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106 Cards in this Set
- Front
- Back
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What are the five functions performed on data in a business information system? |
1. collect 2. process 3. store 4. transform 5. distribute |
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Describe the normal series of events in an accounting information system (AIS). |
1. The transaction data from source docs is entered in the the AIS by an end user 2. The original paper source docs are filed 3. The transactions are recorded in the appropriate journal 4. The transactions are posted to the general and subsidiary ledgers 5. Trial balances are prepared 6. Adjustments, accruals, and corrections are entered 7. Financial reports are generated |
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Name and briefly describe six different types of MIS reports |
1. Periodic Scheduled Reports: The traditional reports that display info in a predefined format and are made available on a regular basis 2. Exception Reports: Reports produced when a specific condition or "exception" occurs 3. Demand Reports: Specific reports that can be printed on demand 4. Ad Hoc Reports: A report that does not currently exist but that can be created on demand without having to get a software developer 5. Push Reports: A report that can be "pushed" or sent to a computer screen or desktop 6. Dashboard Reports: A report used by a company to present summary information necessary for management action |
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What are the primary roles of business information systems? |
1. Process detailed data 2. Assist in making daily decisions 3. Assist in developing business strategies 4. Take orders from customers |
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Name the five functions performed on data by a business information system. |
1. Collect 2. Process 3. Store 4. Transform 5. Distribute |
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Describe the two types of processing used in a computerized environment. |
1. Batch Processing--periodic processing 2. Online, real-time (OLRT) processing ("online processing"--immediate processing |
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What is a batch control total and how does it differ from a hash total? |
A batch control total is a manually calculated total that is compared to a computer-generated total as a means of testing the accuracy and completeness of the input and processing. Batch totals are used for numbers that are normally added, such as dollar amounts. Hash totals are used for numbers that are not normally added, such as account numbers. |
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What are the advantages and disadvantages of centralized processing? |
Advantages: 1. Data is secured better, once received 2. Processing is consistent Disadantages: 1. The cost of transmitting large numbers of detailed transactions can be high 2. The are increased processing power and data storage needs at the central location 3. There is a reduction in local accountability 4. Input/output bottlenecks may occur at high traffic times 5. There may be a lack of ability to respond in a timely manner to information requests from remote locations 6. The entire organization may be vulnerable to problems incurred at a single location
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List and explain the steps in batch processing |
1. Create a transaction file 2. Update the master file |
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What are the various categories of business information systems? |
1. Transaction processing systems 2. Decision support systems 3. Management information systems 4. Executive information systems |
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Identify functions that should be segregated in an IT department |
The duties of systems analysts, computer programmers, and computer operators should be segregated (although many companies combine systems analysts and computer programmers). |
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What are three types of programmed controls? |
1. Input controls 2. Processing controls 3. Output controls |
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What are the six steps of the system development life cycle (SDLC)? |
1. Systems analysis 2. Conceptual and physical design 3. Implementation and conversion 4. Training 5. Testing 6. Operations and maintenance |
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What is the objective of executive information systems (EIS)? |
To provide senior executives with immediate and easy access to internal and external information to assist executives in monitoring business conditions. EIS assist in strategic, not daily, decision making. |
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What is the decision support system (DSS)? |
A decision support system is a computer-based information system that provides interactive support for managers during the decision-making process. A DSS is useful for developing information directed toward making particular decisions. |
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What is the objective of management information systems (MIS)? |
The objective of MIS is to provide managerial and other end users with reports. These predefined management reports provide managers with the information they need to assist them in the business decision-making process. |
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What are the five focus areas of the COBIT framework? |
1. Strategic alignment 2. Value delivery 3. Resource management 4. Risk management 5. Performance measurement |
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What are the information criteria described by COBIT? (Hint: ICE RACE) |
Integrity Confidentiality Efficiency
Reliability Availability Compliance Effectiveness |
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Identify the four domains and related process of the COBIT framework. |
1. Plan and Organize (direct) 2. Acquire and Implement (solution) 3. Deliver and Support (service) 4. Monitor and Evaluate (ensure direction followed) |
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Why is it important to have segregation of duties between computer operators and computer programmers? |
Because a person performing both functions would have the opportunity to make unauthorized and undetected program changes |
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What are the four types of computer security policies? |
1. Program-level policy 2. Program-framework policy 3. Issue-specific policy 4. System-specific policy |
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Identify the costs associated with implementing EDI |
1. Legal costs 2. Hardware costs 3. Cost of translation software 4. Costs of data transmission 5. Process reengineering and employee training costs for affected applications 6. Costs associated with security, monitoring, and control procedures |
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What are the features of EDI? |
1. EDI allows the transmission of electronic documents between computer systems in different organizations 2. EDI reduces handling costs and speeds transaction processing 3. EDI requires that all transactions be submitted in a standard data format 4. EDI can be implemented using direct links, VANs, or over the internet |
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What are some controls for an EDI system? |
1. Encryption of data 2. Activity logs of failed transactions 3. Network and sender/recipient acknowledgements |
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What is e-commerce? |
E-commerce involves electronic consummation of exchange transactions. E-commerce normally implies the use of the internet but a private network can also be used. |
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How does EDI differ from e-commerce on a cost, security, speed, and network basis? |
Cost: EDI is more expensive than e-commerce Security: EDI is more secure than e-commerce Speed: e-commerce is faster than EDI Network: EDI uses VAN (private) and e-commerce uses the internet (public) |
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Define and describe the purpose of BPR |
Business process reengineering (BPR) is the analysis and design of business processes and information systems to achieve significant performance improvements. The purpose of BPR is to simplify the system, make it more effective, and improve the entity's quality and service |
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Define and describe the purpose of ERP |
An enterprise resource planning system (ERP) is a cross-functional enterprise system that integrates and automates the many business processes and systems that must work together in various functions (e.g. manufacturing, distribution, human resources) of a business |
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Compare and contrast HTML, HTTP, and URL |
Hypertext markup language (HTML) is tag-based formatting language used for Web pages.
Hypertext transfer protocol (HTTP) is the communications protocol used to transfer Web pages on the World Wide Web
Uniform resource locator (URL) is the technical name for a Web address, which directs users to a specific location on the Web |
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What are the risks in a business information system? |
The risks in a business information system are: 1. Strategic risk 2. Operating risk 3. Financial risk 4. Information risk |
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Name the five threats in a computerized environment |
1. Virus 2. Worm 3. Trojan horse 4. Denial-of-service attack 5. Phishing |
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Explain the difference between the contribution approach and the absorption approach |
The difference is the treatment of fixed overhead. Under the absorption approach, fixed overhead is a product cost. Under the contribution approach, fixed overhead is a period cost. |
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Explain the difference between absorption costing net income and variable costing net income |
The difference depends on the change in inventory level during the period
No change in inventory: Absorption income = Variable income Increase in inventory: Absorption income > Variable income Decrease in inventory: Absorption income < Variable income |
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What is the formula for breakeven point in units? |
Total fixed costs/Contribution margin per unit = Breakeven point in units |
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What is the formula for breakeven point in dollars? |
Total fixed costs/Contribution margin ratio= Breakeven point in dollars |
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What is the margin of safety formula? |
Total sales (in dollars) - Breakeven sales (in dollars) = Margin of safety (in dollars) |
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Title IV of the Sarbanes-Oxley Act, Enhanced Financial Disclosures, includes the following topics |
Disclosures in periodic reports Enhanced conflict-of-interest provisions Disclosures of transactions involving management and principal stockholders Management assessment of internal controls Certain exemptions Code of ethics for senior financial officers Disclosure of audit committee financial expert Enhanced review of periodic disclosures by issuers |
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The Sarbanes-Oxley Act requires certain disclosures in periodic reports. Those disclosures include: |
1. All adjusting entries identified by the public accounting firm reporting on the financial statements 2. The financial statements disclose all material off-balance sheet transactions including operating leases, contingent obligations, and relationships with unconsolidated subsidiaries 3. Pro forma financial statements shall include all relevant information and shall not include misleading or untrue information |
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The Sarbanes-Oxley Act includes certain enhanced conflict-of-interest provisions. Those provisions include: |
Prohibitions on personal loans to executives with some exceptions |
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The Sarbanes-Oxley Act includes provisions for disclosure of transactions involving management and principal stockholders. Those provisions include: |
Reporting by persons with ownership of 10% or more. Statements are filed at the time of registration, when a person achieves 10% ownership, and when there has been a change in ownership. |
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The Sarbanes-Oxley Act includes provisions for management assessment of internal controls. Those provisions include a report showing: |
1. Management's assertion that it is responsible for adequate internal control structure. 2. Management's conclusions regarding its assessment of the effectiveness of the internal control structure and procedures for financial reporting. 3. The auditor's attestation regarding management's assessment of internal control |
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The Sarbanes-Oxley Act includes provisions for audit committee disclosures. Those provisions include: |
The issuers must disclose the existence of a financial expert on the committee or the reasons why the committee does not have a member who is a financial expert. |
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For purposes of service on the audit committee, what qualifies an individual for classification as a financial expert? |
A financial expert qualifies through education, past experience as a public accountant, or past experience as a finance officer for an issuer. Knowledge of the financial expert should include: 1. Understanding of GAAP 2. Experience in the preparation of auditing of financial statements Application of GAAP 3. Application of GAAP 4. Experience with internal controls 5. Understanding of audit committee functions |
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Title VIII of the Sarbanes-Oxley Act considers what topics? |
Criminal penalties for altering documents Statute of limitations for securities fraud Whistle-blower protection Criminal penalties for securities fraud |
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Title IX of the Sarbanes-Oxley Act considers what topics? |
Title IX, White Collar Crime Penalty Enhancements, includes the following: - Attempt and conspiracy - Amended sentencing guidelines for white-collar offences - Failure of corporate officers to certify financial reports |
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An issuer periodic report containing financial statements files with SEC must include the following written certifications: |
Each certified financial report must include a written statement: 1. That the periodic report complies with the Securities Exchange Act of 1934 2. That information in the report fairly presents, in all material respects, the financial condition and operating results of the issuer. 3. Which must be signed by the CEO and CFO of the issuer, who bear responsibility for these statements |
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Title XI of the Sarbanes-Oxley Act considers what topics? |
Title XI, Corporate Fraud Accountability, includes the following: - Tampering with a record or impeding an official proceeding - Temporary freeze of authority for the SEC - Authority of the SEC to prohibit persons from serving as officers or directors - Retaliation against informants |
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Identify nine components of LAN |
1. Note 2. Workstation 3. Server 4. Network Interface Card (NIC) 5. Transmission Media 6. Network Operating System (NOS) 7. Communications Device 8. Communication/Network Protocols 9. Gateways and Routers |
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Identify the two types of networks that can be used to provide WAN communications services |
Value added network: Privately owned communication network that provides additional services beyond standard data
Internet-based network: Uses internet protocols and public communications channels to establish network communications |
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List some of the features of a value added network (VAN) |
A value added network: - Is privately owned - Provides additional services - Provides good security - Uses periodic (batch) processing - May be expensive |
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List some of the features of an Internet-based network |
An internet-based network: - Uses public communications channels - Transmits transactions immediately - Is relatively affordable - Increasing the number of potential trading partners |
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What is the difference between an intranet and an extranet? |
An intranet connects geographically separate LANs within a company, whereas an extranet permits specified external parties to access the company's network |
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What are some advantages of DBMS? |
Advantages of a DBMS: 1. Data redundancy and inconsistency are reduced 2. Data sharing exists 3. Data independence exists 4. Data standardization exists 5. Data security is improved 6. Data fields can be expanded without adverse effects on application programs 7. Timeliness, effectiveness, and availability of information is enhanced |
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What are the four principles associated with the risk assessment component of the Committee on Sponsoring Organization's (COSO) Internal Control Integrated Framework? |
1. Specify objectives 2. Identify and analyze risks 3. Consider potential for fraud 4. Identify and assess changes |
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How are EDI transactions submitted, and what is mapping? |
EDI transactions are submitted in a standard data format.
Mapping is the process of determining the correspondence between elements in a company's terminology and elements in standard EDI terminology |
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List the factors that shift short-run aggregate supply |
- Changes in input (resource) prices - Supply shocks |
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How is GDP calculated under the income approach? I PIRATED |
It is calculated by summing the value of resource costs and incomes generated during the measurement period.
Income of proprietors+Profits of corporations+Interest (net)+Rental income+Adjustments for net foreign income+Taxes (indirect business taxes)+Employee compensation (wages)+Depreciation (capital consumption allowance) |
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What are the four key management processes of supply chain management (SCM) per the SCOR model? |
-Plan -Source -Make -Deliver |
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What are the three principles associated with the (existing) control activities component of the Committee on Sponsoring Organization's (COSO) Internal Control Integrated Framework? |
1. Select and develop control activities 2. Select and develop technology controls 3. Deploy through policies and procedures |
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List the five process management activities |
1. Design 2. Modeling 3. Execution 4. Monitoring 5. Optimization |
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List the elements of PDCA: |
1. Plan 2. Do 3. Check 4. Act |
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Identify and describe the four elements of the Code of Ethics adopted by the International Standards for the Practice of Internal Auditing |
1. Integrity 2. Objectivity--should be objective in gathering, evaluating and communicating information and should not participate in relationships that represent conflicts of interest 3. Confidentiality--internal auditors do not disclose information without appropriate authority or use info for personal gain 4. Competency |
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Attribute Standards are defined by what four major headings? |
1. Purpose, Authority, and Responsibility 2. Independence and Objectivity 3. Proficiency and Due Professional Care 4. Quality Assurance and Improvement Program |
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Performance Standards are defined by what seven major headings? |
- Managing the Internal Audit Activity - Nature of Work - Engagement Planning - Performing the Engagement - Communicating Results - Monitoring Progress - Management's Acceptance of Risk |
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What are the two primary features of managing the internal audit activity? |
1. Effective management--ensuring that activities are contemplated by the internal audit charter and that activities conform to the definition of internal audit, the Standards and the code of Ethics 2. Added value--objective and relevant assurance and contributions to the effectiveness and efficiency of governance, risk management, and control processes |
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What major features of an internal audit engagement must be documented as part of planning? |
- Engagement objectives - Engagement scope - Engagement resource allocation - Engagement work program |
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In performing an engagement, the internal auditor must identity information that meet which four criteria? |
- Sufficiency - Reliable - Relevant - Useful |
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Communication of the results of an internal audit engagement must generally include which elements? |
1. Engagement objectives 2. Engagement scope 3. Conclusions 4. Recommendations 5. Action plans |
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Describe the implementation standards of the International Standards for the Practice of Internal Auditing |
They are embedded within the attribute and reporting standards to the address the requirements of implementing both assurance and consulting activities |
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What are three types of disaster recovery? |
1. Disaster recovery service 2. Internal disaster recovery 3. Multiple data center backups |
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Identify the four main functions of a DBMS |
1. Database development 2. Database query 3. Database maintenance 4. Application development |
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Identify the manufacturing overhead variances (one-way, two-way, and three-way analysis) |
One-way: OH variance = Actual OH - Applied OH
Two-way: Budget (Controllable) variance = Actual OH - [Budgeted FOH + (Std DLH x Std VOH rate)] Volume (Noncontrollable) variance= [Budgeted FOH + (Std DLH x Std VOH rate)] - Applied OH
Three-way: Spending variance= Actual OH - [Budgeted FOH + (Actual DLH x Std VOH rate)] Efficiency variance= [Budgeted FOH + (Actual DLH + Std VOH rate)] - [Budgeted FOH + (Std DLH x Std VOH rate)] Volume variance=[Budgeted FOH + (Std DLH x std VOH rate)] - Applied OH
(Applied OH=std rt x allowable hours) |
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Describe two alternative ways to calculate the volume variance |
Volume variance=Budgeted fixed OH - Applied fixed OH
Volume variance=(Actual production in units-Budgeted production in units) x Per unit st fixed OH rate |
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Identify the direct materials variances (two-way variance analysis) |
1. Direct materials price variance = (AP - SP) x AQ AP=act price SP=St price AQ=act qty purchased
2. Direct materials qty usage variance=(AQ- SQ) x SP AQ=act qty used SQ=std qty allowed SP=st price |
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Identify the direct labor variances (two-way variance analysis) |
1. Direct labor rate variance = (AR - SR) x AH 2. Direct labor efficiency variance = (AH - SH) x SR
AR=act labor rt SR=st labor rt AH=act hours SH=st hours |
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How is the payables deferral period calculated? |
AP turnover=COGS/Avg AP
Payables deferral period=365/AP turnover |
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What is the absorption formula? |
Revenue - COGS = Gross margin Gross margin - Operating expenses=Net income |
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How does the International Professional Practices Framework define Internal Auditing? |
1. It is an independent and objective assurance and consulting activity designed to add value and improve an organization's operations 2. It adds value and helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the following: a. Risk management b. Control c. Governance processes |
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Describe the attributes standards of the International Standards for the Practice of Internal Auditing |
they address issues related to auditor independence, technical proficiency, and professional care |
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Describe the performance standards of the International standards for the Practice of Internal Auditing |
They address planning and supervision of the engagement, documentation of evidence or basis for conclusions, and generic reporting requirements |
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What is linear regression? |
It is a method for studying the relationship between two or more variables. Linear regression is used to predict the value of a dependent variable [e.g. total cost (y)] corresponding to given values of the independent variables [e.g. fixed costs (A), variable cost per unit (B), and production expressed in units (x)]
Simple regression involves only one independent variable.
Multiple regression involves more than one independent variable. |
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Define currently attainable standards |
Currently attainable standards represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effort |
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Define ideal standards |
costs that result from perfect efficiency and effectiveness in job performance |
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Define flexible budget |
a budget that can be adjusted to any activity level; it shows how costs vary with production volume
Budgeted total costs=(Variable cost per unit x Activity level) + fixed costs
Fixed costs in total are constant over the relevant range of activity level |
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Define a master budget |
it documents specific short-term operating performance goals for a period of time, normally one year or less. The plan generally includes an operating (nonfinancial) budget as well as a financial budget |
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List the operating budgets included in the master budget |
- Sales budget - Production budget - Direct materials budget - Direct labor budget - Overhead budget - COGS budget - SG&A budget |
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List the financial budgets included in the master budget |
- Cash budget - Pro forma financial statements |
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Describe an alternative way to calculate efficiency variance |
(Actual DLH - Std DLH allowed) x Std variable OH rate |
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What is the formula for market size variance? |
[act market size (in units) - Expected market size (in units)] x budgeted market share x budgeted contribution margin per unit (weighted avg) |
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What is the formula for market share variance? |
[Act market share - Budgeted market rate] x Act industry units x Budgeted contribution margin per unit (weighted avg) |
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What is the formula for sales volume variance? |
[Actual sold units - Budgeted sales units] x std contribution margin per unit |
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What is the formula for selling price variance? |
[Actual SP/Unit - Budgeted SP/unit] x Act units sold |
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Define contribution by SBU |
It represents the difference between the contribution margin (Revenue - Variable costs) and controllable fixed costs (those costs that managers can impact in less than one year) |
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What is the purpose of the balanced scorecard? |
It displays performance relative to critical success factors identified for multiple dimensions of a business operation |
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What dimensions or categories of business operation are frequently identified by the balanced scorecard? |
F inance I nternal business processes C ustomer satisfaction A dvancement of human resource innovation |
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What is the contribution margin ratio formula? |
Contribution margin/Revenue |
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List and define the types of responsibility segments (or strategic business units--SBUs) that are used to establish business performance measures |
Cost SBU--managers are held responsible for controlling costs Revenue SBU--managers are held responsible for generating revenues Profit SBU--managers are held responsible for producing a target profit Investment SBU--mangers are held responsible for return on investment |
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Define sunk costs |
costs that have been incurred, are unavoidable in the future, and will not vary with the course of action taken |
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What is the formula for after-tax cash flow? |
(1.0 - Tax rate) x Pre-tax cash flows = After-tax cash flow |
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How should management approach a keep or drop decision? |
When deciding to keep or drop a segment, a firm should compare the fixed costs that can be avoided if the segment is dropped (i.e. the costs of running the seg) to the contribution margin that will be lost if the segment is dropped
The segment should be kept if the lost contribution margin exceeds avoided fixed costs and dropped if the lost contribution margin is less than avoided fixed costs |
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The formula for computing a depreciation tax shield is |
Tax rate x Depreciation = Tax savings from the depreciation tax shield |
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What are the three general stages in which capital investment cash flows are categorized? |
- Cash flows at the inception of the project - Operating cash flows - Cash flows from the disposal of the project |
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What approaches can management take to select the desired rate of return for a project? |
- Use a weighted average cost of capital (WACC) method - Assign a target rate for new projects - Recommend that the discount rate be related to the risk of the project |
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How should management approach a sell or process further decision? |
The decision is made by comparing the incremental cost and the incremental revenue generate after the split-off point - If the incremental revenue exceeds the incremental cost, the organization should process further - If the incremental cost exceeds the incremental revenue, the organization should sell at the split-off point |
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Define financial leverage |
Financial leverage is defined as the degree to which a firm's use of debt to finance the firm magnifies the effects of a given percentage change in EBIT on the percentage change in EPS |
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Define net present value (NPV) |
It is the difference between the present value of the cash inflows and outflows from a project |
