an organization's control environment is stable and well managed.
a) Application
b) Detective
c) General
d) Preventive
C
17. __________ controls prevent, detect and correct transaction errors and fraud.
a) Application
b) Detective
c) General
d) Preventive
A
18. Which of the following federal laws incorporated the language of the AICPA about controls into a law applying to all registered companies?
a) Foreign Corrupt Practices Act of 1977
b) The Securities Exchange Act of 1934
c) Federal Corruption Prevention Act of 1987
d) The Securities Act of 1933
A
19. The primary purpose of the Foreign Corrupt Practices Act of 1977 was
a) to require corporations to maintain a good system of internal control.
b) to prevent the bribery of foreign officials by American companies.
c) to require the reporting of any material fraud by a business.
d) All of the above are required by the act.
B
20. Congress passed this federal law for the purpose of preventing financial statement fraud, to make financial reports more transparent and to strengthen the internal control of public companies.
a) Foreign Corrupt Practices Act of 1977
b) The Securities Exchange Act of 1934
c) The Sarbanes-Oxley Act of 2002
d) The Control Provision of 1998
C
21. Which of the following is not one of the important aspects of the Sarbanes-Oxley Act?
a) The creation of the Public Company Accounting Oversight Board
b) New rules for auditors and management
c) New roles for audit committees
d) New rules for information systems development
D
22. A ________________ helps employees act ethically by setting limits beyond which an employee must not pass.
a) Boundary system
b) Diagnostic control system
c) Interactive control system
d) Internal control system
A
23. A ________________ measures company progress by comparing actual performance to planned performance.
a) Boundary system
b) Diagnostic control system
c) Interactive control system
d) Internal control system
B
24. A ________________ helps top-level managers with high-level activities that demand frequent and regular attention.
a) Boundary system
b) Diagnostic control system
c) Interactive control system
d) Internal control system
C
25. This control framework addresses the issue of control from three vantage points: business objectives, information technology resources, and information technology processes.
a) ISACF's control objectives for information and related technology
b) COSO's internal control framework
c) COSO's enterprise risk management framework
d) None of the above
A
26. This control framework defines internal controls and provides guidance for evaluating and enhancing internal control systems.
a) ISACF's control objectives for information and related technology
b) COSO's internal control framework
c) COSO's enterprise risk management framework
d) None of the above
B
27. This control framework's intent includes helping the organization to provide reasonable assurance that objectives are achieved and problems are minimized, and to avoid adverse publicity and damage to the organization's reputation.
a) ISACF's control objectives for information and related technology
b) COSO's internal control framework
c) COSO's enterprise risk management framework
d) None of the above
C
28. The COSO control model has five crucial components. Which of the following is not one of them?
a) control environment
b) risk assessment
c) compliance with federal, state, or local laws
d) monitoring
C
29. According to the ERM, these help the company address all applicable laws and regulations.
a) Compliance objectives
b) Operations objectives
c) Reporting objectives
d) Strategic objectives
A
30. According to the ERM, high level goals that are aligned with and support the company's mission are
a) Compliance objectives
b) Operations objectives
c) Reporting objectives
d) Strategic objectives
D
31. According to the ERM, these deal with the effectiveness and efficiency of company operations, such as performance and profitability goals.
a) Compliance objectives
b) Operations objectives
c) Reporting objectives
d) Strategic objectives
B
32. According to the ERM, these objectives help ensure the accuracy, completeness and reliability of internal and external company reports.
a) Compliance objectives
b) Operations objectives
c) Reporting objectives
d) Strategic objectives
C
33. Which of the following is not one of the eight interrelated risk and control components of COSO?
a) Internal environment
b) Monitoring
c) Risk response
d) Event assessment
D
34. Which of the following is not one of the reasons COSO developed the more comprehensive ERM framework?
a) The internal control framework has too narrow a focus.
b) Long-standing internal control systems often have controls that protect against items that are no longer risks.
c) Risk should be evaluated first, before controls.
d) The Sarbanes-Oxley Act of 2002 required it.
D
35. Which of the following would be considered a "red flag" for problems with management operating style if the question were answered "yes"?
a) Does management take undue business risks to achieve its objectives?
b) Does management attempt to manipulate performance measures such as net income?
c) Does management pressure employees to achieve results regardless of the methods?
d) All of the above statements would raise "red flags" if answered "yes."
D
36. The audit committee of the board of directors is composed of
a) officers of the company.
b) inside directors of the company.
c) outside directors of the company.
d) all of the above
C
37. The audit committee is responsible for
a) overseeing the internal control structure.
b) overseeing the financial reporting process.
c) working with the internal and external auditors.
d) All of the above are responsibilities.
D
38. Regarding the issue of internal control, the internal environment itself consists of many factors. An issue regarding a conflict of interest should be addressed as a component of which factor?
a) organization structure
b) commitment to integrity and ethical values
c) the audit committee of the board of directors
d) management's philosophy and operating style
B
39. The definition of the lines of authority and responsibility and the overall framework for planning, directing, and controlling is laid out by the
a) control activities
b) organizational structure
c) budget framework
d) internal environment
B
40. Personnel policies such as background checks, mandatory vacations, and rotation of duties tend to deter
a) unintentional errors
b) employee fraud or embezzlement
c) fraud by outsiders
d) payroll irregularities
B
41. The stock exchange or FASB is best described as external influences that directly affect an organization's
a) hiring practices
b) philosophy and operating style
c) internal environment
d) methods of assigning authority
C
42. The internal control model developed by COSO is comprised of five interrelated components. Among these components is the internal environment. Which attribute below is not part of the internal environment?
a) the competence of an organization's people
b) the integrity of an organization's people
c) monitoring activities within the organization itself
d) the ethical values of an organization's people
C
43. The amount of risk a company is willing to accept in order to achieve its goals and objectives is
a) Inherent risk
b) Residual risk
c) Risk appetite
d) Risk assessment
C
44. The risk that remains after management implements internal controls is
a) Inherent risk
b) Residual risk
c) Risk appetite
d) Risk assessment
B
45. The risk that exists before management takes any steps to control the likelihood or impact of a risk is
a) Inherent risk
b) Residual risk
c) Risk appetite
d) Risk assessment
A
46. When undertaking risk assessment, the expected loss is calculated like this.
a) Impact times expected loss
b) Impact times likelihood
c) Inherent risk times likelihood
d) Residual risk times likelihood
B
47. Generally in a risk assessment process, the first step is to
a) identify the threats that the company currently faces.
b) estimate the risk probability of negative events occurring.
c) estimate the exposure from negative events.
d) identify controls to reduce all risk to zero.
A
48. The third component of COSO's internal control model is risk assessment. Part of risk assessment is to identify threats to companies. If a company does the right things in the wrong way, this is known as
a) a strategic threat.
b) an operating threat.
c) a financial threat.
d) an information threat.
B
49. Management can authorize employees to handle routine transactions without special approval. This is known as
a) Authorization
b) General authorization
c) Special authorization
d) Specific authorization
A
50. Good internal control demands that no single employee be given too much responsibility. The segregation of duties is key to fulfilling this demand. Which two functions, when not performed by different employees, will cause a potential internal control problem due to the lack of separation of duties?
a) digital signature, specific authorization
b) custody, recording
c) digital signature, general authorization
d) custody, digital signature
B
51. Regarding project development and acquisition controls, this is developed to show all projects that must be completed to achieve long-range company goals.
a) Performance evaluation
b) Project development plan
c) Steering committee
d) Strategic master plan
D
52. Regarding project development and acquisition controls, a ________ is created to guide and oversee systems development and acquisition.
a) Performance evaluation
b) Project development plan
c) Steering committee
d) Strategic master plan
C
53. Regarding project development and acquisition controls, a ________ shows how a project will be completed, including tasks and who will perform them as well as a timeline and cost estimates.
a) Performance evaluation
b) Project development plan
c) Steering committee
d) Strategic master plan
C
54. Chuck Hewitt was relaxing after work with a colleague at a local watering hole. Well into his second martini, he began expressing his opinion about government regulation. It seems that, as a result of "government interference" the company's longstanding policy of making low-interest loans to top management was being terminated. The regulation that Chuck is referring to is the
a) Foreign Corrupt Practices Act
b) McCain-Feingold Act
c) Truth in Lending Act
d) Sarbanes-Oxley Act
D
55. Which of the following is not a violation of the Sarbanes-Oxley Act (SOX)? The management at Folding Squid Technologies
a) asked their auditors to make recommendations for the redesign of their information technology system and to aid in the implementation process.
b) hired the head of the external audit team as company CFO six months after completion of the previous audit.
c) selected the company's Chief Financial Officer to chair the audit committee.
d) did not mention to auditors that the company had experienced significant losses due to fraud during the past year.
B
56. The Sarbanes-Oxley Act (SOX) applies to
a) all companies with gross annual revenues exceeding $500 million.
b) only publicly held companies.
c) only privately held companies.
d) corporations and partnerships but not sole proprietorships.
B
57. Chuck Hewitt was relaxing after work with a colleague at a local watering hole. Well into his second martini, he began expressing his opinions about his company's budgeting practices. It seems that, as a result of "budget handcuffs" that require managers to explain material deviations from budgeted expenditures, his ability to creatively manage his department's activities have been curtailed. The lever of control that the company is using in this case is a
a) boundary system.
b) belief system.
c) interactive control system.
d) diagnostic control system.
D
58. Chuck Hewitt was relaxing after work with a colleague at a local watering hole. Well into his second martini, he began expressing his opinions about his work environment. It seems that, as a result of "feminazi" interference, the suggestive banter that had been prevalent in the workplace during his youth was no longer acceptable. He even had to sit through a sexual harassment workshop! The lever of control that the company is using in this case is a
a) boundary system.
b) belief system.
c) interactive control system.
d) diagnostic control system.
A
59. River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa. Management has determined that there is one chance in a thousand of a client being injured or killed. Settlement of resulting lawsuits has an average cost of $650,000. Insurance with a $50,000 deductible is available. It covers the costs of lawsuits unless there is evidence of criminal negligence. What is the impact of this risk without insurance?
a) $50,000
b) $650,000
c) $650
d) $50
B
60. River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa. Management has determined that there is one chance in a thousand of a client being injured or killed. Settlement of resulting lawsuits has an average cost of $650,000. Insurance with a $50,000 deductible is available. It covers the costs of lawsuits unless there is evidence of criminal negligence. What is the expected loss without insurance?
a) $50,000
b) $650,000
c) $650
d) $50
C
61. River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa. Management has determined that there is one chance in a thousand of a client being injured or killed. Settlement of resulting lawsuits has an average cost of $650,000. Insurance with a $50,000 deductible is available. It covers the costs of lawsuits unless there is evidence of criminal negligence. What is the expected loss with insurance?
a) $50,000
b) $650,000
c) $650
d) $50
D
62. River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa. Management has determined that there is one chance in a thousand of a client being injured or killed. Settlement of resulting lawsuits have an average cost of $650,000. Insurance with a $50,000 deductible is available. It covers the costs of lawsuits unless there is evidence of criminal negligence. Based on cost-benefit analysis, what is the most that the business should pay per client for the insurance?
a) $500
b) $650
c) $600
d) $50
C
63. Global Economic Strategies, L.L.D., has been diligent in ensuring that their operations meet modern control standards. Recently, they have extended their control compliance system by incorporating policies and procedures that require the specification of company objectives, uncertainties associated with objectives, and contingency plans. They are transitioning from a _____ to a _____ control framework.
a) COSO-Integrated Framework; COBIT
b) COBIT; COSO-Integrated Framework
c) COBIT; COSO-ERM
d) COSO-Integrated Framework; COSO-ERM
e) COSO-ERM; COBIT
D
64. FranticHouse Partners, L.L.C., does home remodeling and repair. All employees are bonded, so the firm’s risk exposure to employee fraud is
a) reduced.
b) shared.
c) avoided.
d) accepted.
B
65. FranticHouse Partners, L.L.C., does home remodeling and repair. The firm does not accept jobs that require the installation of slate or copper roofing because these materials often require costly post-installation services. The firm’s risk exposure to this source of cost
a) reduced.
b) shared.
c) avoided.
d) accepted.
C
66. Ferdinand Waldo Demara was known as the great imposter. He had an astounding ability to convince people that he was who he truly was not. He worked as a naval officer, physician, college teacher, prison warden, and other jobs without any of the prerequisite qualifications. The organizations fooled by Demara (including the Canadian Navy) apparently chose to _______ the risk of fraud.
a) reduce.
b) share.
c) avoid.
d) accept.
D
67. Which of the following is an independent check on performance?
a) The Purchasing Agent physically reviews the contents of shipments and compares them with the purchase orders he has placed.
b) Production teams perform quality evaluations of the products that they produce.
c) The General Manager compares budgeted amounts with expenditure records from all departments.
d) Petty cash is disbursed by the Fred Haynes in the Cashier's Office. He also maintains records of disbursements, places requests to finance to replace expended funds, and periodically reconciles the petty cash balance.
C
68. Petty cash is disbursed by the Fred Haynes in the Cashier's Office. He also maintains records of disbursements, places requests to the Finance Department to replace expended funds, and periodically reconciles the petty cash balance. This represents a(an) ___________ segregation of duties.
a) effective
b) partial
c) ineffective
d) limited
C
69. Hiring decisions at Frazier’s Razors are made by Sheila Frazier, the Director of Human Resources. Pay rates are approved by the Vice President for Operations. At the end of each pay period, supervisors submit time cards to Sheila, who prepares paycheck requisitions. Paychecks are then distributed through the company’s mail room. This represents a(an) ___________ segregation of duties.
a) effective
b) partial
c) ineffective
d) limited
A
70. Change management refers to
a) disbursement controls on petty cash.
b) operational controls applied to companies after mergers or acquisitions.
c) replacement of upper management and their introduction to the organization.
d) controls designed to ensure that updates in information technology do not have negative consequences.
D
71. In restaurants, servers often take orders, collect payments from customers, and return change. This violates the principle of segregation of duties if servers also
a) participate in food preparation.
b) operate cash registers.
c) bus tables.
d) evaluate potential employees.
B
72. The Director of Information Technology for the city of Bumpkiss, Minnesota, formed a company to sell computer supplies and software. All purchases made on behalf of the City were made from his company. He was later charged with fraud for overcharging the City, but was not convicted. The control issue in this case arose because the Director had both _______ and _______ duties.
a) custody; authorization
b) custody; recording
c) recording; authorization
d) management; custody
C
73. Segregation of duties is only effective if employees
a) are unable to collude.
b) have received supplemental ethics training.
c) understand the implications of the segregation of duties.
d) are carefully supervised.
A