ACC 564 Exam and Quizzes – New

ACC 564 Exam and Quizzes – Strayer New

ACC 564 Quiz 1, Quiz 2, Quiz 3, Quiz 4, Final Exam, Midterm Exam

ACC 564 Week 11 Final Exam: Chapters 1 through 10, 11 through 13, 15 through 17, and 20 through 22
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This Quiz bank can also be use for other classes, if your assigned Textbook is AIS 12e by Romney

Accounting Information System test Bank (Quiz Bank)

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 1 Accounting Information Systems: An Overview

1) 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.
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) 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 has been organized and processed so that it’s meaningful.
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

3) 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.
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
4) An accounting information system (AIS) processes ________ to provide users with ________.
A) data; information
B) data; transactions
C) information; data
D) data; benefits
Answer:
Page Ref: 10
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) 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.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) 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.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
7) 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.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

8) 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.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) 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.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
10) 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
Answer:
Page Ref: 10
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

11) 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
Answer:
Page Ref: 8
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

12) 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) Hardware
Answer:
Page Ref: 10
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

13) 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.
Answer:
Page Ref: 12
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
14) 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.
Answer:
Page Ref: 12
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

15) 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.
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

16) 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
Answer:
Page Ref: 10
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
17) 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.
Answer:
Page Ref: 13
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

18) The process of creating value for customers is the result of nine activities that form a
A) value chain.
B) profitable operation.
C) successful business.
D) support system.
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic

19) 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.
Answer:
Page Ref: 13-14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic

20) Which of the following is a primary activity in the value chain?
A) infrastructure
B) technology
C) purchasing
D) marketing and sales
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic
21) 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
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic

22) An AIS provides value by
A) improving products or services through information that increases quality and reduces costs.
B) providing timely and reliable information to decision makers.
C) creating new products.
D) both A and B
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

23) In Chapter 1, Figure 1-4 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.
Answer:
Page Ref: 13
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic
24) 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.
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic

25) A good example of how an AIS is used to share knowledge within an organization is
A) the use of a corporate database 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.
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

26) One activity within the value chain 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.
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
27) 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
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

28) 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
Answer:
Page Ref: 12
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

29) 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.
Answer:
Page Ref: 12
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
30) 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
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

31) 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
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

32) 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
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

33) 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
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
34) 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
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

35) 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
Answer: G
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

36) 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
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

37) 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
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic

38) 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
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic

39) 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
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic

40) 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
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic

41) 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
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic

42)

Refer to the chart above. At what point, measured in terms of the net cost of information, does information overload begin?
A) 0
B) 5
C) 10
D) 12
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
43) 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 than $63.16
D) At least $300.00
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

44) 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.
Answer:
Page Ref: 9
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

45) 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
Answer:
Page Ref: 7-8
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
46) Which of the following is not a transaction cycle?
A) revenue
B) expenditure
C) human resources
D) general ledger and reporting
Answer:
Page Ref: 7-9
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

47) 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.
Answer:
Page Ref: 9
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

48) 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.
Answer:
Page Ref: 7
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

49) 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.
Answer:
Page Ref: 7
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
50) 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.
Answer:
Page Ref: 6-7
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

51) Which of the following is a true statement?
A) Business strategy directly influences AIS, but not information technology.
B) Information technology directly influences organizational culture, but not business strategy.
C) Organizational culture directly influences business strategy, but not AIS.
D) AIS directly influences information technology, but not business strategy.
Answer:
Page Ref: 13
Objective: Learning Objective 7
Difficulty : Difficult
AACSB: Analytic

52) The transaction 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.
Answer:
Page Ref: 7-8
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
53) The transaction cycle approach leads to efficient processing of a 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.
Answer:
Page Ref: 7
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

54) Which of the following is not an example of how an AIS adds value to an organization?
A) All employees at a hospital can access and update patient records from any computer terminal in the hospital.
B) A customer service representative can find a customer’s account data, purchase history, payment history, and salesperson’s name while on the phone with the customer, to resolve issues quickly.
C) Suppliers are able to access sales data directly from the point-of-sale system of a retailer and deliver inventory automatically when needed.
D) Client tax files are encrypted and made available on the CPA firm’s network to any employee with an access code.
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Difficult
AACSB: Analytic

55) Rolleigh Corp. identifies growth by new product development and product improvement as the number one corporate goal. An employee at Wrigley’s, one of Rolleigh’s wholly-owned subsidiaries, developed an innovation to an existing product that would directly address a shortcoming in the similar product offered by Rolleigh’s closest competitor. Wrigley’s current Return on Investment (ROI) is 15%, but the product innovation is expected to generate ROI of only 12%. Awarding bonuses to subsidiary managers based on ROI could result in:
A) goal conflict
B) information overload
C) goal congruence
D) decreased value of information
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic
56) Which of the following tradeoffs between characteristics of useful information is least objectionable?
A) Incomplete information received on a timely basis
B) Irrelevant information received in an understandable format
C) Unreliable information easily accessible
D) Verifiable information received in unreadable format
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

57) Paid time-off policies, job descriptions, and procedures manuals are examples of information needed to support key decisions in what business process?
A) Hire and train employees
B) Acquire inventory
C) Sell merchandise
D) Collect payment from customers
Answer:
Page Ref: 6
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

58) Which of the following is not a key decision to be made when starting a business?
A) How to estimate the allowance for uncollectible accounts
B) Whether to advertise on TV, radio, or newspaper
C) How to raise capital
D) Whether to accept American Express
Answer:
Page Ref: 5
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

59) Paying federal payroll taxes is part of which transaction cycle?
A) Human resources/payroll
B) Expenditure
C) Financing
D) Revenue
Answer:
Page Ref: 8
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic
60) Who of the following would not be involved in the revenue cycle?
A) Accounts payable clerk
B) Customer
C) Cashier
D) Credit manager
Answer:
Page Ref: 7-8
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

61) Which of the following is not one of the three basic types of data about a specific sales transaction that should be captured by an Accounting Information System?
A) Name of the employee who completed the sale
B) Daily sales quota
C) Product sold
D) Date
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

62) Who of the following is not a stakeholder with whom an accounting information system typically communicates directly?
A) Wall Street industry analyst
B) Venture capitalist
C) Company that supplies raw materials
D) Company that purchases finished goods for resale to consumers
Answer:
Page Ref: 6
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

63) Define the concept of a system.

64) Define data, information, and how the value of information is determined.

65) Define an accounting information system.

66) Identify the components of an accounting information system.

67) What is the CITP designation and why is it important to AIS?

68) Differentiate between an AIS course and other accounting courses.

69) What is the purpose behind the five primary activities in the value chain?

70) How can an AIS add value to the organization?

71) How can a well-designed AIS improve the efficiency and effectiveness of a company’s value chain?

72) Discuss the concept of a system and the issues of goal conflict and goal congruence.

73) Discuss the seven characteristics of useful information.

74) Explain what an AIS is, describe the basic tasks it performs in an organization, and give some examples of the types of accounting transactions it processes.

75) Discuss the components of a supply chain.

76) How can an AIS become part of the firm’s value chain and add value to the business?

77) How can the value of the information produced by an accounting information system be determined? What would a measurement and verification expert think about quantification and verification of such information?

78) Why have accounting software packages been designed with separate transaction modules?

79) How are “Give and Take” transactions classified in business today and what impact does this have on AIS?

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 2 Overview of Transaction Processing and ERP Systems

1) What usually initiates data input into a system?
A) The 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 a source document is submitted to the accounting department.
Answer:
Page Ref: 26
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) An ERP system might facilitate the purchase of direct materials by all of the following except
A) selecting the best supplier by comparing bids.
B) preparing a purchase order when inventory falls to reorder point.
C) routing a purchase order to a purchasing agent for approval.
D) communicating a purchase order to a supplier.
Answer:
Page Ref: 37
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking

3) Which of the following is not true about the accounts receivable subsidiary ledger?
A) Debits and credits in the subsidiary ledger must always equal.
B) Every credit sale is entered individually into the subsidiary ledger.
C) The total of the subsidiary ledgers must equal the control account.
D) The subsidiary ledgers play an important role in maintaining the accuracy of the data stored in the AIS.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
4) Which of the following is not usually a consideration when designing a coding system?
A) Government regulations on coding systems
B) Standardization
C) Future expansion needs
D) Facilitating report preparation
Answer:
Page Ref: 29
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

5) The general ledger
A) summarizes the transactions in journals.
B) only includes balance sheet accounts.
C) is posted in total to the general journal.
D) is the initial place to record depreciation expense.
Answer:
Page Ref: 28
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

6) For a retail business, a delivery of inventory, from a vendor (with whom there is an established credit relationship) would be initially recorded in which type of accounting record as part of which transaction cycle?
A) purchases journal; expenditure cycle
B) general journal; expenditure cycle
C) general ledger; expenditure cycle
D) cash disbursements journal; production cycle
Answer:
Page Ref: 31
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

7) Which of the following statements regarding special journals is not true?
A) The balances in a special journal must always reconcile to the general ledger.
B) Special journals are used to record large numbers of repetitive transactions.
C) Special journals are periodically summarized and posted to the general ledger.
D) Special journals provide a specialized format for recording similar transactions.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
8) Changing an employee’s hourly wage rate would be recorded in which file?
A) Employee master file
B) Employee transaction file
C) Payroll master file
D) Payroll transaction file
Answer:
Page Ref: 32
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

9) A typical source document could be
A) in some paper form.
B) a computer data entry screen.
C) a notepad entry.
D) both A and B
Answer:
Page Ref: 27
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

10) 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
Answer:
Page Ref: 26
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) 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
Answer:
Page Ref: 26
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
12) 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
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

13) The collection of job time tickets or time sheets is part of which transaction cycle?
A) revenue cycle
B) production cycle
C) human resources cycle
D) expenditure cycle
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

14) 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.
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

15) Which of the following documents would be found in the expenditure cycle?
A) delivery ticket
B) time card
C) credit memo
D) purchase order
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
16) Documents that are sent to customers or suppliers and then sent back to the company in the course of a business transaction are known as
A) turnaround documents.
B) source documents.
C) source data automation.
D) transaction documents.
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

17) Which of the following is an 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
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

18) Pre-numbering of source documents helps to verify that
A) all transactions have been recorded since the numerical sequence serves as a control.
B) source data automation was used to capture data.
C) documents have been used in order.
D) company policies were followed.
Answer:
Page Ref: 27-28
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

19) Source documents generally help to improve accuracy in transaction processing because
A) they specify which information to collect.
B) logically related data can be grouped in the same area of the document.
C) they provide directions and steps for completing the form.
D) All of the above are correct.
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
20) When the sum of all entries in the subsidiary ledger equals the balance in the corresponding general ledger account, it is assumed that
A) the recording processes were accurate.
B) all source documents were recorded.
C) adjusting entries are not required.
D) no errors exist in the subsidiary ledger.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

21) 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.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) Pre-numbered checks, invoices, and purchase orders are examples of
A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

23) A chart of accounts is an example of (select all that apply)
A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
Answer:, C
Page Ref: 28-29
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
24) Product items are often coded with (select all that apply)
A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
Answer:, D
Page Ref: 28-29
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

25) Which of the following statements is false?
A) Codes should be consistent with intended use.
B) Codes should allow for growth.
C) Codes should be as simple as possible.
D) Codes should be customized for each division of an organization.
Answer:
Page Ref: 29
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

26) To be effective, the chart of accounts must
A) be as concise as possible.
B) begin with account 001.
C) utilize only one coding technique.
D) contain sufficient detail to meet the information needs of the organization.
Answer:
Page Ref: 29
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

27) 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
Answer:
Page Ref: 29
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
28) 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) recording data in a general ledger
Answer:
Page Ref: 26
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

29) 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) subsidiary ledgers.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

30) A general journal
A) would be used to record monthly depreciation entries.
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.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

31) The general ledger
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.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
32) A subsidiary ledger
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.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

33) 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.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

34) An audit trail
A) provides the means to check the accuracy and validity of ledger postings.
B) begins with the general journal.
C) is automatically created in every computer-based information system.
D) is a summary of recorded transactions.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

35) Concerning a master file, which of the following statements is false?
A) A master file is conceptually similar to a ledger in a manual AIS.
B) A master file stores cumulative information.
C) A master file exists across fiscal periods.
D) A master file’s individual records are rarely, if ever, changed.
Answer:
Page Ref: 32
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
36) Which of the following is conceptually similar to a journal in a manual AIS?
A) database
B) master file
C) record
D) transaction file
Answer:
Page Ref: 33
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

37) 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 not frequently used.
Answer:
Page Ref: 33-34
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

38) The data processing method used by FedEx to track packages is an example of
A) real-time processing.
B) batch processing.
C) online batch processing.
D) real-time batch processing.
Answer:
Page Ref: 34
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
39) Which statement below regarding the AIS 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) The AIS was often just one of the information systems used by an organization to collect and process financial and nonfinancial data.
D) Traditionally, most AIS have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.
Answer:
Page Ref: 34
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

40) Callow Youth Clothing (CYC) 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 CYC 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 sales invoices
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

41) In Petaluma, California, electric power is provided to consumers by the Power To The People Electrical Company (PTTP), 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 bills
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking
42) 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 products. Inventory is updated in real time by the AIS. When designing a chart of accounts for this business, what is the minimum number of digits necessary to represent the general ledger account code, including subsidiary ledgers?
A) 4
B) 6
C) 7
D) 9
Answer:
Page Ref: 29
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

43) 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.
Answer:
Page Ref: 34
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

44) 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 figures is a(an)
A) entity.
B) attribute.
C) field.
D) record.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
45) 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.
Answer:
Page Ref: 32
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

46) 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, action figures (collectively) are a(an)
A) entity.
B) attribute.
C) field.
D) record.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
47) 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.
Answer:
Page Ref: 32
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

48) Hector Sanchez works in the accounting department of a multinational manufacturing company. His job includes updating accounts receivable based on sales orders and remittance advices. His responsibilities are part of the company’s
A) revenue cycle.
B) expenditure cycle.
C) financing cycle.
D) production cycle.
Answer:
Page Ref: 27
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

49) Hector Sanchez works in the accounting department of a multinational manufacturing company. His job includes updating accounts payable based on purchase orders and checks. His responsibilities are part of the company’s
A) revenue cycle.
B) expenditure cycle.
C) financing cycle.
D) production cycle.
Answer:
Page Ref: 27
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

50) 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.
Answer:
Page Ref: 27
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

51) The coding technique most likely used for sales orders is called a
A) group code.
B) block code.
C) data code.
D) sequence code.
Answer:
Page Ref: 28
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

52) Data processing includes all of the following except
A) verifying subsidiary ledger balances.
B) changing customer addresses.
C) removing inventory items no longer offered.
D) adding the name of a new vendor.
Answer:
Page Ref: 33
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

53) Which of the following is an example of an ERP system?
A) Alexis uses a computerized 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, the system helps her to prepare her taxes in just two hours.
C) Charlie keeps records of all his business records in a shoe box. Each week he enters all of the data into spreadsheets that automatically generate purchase orders, based on predetermined inventory reorder points. Production quotas for the coming week are also automatically generated based on 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.
Answer:
Page Ref: 36
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking

54) A specialized journal would be most likely to be used to enter
A) sales transactions.
B) monthly depreciation adjustments.
C) annual closing entries.
D) stock issuance transactions.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

55) 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 designs 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
Answer:
Page Ref: 27
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

56) Which of the following information would most likely be reviewed by management on an exception report?
A) Monthly cash budget
B) Quality control system failures
C) Unit sales by territory and salesperson
D) Income statement
Answer:
Page Ref: 34
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

57) All of the following situations would likely be communicated in an exception report except
A) production stoppages.
B) weekly credit and cash sales comparison.
C) low inventory level.
D) expense variances outside acceptable range.
Answer:
Page Ref: 34
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Reflective Thinking

58) Changing an employee’s hourly wage rate would be recorded where?
A) Employee master file
B) Employee transaction file
C) Special journal
D) Employee update file
Answer:
Page Ref: 32
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

59) Which of the following statements is not correct?
A) The audit trail is intended to verify the validity and accuracy of transaction recording.
B) The audit trail consists of records stored sequentially in an audit file.
C) The audit trail provides the means for locating and examining source documents.
D) The audit trail is created with document numbers and posting references.
Answer:
Page Ref: 31
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

60) Data about which of the following facets of a business activity is most likely to be recorded in a transaction file?
A) Business activity
B) Resources affected by the business activity
C) People who participate in the business activity
D) Place the business activity occurs
Answer:
Page Ref: 33
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

61) Data about all of the following facets of a business activity are most likely to be recorded in a master file except the
A) business activity.
B) resources affected by the business activity.
C) people who participate in the business activity.
D) place the business activity occurs.
Answer:
Page Ref: 32
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

62) Which of the following statements about data processing methods is true?
A) Online real-time processing does not store data in a temporary file.
B) Batch processing cannot be used to update a master file.
C) Control totals are used to verify accurate processing in both batch and online batch processing.
D) Online real-time processing is only possible with source data automation.
Answer:
Page Ref: 33
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking
63) In an ERP system, the module used to record data about transactions in the revenue cycle is called
A) order to cash.
B) purchase to pay.
C) financial.
D) customer relationship management.
Answer:
Page Ref: 37
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

64) A delivery of inventory from a vendor, with whom a credit line is already established, would be initially recorded in which type of accounting record and as part of what transaction cycle?
A) purchases journal; expenditure cycle
B) general journal; expenditure cycle
C) general ledger; expenditure cycle
D) cash disbursements journal; production cycle
Answer:
Page Ref: 27
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking

65) Implementation of an ERP system requires increased focus on all except which of the following controls ?
A) Segregation of duties between custody, authorization, and recording
B) Data entry controls on validity and accuracy
C) Controls over access to data
D) Appropriate disposal of hard copy reports
Answer:
Page Ref: 38
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic
66) Which statement below regarding the AIS and managerial reports is false?
A) The AIS is best utilized for financial data while the management information system is best utilized for operational data.
B) The AIS must be able to provide managers with detailed operational information about the organization’s performance.
C) Both financial and nonfinancial data are required for proper and complete evaluation of organizational performance.
D) Most source documents capture both financial and nonfinancial data about business transactions.
Answer:
Page Ref: 34
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

67) What is the purpose of source documents? What controls are embedded in source documents? Give two examples of source documents.

68) Describe an audit trail.

69) Explain how data is organized and stored in an AIS.

70) Describe the basic cycles and business activities for a typical merchandising company.

71) Describe guidelines to follow for a well-designed coding system.

72) Describe the relationship between the general and subsidiary ledgers.

73) Describe four advantages and four disadvantages of implementing an ERP system at a multinational corporation.

74) Describe the methods used to collect data about business activities. Describe design and control considerations for each of the data collection methods.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 3 Systems Documentation Techniques

1) Graphical representations of information are often supplemented by
A) product specifications.
B) narrative descriptions.
C) logic charts.
D) oral descriptions from management.
Answer:
Page Ref: 49
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) The correct label for Shape 1 in the flowchart below is

A) Purchase Order 2
B) Purchase Requisition 1
C) Accounts Payable Trial Balance
D) 2
Answer:
Page Ref: 55-60
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

3) The correct label for Shape 2 in the flowchart below is

A) 1
B) Purchase Requisition 1
C) Receiving Report 1
D) 2
Answer:
Page Ref: 55-60
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

4) The correct label for Shape 3 in the flowchart below is

A) Purchase Order 4
B) Purchase Requisition 1
C) Vendor
D) 4
Answer:
Page Ref: 55-60
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

5) The correct shape for the triangle labeled “Supplier” in the flowchart below is

A) magnetic disk
B) terminal
C) manual process
D) off-page connector
Answer:
Page Ref: 57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
6) When preparing a document flowchart, the names of organizational departments or job functions should appear in the
A) column headings.
B) right-hand margin.
C) written narrative accompanying the flowchart.
D) title of the flowchart.
Answer:
Page Ref: 60
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

7) All of the following are guidelines for preparing data flow diagrams except
A) show the most detail in the highest-level DFD.
B) include all storage files, even if they are only temporary.
C) uniquely name all data flows.
D) sequentially number process bubbles.
Answer:
Page Ref: 55
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

8) Flowchart symbols
A) are divided into four categories.
B) are unique to the organization creating the flowchart.
C) are normally drawn using a flowcharting template.
D) eliminate the need for narrative descriptions or explanations.
Answer:
Page Ref: 56
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

9) The Sarbanes-Oxley Act requires independent auditors to
A) create flowcharts using specialized software.
B) establish and maintain adequate controls in the client’s information system.
C) understand a client’s system of internal controls.
D) prepare and understand all types of system documentation.
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
10) 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) mandates that auditors must be able to prepare, evaluate and read documentation tools such as flowcharts.
D) all of the above
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) 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.
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) 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.
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
13) In a DFD, a “data sink” is also known as a
A) data store.
B) transformation process.
C) data flow.
D) data destination.
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) 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.
Answer:
Page Ref: 50-51
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

15) 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.
Answer:
Page Ref: 51
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

16) In a data flow diagram of the customer payment process, “update receivables” will appear above or in
A) a square.
B) a circle.
C) two horizontal lines.
D) none of the above
Answer:
Page Ref: 51
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
17) In a data flow diagram of the customer payment process, “Customer” will appear above or in
A) a square.
B) a circle.
C) two horizontal lines.
D) none of the above
Answer:
Page Ref: 51
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

18) In a 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.
Answer:
Page Ref: 51
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

19) 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.
Answer:
Page Ref: 55
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

20) More than one arrow is needed between symbols on a DFD 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.
Answer:
Page Ref: 55
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
21) A DFD created at the highest-level or summary view is referred to as a
A) process diagram.
B) overview diagram.
C) content diagram.
D) context diagram.
Answer:
Page Ref: 52
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

22) In a payroll processing DFD, the “prepare reports” activity will be represented by ________, the “employee payroll file” will be represented by ________, and the “management” will be represented by ________.
A) a circle; two horizontal lines; a square
B) a circle; two horizontal lines; two horizontal lines
C) a rectangle; a square; a circle
D) a square; two horizontal lines; a circle
Answer:
Page Ref: 54
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

23) 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) Use a manual processing symbol to indicate a document being filed.
Answer:
Page Ref: 60
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
24) Which is a true statement regarding a document flowchart?
A) A document flowchart illustrates the sequence of logical operations performed by a computer.
B) A document flowchart is particularly useful in analyzing the adequacy of internal control procedures.
C) A document flowchart should ignore control processes and actions.
D) A document flowchart is not normally used in the systems design process.
Answer:
Page Ref: 57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

Use the chart below to answer the following questions regarding flow chart symbols.

25) Which symbol would be used in a flowchart to represent a computer process?
A) #1
B) #2
C) #5
D) #15
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

26) Which symbol would be used in a flowchart to represent a decision?
A) #10
B) #16
C) #9
D) #6
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

27) Which symbol would be used in a flowchart to represent an invoice sent to a customer?
A) #2
B) #6
C) #1
D) #15
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

28) Which symbol would be used in a flowchart to represent a general ledger?
A) #2
B) #1
C) #3
D) #5
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

29) Which symbol would be used in a flowchart to represent a manual process?
A) #5
B) #6
C) #10
D) #11
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

30) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

31) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

32) Which symbol would be used in a flowchart to represent a file of paper documents?
A) #7
B) #8
C) #9
D) #15
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

33) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

34) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

35) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

36) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
37) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

38) 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
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

39) Which symbol would be used in a flowchart to represent a flow of data or documents?
A) #12
B) #13
C) #14
D) #15
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

40) Which symbol would be used in a flowchart to represent a communication link?
A) #12
B) #13
C) #14
D) #15
Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
41) 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
Answer:
Page Ref: 58
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

42) 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.
Answer:
Page Ref: 60
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

43) In a program flowchart, branching to alternative paths is represented by
A) a terminal.
B) data/information flow.
C) computer operation.
D) decision diamond.
Answer:
Page Ref: 57
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
44) 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

45) 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
46) 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

47) 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
48) 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
49) Chuck and Jill Scruggs 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
50) Chuck and Jill Scruggs 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
51) Chuck and Jill Scruggs 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
52) Chuck and Jill Scruggs 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)

Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

53) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements to internal controls. 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.
Answer:
Page Ref: 57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking
54) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to document the existing accounting information system, and focus on the activities and flow of data between activities. 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.
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

55) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order to develop an understanding of the computer programs 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.
Answer:
Page Ref: 62
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Reflective Thinking

56) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order to 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.
Answer:
Page Ref: 60
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking
57) When a sale is made, data is captured by 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)

B)

C)

D)

Answer:
Page Ref: 56
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

58) A materials requisition order document is prepared from the inventory file and the materials file, both of which are stored on disk. Which one of the following diagrams represents this activity?
A)

B)

C)

D)

Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

59) A customer’s 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?
A)

B)

C)

D)

Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

60) A business simulation game that is used by colleges and universities all over the world has students submit decisions over the Internet. Decisions are stored online, processed on the server, and then the results are stored online. They are then downloaded by students in preparation for the next round. Which one of the following diagrams represents this activity?
A)

B)

C)

D)

Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

61) A report is generated from data stored on magnetic disk. Which one of the following diagrams represents this activity?
A)

B)

C)

D)

Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking
62) An employee receives a paycheck prepared in the payroll process. Which one of the following diagrams represents this activity?
A)

B)

C)

D)

Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking
63) A student manually prepares a homework assignment and then turns it in to her teacher. Which one of the following diagrams represents this activity?
A)

B)

C)

D)

Answer:
Page Ref: 56-57
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

64) A well-planned and drawn level 0 data flow diagram for the expenditure cycle would show which of the following processes?
A) 0.1 Order Goods; 1.1 Receive and Store Goods; 2.1 Pay for Goods
B) 0.1 Order Goods; 0.2 Receive and Store Goods; 0.3 Pay for Goods
C) 1.0 Order Goods; 2.0 Receive and Store Goods; 3.0 Pay for Goods
D) 1.0 Order Goods; 1.1 Receive and Store Goods; 1.2 Pay for Goods
Answer:
Page Ref: 52-53
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking
65) A well-planned and drawn context data flow diagram will include how many processes?
A) One
B) Between 5 and 7
C) Between 2 and 7, but no more than 7
D) As many as are needed to accurately depict the process being documented
Answer:
Page Ref: 52
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

66) Which of the following is not true about program flowcharts?
A) Program flowcharts are a high-level overview of all business processes.
B) Program flowcharts document the processing logic of computer programs.
C) A program flowchart will exist for every computer process symbol on a system flowchart.
D) Program flowcharts increase computer programmer productivity.
Answer:
Page Ref: 62
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

67) Data flow diagrams depict
A) processes, but not who is performing the processes.
B) processes, but not the data that flows between processes.
C) who is performing processes, but not how they perform the process.
D) who is performing processes, but not the data that flows between processes.
Answer:
Page Ref: 50
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking

68) Which is the correct label for the blank transformation process circle in the data flow diagram below?

A) 1.2 Check Credit
B) 1.2 Enter Order in Sales Journal
C) 1.2 Does Customer Have Credit?
D) 1.2 Salesperson Approves
Answer:
Page Ref: 52
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

69) In the data flow diagram below, inventory is a

A) data store.
B) data source.
C) data flow.
D) data source and destination.
Answer:
Page Ref: 52
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

70) Discuss the ways in which information professionals interact with documentation tools and the various levels of understanding necessary.

71) Explain two reasons why it is important to have a working knowledge of DFDs and flowcharting.

72) What does the Sarbanes-Oxley Act require that is relevant to documentation tools?

73) Describe a situation in which data flow should be shown with two data flow lines instead of one.

74) Describe the different levels of DFDs.

75) Describe a system flowchart. Describe a program flowchart. How are the two interrelated?

76) How is a DFD different from a flowchart?

77) Explain the relevance of the Sarbanes Oxley Act to the documentation tools presented in this chapter.

78) Discuss the idea of a data flow.

79) What is the value of using a context diagram when working with DFDs?

80) Identify five important guidelines for drawing a DFD. Select one from your list and describe why it could be the most important one to consider when preparing a DFD. Support your choice with an example.

81) Identify five important guidelines for drawing a flowchart. Select one from your list and describe why it could be the most important one to consider when preparing a flowchart. Support your choice with an example.
82) Following is a context diagram for a current Payroll Processing System. a) Identify the data sources and destinations, data flows, and transformation process marked by question marks. b) What would you need to do to explode this diagram?

83) Identify the mistake(s) in each flowchart segment.

Accounting Information Systems, 12e (Romney/Steinbart)

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 4 Relational Databases

1) Using a file-oriented approach to data and information, data is maintained in
A) a centralized database.
B) many interconnected files.
C) many separate files.
D) a decentralized database.
Answer:
Page Ref: 88
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) In a well-structured relational database,
A) every table must be related to at least one other table.
B) every table must be related to all other tables.
C) one table must be related to at least one other table.
D) one table must be related to all other tables.
Answer:
Page Ref: 96-98
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

3) File-oriented approaches create problems for organizations because of
A) multiple transaction files.
B) a lack of sophisticated file maintenance software.
C) multiple users.
D) multiple master files.
Answer:
Page Ref: 88
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

4) Which statement is true regarding file systems?
A) Transaction files are similar to ledgers in a manual AIS.
B) Multiple master files create problems with data consistency.
C) Transaction files are permanent.
D) Individual records are never deleted in a master file.
Answer:
Page Ref: 88
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) The ________ acts as an interface between the database and the various application programs.
A) data warehouse
B) database administrator
C) database management system
D) database system
Answer:
Page Ref: 88
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

6) The combination of the database, the DBMS, and the application programs that access the database through the DBMS is referred to as the
A) data warehouse.
B) database administrator.
C) database system.
D) database manager.
Answer:
Page Ref: 88
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

7) The person responsible for the database is the
A) data coordinator.
B) database administrator.
C) database manager.
D) database master.
Answer:
Page Ref: 88
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

8) All of the following are benefits of the database approach except:
A) Data integration and sharing
B) Decentralized management of data
C) Minimal data redundancy
D) Cross-functional analysis and reporting
Answer:
Page Ref: 89
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) The physical view of a database system refers to
A) how a user or programmer conceptually organizes and understands the data.
B) how the DBMS accesses data for a certain application program.
C) how and where the data are physically arranged and stored.
D) how master files store data values used by more than one application program.
Answer:
Page Ref: 90
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

10) The ________ handles the link between the way data are physically stored and each user’s logical view of that data.
A) data warehouse
B) data dictionary
C) database management (DBMS) software
D) schema
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

11) The logical structure of a database is described by the
A) data dictionary.
B) schema.
C) database management system.
D) internal level.
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

12) The schema that provides an organization-wide view of the entire database is known as the
A) external-level schema.
B) internal-level schema.
C) conceptual-level schema.
D) logical view of the database.
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

13) A set of individual user views of the database is called the
A) conceptual-level schema.
B) internal-level schema.
C) external-level schema.
D) meta-schema.
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

14) A low-level view of the database that describes how the data are actually stored and accessed is the
A) conceptual-level schema.
B) subschema.
C) internal-level schema.
D) external-level schema.
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

15) Record layouts, definitions, addresses, and indexes will be stored at the ________ level schema.
A) external
B) conceptual
C) internal
D) meta
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

16) The ________ contains information about the structure of the database.
A) data definition language
B) data dictionary
C) data warehouse
D) database management system
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

17) Which of the following would not be found in a data dictionary entry for a data item?
A) records containing a specific data item
B) physical location of the data
C) source of the data item
D) field type
Answer:
Page Ref: 93
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

18) The data dictionary usually is maintained
A) automatically by the DBMS.
B) by the database administrator.
C) by the database programmers.
D) by top management.
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

19) Reports produced using the data dictionary could include all of the following except a list of
A) programs where a data item is used.
B) synonyms for the data items in a particular file.
C) outputs where a data element is used.
D) the schemas included in a database.
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

20) Which statement below concerning the database management system (DBMS) is false?
A) The DBMS automatically creates application software for users, based on data dictionary parameters.
B) The DBMS automatically maintains the data dictionary.
C) Users’ requests for information are transmitted to the DBMS through application software.
D) The DBMS uses special languages to perform specific functions.
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

21) Which would not generally be considered a data dictionary output report?
A) A list of cash balances in the organization’s bank accounts
B) A list of all programs in which a data element is used
C) A list of all synonyms for the data elements in a particular file
D) A list of all data elements used by a particular user
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) Creating an empty table in a relational database requires use of the ________, and populating that table requires the use of ________.
A) DDL; DML
B) DQL; SQL
C) DDL; DQL
D) DML; DDA
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

23) When the human resources manager wants to gather data about vacation and personal day usage by employees and by departments, the manager would use which language?
A) Data Query Language
B) Data Manipulation Language
C) Data Report Language
D) Data Definition Language
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

24) If a national sales tax were implemented, which language would be used to add a new field in the sales table to track the sales tax due?
A) Data Definition Language
B) Data Manipulation Language
C) Data Query Language
D) Data Update Language
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

25) The feature in many database systems that simplifies the creation of reports by allowing users to specify the data elements desired and the format of the output. is named the
A) report writer.
B) report generator.
C) report creator.
D) report printer.
Answer:
Page Ref: 92
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

26) The abstract representation of the contents of a database is called the
A) logical data model.
B) data dictionary.
C) physical view.
D) schema.
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

27) The problem of changes (or updates) to data values in a database being incorrectly recorded is known as
A) an update anomaly.
B) an insert anomaly.
C) a delete anomaly.
D) a memory anomaly.
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

28) The potential inconsistency that could occur when there are multiple occurrences of a specific data item in a database is called the
A) update anomaly.
B) insert anomaly.
C) inconsistency anomaly.
D) delete anomaly.
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

29) Inability to add new data to a database without violating the basic integrity of the database is referred to as the
A) update anomaly.
B) insert anomaly.
C) integrity anomaly.
D) delete anomaly.
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

30) A relational database in which customer data is not maintained independently of sales invoice data will most likely result in
A) an update anomaly.
B) an insert anomaly.
C) a delete anomaly.
D) an integrity anomaly.
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

31) The problem of losing desired information from a database when an unwanted record is purged from the database is referred to as the ________ anomaly.
A) purge
B) erase
C) delete
D) integrity
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

32) The delete anomaly
A) may result in unintentional loss of important data.
B) is usually easily detected by users.
C) restricts the addition of new records.
D) prevents users from deleting outdated data from records or tables.
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

33) The update anomaly in file-based systems or unnormalized database tables
A) occurs because of data redundancy.
B) restricts addition of new fields or attributes.
C) results in records that cannot be updated.
D) is usually easily detected by users.
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

34) In a relational database, requiring that every record in a table have a unique identifier is called the
A) entity integrity rule.
B) referential integrity rule.
C) unique primary key rule.
D) foreign key rule.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

35) The database requirement that foreign keys must be null or have a value corresponding to the value of a primary key in another table is formally called the
A) entity integrity rule.
B) referential integrity rule.
C) rule of keys.
D) foreign key rule.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

36) In a well-structured database, the constraint that ensures the consistency of the data is known as the
A) entity integrity rule.
B) referential integrity rule.
C) logical view.
D) consistency integrity rule.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

37) Which statement below is false regarding the basic requirements of the relational data model?
A) Every column in a row must be single-valued.
B) All non-key attributes in a table should describe a characteristic about the object identified by the primary key.
C) Foreign keys, if not null, must have values that correspond to the value of a primary key in another table.
D) Primary keys can be null.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

38) Identify the aspect of a well-structured database that is incorrect.
A) Data is consistent.
B) Redundancy is minimized and controlled.
C) All data is stored in one table or relation.
D) The primary key of any row in a relation cannot be null.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

39) In the database design approach known as normalization, the first assumption made about data is
A) there is no redundancy in the data.
B) the delete anomaly will not apply since all customer records will be maintained indefinitely.
C) everything is initially stored in one large table.
D) the data will not be maintained in 3NF tables.
Answer:
Page Ref: 97
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic
40) The database design method in which a designer uses knowledge about business processes to create a diagram of the elements to be included in the database is called
A) normalization.
B) decentralization.
C) geometric data modeling.
D) semantic data modeling.
Answer:
Page Ref: 97
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

41) Which of the statements below is incorrect?
A) Semantic data modeling facilitates the efficient design of databases.
B) Semantic data modeling facilitates communicating with the intended users of the system.
C) Semantic data modeling allows a database designer to use knowledge about business processes to design the database.
D) Semantic data modeling follows the rules of normalization in the design of a database.
Answer:
Page Ref: 97
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

42) What is one potential drawback in the design and implementation of database systems for accounting?
A) Double-entry accounting relies on redundancy as part of the accounting process but well-designed database systems reduce and attempt to eliminate redundancy.
B) Relational DBMS query languages will allow financial reports to be prepared to cover whatever time periods managers want to examine.
C) Relational DBMS provide the capability of integrating financial and operational data.
D) Relational DBMS can accommodate multiple views of the same underlying data; therefore, tables storing information about assets can include data about both historical and replacement costs.
Answer:
Page Ref: 104
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking
43) Which is probably the most immediate and significant effect of database technology on accounting?
A) replacement of the double entry-system
B) change in the nature of financial reporting
C) elimination of traditional records such as journals and ledgers
D) quicker access to and greater use of accounting information in decision-making
Answer:
Page Ref: 105
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

44) In a well-designed and normalized database, which of the following attributes would be a foreign key in a cash receipts table?
A) Customer number
B) Cash receipt date
C) Remittance advice number
D) Customer check number
Answer:
Page Ref: 96
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

45) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the first table is:
A) name
B) birth date
C) a foreign key in the second table.
D) the primary key in the second table.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking
46) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the second table is:
A) name
B) birth date
C) a combination of primary keys in the first table
D) the same as the primary key in the first table
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Difficult
AACSB: Reflective Thinking

47) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The entities described by the second table are:
A) marmosets
B) parental relationships
C) registration numbers
D) names
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking

48) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The entities described by the first table are:
A) marmosets
B) parental relationships
C) registration numbers
D) names
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking

49) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the first table is:
A) name
B) registration number
C) date of birth
D) relationship number
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking
50) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the second table is:
A) name
B) registration number
C) date of birth
D) relationship number
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking

51) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. As you read through the records, you notice that some customer last names have different first names in different records. For example, R. Framington Farnsworth (custom chopper), Bob Farnsworth (tattoo), and Snake Farnsworth (tattoos and piercings) all seem to be the same person. This is an example of what type of problem in the existing records?
A) Entity integrity
B) Referential integrity
C) Update anomaly
D) Insert anomaly
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking
52) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. As you read through the records, you notice that some describe multiple services. For example, Sheila Yasgur (notation: won lottery) got a custom chopper, multiple tattoos, and piercings in undisclosed locations (no pictures.) You realize that, in these cases, a single written record will have to be translated into multiple sales records. This is an example of what type of problem in the existing records?
A) Entity integrity
B) Referential integrity
C) Update anomaly
D) Insert anomaly
Answer:
Page Ref: 94
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

53) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. As you read through the records, you notice that some customer last names have different first names in different records. For example, R. Framington Farnsworth (custom chopper), Bob Farnsworth (tattoo), and Snake Farnsworth (tattoos and piercings) all seem to be the same person. You explain to Scuz that every customer must be identified by a unique customer number in the AIS. You are referring to the
A) entity integrity rule.
B) referential integrity rule.
C) update anomaly.
D) insert anomaly.
Answer:
Page Ref: 96
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking
54) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. You begin development of the relational database that will form the core of the AIS by envisioning the record stored in a single table with a column that represents each attribute. You then begin to break this table down into smaller tables. This process is called
A) integration.
B) optimization.
C) minimization.
D) normalization.
Answer:
Page Ref: 97
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Reflective Thinking

55) Chelsana Washington is a medical equipment sales representative. Her company has provided her with a laptop computer that uses wireless connectivity to access the accounting information system from virtually anywhere in the country. She, and the other sales reps, have access to view customer and product information. They have access that allows them to enter and cancel customer orders. The permissions for Chelsana define a(an) ________ in the company’s database management system.
A) conceptual-level schema
B) subschema
C) data dictionary
D) physical view
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
56) Chelsana Washington is a medical equipment sales representative. Her company has provided her with a laptop computer that uses wireless connectivity to access the accounting information system from virtually anywhere in the country. She, and the other sales reps, have access to view customer and product information. They have access that allows them to enter and cancel customer orders. The permissions for the sales reps define a(an) ________ in the company’s database management system.
A) conceptual-level schema
B) external-level schema
C) data dictionary
D) physical view
Answer:
Page Ref: 90
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

57) Shandra Bundawi is a new graduate who has been hired by an old-line, family-owned furniture manufacturing company in the northeast. She has been asked to analyze the company’s accounting information system and to recommend cost-effective improvements. After noting that the production and sales departments use database systems that are entirely separated, she recommends that they be combined. Implementation of her recommendation would benefit the company by contributing to data
A) independence.
B) integration.
C) redundancy.
D) qualifications.
Answer:
Page Ref: 89
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Reflective Thinking
58) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done. These have been entered into a computerized accounting information system that his accountant refers to as a “data warehouse.” Scuz is considering an expansion of his business into scarification, and has asked his accountant to identify past customers who might be likely candidates for this service. Scuz wants his accountant to engage in
A) customer auditing.
B) customer resource management.
C) data mining.
D) enterprise resource planning.
Answer:
Page Ref: 89
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

59) Heidi Holloway is a headhunter with Career Funnel in Boca Raton, Florida. Heidi is proud of the company’s motto: We funnel workers into jobs. The foundation of CF’s success is its accounting information system. When a client is placed with an employer, a record is created that identifies the employment relationship. CF follows up on placements by surveying both employers and clients about the employment experience and then entering the results into the AIS. Clients are uniquely identified by social security number. In records that contain client survey data,the social security number number is likely to be
A) the primary key.
B) a foreign key.
C) combined with other data fields to form a primary key.
D) null.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Reflective Thinking

60) The data on this sales invoice would be generated from how many well-structured tables in a well-designed relational database?

A) 6
B) 5
C) 4
D) 7
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Difficult
AACSB: Reflective Thinking

61) Which of the following would not be one of the well-structured tables in a well-designed relational database used to generate this sales invoice?

A) Customer Order
B) Customer
C) Sales
D) Sales Order
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Difficult
AACSB: Reflective Thinking

62) Which of the following would not be true about the well-structured tables in a well-designed relational database used to generate this sales invoice?

A) Quantity would be generated from the Sales table.
B) 34567 would be a primary key in the Sales table.
C) Unit Price would be generated from the Inventory table.
D) Hardware City is an example of a non-key data value in the Customer table.
Answer:
Page Ref: 96
Objective: Learning Objective 5
Difficulty : Difficult
AACSB: Reflective Thinking

63) Which one of the following results corresponds to the query below?

A)

B)

C)

D)

Answer:
Page Ref: 97-104
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

64) Which one of the following results corresponds to the query below?

A)

B)

C)

D)

Answer:
Page Ref: 97-104
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Reflective Thinking
65) Which one of the following results corresponds to the query below?

A)

B)

C)

D)

Answer:
Page Ref: 97-104
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Reflective Thinking
66) Describe a major advantage of database systems over file-oriented transaction processing systems.

67) What is the difference in logical view and physical view?

68) Describe the different schemas involved in a database structure. What is the role of accountants in development of schemas?

69) Describe a data dictionary.

70) Explain the types of attributes that tables possess in a relational database.

71) Explain the two advantages semantic data modeling has over normalization when designing a relational database.

72) Explain the difference between file-oriented transaction processing systems and relational database systems. Discuss the advantages and disadvantages of each system.

73) Discuss redundancy as it applies to database design.

74) Discuss the ways in which a well-designed DBMS will facilitate the three basic functions of creating, changing, and querying data.

75) List the four DBMS “languages” and describe who uses each and for what purpose.

76) Describe the information that is contained in the data dictionary.

77) Explain the relational database data model.

78) What are the basic requirements when logically designing a relational database model?

79) Describe what you think will be the main impact of database technology in your career.

80) Chagall Curtain Company is changing from a file-oriented system to a relational database system. Design at least three tables that would be needed to capture data for a sales transaction. Each table should include a primary key, three non-key attributes, and foreign keys as necessary. Make up data

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 5 Computer Fraud

1) Perhaps the most striking fact about natural disasters in relation to AIS controls is that
A) many companies in one location can be seriously affected at one time by a disaster.
B) losses are absolutely unpreventable.
C) there are a large number of major disasters every year.
D) disaster planning has largely been ignored in the literature.
Answer:
Page Ref: 121
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) Which of the following best describes lapping?
A) Applying cash receipts to a different customer’s account in an attempt to conceal previous thefts of cash receipts.
B) Inflating bank balances by transferring money among different bank accounts.
C) Increasing expenses to conceal that an asset was stolen.
D) Stealing small amounts of cash, many times over a period of time.
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

3) Which of the following is the greatest risk to information systems and causes the greatest dollar losses?
A) human errors and omissions
B) physical threats such as natural disasters
C) dishonest employees
D) fraud and embezzlement
Answer:
Page Ref: 122
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
4) All of the following could lead to computer fraud except
A) allowing computer operators full access to the computer room.
B) releasing data to unauthorized users.
C) allowing computer users to test software upgrades.
D) storing backup tapes in a location where they can be quickly accessed.
Answer:
Page Ref: 131-134
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

5) Which of the following is not an example of the fraud triangle characteristic concerned with easing a fraudster’s conscience?
A) Revenge against the company
B) Sense of entitlement as compensation for receiving a lower than average raise
C) Intent to repay “borrowed” funds in the future
D) Belief that the company won’t suffer because an insurance company will reimburse losses
Answer:
Page Ref: 130
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

6) Most fraud perpetrators are insiders because
A) insiders are more dishonest than outsiders.
B) insiders know more about the system and its weaknesses than outsiders.
C) outsiders are more likely to get caught than insiders.
D) insiders have more need for money than outsiders.
Answer:
Page Ref: 126
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

7) Most frauds are detected by
A) external auditors.
B) internal auditors.
C) accident.
D) hotline tip.
Answer:
Page Ref: 135
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic
8) Amy wants to open a floral shop in a downtown business district. She doesn’t have funds enough to purchase inventory and pay six months rent up front. Amy approaches a good friend, Coleen, to discuss the possibility of Coleen investing funds and becoming a 25% partner in the business. After a lengthy discussion Coleen agrees to invest. Eight months later, Coleen and Amy have a falling out. In order for Coleen to sue Amy for fraud, all the following must be true except
A) Amy told Coleen she had worked at a floral shop for several years, when in fact she did not have any prior experience in floral retail.
B) Coleen’s decision to invest was primarily based on Amy’s assertion that she had prior floral retail experience.
C) Coleen’s 25% share of the business is worth substantially less than her initial investment.
D) Before Coleen invested, Amy prepared a detailed business plan and sales forecasts, and provided Coleen with copies.
Answer:
Page Ref: 123
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

9) Perpetrators of theft of company assets typically exhibit all the following characteristics except that they
A) attempt to return or pay back stolen amounts soon after the initial theft, but find they are unable to make full restitution.
B) use trickery or lies to gain the confidence and trust of others at the organization they defraud.
C) become bolder and more greedy the longer the theft remains undetected.
D) begin to rely on stolen amounts as part of their income.
Answer:
Page Ref: 124-125
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

10) “Cooking the books” is typically accomplished by all the following except
A) inflating accounts payable.
B) accelerating recognition of revenue.
C) delaying recording of expenses.
D) overstating inventory.
Answer:
Page Ref: 125
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

11) SAS No. 99 requires that auditors
A) plan audits based on an analysis of fraud risk.
B) detect all material fraud.
C) alert the Securities and Exchange Commission of any fraud detected.
D) take all of the above actions.
Answer:
Page Ref: 125
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

12) Which of the following is not a management characteristic that increases pressure to commit fraudulent financial reporting?
A) Close relationship with the current audit engagement partner and manager
B) Pay for performance incentives based on short-term performance measures
C) High management and employee turnover
D) Highly optimistic earnings projections
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

13) Intentional or reckless conduct that results in materially misleading financial statements is called
A) financial fraud.
B) misstatement fraud.
C) fraudulent financial reporting.
D) audit failure fraud.
Answer:
Page Ref: 125
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

14) Researchers have compared the psychological and demographic characteristics of white-collar criminals, violent criminals, and the general public. They found that
A) few differences exist between white-collar criminals and the general public.
B) white-collar criminals eventually become violent criminals.
C) most white-collar criminals invest their illegal income rather than spend it.
D) most white-collar criminals are older and not technologically proficient.
Answer:
Page Ref: 126
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

15) Which of the following is an opportunity that could contribute to employee fraud?
A) an employee’s spouse loses their job
B) an employee suddenly acquires lots of credit cards
C) an employee is upset that he was passed over for a promotion
D) close association with suppliers or customers
Answer:
Page Ref: 129
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

16) Which of the following is a financial pressure that could cause an employee to commit fraud?
A) a feeling of not being appreciated
B) failing to receive a deserved promotion
C) believing that their pay is too low relative to others around them
D) having a spouse injured in a car accident and in the hospital for several weeks
Answer:
Page Ref: 127
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

17) Opportunity to commit fraud is comprised of three stages. The stage that often takes most time and effort would include
A) stealing inventory from the warehouse.
B) selling stolen inventory to get cash.
C) lapping accounts receivable.
D) creating false journal entries to overstate revenue.
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

18) In many cases of fraud, the ________ takes more time and effort than the ________.
A) concealment; theft
B) theft; concealment
C) conversion; theft
D) conversion; concealment
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

19) Which of the following is the best way to hide theft of assets?
A) Creating “cash” through the transfer of money between banks
B) Conversion of stolen assets into cash
C) Stealing cash from customer A and then using customer B’s balance to pay customer A’s accounts receivable
D) Charging the stolen asset to an expense account
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

20) In a ________ scheme, customer receipts are stolen and then subsequent payments by other customers are misapplied to cover the theft of the original receipts.
A) kiting
B) laundering
C) bogus expense
D) lapping
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

21) One fraudulent scheme covers up a theft by creating cash through the transfer of money between banks. This is known as
A) lapping.
B) misappropriation of assets.
C) kiting.
D) concealment.
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
22) Which characteristic of the fraud triangle often stems from a lack of internal controls within an organization?
A) pressure
B) opportunity
C) rationalization
D) concealment
Answer:
Page Ref: 129
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

23) Which situation below makes it easy for someone to commit a fraud?
A) placing excessive trust in key employees
B) inadequate staffing within the organization
C) unclear company policies
D) All of the above situations make it easy for someone to commit a fraud.
Answer:
Page Ref: 129
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

24) What is the most prevalent opportunity within most companies to commit fraud?
A) lack of any internal controls
B) failure to enforce the internal controls
C) loopholes in the design of internal controls
D) management’s failure to believe employees would commit fraud
Answer:
Page Ref: 129
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

25) Which characteristic of the fraud triangle relates to excuses that perpetrators use to justify their illegal behavior?
A) pressure
B) opportunity
C) rationalization
D) concealment
Answer:
Page Ref: 130
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
26) The US Justice Department defines computer fraud as
A) any crime in which a computer is used.
B) an illegal act in which knowledge of computer technology is essential.
C) any act in which cash is stolen using a computer.
D) an illegal act in which a computer is an integral part of the crime.
Answer:
Page Ref: 130
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

27) The most efficient way to conceal asset misappropriation is to
A) write-off a customer receivable as bad debt.
B) alter monthly bank statements before reconciliation.
C) alter monthly physical inventory counts to reconcile to perpetual inventory records.
D) record phony payments to vendors.
Answer:
Page Ref: 128
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

28) Computer fraud is often much more difficult to detect than other types of fraud because
A) perpetrators usually only steal very small amounts of money at a time, thus requiring a long period of time to have elapsed before they’re discovered.
B) massive fraud can be committed in only seconds, leaving little or no evidence.
C) most perpetrators invest their illegal income rather than spend it, thus concealing key evidence.
D) most computer criminals are older and are considered to be more cunning when committing such a fraud.
Answer:
Page Ref: 130
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

29) Why is computer fraud often more difficult to detect than other types of fraud?
A) Rarely is cash stolen in computer fraud.
B) The fraud may leave little or no evidence it ever happened.
C) Computers provide more opportunities for fraud.
D) Computer fraud perpetrators are just more clever than other types of criminals.
Answer:
Page Ref: 130
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
30) Why do many fraud cases go unreported and unprosecuted?
A) Major fraud is a public relations nightmare.
B) Fraud is difficult, costly, and time-consuming to investigate and prosecute.
C) Law enforcement and the courts are often so busy with violent crimes that little time is left for fraud cases.
D) all of the above
Answer:
Page Ref: 131
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

31) The fraud that requires the least computer knowledge or skill involves
A) altering or falsifying source data.
B) unauthorized use of computers.
C) tampering with or copying software.
D) forging documents like paychecks.
Answer:
Page Ref: 131
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

32) The simplest and most common way to commit a computer fraud is to
A) alter computer input.
B) alter computer output.
C) modify the processing.
D) corrupt the database.
Answer:
Page Ref: 131
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

33) Downloading a master list of customers and selling it to a competitor is an example of
A) data fraud.
B) output theft.
C) download fraud.
D) fraudulent financial reporting.
Answer:
Page Ref: 133
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
34) Which of the following will not reduce the likelihood of an occurrence of fraud?
A) encryption of data and programs
B) use of forensic accountants
C) adequate insurance coverage
D) required vacations and rotation of duties
Answer:
Page Ref: 134-135
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

35) Which of the following is not an example of one of the basic types of fraud?
A) While straightening the store at the end of the day, a shoe store employee finds and keeps an expensive pair of sunglasses left by a customer.
B) An executive devised and implemented a plan to accelerate revenue recognition on a long-term contract, which will allow the company to forestall filing for bankruptcy. The executive does not own any stock, stock options or grants, and will not receive a bonus or perk because of the overstated revenue.
C) A purchasing agent places a large order at higher-than-normal unit prices with a vendor that gave the agent tickets to several football games.
D) A salesperson approves a large sales discount on an order from a company owned partially by the salesperson’s sister.
Answer:
Page Ref: 124-125
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

36) On Monday morning, Janet Pillsner, Chief Information Officer at International Securities Corporation (ISC), got some bad news. A tape used to store system data backups was lost while it was being transported to an offsite storage location. She called a meeting of her technical staff to discuss the implications of the loss. Which of the following is most likely to relieve her concerns over the potential cost of the loss?
A) The shipper has insurance that will reimburse ISC for the cost of the tape.
B) ISC has a copy of the tape onsite, so a new copy for storage offsite can easily be prepared.
C) The tape was encrypted and password protected.
D) ISC has a comprehensive disaster recovery plan.
Answer:
Page Ref: 135
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Reflective Thinking
37) A simple method for catching or preventing many types of employee fraud is to
A) monitor all employee behavior using video cameras.
B) require all employees to take annual vacations.
C) explain to employees that fraud is illegal and that it will be severely punished.
D) monitor employee bank accounts and net worth.
Answer:
Page Ref: 134
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

38) Describe two kinds of fraud.

39) What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?

40) Explain the impact of SAS No. 99 on auditors’ responsibilities.

41) Why is computer fraud on the rise?

42) Describe at least four ways a company can make fraud less likely to occur.

43) Describe four ways companies can reduce losses from fraud.

44) What are some of the distinguishing characteristics of fraud perpetrators?

45) Why do fraudulent acts often go unreported and are therefore not prosecuted?

46) A teller at a savings and loan drive-through accepted a cash payment from customer #1 for an auto loan. The teller appeared to process the payment, but told the customer the printer was jammed and she can’t print a receipt. The customer accepted the excuse and drove away. The teller pocketed the cash and wrote down customer #1’s loan number and payment amount for future reconciling. A couple of days before customer #1’s monthly statement was printed, the teller recorded a cash payment from customer #2 as if it were made by customer #1. The teller pocketed the difference between the two payments. The teller continued to steal and misapply customer payments for the next two years without detection.

Identify the type of fraud scheme described. Describe five controls you would implement to address the fraud risk, and label each control as preventive or detective.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 6 Computer Fraud and Abuse Techniques

1) Wally Hewitt maintains an online brokerage account. In early March, Wally received an email from the firm that explained that there had been a computer error and that provided a phone number so that Wally could verify his customer information. When he called, a recording asked that he enter the code from the email, his account number, and his social security number. After he did so, he was told that he would be connected with a customer service representative, but the connection was terminated. He contacted the brokerage company and was informed that they had not sent the email. Wally was a victim of
A) Bluesnarfing.
B) splogging.
C) vishing.
D) typosquatting.
Answer:
Page Ref: 157
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

2) When a computer criminal gains access to a system by searching records or the trash of the target company, this is referred to as
A) data diddling.
B) dumpster diving.
C) eavesdropping.
D) piggybacking.
Answer:
Page Ref: 159
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

3) Jerry Schneider was able to amass operating manuals and enough technical data to steal $1 million of electronic equipment by
A) scavenging.
B) skimming.
C) Internet auction fraud.
D) cyber extortion.
Answer:
Page Ref: 159
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

4) A part of a program that remains idle until some date or event occurs and then is activated to cause havoc in the system is a
A) trap door.
B) data diddle.
C) logic bomb.
D) virus.
Answer:
Page Ref: 161
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

5) The unauthorized copying of company data is known as
A) data leakage.
B) eavesdropping.
C) masquerading.
D) phishing.
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) Computer fraud perpetrators who use telephone lines to commit fraud and other illegal acts are typically called
A) hackers.
B) crackers.
C) phreakers.
D) jerks.
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
7) What is a denial of service attack?
A) A denial of service attack occurs when the perpetrator sends hundreds of messages from randomly generated false addresses, overloading an Internet service provider’s e-mail server.
B) A denial of service attack occurs when an e-mail message is sent through a re-mailer, who removes the message headers making the message anonymous, then resends the message to selected addresses.
C) A denial of service attack occurs when a cracker enters a system through an idle modem, captures the PC attached to the modem, and then gains access to the network to which it is connected.
D) A denial of service attack occurs when the perpetrator e-mails the same message to everyone on one or more Usenet newsgroups LISTSERV lists.
Answer:
Page Ref: 150
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

8) Gaining control of someone else’s computer to carry out illicit activities without the owner’s knowledge is known as
A) hacking.
B) hijacking.
C) phreaking.
D) sniffings.
Answer:
Page Ref: 150
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) Illegally obtaining and using confidential information about a person for economic gain is known as
A) eavesdropping.
B) identity theft.
C) packet sniffing.
D) piggybacking.
Answer:
Page Ref: 156
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
10) Tapping into a communications line and then entering the system by accompanying a legitimate user without their knowledge is called
A) superzapping.
B) data leakage.
C) hacking.
D) piggybacking.
Answer:
Page Ref: 153
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) Which of the following is not a method of identify theft?
A) Scavenging
B) Phishing
C) Shoulder surfing
D) Phreaking
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) Which method of fraud is physical in its nature rather than electronic?
A) cracking
B) hacking
C) eavesdropping
D) scavenging
Answer:
Page Ref: 159
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

13) Which of the following is the easiest method for a computer criminal to steal output without ever being on the premises?
A) dumpster diving
B) by use of a Trojan horse
C) using a telescope to peer at paper reports
D) electronic eavesdropping on computer monitors
Answer:
Page Ref: 159
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
14) The deceptive method by which a perpetrator gains access to the system by pretending to be an authorized user is called
A) cracking.
B) masquerading.
C) hacking.
D) superzapping.
Answer:
Page Ref: 153
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

15) The unauthorized access to, and use of, computer systems is known as
A) hacking.
B) hijacking.
C) phreaking.
D) sniffing.
Answer:
Page Ref: 149
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

16) A fraud technique that slices off tiny amounts from many projects is called the ________ technique.
A) Trojan horse
B) round down
C) salami
D) trap door
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
17) Data diddling is
A) gaining unauthorized access to and use of computer systems, usually by means of a personal computer and a telecommunications network.
B) unauthorized copying of company data such as computer files.
C) unauthorized access to a system by the perpetrator pretending to be an authorized user.
D) changing data before, during, or after it is entered into the system in order to delete, alter, or add key system data.
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

18) Spyware is
A) software that tells the user if anyone is spying on his computer.
B) software that monitors whether spies are looking at the computer.
C) software that monitors computing habits and sends the data it gathers to someone else.
D) none of the above
Answer:
Page Ref: 159
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

19) The unauthorized use of special system programs to bypass regular system controls and perform illegal act is called
A) a Trojan horse.
B) a trap door.
C) the salami technique.
D) superzapping.
Answer:
Page Ref: 162
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

20) Computer fraud perpetrators that modify programs during systems development, allowing access into the system that bypasses normal system controls are using
A) a Trojan horse.
B) a trap door.
C) the salami technique.
D) superzapping.
Answer:
Page Ref: 162
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

21) A fraud technique that allows a perpetrator to bypass normal system controls and enter a secured system is called
A) superzapping.
B) data diddling.
C) using a trap door.
D) piggybacking.
Answer:
Page Ref: 162
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) A set of unauthorized computer instructions in an otherwise properly functioning program is known as a
A) logic bomb.
B) spyware.
C) trap door.
D) Trojan horse.
Answer:
Page Ref: 161
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
23) A ________ is similar to a ________, except that it is a program rather than a code segment hidden in a host program.
A) worm; virus
B) Trojan horse; worm
C) worm; Trojan horse
D) virus; worm
Answer:
Page Ref: 163
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

24) Wally Hewitt is an accountant with a large accounting firm. The firm has a very strict policy of requiring all users to change their passwords every sixty days. In early March, Wally received an email from the firm that explained that there had been an error updating his password and that provided a link to a Web site with instructions for re-entering his password. Something about the email made Wally suspicious, so he called the firm’s information technology department and found that the email was fictitious. The email was an example of
A) social engineering.
B) phishing.
C) piggybacking.
D) spamming.
Answer:
Page Ref: 157
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

25) Developers of computer systems often include a user name and password that is hidden in the system, just in case they need to get into the system and correct problems in the future. This is referred to as a
A) Trojan horse.
B) key logger.
C) spoof.
D) back door.
Answer:
Page Ref: 162
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
26) In the 1960s, techniques were developed that allowed individuals to fool the phone system into providing free access to long distance phone calls. The people who use these methods are referred to as
A) phreakers.
B) hackers.
C) hijackers.
D) superzappers.
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

27) During a routine audit, a review of cash receipts and related accounting entries revealed discrepancies. Upon further analysis, it was found that figures had been entered correctly and then subsequently changed, with the difference diverted to a fictitious customer account. This is an example of
A) kiting.
B) data diddling.
C) data leakage.
D) phreaking.
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

28) It was late on a Friday afternoon when Troy Willicott got a call at the help desk for Taggitt Finances. A man with an edge of panic clearly discernible in his voice was on the phone. “I’m really in a bind and I sure hope that you can help me.” He identified himself as Chet Frazier from the Accounting Department. He told Troy that he had to work on a report that was due on Monday morning and that he had forgotten to bring a written copy of his new password home with him. Troy knew that Taggitt’s new password policy, that required that passwords must be at least fifteen characters long, must contain letters and numbers, and must be changed every sixty days, had created problems. Consequently, Troy provided the password, listened as it was read back to him, and was profusely thanked before ending the call. The caller was not Chet Frazier, and Troy Willicott was a victim of
A) phreaking.
B) war dialing.
C) identity theft.
D) social engineering.
Answer:
Page Ref: 156
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
29) Chiller451 was chatting online with 3L3tCowboy. “I can’t believe how lame some people are! 🙂 I can get into any system by checking out the company web site to see how user names are defined and who is on the employee directory. Then, all it takes is brute force to find the password.” Chiller451 is a ________ and the fraud he is describing is ________.
A) phreaker; dumpster diving
B) hacker; social engineering
C) phreaker; the salami technique
D) hacker; password cracking
Answer:
Page Ref: 153
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

30) After graduating from college with a communications degree, Sylvia Placer experienced some difficulty in finding full-time employment. She free-lanced during the summer as a writer and then started a blog in the fall. Shortly thereafter she was contacted by Clickadoo Online Services, who offered to pay her to promote their clients by mentioning them in her blog and linking to their Web sites. She set up several more blogs for this purpose and is now generating a reasonable level of income. She is engaged in
A) Bluesnarfing.
B) splogging.
C) vishing.
D) typosquatting.
Answer:
Page Ref: 150
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

31) Telefarm Industries is a telemarketing firm that operates in the Midwest. The turnover rate among employees is quite high. Recently, the information technology manager discovered that an unknown employee had used a Bluetooth-enabled mobile phone to access the firm’s database and copy a list of customers from the past three years that included credit card information. Telefarm was a victim of
A) Bluesnarfing.
B) splogging.
C) vishing.
D) typosquatting.
Answer:
Page Ref: 165
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
32) Jim Chan decided to Christmas shop online. He linked to Amazon.com, found a perfect gift for his daughter, registered, and placed his order. It was only later that he noticed that the Web site’s URL was actually Amazom.com. Jim was a victim of
A) Bluesnarfing.
B) splogging.
C) vishing.
D) typosquatting.
Answer:
Page Ref: 158
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

33) Computers that are part of a botnet and are controlled by a bot herder are referred to as
A) posers.
B) zombies.
C) botsquats.
D) evil twins.
Answer:
Page Ref: 150
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

34) Jiao Jan had been the Web master for Folding Squid Technologies for only three months when the Web site was inundated with access attempts. The only solution was to shut down the site and then selectively open it to access from certain Web addresses. FST suffered significant losses during the period. The company had been the victim of a(an)
A) denial-of-service attack.
B) zero-day attack.
C) malware attack.
D) cyber-extortion attack.
Answer:
Page Ref: 150
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
35) Jiao Jan had been the Web master for Folding Squid Technologies for only three months when he received an anonymous email that threatened to inundate the company Web site with access attempts unless a payment was wired to an account in Eastern Europe. Jiao was concerned that FST would suffer significant losses if the threat was genuine. The author of the email was engaged in
A) a denial-of-service attack.
B) Internet terrorism.
C) hacking.
D) cyber-extortion.
Answer:
Page Ref: 154
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

36) Mo Chauncey was arrested in Emporia, Kansas, on February 29, 2008, for running an online business that specialized in buying and reselling stolen credit card information. Mo was charged with
A) typosquatting.
B) carding.
C) pharming.
D) phishing.
Answer:
Page Ref: 158
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

37) I work in the information technology department of a company I’ll call CMV. On Wednesday morning, I arrived at work, scanned in my identity card and punched in my code. This guy in a delivery uniform came up behind me carrying a bunch of boxes. I opened the door for him, he nodded and went on in. I didn’t think anything of it until later. Then I wondered if he might have been
A) pretexting.
B) piggybacking.
C) posing.
D) spoofing.
Answer:
Page Ref: 153
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
38) The call to tech support was fairly routine. A first-time computer user had purchased a brand new PC two months ago and it was now operating much more slowly and sluggishly than it had at first. Had he been accessing the Internet? Yes. Had he installed any “free” software? Yes. The problem is likely to be a(an)
A) virus.
B) zero-day attack.
C) denial of service attack.
D) dictionary attack.
Answer:
Page Ref: 163
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

39) In November of 2005 it was discovered that many of the new CDs distributed by Sony BMG installed software when they were played on a computer. The software was intended to protect the CDs from copying. Unfortunately, it also made the computer vulnerable to attack by malware run over the Internet. The scandal and resulting backlash was very costly. The software installed by the CDs is a
A) virus.
B) worm.
C) rootkit.
D) squirrel.
Answer:
Page Ref: 162
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

40) Which of the following would be least effective to reduce exposure to a computer virus?
A) Only transfer files between employees with USB flash drives.
B) Install and frequently update antivirus software.
C) Install all new software on a stand-alone computer for until it is tested.
D) Do not open email attachments from unknown senders.
Answer:
Page Ref: 164
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
41) Which of the following is not an example of social engineering?
A) Obtaining and using another person’s Social Security Number, credit card, or other confidential information
B) Creating phony Web sites with names and URL addresses very similar to legitimate Web sites in order to obtain confidential information or to distribute malware or viruses
C) Using email to lure victims into revealing passwords or user IDs
D) Setting up a computer in a way that allows the user to use a neighbors unsecured wireless network
Answer:
Page Ref: 156-159
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

42) How can a system be protected from viruses?

43) Describe at least six computer attacks and abuse techniques.

44) Describe at least four social engineering techniques.

45) Describe the differences between a worm and a virus?

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 7 Control and Accounting Information Systems

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.
Answer:
Page Ref: 184
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) Which of the following is not one of the risk responses identified in the COSO Enterprise Risk Management Framework?
A) Monitoring
B) Avoidance
C) Acceptance
D) Sharing
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

3) A control procedure designed so that the employee that records cash received from customers does not also have access to the cash itself is an example of a(n)
A) preventive control.
B) detective control.
C) corrective control.
D) authorization control.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

4) At a movie theater box office, all tickets are sequentially prenumbered. At the end of each day, the beginning ticket number is subtracted from the ending number to calculate the number of tickets sold. Then, ticket stubs collected at the theater entrance are counted and compared with the number of tickets sold. Which of the following situations does this control detect?
A) Some customers presented tickets purchased on a previous day when there wasn’t a ticket taker at the theater entrance (so the tickets didn’t get torn.)
B) A group of kids snuck into the theater through a back door when customers left after a show.
C) The box office cashier accidentally gives too much change to a customer.
D) The ticket taker admits his friends without tickets.
Answer:
Page Ref: 199-200
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

5) At a movie theater box office, all tickets are sequentially prenumbered. At the end of each day, the beginning ticket number is subtracted from the ending number to calculate the number of tickets sold. Cash is counted and compared with the number of tickets sold. Which of the following situations does this control detect?
A) Some customers presented tickets purchased on a previous day when there wasn’t a ticket taker at the theater entrance (so the tickets didn’t get torn.)
B) A group of kids snuck into the theater through a back door when customers left after a show.
C) The box office cashier accidentally gives too much change to a customer.
D) The ticket taker admits his friends without tickets.
Answer:
Page Ref: 199-200
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

6) Which of the following is an example of a preventive control?
A) approving customer credit prior to approving a sales order
B) reconciling the bank statement to the cash control account
C) counting inventory on hand and comparing counts to the perpetual inventory records
D) maintaining frequent backup records to prevent loss of data
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

7) Independent checks on performance include all the following except
A) data input validation checks.
B) reconciling hash totals.
C) preparing a trial balance report.
D) supervisor review of journal entries and supporting documentation.
Answer:
Page Ref: 200
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

8) A computer operator is allowed to work as a programmer on a new payroll software project. Does this create a potential internal control problem?
A) Yes, the computer operator could alter the payroll program to increase her salary.
B) Yes, this is a potential problem unless the computer operator is supervised by the payroll manager.
C) No, ideal segregation of duties is not usually possible, and operators are often the best at programming changes and updates.
D) No, as long as the computer operator separately accounts for hours worked in programming and in operations.
Answer:
Page Ref: 198
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Analytic

9) One of the objectives of the segregation of duties is to
A) make sure that different people handle different parts of the same transaction.
B) ensure that no collusion will occur.
C) make sure that different people handle different transactions.
D) achieve an optimal division of labor for efficient operations.
Answer:
Page Ref: 196
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Analytic
10) Pam is a receptionist for Dunderhead Paper Co., which has strict corporate policies on appropriate use of corporate resources. The first week of August, Pam saw Michael, the branch manager, putting pencils, pens, erasers, paper and other supplies into his briefcase on his way out the door. This situation best reflects a weakness in which aspect of internal environment, as discussed in the COSO Enterprise Risk Management Framework?
A) Integrity and ethical values
B) Risk management philosophy
C) Restrict access to assets
D) Methods of assigning authority and responsibility
Answer:
Page Ref: 189
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

11) Which of the following statements is true?
A) Internal auditors, rather than external auditors, can conduct evaluations of effectiveness of Enterprise Risk Management processes.
B) Re-adding the total of a batch of invoices and comparing the total with the first total you calculated is an example of an independent check.
C) Requiring two signatures on checks over $20,000 is an example of segregation of duties.
D) Although forensic specialists utilize computers, only people can accurately identify fraud.
Answer:
Page Ref: 201
Objective: Learning Objective 7
Difficulty : Difficult
AACSB: Reflective Thinking

12) Of the following examples of fraud, which will be the most difficult to prevent and detect? Assume the company enforces adequate segregation of duties.
A) Jim issues credit cards to him and Marie, and when the credit card balances are just under $1,000, Marie writes off the accounts as bad debt. Jim then issues new cards.
B) An employee puts inventory behind the dumpster while unloading a vendor’s delivery truck, then picks up the inventory later in the day and puts it in her car.
C) A mail room employee steals a check received from a customer and destroys the documentation.
D) The accounts receivable clerk does not record sales invoices for friends or family, so they can receive free goods.
Answer:
Page Ref: 197
Objective: Learning Objective 7
Difficulty : Difficult
AACSB: Reflective Thinking
13) According to The Sarbanes-Oxley Act of 2002, the audit committee of the board of directors is directly responsible for
A) hiring and firing the external auditors.
B) performing tests of the company’s internal control structure.
C) certifying the accuracy of the company’s financial reporting process.
D) overseeing day-to-day operations of the internal audit department.
Answer:
Page Ref: 186
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

14) Go-Go Corporation, a publicly traded company, has three brothers who serve as President, Vice President of Finance and CEO. This situation
A) increases the risk associated with an audit.
B) must be changed before your audit firm could accept the audit engagement.
C) is a violation of the Sarbanes-Oxley Act.
D) violates the Securities and Exchange Act.
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

15) Which of the following is a control related to design and use of documents and records?
A) Sequentially prenumbering sales invoices
B) Comparing physical inventory counts with perpetual inventory records
C) Reconciling the bank statement to the general ledger
D) Locking blank checks in a drawer or safe
Answer:
Page Ref: 199
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic
16) Which of the following duties could be performed by the same individual without violating segregation of duties controls?
A) Approving accounting software change requests and testing production scheduling software changes
B) Programming new code for accounting software and testing accounting software upgrades
C) Approving software changes and implementing the upgraded software
D) Managing accounts payable function and revising code for accounting software to more efficiently process discount due dates on vendor invoices
Answer:
Page Ref: 198
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

17) With a limited work force and a desire to maintain strong internal control, which combination of duties would result in the lowest risk exposure?
A) Updating the inventory subsidiary ledgers and recording purchases in the purchases journal
B) Approving a sales return on a customer’s account and depositing customers’ checks in the bank
C) Updating the general ledger and working in the inventory warehouse
D) Entering payments to vendors in the cash disbursements journal and entering cash received from customers in the cash receipts journal
Answer:
Page Ref: 196-197
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

18) Which of the following is not a factor of internal environment according to the COSO Enterprise Risk Management Framework?
A) Analyzing past financial performance and reporting
B) Providing sufficient resources to knowledgeable employees to carry out duties
C) Disciplining employees for violations of expected behavior
D) Setting realistic targets for long-term performance
Answer:
Page Ref: 188
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
19) Which of the following suggests a weakness in a company’s internal environment?
A) The audit committee regularly meets with the external auditors.
B) The Board of Directors is primarily independent directors.
C) The company has an up-to-date organizational chart.
D) Formal employee performance evaluations are prepared every three years.
Answer:
Page Ref: 191
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

20) Which of the following statements about internal environment is false?
A) Management’s attitudes toward internal control and ethical behavior have only minimal impact on employee beliefs or actions.
B) Supervision is especially important in organizations that cannot afford elaborate responsibility reporting or are too small to have adequate segregation of duties.
C) An overly complex or unclear organizational structure may be indicative of more serious problems.
D) A written policy and procedures manual is an important tool for assigning authority and responsibility.
Answer:
Page Ref: 189
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Reflective Thinking

21) 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
Answer:
Page Ref: 184
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

22) 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
Answer:
Page Ref: 184
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

23) 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.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

24) The process 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.
Answer:
Page Ref: 184
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
25) Safeguarding assets is one of the control objectives of internal control. Which of the following is not one of the other control objectives?
A) providing accurate and reliable information
B) promoting operational efficiency
C) ensuring that no fraud has occurred
D) encouraging adherence to management policies
Answer:
Page Ref: 184
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

26) Internal control is often referred to as a(n) ________, because it permeates an organization’s operating activities and is an integral part of management activities.
A) event
B) activity
C) process
D) system
Answer:
Page Ref: 184
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

27) 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.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

28) Duplicate checking of calculations is an example of a ________ control, and procedures to resubmit rejected transactions is an example of a ________ control.
A) corrective; detective
B) detective; corrective
C) preventive; corrective
D) detective; preventive
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
29) 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.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

30) ________ controls are designed to make sure an organization’s control environment is stable and well managed.
A) Application
B) Detective
C) General
D) Preventive
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

31) ________ controls prevent, detect and correct transaction errors and fraud.
A) Application
B) Detective
C) General
D) Preventive
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

32) 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.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
33) 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
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

34) 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
Answer:
Page Ref: 186
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

35) A(n) ________ 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
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
36) A(n) ________ 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
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

37) A(n) ________ 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
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

38) This control framework addresses the issue of control from three vantage points: business objectives, information technology resources, and information technology processes.
A) ISACA’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
Answer:
Page Ref: 186
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
39) 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) ISACA’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
Answer:
Page Ref: 187
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

40) The COSO Enterprise Risk Management Framework includes eight 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
Answer:
Page Ref: 188
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

41) Which of the following is not one of the eight interrelated risk and control components of COSO Enterprise Risk Management Framework?
A) Internal environment
B) Monitoring
C) Risk response
D) Event assessment
Answer:
Page Ref: 188
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

42) The COSO Enterprise Risk Management Integrated Framework stresses that
A) risk management activities are an inherent part of all business operations and should be considered during strategy setting.
B) effective risk management is comprised of just three interrelated components; internal environment, risk assessment, and control activities.
C) risk management is the sole responsibility of top management.
D) risk management policies, if enforced, guarantee achievement of corporate objectives.
Answer:
Page Ref: 187
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

43) 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.”
Answer:
Page Ref: 189
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

44) Which component of the COSO Enterprise Risk Management Integrated Framework is concerned with understanding how transactions are initiated, data are captured and processed, and information is reported?
A) Information and communication
B) Internal environment
C) Event identification
D) Objective setting
Answer:
Page Ref: 201
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic
45) The COSO Enterprise Risk Management Integrated Framework identifies four objectives necessary to achieve corporate goals. Objectives specifically identified include all of the following except
A) implementation of newest technologies.
B) compliance with laws and regulations.
C) effective and efficient operations.
D) reliable reporting.
Answer:
Page Ref: 192
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

46) The audit committee of the board of directors
A) is usually chaired by the CFO.
B) conducts testing of controls on behalf of the external auditors.
C) provides a check and balance on management.
D) does all of the above.
Answer:
Page Ref: 189
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

47) 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.
Answer:
Page Ref: 189
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

48) 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
Answer:
Page Ref: 190
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
49) Reducing management layers, creating self-directed work teams, and emphasizing continuous improvement are all related to which aspect of internal environment?
A) Organizational structure
B) Methods of assigning authority and responsibility
C) Management philosophy and operating style
D) Commitment to competence
Answer:
Page Ref: 190
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

50) 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) disgruntled employees.
Answer:
Page Ref: 190-191
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

51) The SEC and FASB are 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.
Answer:
Page Ref: 192
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
52) Which attribute below is not an aspect of the COSO ERM Framework internal environment?
A) Enforcing a written code of conduct
B) Holding employees accountable for achieving objectives
C) Restricting access to assets
D) Avoiding unrealistic expectations
Answer:
Page Ref: 188
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

53) 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
Answer:
Page Ref: 189
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

54) The risk that remains after management implements internal controls is
A) Inherent risk
B) Residual risk
C) Risk appetite
D) Risk assessment
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

55) 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
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
56) 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
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

57) 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.
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

58) Store policy that allows retail clerks to process sales returns for $300 or less, with a receipt dated within the past 60 days, is an example of
A) general authorization.
B) specific authorization.
C) special authorization.
D) generic authorization.
Answer:
Page Ref: 196
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Reflective Thinking

59) Corporate policy that requires a purchasing agent and purchasing department manager to sign off on asset purchases over $1,500 is an example of
A) general authorization.
B) specific authorization.
C) special authorization.
D) generic authorization.
Answer:
Page Ref: 196
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Reflective Thinking
60) A document that shows all projects that must be completed and the related IT needs in order to achieve long-range company goals is known as a
A) performance evaluation.
B) project development plan.
C) data processing schedule.
D) strategic master plan.
Answer:
Page Ref: 198
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Analytic

61) 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
Answer:
Page Ref: 198
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

62) 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
Answer:
Page Ref: 198
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic
63) 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 manager from the external audit team as company CFO twelve months after the manager had worked on the 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.
Answer:
Page Ref: 186
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

64) The Sarbanes-Oxley Act (SOX) applies to
A) all companies with gross annual revenues exceeding $500 million.
B) publicly held companies with gross annual revenues exceeding $500 million.
C) all private and publicly held companies incorporated in the United States.
D) all publicly held companies.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

65) 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 level 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.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
66) 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 level 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.
Answer:
Page Ref: 185
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

67) 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
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

68) 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
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
69) 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
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

70) 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 for the insurance?
A) $500
B) $650
C) $600
D) $50
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

71) Due to data errors occurring from time to time in processing the Albert Company’s payroll, the company’s management is considering the addition of a data validation control procedure that is projected to reduce the risk of these data errors from 13% to 2%. The cost of the payroll reprocessing is estimated to be $11,000. The cost of implementing the data validation control procedure is expected to be $700. Which of the following statements is true?
A) The data validation control procedure should be implemented because its net estimated benefit is $510.
B) The data validation control procedure should be implemented because its cost of $700 is less than the payroll reprocessing cost of $1,430.
C) The data validation control procedure should not be implemented because its cost of $700 exceeds the expected benefit by $480.
D) The data validation control procedure should not be implemented because its net estimated benefit is a negative $1,210.
Answer:
Page Ref: 194
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

72) The organization chart for Geerts Corporation includes a controller and an information processing manager, both of whom report to the vice president of finance. Which of the following would be a control weakness?
A) Assigning the programming and operating of the computer system to an independent control group which reports to the controller
B) Providing for maintenance of input data controls by an independent control group which reports to the controller
C) Periodically rotating assignment of application processing among machine operators, who all report to the information processing manager
D) Providing for review and distribution of system-generated reports by an independent control group which reports to the controller
Answer:
Page Ref: 198
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

73) 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
Answer:
Page Ref: 187-188
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking

74) 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.
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

75) 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 costly post-installation services is
A) reduced.
B) shared.
C) avoided.
D) accepted.
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

76) According to the COSO Enterprise Risk Management Framework, the risk assessment process incorporates all of the following components except
A) reporting potential risks to auditors.
B) identifying events that could impact the enterprise.
C) evaluating the impact of potential events on achievement of objectives.
D) establishing objectives for the enterprise.
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

77) 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. By not diligently checking references, the organizations fooled by Demara (including the Canadian Navy) apparently chose to ________ the risk of fraud.
A) reduce
B) share
C) avoid
D) accept
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

78) 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 Fred Haynes. He also maintains records of disbursements, places requests to finance to replace expended funds, and periodically reconciles the petty cash balance.
Answer:
Page Ref: 200
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

79) 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) ideal
C) ineffective
D) limited
Answer:
Page Ref: 196
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

80) 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
Answer:
Page Ref: 196
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

81) 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.
Answer:
Page Ref: 199
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

82) 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
Answer:
Page Ref: 196
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Reflective Thinking

83) 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
Answer:
Page Ref: 192
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

84) 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.
Answer:
Page Ref: 192
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
85) 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
Answer:
Page Ref: 192
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

86) 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
Answer:
Page Ref: 192
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

87) Which of the following is not a risk reduction element of a disaster recovery plan?
A) Identification of alternate work site
B) Off-site storage of backup files and programs
C) Documentation of procedures and responsibilitie
D) Adequate casualty insurance
Answer:
Page Ref: 193
Objective: Learning Objective 6
Difficulty : Difficult
AACSB: Reflective Thinking
88) Describe the differences between general and specific authorization.

89) Explain how a company could be the victim of fraud, even if ideal segregation of duties is enforced.

90) Classify each of the following controls as preventive, detective, or corrective.
Periodic bank reconciliation
Separation of cash and accounting records
Maintaining backup copies of master and transaction files
Pre-numbering of sales invoices
Chart of accounts
Retina scan before entering a sensitive R & D facility
Resubmission of error transactions for subsequent processing
Internal auditor rechecking the debits and credits on the payment voucher
Depositing all cash receipts intact
Hiring qualified accounting personnel

91) Discuss four reasons why AIS threats are increasing.

92) Explain why the Foreign Corrupt Practices Act was important to accountants.

93) Discuss the internal environment and identify the elements that comprise the internal environment.

94) Explain why management’s philosophy and operating style are considered to be the most important element of the internal environment.

95) What are some of the ways to assign authority and responsibility within an organization?

96) Discuss the weaknesses in COSO’s internal control framework that led to the development of the COSO Enterprise Risk Management framework.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 8 Information Systems Controls for System ReliabilityPart 1: Information Security

1) The Trust Services Framework reliability principle that states that users must be able to enter, update, and retrieve data during agreed-upon times is known as
A) availability.
B) security.
C) maintainability.
D) integrity.
Answer:
Page Ref: 221
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) Which of the following is not a useful control procedure to control access to system outputs?
A) Allowing visitors to move through the building without supervision
B) Coding reports to reflect their importance
C) Requiring employees to log out of applications when leaving their desk
D) Restricting access to rooms with printers
Answer:
Page Ref: 229
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

3) According to the Trust Services Framework, the reliability principle of integrity is achieved when the system produces data that
A) is available for operation and use at times set forth by agreement.
B) is protected against unauthorized physical and logical access.
C) can be maintained as required without affecting system availability, security, and integrity.
D) is complete, accurate, and valid.
Answer:
Page Ref: 221
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
4) Which of the following is not one of the three fundamental information security concepts?
A) Information security is a technology issue based on prevention.
B) Security is a management issue, not a technology issue.
C) The idea of defense-in-depth employs multiple layers of controls.
D) The time-based model of security focuses on the relationship between preventive, detective and corrective controls.
Answer:
Page Ref: 222-224
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

5) Which of the following is not one of the essential criteria for successfully implementing each of the principles that contribute to systems reliability, as discussed in the Trust Services Framework?
A) Developing and documenting policies
B) Effectively communicating policies to all outsiders
C) Designing and employing appropriate control procedures to implement policies
D) Monitoring the system and taking corrective action to maintain compliance with policies
Answer:
Page Ref: 223
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

6) If the time an attacker takes to break through the organization’s preventive controls is greater than the sum of the time required to detect the attack and the time required to respond to the attack, then security is
A) effective.
B) ineffective.
C) overdone.
D) undermanaged.
Answer:
Page Ref: 224
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
7) Verifying the identity of the person or device attempting to access the system is
A) authentication.
B) authorization.
C) identification.
D) threat monitoring.
Answer:
Page Ref: 226
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

8) Restricting access of users to specific portions of the system as well as specific tasks, is
A) authentication.
B) authorization.
C) identification.
D) threat monitoring.
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

9) Which of the following is an example of a preventive control?
A) Encryption
B) Log analysis
C) Intrusion detection
D) Emergency response teams
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

10) Which of the following is an example of a detective control?
A) Physical access controls
B) Encryption
C) Log analysis
D) Emergency response teams
Answer:
Page Ref: 237
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
11) Which of the following is an example of a corrective control?
A) Physical access controls
B) Encryption
C) Intrusion detection
D) Incident response teams
Answer:
Page Ref: 239
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

12) Which of the following is not a requirement of effective passwords?
A) Passwords should be changed at regular intervals.
B) Passwords should be no more than 8 characters in length.
C) Passwords should contain a mixture of upper and lowercase letters, numbers and characters.
D) Passwords should not be words found in dictionaries.
Answer:
Page Ref: 227
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

13) Multi-factor authentication
A) involves the use of two or more basic authentication methods.
B) is a table specifying which portions of the systems users are permitted to access.
C) provides weaker authentication than the use of effective passwords.
D) requires the use of more than one effective password.
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

14) An access control matrix
A) does not have to be updated.
B) is a table specifying which portions of the system users are permitted to access.
C) is used to implement authentication controls.
D) matches the user’s authentication credentials to his authorization.
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
15) Perimeter defense is an example of which of the following preventive controls that are necessary to provide adequate security?
A) Training
B) Controlling physical access
C) Controlling remote access
D) Host and application hardening
Answer:
Page Ref: 230
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

16) Which of the following preventive controls are necessary to provide adequate security for social engineering threats?
A) Controlling remote access
B) Encryption
C) Host and application hardening
D) Awareness training
Answer:
Page Ref: 226
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

17) A special purpose hardware device or software running on a general purpose computer, which filters information that is allowed to enter and leave the organization’s information system, is known as a(n)
A) demilitarized zone.
B) intrusion detection system.
C) intrusion prevention system.
D) firewall.
Answer:
Page Ref: 230
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
18) This protocol specifies the procedures for dividing files and documents into packets to be sent over the Internet.
A) Access control list
B) Internet protocol
C) Packet switching protocol
D) Transmission control protocol
Answer:
Page Ref: 231
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

19) This protocol specifies the structure of packets sent over the internet and the route to get them to the proper destination.
A) Access control list
B) Internet protocol
C) Packet switching protocol
D) Transmission control protocol
Answer:
Page Ref: 231
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

20) This network access control determines which IP packets are allowed entry to a network and which are dropped.
A) Access control list
B) Deep packet inspection
C) Stateful packet filtering
D) Static packet filtering
Answer:
Page Ref: 233
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

21) Compatibility tests utilize a(n) ________, which is a list of authorized users, programs, and data files the users are authorized to access or manipulate.
A) validity test
B) biometric matrix
C) logical control matrix
D) access control matrix
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) The process that screens individual IP packets based solely on the contents of the source and/or destination fields in the packet header is known as
A) access control list.
B) deep packet inspection.
C) stateful packet filtering.
D) static packet filtering.
Answer:
Page Ref: 233
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

23) The process that maintains a table that lists all established connections between the organization’s computers and the Internet, to determine whether an incoming packet is part of an ongoing communication initiated by an internal computer is known as
A) access control list.
B) deep packet inspection.
C) stateful packet filtering.
D) static packet filtering.
Answer:
Page Ref: 233
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
24) The process that allows a firewall to be more effective by examining the data in the body of an IP packet, instead of just the header, is known as
A) deep packet inspection.
B) stateful packet filtering.
C) static packet filtering.
D) an intrusion prevention system.
Answer:
Page Ref: 233
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

25) The security technology that evaluates IP packet traffic patterns in order to identify attacks against a system is known as
A) an intrusion prevention system.
B) stateful packet filtering.
C) static packet filtering.
D) deep packet inspection.
Answer:
Page Ref: 234
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

26) This is used to identify rogue modems (or by hackers to identify targets).
A) War chalking
B) War dialing
C) War driving
D) none of the above
Answer:
Page Ref: 235
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

27) The process of turning off unnecessary features in the system is known as
A) deep packet inspection.
B) hardening.
C) intrusion detection.
D) war dialing.
Answer:
Page Ref: 236
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
28) The most common input-related vulnerability is
A) buffer overflow attack.
B) hardening.
C) war dialing.
D) encryption.
Answer:
Page Ref: 237
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

29) This creates logs of network traffic that was permitted to pass the firewall.
A) Intrusion detection system
B) Log analysis
C) Penetration test
D) Vulnerability scan
Answer:
Page Ref: 238
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

30) The process that uses automated tools to identify whether a system possesses any well-known security problems is known as a(n)
A) intrusion detection system.
B) log analysis.
C) penetration test.
D) vulnerability scan.
Answer:
Page Ref: 236
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

31) This is an authorized attempt by an internal audit team or an external security consultant to attempt to break into the organization’s information system.
A) Intrusion detection system
B) Log analysis
C) Penetration test
D) Vulnerability scan
Answer:
Page Ref: 238
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
32) A well-known hacker started his own computer security consulting business shortly after being released from prison. Many companies pay him to attempt to gain unauthorized access to their network. If he is successful, he offers advice as to how to design and implement better controls. What is the name of the testing for which the hacker is being paid?
A) Penetration test
B) Vulnerability scan
C) Deep packet inspection
D) Buffer overflow test
Answer:
Page Ref: 238
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

33) The ________ disseminates information about fraud, errors, breaches and other improper system uses and their consequences.
A) chief information officer
B) chief operations officer
C) chief security officer
D) computer emergency response team
Answer:
Page Ref: 240
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

34) In 2007, a major U.S. financial institution hired a security firm to attempt to compromise its computer network. A week later, the firm reported that it had successfully entered the system without apparent detection and presented an analysis of the vulnerabilities that had been found. This is an example of a
A) preventive control.
B) detective control.
C) corrective control.
D) standard control.
Answer:
Page Ref: 238
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
35) It was 9:08 A.M. when Jiao Jan, the Network Administrator for Folding Squid Technologies, was informed that the intrusion detection system had identified an ongoing attempt to breach network security. By the time that Jiao had identified and blocked the attack, the hacker had accessed and downloaded several files from the company’s server. Using the notation for the time-based model of security, in this case
A) P > D
B) D > P
C) C > P
D) P > C
Answer:
Page Ref: 224
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

36) Which of the following is commonly true of the default settings for most commercially available wireless access points?
A) The security level is set at the factory and cannot be changed.
B) Wireless access points present little danger of vulnerability so security is not a concern.
C) Security is set to the lowest level that the device is capable of.
D) Security is set to the highest level that the device is capable of.
Answer:
Page Ref: 235
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

37) In recent years, many of the attacks carried out by hackers have relied on this type of vulnerability in computer software.
A) Code mastication
B) Boot sector corruption
C) Weak authentication
D) Buffer overflow
Answer:
Page Ref: 236
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
38) Meaningful Discussions is a social networking site that boasts over a million registered users and a quarterly membership growth rate in the double digits. As a consequence, the size of the information technology department has been growing very rapidly, with many new hires. Each employee is provided with a name badge with a photo and embedded computer chip that is used to gain entry to the facility. This is an example of a(an)
A) authentication control.
B) biometric device.
C) remote access control.
D) authorization control.
Answer:
Page Ref: 226
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

39) When new employees are hired by Folding Squid Technologies, they are assigned user names and appropriate permissions are entered into the information system’s access control matrix. This is an example of a(an)
A) authentication control.
B) biometric device.
C) remote access control.
D) authorization control.
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

40) When new employees are hired by Folding Squid Technologies, they are assigned user names and passwords and provided with laptop computers that have an integrated fingerprint reader. In order to log in, the user’s fingerprint must be recognized by the reader. This is an example of a(an)
A) authorization control.
B) biometric device.
C) remote access control.
D) defense in depth.
Answer:
Page Ref: 227
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
41) Information technology managers are often in a bind when a new exploit is discovered in the wild. They can respond by updating the affected software or hardware with new code provided by the manufacturer, which runs the risk that a flaw in the update will break the system. Or they can wait until the new code has been extensively tested, but that runs the risk that they will be compromised by the exploit during the testing period. Dealing with these issues is referred to as
A) change management.
B) hardening.
C) patch management.
D) defense in depth.
Answer:
Page Ref: 240
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

42) Murray Snitzel called a meeting of the top management at Snitzel Capital Management. Number one on the agenda was computer system security. “The risk of security breach incidents has become unacceptable,” he said, and turned to the Chief Information Officer. “This is your responsibility! What do you intend to do?” Which of the following is the best answer?
A) Evaluate and modify the system using the Trust Services framework
B) Evaluate and modify the system using the COSO Internal Control Framework.
C) Evaluate and modify the system using the CTC checklist.
D) Evaluate and modify the system using COBOL.
Answer:
Page Ref: 221
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

43) Which of the following is the most effective method of protecting against social engineering attacks on a computer system?
A) stateful packet filtering
B) employee awareness training
C) a firewall
D) a demilitarized zone
Answer:
Page Ref: 226
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
44) The most effective way to protect network resources, like email servers, that are outside of the network and are exposed to the Internet is
A) stateful packet filtering.
B) employee training.
C) a firewall.
D) a demilitarized zone.
Answer:
Page Ref: 230
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

45) All employees of E.C. Hoxy are required to pass through a gate and present their photo identification cards to the guard before they are admitted. Entry to secure areas, such as the Information Technology Department offices, requires further procedures. This is an example of a(an)
A) authentication control.
B) authorization control.
C) physical access control.
D) hardening procedure.
Answer:
Page Ref: 229
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

46) On February 14, 2008, students enrolled in an economics course at Swingline College received an email stating that class would be cancelled. The email claimed to be from the professor, but it wasn’t. Computer forensic experts determined that the email was sent from a computer in one of the campus labs at 9:14 A.M. They were then able to uniquely identify the computer that was used by means of its network interface card’s ________ address. Security cameras revealed the identity of the student responsible for spoofing the class.
A) TCP/IP
B) MAC
C) DMZ
D) IDS
Answer:
Page Ref: 228
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic
47) There are “white hat” hackers and “black hat” hackers. Cowboy451 was one of the “black hat” hackers. He had researched an exploit and determined that he could penetrate the target system, download a file containing valuable data, and cover his tracks in eight minutes. Six minutes into the attack he was locked out of the system. Using the notation of the time-based model of security, which of the following must be true?
A) P < 6 B) D = 6 C) P = 6 D) P > 6
Answer:
Page Ref: 224
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

48) Identify three ways users can be authenticated and give an example of each.
Answer: Users can be authenticated by verifying: 1. something they know (password). 2. something they have (smart card or ID badge). 3. Something they are (biometric identification of fingerprint).
Page Ref: 226
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

49) Describe four requirements of effective passwords .
Answer: 1. Strong passwords should be at least 8 characters. 2. Passwords should use a mixture of upper and lowercase letters, numbers and characters. 3. Passwords should be random and not words found in dictionaries. 4. Passwords should be changes frequently.
Page Ref: 227
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

50) Explain social engineering.
Answer: Social engineering attacks use deception to obtain unauthorized access to information resources, such as attackers who post as a janitor or as a legitimate system user. Employees must be trained not to divulge passwords or other information about their accounts to anyone who contacts them and claims to be part of the organization’s security team.
Page Ref: 226
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
51) Explain the value of penetration testing.
Answer: Penetration testing involves an authorized attempt by an internal audit team or an external security consultant to break into the organization’s information system. This type of service is provided by risk management specialists in all the Big Four accounting firms. These specialists spend more than half of their time on security matters. The team attempts to compromise the system using every means possible. With a combination of systems technology skills and social engineering, these teams often find weaknesses in systems that were believed to be secure.
Page Ref: 238
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

52) Describe the function of a computer incident response team (CIRT) and the steps that a CIRT should perform following a security incident.
Answer: CIRT is responsible for dealing with major security incidents and breaches. The team should include technical specialists and senior operations management. In response to a security incident, first the CIRT must recognize that a problem exists. Log analysis, intrusion detection systems can be used to detect problems and alert the CIRT. Second, the problem must be contained, perhaps by shutting down a server or curtailing traffic on the network. Third, the CIRT must focus on recovery. Corrupt programs may need to be reinstalled and data restored from backups. Finally, the CIRT must follow-up to discover how the incident occurred and to design corrective controls to prevent similar incidents in the future.
Page Ref: 239
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

53) Identify six physical access controls.
Answer: Require visitors to sign in and receive a visitor badge before being escorted by an employee; require employees to wear photo ID badges that are checked by security guards; physical locks and keys; storing documents and electronic media in a fire-proof safe or cabinet; restrict or prohibit cell phones, iPods and other portable devices; set screen savers to start after a few minutes of inactivity; set computers to lock keyboards after a few minutes of inactivity; utilize screen protection devices; use biometric devices to authorize access to spaces and equipment; attach and lock laptops to immobile objects; utilize magnetic or chip cards to authorize access to spaces and equipment; limit or prohibit windows and glass walls in sensitive areas.
Page Ref: 229-230
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 9 Information Systems Controls for Systems ReliabilityPart 2: Confidentiality and Privacy

1) Concerning virtual private networks (VPN), which of the following is not true?
A) VPNs provide the functionality of a privately owned network using the Internet.
B) Using VPN software to encrypt information while it is in transit over the Internet in effect creates private communication channels, often referred to as tunnels, which are accessible only to those parties possessing the appropriate encryption and decryption keys.
C) The cost of the VPN software is much less than the cost of leasing or buying the infrastructure (telephone lines, satellite links, communications equipment, etc.) needed to create a privately owned secure communications network.
D) It is more expensive to reconfigure VPNs to include new sites than it is to add or remove the corresponding physical connections in a privately owned network.
Answer:
Page Ref: 264
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

2) Which of the following is not associated with asymmetric encryption?
A) No need for key exchange
B) Public keys
C) Private keys
D) Speed
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

3) The system and processes used to issue and manage asymmetric keys and digital certificates are known as
A) asymmetric encryption.
B) certificate authority.
C) digital signature.
D) public key infrastructure.
Answer:
Page Ref: 262
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

4) Which of the following describes one weakness of encryption?
A) Encrypted packets cannot be examined by a firewall.
B) Encryption protects the confidentiality of information while in storage.
C) Encryption protects the privacy of information during transmission.
D) Encryption provides for both authentication and non-repudiation.
Answer:
Page Ref: 264
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

5) Using a combination of symmetric and asymmetric key encryption, Chris Kai sent a report to her home office in Syracuse, New York. She received an email acknowledgement that the document had been received and then, a few minutes later, she received a second email that indicated that the hash calculated from the report differed from that sent with the report. This most likely explanation for this result is that
A) the public key had been compromised.
B) the private key had been compromised.
C) the symmetric encryption key had been compromised.
D) the asymmetric encryption key had been compromised.
Answer:
Page Ref: 261
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

6) Encryption has a remarkably long and varied history. The invention of writing was apparently soon followed by a desire to conceal messages. One of the earliest methods, attributed to an ancient Roman emperor, was the simple substitution of numbers for letters, for example A = 1, B = 2, etc. This is an example of
A) a hashing algorithm.
B) symmetric key encryption.
C) asymmetric key encryption.
D) a public key.
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
7) An electronic document that certifies the identity of the owner of a particular public key.
A) Asymmetric encryption
B) Digital certificate
C) Digital signature
D) Public key
Answer:
Page Ref: 262
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

8) These systems use the same key to encrypt and to decrypt.
A) Asymmetric encryption
B) Hashing encryption
C) Public key encryption
D) Symmetric encryption
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

9) These are used to create digital signatures.
A) Asymmetric encryption and hashing
B) Hashing and packet filtering
C) Packet filtering and encryption
D) Symmetric encryption and hashing
Answer:
Page Ref: 261
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

10) Information encrypted with the creator’s private key that is used to authenticate the sender is
A) asymmetric encryption.
B) digital certificate.
C) digital signature.
D) public key.
Answer:
Page Ref: 261
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
11) Which of the following is not one of the three important factors determining the strength of any encryption system?
A) Key length
B) Key management policies
C) Encryption algorithm
D) Privacy
Answer:
Page Ref: 259
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

12) A process that takes plaintext of any length and transforms it into a short code.
A) Asymmetric encryption
B) Encryption
C) Hashing
D) Symmetric encryption
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

13) Which of the following descriptions is not associated with symmetric encryption?
A) A shared secret key
B) Faster encryption
C) Lack of authentication
D) Separate keys for each communication party
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
14) Encryption has a remarkably long and varied history. Spies have been using it to convey secret messages ever since there were secret messages to convey. One powerful method of encryption uses random digits. Two documents are prepared with the same random sequence of numbers. The spy is sent out with one and the spy master retains the other. The digits are used as follows. Suppose that the word to be encrypted is SPY and the random digits are 352. Then S becomes V (three letters after S), P becomes U (five letters after P), and Y becomes A (two letters after Y, restarting at A after Z). The spy would encrypt a message and then destroy the document used to encrypt it. This is an early example of
A) a hashing algorithm.
B) asymmetric key encryption.
C) symmetric key encryption.
D) public key encryption.
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

15) One way to circumvent the counterfeiting of public keys is by using
A) a digital certificate.
B) digital authority.
C) encryption.
D) cryptography.
Answer:
Page Ref: 262
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

16) In a private key system the sender and the receiver have ________, and in the public key system they have ________.
A) different keys; the same key
B) a decrypting algorithm; an encrypting algorithm
C) the same key; two separate keys
D) an encrypting algorithm; a decrypting algorithm
Answer:
Page Ref: 260
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
17) Asymmetric key encryption combined with the information provided by a certificate authority allows unique identification of
A) the user of encrypted data.
B) the provider of encrypted data.
C) both the user and the provider of encrypted data.
D) either the user or the provider of encrypted data.
Answer:
Page Ref: 262
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

18) Which of the following is not one of the 10 internationally recognized best practices for protecting the privacy of customers’ personal information?
A) Providing free credit report monitoring for customers
B) Inform customers of the option to opt-out of data collection and use of their personal information
C) Allow customers’ browsers to decline to accept cookies
D) Utilize controls to prevent unauthorized access to, and disclosure of, customers’ information
Answer:
Page Ref: 256-257
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

19) On March 3, 2008, a laptop computer belonging to Folding Squid Technology was stolen from the trunk of Jiao Jan’s car while he was attending a conference in Cleveland, Ohio. After reporting the theft, Jiao considered the implications of the theft for the company’s network security and concluded there was nothing to worry about because
A) the computer was protected by a password.
B) the computer was insured against theft.
C) it was unlikely that the thief would know how to access the company data stored on the computer.
D) the data stored on the computer was encrypted.
Answer:
Page Ref: 258
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
20) Jeff Davis took a call from a client. “Jeff, I need to interact online and real time with our affiliate in India, and I want to make sure that our communications aren’t intercepted. What do you suggest?” Jeff responded “The best solution will be to implement
A) a virtual private network.”
B) a private cloud environment.”
C) an asymmetric encryption system with digital signatures.”
D) multifactor authentication.”
Answer:
Page Ref: 264
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

21) In developing policies related to personal information about customers, Folding Squid Technologies adhered to the Trust Services framework. The standard applicable to these policies is
A) security.
B) confidentiality.
C) privacy.
D) availability.
Answer:
Page Ref: 254
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

22) Jeff Davis took a call from a client. “Jeff, I need for my customers to make payments online using credit cards, but I want to make sure that the credit card data isn’t intercepted. What do you suggest?” Jeff responded “The best solution will be to implement
A) a virtual private network.”
B) a private cloud environment.”
C) an encryption system with digital signatures.”
D) a data masking program.”
Answer:
Page Ref: 261
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

23) Describe some steps you can take to minimize your risk of identify theft.

24) Describe symmetric encryption and identify three limitations.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 10 Information Systems Controls for Systems ReliabilityPart 3: Processing Integrity and Availability

1) The best example of a hash total for a payroll transaction file could be
A) total of employees’ social security numbers.
B) sum of net pay.
C) total number of employees.
D) sum of hours worked.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) Error logs and review are an example of
A) data entry controls.
B) data transmission controls.
C) output controls.
D) processing controls.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
3) Following is the result of batch control totals on employee Social Security Numbers in a payroll processing transaction:

Correct Values From Masterfile Values Entered During Processing
487358796 487358796
534916487 534916487
498374526 498374526
514873420 514873420
534196487 534916487
678487853 678487853
471230589 471230589
3719438158 3720158158

The difference in the control totals is 720,000. Which data entry control would best prevent similar data entry errors in the future?
A) Modulus 11
B) Validity check
C) Check digit
D) Sequence check
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

4) Which of the following data entry controls would not be useful if you are recording the checkout of library books by members?
A) Sequence check
B) Prompting
C) Validity check
D) Concurrent update control
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

5) A customer failed to include her account number on her check, and the accounts receivable clerk credited her payment to a different customer with the same last name. Which control could have been used to most effectively to prevent this error?
A) Closed-loop verification
B) Duplicate values check
C) Validity check
D) Reconciliation of a batch control total
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) If invoices are processed in groups of fifty, which fields from the document shown below would not be used to create a hash control total?

A) Amount
B) Item Number
C) Quantity Ordered
D) Sales Order number
Answer:

Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Reflective Thinking

7) A data entry input control in which the application software sums the first four digits of a customer number to calculate the value of the fifth digit and then compares the calculated number to the number typed in during data entry is an example of a
A) check digit verification.
B) validity check.
C) closed-loop verification.
D) duplicate data check.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

8) All of the following controls for online entry of a sales order would be useful except
A) check digit verification on the dollar amount of the order.
B) validity check on the inventory item numbers.
C) field check on the customer ID and dollar amount of the order.
D) concurrent update control.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

9) A specific inventory record indicates that there were 12 items on hand before a customer brings two of the items to the check stand to be purchased. The cashier accidentally entered quantity 20 instead of 2. Which data entry control would best have prevented this error?
A) sign check
B) limit check
C) validity check
D) field check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

10) When processing weekly payroll, an employee accidentally entered 400 for hours worked. The best data entry control for this error would be
A) a limit check.
B) a check digit.
C) batch total reconciliation.
D) a field check.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) The data entry control that would best prevent entering an invoice received from a vendor who is not on an authorized supplier list is
A) a validity check.
B) an authorization check.
C) a check digit.
D) closed-loop verification.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) Forms design is an example of this type of control.
A) Data entry control
B) Processing control
C) Output control
D) Input control
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

13) Sequentially prenumbered forms is an example of a(n)
A) data entry control.
B) data transmission control.
C) processing control.
D) input control.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) Turnaround documents are an example of a(n)
A) data entry control.
B) output control.
C) processing control.
D) input control.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

15) A validity check is an example of a(n)
A) data entry control.
B) data transmission control.
C) output control.
D) input control.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

16) Parity checks are an example of a(n)
A) data entry control.
B) data transmission control.
C) output control.
D) processing control.
Answer:
Page Ref: 279
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

17) User reviews are an example of a(n)
A) data entry control.
B) data transmission control.
C) output control.
D) processing control.
Answer:
Page Ref: 278
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

18) Data matching is an example of a(n)
A) data entry control.
B) data transmission control.
C) processing control.
D) input control.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

19) Batch totals are an example of a(n)
A) data entry control.
B) data transmission control.
C) output control.
D) processing control.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

20) Cancellation and storage of documents means that
A) data are copied from a document and stored, after which the document is shredded.
B) documents are defaced before being shredded.
C) documents are defaced and stored.
D) cancellation data are copied from documents before they are stored.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

21) Check digit verification is an example of a(n)
A) data transmission control.
B) output control.
C) processing control.
D) input control.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

22) This ensures that the input data will fit into the assigned field.
A) Limit check
B) Range check
C) Size check
D) Validity check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

23) This tests a numerical amount to ensure that it does not exceed a predetermined value nor fall below another predetermined value.
A) Completeness check
B) Field check
C) Limit check
D) Range check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

24) This determines if all required data items have been entered.
A) Completeness check
B) Field check
C) Limit check
D) Range check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

25) This determines the correctness of the logical relationship between two data items.
A) Range check
B) Reasonableness test
C) Sign check
D) Size check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

26) This determines if characters are of the proper type.
A) Field check
B) Alpha-numeric check
C) Range check
D) Reasonableness test
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

27) This tests a numerical amount to ensure that it does not exceed a predetermined value.
A) Completeness check
B) Limit check
C) Range check
D) Sign check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

28) This batch processing data entry control sums a field that contains dollar values.
A) Record count
B) Financial total
C) Hash total
D) Sequence check
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

29) This batch processing data entry control sums a non-financial numeric field.
A) Record count
B) Financial total
C) Hash total
D) Sequence check
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

30) When I enter a correct customer number, the data entry screen displays the customer name and address. This is an example of
A) prompting.
B) preformatting.
C) closed-loop verification.
D) error checking.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

31) This control ensures that the correct and most current files are being updated.
A) Cross-footing balance test
B) Data matching
C) File labels
D) Write-protect mechanism
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

32) This batch processing data entry control sums the number of items in a batch.
A) Financial total
B) Hash total
C) Record count
D) Sequence check
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

33) This data entry control compares the ID number in transaction data to a master file to verify that the ID number exists.
A) Reasonableness test
B) User review
C) Data matching
D) Validity check
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

34) File labels are an example of
A) data entry controls.
B) output controls.
C) processing controls.
D) source data controls.
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

35) A computer operator accidentally used the wrong master file when updating a transaction file. As a result, the master file data is now unreadable. Which control could best have prevented this from happening?
A) Internal header label
B) Validity check
C) Check digit
D) Parity check
Answer:
Page Ref: 277
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

36) Chaz Finnerty called the IT Help Desk in a huff. “I’m trying to open an Excel file and I get a message that says that the file is locked for editing. What’s going on?” The answer is likely that
A) the file is corrupted due to a computer virus.
B) there is no problem. Chaz is editing the file, so it is locked.
C) concurrent update controls have locked the file.
D) Chaz probably opened the file as read-only.
Answer:
Page Ref: 278
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
37) This control protects records from errors that occur when two or more users attempt to update the same record simultaneously.
A) Concurrent update controls
B) Cross-footing balance test
C) Data conversion controls
D) Recalculation of batch totals
Answer:
Page Ref: 278
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

38) Modest Expectations Investment Services (MEIS) allows customers to manage their investments over the Internet. If customers attempt to sell more shares of a stock than they have in their account, an error message is displayed. This is an example of a
A) reasonableness test.
B) field check.
C) validity check.
D) limit check.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

39) Modest Expectations Investment Services (MEIS) allows customers to manage their investments over the Internet. If customers attempt to spend more money than they have in their account, an error message is displayed. This is an example of a
A) reasonableness test.
B) field check.
C) validity check.
D) limit check.
Answer:
Page Ref: 276
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
40) The Spontaneous Combustion Rocket Shoppe in downtown Fargo, North Dakota, generates three quarters of its revenue from orders taken over the Internet. The revenue clearing account is debited by the total of cash and credit receipts and credited by the total of storefront and Internet sales. This is an example of a
A) data integrity test.
B) zero-balance test.
C) trial balance audit.
D) cross-footing balance test.
Answer:
Page Ref: 278
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

41) What is the most effective way to ensure information system availability?
A) High bandwidth
B) Maintain a hot site
C) Maintain a cold site
D) Frequent backups
Answer:
Page Ref: 287
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

42) Concerning system availability, which of the following statements is true?
A) Human error does not threaten system availability.
B) Proper controls can maximize the risk of threats causing significant system downtime.
C) Threats to system availability can be completely eliminated.
D) Threats to system availability include hardware and software failures as well as natural and man-made disasters.
Answer:
Page Ref: 284
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
43) Which of the following is not an objective of a disaster recovery plan?
A) Minimize the extent of the disruption, damage or loss.
B) Permanently establish an alternative means of processing information.
C) Resume normal operations as soon as possible.
D) Train employees for emergency operations.
Answer:
Page Ref: 287
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

44) Which item below would not typically be part of an adequate disaster recovery plan?
A) a system upgrade due to operating system software changes
B) uninterruptible power systems installed for key system components
C) scheduled electronic vaulting of files
D) backup computer and telecommunication facilities
Answer:
Page Ref: 287
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

45) A facility that contains all the computing equipment the organization needs to perform its essential business activities is known as a
A) cold site.
B) hot site.
C) remote site.
D) subsidiary location.
Answer:
Page Ref: 287
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

46) A facility that is pre-wired for necessary telecommunications and computer equipment, but doesn’t have equipment installed, is known as a
A) cold site.
B) hot site.
C) remote site.
D) subsidiary location.
Answer:
Page Ref: 287
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
47) When a computer system’s files are automatically duplicated on a second data storage system as they are changed, the process is referred to as
A) real-time mirroring.
B) batch updating.
C) consistency control.
D) double-secure storage.
Answer:
Page Ref: 287
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

48) ________ enables a system to continue functioning in the event that a particular component fails.
A) An incremental backup procedure
B) Fault tolerance
C) Preventive maintenance
D) A concurrent update control
Answer:
Page Ref: 284
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

49) A copy of a database, master file, or software that will be retained indefinitely as a historical record is known as a(n)
A) archive.
B) cloud computing.
C) differential backup.
D) incremental backup.
Answer:
Page Ref: 286
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

50) While this type of backup process takes longer than the alternative, restoration is easier and faster.
A) Archive
B) Cloud computing
C) Differential backup
D) Incremental backup
Answer:
Page Ref: 286
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

51) ________ involves copying only the data items that have changed since the last partial backup.
A) Archive
B) Cloud computing
C) Differential backup
D) Incremental backup
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

52) ________ copies all changes made since the last full backup.
A) Archive
B) Cloud computing
C) Differential backup
D) Incremental backup
Answer:
Page Ref: 286
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

53) The maximum amount of time between backups is determined by a company’s
A) recovery time objective.
B) recovery point objective.
C) recovery objective.
D) maximum time recovery objective.
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

54) The maximum acceptable down time after a computer system failure is determined by a company’s
A) recovery time objective.
B) recovery point objective.
C) recovery objective.
D) maximum time recovery objective.
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

55) The accounting department at Synergy Hydroelectric records an average of 12,500 transactions per hour. By cost-benefit analysis, managers have concluded that the maximum acceptable loss of data in the event of a system failure is 25,000 transactions. If the firm’s recovery time objective is 120 minutes, then the worst case recovery time objective is
A) 1 hour
B) 2 hours
C) 3 hours
D) 4 hours
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

56) The accounting department at Synergy Hydroelectric records an average of 10,000 transactions per hour. By cost-benefit analysis, managers have concluded that the maximum acceptable loss of data in the event of a system failure is 20,000 transactions. If the firm’s recovery time objective is 60 minutes, then the worst case recovery time objective is
A) 1 hour
B) 2 hours
C) 3 hours
D) 4 hours
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

57) The accounting department at Synergy Hydroelectric records an average of 10,000 transactions per hour. By cost-benefit analysis, managers have concluded that the maximum acceptable loss of data in the event of a system failure is 40,000 transactions. The firm’s recovery point objective is therefore
A) 40,000 transactions
B) 10,000 transactions
C) 10 hours
D) 4 hours
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

58) The accounting department at Synergy Hydroelectric records an average of 12,500 transactions per hour. By cost-benefit analysis, managers have concluded that the maximum acceptable loss of data in the event of a system failure is 25,000 transactions. The firm’s recovery point objective is therefore
A) 25,000 transactions
B) 12,500 transactions
C) 1 hour
D) 2 hours
Answer:
Page Ref: 285
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

59) This control entails verifying that the proper number of bits are set to the value 1 in each character received.
A) Echo check
B) Field check
C) Parity check
D) Trailer record
Answer:
Page Ref: 279
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
60) Probably the most important change management control is
A) monitoring user rights and privileges during the change process.
B) testing all changes thoroughly prior to implementation on a stand-alone computer.
C) updating all documentation to reflect changes made to the system.
D) management’s careful monitoring and review.
Answer:
Page Ref: 289
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

61) Which of the following is true?
A) Cloud computing is a control technique for system availability.
B) Cloud computing eliminates the need for backup of applications and data.
C) Cloud computing refers to the practice of storing application files and backup data on satellites ‘in the clouds’.
D) Cloud computing eliminates the need for companies to own their own software and servers.
Answer:
Page Ref: 288
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

62) Discuss how cloud computing could both positively and negatively affect system availability.

63) Define and contrast a recovery point objective and a recovery time objective.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 11 Auditing Computer-Based Information Systems

1) Auditing involves the
A) collection, review, and documentation of audit evidence.
B) planning and verification of economic events.
C) collection of audit evidence and approval of economic events.
D) testing, documentation, and certification of audit evidence.
Answer:
Page Ref: 303
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) What is not a typical responsibility of an internal auditor?
A) helping management to improve organizational effectiveness
B) assisting in the design and implementation of an AIS
C) preparation of the company’s financial statements
D) implementing and monitoring of internal controls
Answer:
Page Ref: 303
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

3) Which type of work listed below is not typical of internal auditors?
A) operational and management audits
B) information system audits
C) financial statement audit
D) financial audit of accounting records
Answer:
Page Ref: 303
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

4) The ________ audit examines the reliability and integrity of accounting records.
A) financial
B) informational
C) information systems
D) operational
Answer:
Page Ref: 303
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) The ________ audit reviews the general and application controls of an AIS to assess its compliance with internal control policies and procedures and its effectiveness in safeguarding assets.
A) financial
B) information systems
C) management
D) internal control
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) One type of audit that is concerned with the economical and efficient use of resources and the accomplishment of established goals and objectives is known as a(n) ________ audit.
A) financial
B) information systems
C) internal control
D) operational or management
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

7) The ________ audit is concerned with the economical and efficient use of resources and the accomplishment of established goals and objectives.
A) financial
B) informational
C) information systems
D) operational
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
8) The purpose of ________ is to determine why, how, when, and who will perform the audit.
A) audit planning
B) the collection of audit evidence
C) the communication of audit results
D) the evaluation of audit evidence
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) Organizing the audit team and the physical examination of assets are components of which two separate audit stages?
A) planning; evaluating audit evidence
B) planning; collecting audit evidence
C) collecting audit evidence; communicating audit results
D) communicating audit results; evaluating audit evidence
Answer:
Page Ref: 304-305
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

10) With which stage in the auditing process are the consideration of risk factors and materiality most associated?
A) audit planning
B) collection of audit evidence
C) communication of audit results
D) evaluation of audit evidence
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) A system that employs various types of advanced technology has more ________ risk than traditional batch processing.
A) control
B) detection
C) inherent
D) investing
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
12) Control risk is defined as the
A) susceptibility to material risk in the absence of controls.
B) risk that a material misstatement will get through the internal control structure and into the financial statements.
C) risk that auditors and their audit procedures will not detect a material error or misstatement.
D) risk auditors will not be given the appropriate documents and records by management who wants to control audit activities and procedures.
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

13) The possibility that a material error will occur even though auditors are following audit procedures and using good judgment is referred to as
A) control risk.
B) detection risk.
C) inherent risk.
D) investigating risk.
Answer:
Page Ref: 305
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) The ________ stage of the auditing process involves (among other things) the auditors observing the operating activities and having discussions with employees.
A) audit planning
B) collection of audit evidence
C) communication of audit results
D) evaluation of audit evidence
Answer:
Page Ref: 305
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
15) Verifying the accuracy of certain information, often through communication with third parties, is known as
A) reperformance.
B) confirmation.
C) substantiation.
D) documentation.
Answer:
Page Ref: 305
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

16) The evidence collection method that examines all supporting documents to determine the validity of a transaction is called
A) review of documentation.
B) vouching.
C) physical examination.
D) analytical review.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

17) The evidence collection method that considers the relationships and trends among information to detect items that should be investigated further is called
A) review of the documentation.
B) vouching.
C) physical examination.
D) analytical review.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
18) Assessing the quality of internal controls, the reliability of information, and operating performance are all part of which stage of the auditing process?
A) audit planning
B) collection of audit evidence
C) evaluation of audit evidence
D) communication of audit results
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

19) An auditor must be willing to accept some degree of risk that the audit conclusion is incorrect. Accordingly, the auditor’s objective is to seek ________ that no material error exists in the information audited.
A) absolute reliability
B) reasonable evidence
C) reasonable assurance
D) reasonable objectivity
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

20) The risk-based audit approach is
A) a four-step approach to internal control evaluation.
B) a four-step approach to financial statement review and recommendations.
C) a three-step approach to internal control evaluation.
D) a three-step approach to financial statement review and recommendations.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

21) Which of the following is the first step in the risk-based audit approach?
A) Identify the control procedures that should be in place.
B) Evaluate the control procedures.
C) Determine the threats facing the AIS.
D) Evaluate weaknesses to determine their effect on the audit procedures.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
22) Determining whether the necessary control procedures are in place is accomplished by conducting
A) a systems overhaul.
B) a systems review.
C) tests of controls.
D) both B and C
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

23) According to the risk-based auditing approach, when a control deficiency is identified, the auditor should inquire about
A) tests of controls.
B) the feasibility of a systems review.
C) materiality and inherent risk factors.
D) compensating controls.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

24) The ________ to auditing provides auditors with a clear understanding of possible errors and irregularities and the related risks and exposures.
A) risk-based approach
B) risk-adjusted approach
C) financial audit approach
D) information systems approach
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

25) What is the purpose of an information systems audit?
A) To determine the inherent risk factors found in the system
B) To review and evaluate the internal controls that protect the system
C) To examine the reliability and integrity of accounting records
D) To examine whether resources have been used in an economical and efficient manner in keeping with organization goals and objectives
Answer:
Page Ref: 307
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

26) The information systems audit objective that pertains to source data being processed into some form of output is known as
A) overall security.
B) program development.
C) program modifications.
D) processing.
Answer:
Page Ref: 307
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

27) To maintain the objectivity necessary for performing an independent evaluation function, auditors should not be involved in
A) making recommendations to management for improvement of existing internal controls.
B) examining system access logs.
C) examining logical access policies and procedures.
D) developing the information system.
Answer:
Page Ref: 309
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
28) The auditor’s role in systems development should be as
A) an advisor and developer of internal control specifications.
B) a developer of internal controls.
C) an independent reviewer only.
D) A and B above
Answer:
Page Ref: 309
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

29) Regarding program modifications, which statement below is incorrect?
A) Only material program changes should be thoroughly tested and documented.
B) When a program change is submitted for approval, a list of all required updates should be compiled and then approved by management and program users.
C) During the change process, the developmental version of the program must be kept separate from the production version.
D) After the modified program has received final approval, the change is implemented by replacing the developmental version with the production version.
Answer:
Page Ref: 311
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

30) How could auditors determine if unauthorized program changes have been made?
A) By interviewing and making inquiries of the programming staff
B) By examining the systems design and programming documentation
C) By using a source code comparison program
D) By interviewing and making inquiries of recently terminated programming staff
Answer:
Page Ref: 311
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
31) Which auditing technique will not assist in determining if unauthorized programming changes have been made?
A) Use of a source code comparison program
B) Use of the reprocessing technique to compare program output
C) Interviewing and making inquiries of the programming staff
D) Use of parallel simulation to compare program output
Answer:
Page Ref: 311
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

32) Strong ________ controls can partially compensate for inadequate ________ controls.
A) development; processing
B) processing; development
C) operational; internal
D) internal; operational
Answer:
Page Ref: 310
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

33) The ________ procedure for auditing computer process controls uses a hypothetical series of valid and invalid transactions.
A) concurrent audit techniques
B) test data processing
C) integrated test facility
D) dual process
Answer:
Page Ref: 312
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

34) The auditor uses ________ to continuously monitor the system and collect audit evidence while live data are processed.
A) test data processing
B) parallel simulation
C) concurrent audit techniques
D) analysis of program logic
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
35) Auditors have several techniques available to them to test computer-processing controls. An audit technique that immediately alerts auditors of suspicious transactions is known as
A) a SCARF.
B) an audit hook.
C) an audit sinker.
D) the snapshot technique.
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

36) A type of software that auditors can use to analyze program logic and detect unexecuted program code is
A) a mapping program.
B) an audit log.
C) a scanning routine.
D) program tracing.
Answer:
Page Ref: 314
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

37) One tool used to document the review of source data controls is
A) a flowchart generator program.
B) a mapping program.
C) an input control matrix.
D) a program algorithm matrix.
Answer:
Page Ref: 314
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

38) An audit software program that generates programs that perform certain audit functions, based on auditor specifications, is referred to as a(n)
A) input controls matrix.
B) CAATS.
C) embedded audit module.
D) mapping program.
Answer:
Page Ref: 317
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic
39) The use of a secure file library and restrictions on physical access to data files are control procedures used together to prevent
A) an employee or outsider obtaining data about an important client.
B) a data entry clerk from introducing data entry errors into the system.
C) a computer operator from losing or corrupting files or data during transaction processing.
D) programmers making unauthorized modifications to programs.
Answer:
Page Ref: 316
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

40) An auditor might use which of the following to convert data from several sources into a single common format?
A) computer assisted audit techniques software
B) Windows Media Converter
C) concurrent audit technique
D) Adobe Professional
Answer:
Page Ref: 317
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

41) What is the primary purpose of computer audit software?
A) eliminate auditor judgment errors
B) assist the auditor in retrieving and reviewing information
C) detect unauthorized modifications to system program code
D) recheck all mathematical calculations, cross-foot, reprocess financial statements and compare to originals
Answer:
Page Ref: 317
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
42) The scope of a(n) ________ audit encompasses all aspects of systems management.
A) operational
B) information systems
C) financial
D) internal control
Answer:
Page Ref: 318
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

43) Evaluating effectiveness, efficiency, and goal achievement are objectives of ________ audits.
A) financial
B) operational
C) information systems
D) all of the above
Answer:
Page Ref: 318
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

44) In the ________ stage of an operational audit, the auditor measures the actual system against an ideal standard.
A) evidence collection
B) evidence evaluation
C) testing
D) internal control
Answer:
Page Ref: 318
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

45) An increase in the effectiveness of internal controls would have the greatest effect on
A) reducing control risk.
B) reducing detection risk.
C) reducing inherent risk.
D) reducing audit risk.
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic
46) An expansion of a firm’s operations to include production in Russia and China will have the effect of
A) increasing inherent risk.
B) reducing inherent risk.
C) increasing control risk.
D) reducing control risk.
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

47) An increase in the effectiveness of auditing software will have the effect of
A) increasing detection risk.
B) reducing detection risk.
C) increasing control risk.
D) reducing control risk.
Answer:
Page Ref: 305
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

48) An auditor examines all documents related to the acquisition, repair history, and disposal of a firm’s delivery van. This is an example of collecting audit evidence by
A) confirmation.
B) reperformance.
C) vouching.
D) analytical review.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

49) An auditor manually calculates accumulated depreciation on a delivery van and compares her calculation with accounting records. This is an example collecting audit evidence by
A) confirmation.
B) reperformance.
C) vouching.
D) analytical review.
Answer:
Page Ref: 305
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
50) An auditor finds that employee absentee rates are significantly higher on Mondays and Fridays than on other work days. This is an example collecting audit evidence by
A) confirmation.
B) reperformance.
C) vouching.
D) analytical review.
Answer:
Page Ref: 306
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

51) An auditor creates a fictitious customer in the system and then creates several fictitious sales to the customer. The records are then tracked as they are processed by the system. The auditor is using
A) an integrated test facility.
B) the snapshot technique.
C) a system control audit review file.
D) continuous and intermittent simulation.
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

52) An auditor sets an embedded audit module to flag all credit transactions in excess of $1,500. The flag causes the system state to be recorded before and after each transaction is processed. The auditor is using
A) an integrated test facility.
B) the snapshot technique.
C) a system control audit review file.
D) audit hooks.
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
53) An auditor sets an embedded audit module to record all credit transactions in excess of $1,500 and store the data in an audit log. The auditor is using
A) the snapshot technique.
B) a system control audit review file.
C) audit hooks.
D) continuous and intermittent simulation.
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

54) An auditor sets an embedded audit module to flag questionable online transactions, display information about the transaction on the auditor’s computer, and send a text message to the auditor’s cell phone. The auditor is using
A) the snapshot technique.
B) a system control audit review file.
C) audit hooks.
D) continuous and intermittent simulation.
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

55) An auditor sets an embedded audit module to selectively monitor transactions. Selected transactions are then reprocessed independently, and the results are compared with those obtained by the normal system processing. The auditor is using
A) an integrated test facility.
B) the snapshot technique.
C) a system control audit review file.
D) continuous and intermittent simulation.
Answer:
Page Ref: 313
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic
56) Which of the following is not one of the types of internal audits?
A) reviewing corporate organizational structure and reporting hierarchies
B) examining procedures for reporting and disposing of hazardous waste
C) reviewing source documents and general ledger accounts to determine integrity of recorded transactions
D) comparing estimates and analysis made before purchase of a major capital asset to actual numbers and results achieved
Answer:
Page Ref: 304
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

57) When programmers are working with program code, they often employ utilities that are also used in auditing. For example, as program code evolves, it is often the case that blocks of code are superseded by other blocks of code. Blocks of code that are not executed by the program can be identified by
A) embedded audit modules.
B) scanning routines.
C) mapping programs.
D) automated flow charting programs.
Answer:
Page Ref: 314
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

58) When programmers are working with program code, they often employ utilities that are also used in auditing. For example, as program code evolves, it is often the case that variables defined during the early part of development become irrelevant. The occurrences of variables that are not used by the program can be found using
A) program tracing.
B) scanning routines.
C) mapping programs.
D) embedded audit modules.
Answer:
Page Ref: 314
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
59) Explain the differences between each type of audit risk.

60) Explain why the auditor’s role in program development and acquisition should be limited.

61) How and to whom does an auditor communicate the audit results?

62) Audit tests and procedures traditionally have been performed on a sample basis. Do options exist for auditors to test significantly more (or all) transactions?

63) When doing an information systems audit, auditors must review and evaluate the program development process. What errors or fraud could occur during the program development process?

64) Briefly describe tests that can be used to detect unauthorized program modifications.

65) Define and give examples of embedded audit modules.

66) How is a financial audit different from an information systems audit?

67) Why do all audits follow a sequence of events that can be divided into four stages, and what are the four stages?

68) Name and describe the different types of audits.
AACSB: Analytic

69) Describe the risk-based audit approach.

71) Describe the disadvantages of test data processing.

72) Describe how audit evidence can be collected.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 12 The Revenue Cycle: Sales to Cash Collections

1) In organizations with at least basic segregation of duties, the credit manager reports to the ________ and the treasurer reports to the ________.
A) controller; vice president of finance
B) treasurer; controller
C) marketing manager; vice president of finance
D) treasurer; vice president of finance
Answer:
Page Ref: 331
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) In the revenue cycle, before a shipping notice is prepared, the shipping department personnel should match the inventory received from the warehouse to details from
A) picking tickets.
B) sales order and bill of lading.
C) sales order.
D) picking ticket and sales order.
Answer:
Page Ref: 345
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

3) Which is the best control to prevent invoicing customers for the quantity ordered, which was more than the quantity shipped due to items on backorder?
A) Use the information from the packing slip to prepare the sales invoice.
B) Use the information from the picking ticket to prepare the sales invoice.
C) Use the information from the bill of lading to prepare the sales invoice.
D) Use the information from the sales order to prepare the sales invoice.
Answer:
Page Ref: 350
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Reflective Thinking

4) The cashier deposits checks in the bank for Very Large Corporation (VLC) and also prepares payments to vendors. Of the following, who is best to reconcile the bank statement to VLC’s records on a regular basis?
A) Internal audit department
B) Treasurer
C) External auditor
D) Cashier
Answer:
Page Ref: 355
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

5) Which of the following documents normally triggers the billing process in the revenue cycle?
A) Packing slip received from the shipping department
B) Sales order received from the sales department
C) Picking ticket received from the sales department
D) Journal voucher received from the shipping department
Answer:
Page Ref: 348
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) Which of the following documents would normally trigger the process to record a customer payment?
A) Remittance advice
B) Customer monthly statement
C) Deposit slip
D) Sales invoice
Answer:
Page Ref: 353
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
7) Which document should always be included with a merchandise shipment to a customer?
A) Packing slip
B) Picking ticket
C) Remittance advice
D) Sales invoice
Answer:
Page Ref: 345
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

8) A monthly statement sent to customers serves a control purpose by
A) providing an opportunity for customers to verify the balance owed and activity on the account.
B) triggering the process to record a customer payment.
C) summarizing invoices and amounts due for customers.
D) reminding customers of the balance due and due date.
Answer:
Page Ref: 355
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

9) Accounting recognizes a sale when
A) inventory becomes the legal property of the customer.
B) cash is received from the customer.
C) a sales order is approved by sales, inventory control, and credit departments.
D) inventory is removed from the warehouse.
Answer:
Page Ref: 345
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

10) Which of the following is not one of the controls for the mail room where customer payments are commingled with other mail?
A) Requiring the controller to be personally present when mail is received and opened
B) Preparing a remittance list as mail is opened
C) Restrictively endorsing checks when received
D) Requiring two mail room clerks to open mail together
Answer:
Page Ref: 337
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
11) What is the primary objective of the revenue cycle?
A) to maximize revenue and minimize expense
B) to reduce outstanding accounts receivable balances through increased cash sales
C) to provide the right product in the right place at the right time at the right price
D) to sell as much product as possible and/or to maximize service billings
Answer:
Page Ref: 332
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) Which of the decisions below is not ordinarily found as part of the revenue cycle?
A) What credit terms should be offered?
B) How often should accounts receivable be subjected to audit?
C) How can customer payments be processed to maximize cash flows?
D) What are the optimal prices for each product or service?
Answer:
Page Ref: 332-333
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

13) Which of the following is not a basic activity of the revenue cycle?
A) sales order entry
B) shipping
C) receiving
D) billing
Answer:
Page Ref: 333
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) Retail stores could send their orders directly to the manufacturer’s sales order system in a format that would eliminate the need for data entry, using
A) Vendor Managed Inventory.
B) Electronic Data Interchange.
C) Point Of Sale.
D) Electronic Funds Transfer.
Answer:
Page Ref: 338
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
15) Matching customer account numbers and inventory item numbers to the numbers in the customer and inventory master files is an example of a
A) completeness test.
B) field check.
C) reasonableness test.
D) validity check.
Answer:
Page Ref: 339
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

16) During the sales order entry process, a ________ is performed to compare the quantity ordered with the standard amounts normally ordered.
A) completeness test
B) redundant data check
C) field check
D) reasonableness test
Answer:
Page Ref: 339
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

17) During the sales order entry process, a ________ is performed to verify that each transaction record contains all appropriate data items.
A) completeness test
B) redundant data check
C) field check
D) reasonableness test
Answer:
Page Ref: 339
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
18) When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability?
A) The customer’s available credit should be checked.
B) The sales order should be created and written to a file.
C) Shipping should be notified of an order in process.
D) A picking list should be generated for the warehouse.
Answer:
Page Ref: 335
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

19) How is credit approval generally handled for established customers with a documented payment history?
A) Specific authorization by the credit manager
B) General authorization by a sales clerk
C) A new credit application is requested
D) A formal credit check should be made for each sale
Answer:
Page Ref: 340
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

20) What is a typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded?
A) General authorization to approve the order is given to sales clerks.
B) Specific authorization must be granted by the credit manager.
C) The sale should be rejected.
D) The sales clerk should order a report from a credit bureau before approving the order.
Answer:
Page Ref: 340
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
21) A company should check inventory quantities before accepting a sales order for all the following reasons except to
A) verify the accuracy of the perpetual inventory records.
B) inform the customer about availability and delivery times.
C) know which items may need to be back ordered.
D) update inventory records to reduce the quantity available by the number of items ordered.
Answer:
Page Ref: 341-342
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

22) Responding to customer inquiries and general customer service is an important aspect in the revenue cycle. Since customer service is so important, software programs have been created to help manage this function. These special software packages are called
A) EDI systems.
B) POS systems.
C) VMI systems.
D) CRM systems.
Answer:
Page Ref: 343
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

23) The best solution for maintaining accurate automated perpetual inventory system is to use
A) closed-loop verification when inventory is received from vendors and recorded.
B) point of sale devices integrated with inventory records.
C) periodic physical counts to reconcile with perpetual inventory records.
D) RFID tags.
Answer:
Page Ref: 342
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

24) This document is a legal contract that defines responsibility for goods that are in transit.
A) packing slip
B) bill of lading
C) picking list
D) back order
Answer:
Page Ref: 345
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

25) Two documents usually accompany goods shipped to a customer. What are the two documents?
A) a bill of lading and an invoice
B) a packing slip and a bill of lading
C) an invoice and a packing slip
D) an invoice and a sales order
Answer:
Page Ref: 345
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

26) What is the basic document created in the billing process?
A) bill of lading
B) sales order
C) packing list
D) sales invoice
Answer:
Page Ref: 349
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

27) A company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method.
A) monthly statement
B) open-invoice
C) balance forward
D) cycle billing
Answer:
Page Ref: 350
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

28) A method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method.
A) specific identification
B) balance forward
C) cycle billing
D) open-invoice
Answer:
Page Ref: 350
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

29) The document a customer returns with their payment and that identifies the source and the amount of the payment is called a
A) remittance advice.
B) remittance list.
C) credit memorandum.
D) debit memorandum.
Answer:
Page Ref: 350
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

30) In the ________ method of tracking accounts receivable, customers pay according to the amount showing on their monthly statement and payments are applied against the total account balance.
A) specific identification
B) open-invoice
C) balance forward
D) remittance advice
Answer:
Page Ref: 350
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
31) When a customer pays off the balance on an invoice, the payment is credited to the ________ file.
A) customer master
B) sales transaction
C) cash receipts master
D) All of the above are correct.
Answer:
Page Ref: 351
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

32) A type of business document in which part of the original document is returned to the source for further processing is called a ________ document.
A) feedback
B) returnable
C) closed-loop
D) turnaround
Answer:
Page Ref: 350
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

33) A document typically encountered in the revenue cycle that is both an output document and a source document is the
A) sales invoice.
B) customer purchase order.
C) sales order.
D) packing slip.
Answer:
Page Ref: 349
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
34) A ________ system prepares and mails monthly statements to customers throughout the entire month, instead of just at the end of the month.
A) continuous
B) open-invoice
C) cycle billing
D) balance forward
Answer:
Page Ref: 351
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

35) The accounts receivable department must know when customers pay their invoices, yet segregation of duties controls dictate that the collection and recording functions be kept separate from each other. What is a solution to this potential internal control problem?
A) Have customers send a remittance advice with their payment.
B) Have mailroom personnel prepare a remittance list which can be forwarded to accounts receivable.
C) Establish a lockbox arrangement with a bank.
D) all of the above
Answer:
Page Ref: 353-354
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

36) The benefits of a lockbox arrangement with a bank are maximized when
A) the bank is located nearby to the company, so remittance advices can be delivered to the company every day.
B) several banks around the country are used, in order to minimize the time payments spend in the mail.
C) an arrangement is made with only one bank, so all remittance advices can be batched for processing.
D) the bank deposits the payments and accesses the customer’s information system to record the payments.
Answer:
Page Ref: 354
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
37) An arrangement where a bank receives customer payments through the postal system, scans the remittance advices, and transmits payment data to the business electronically is known as
A) e-commerce.
B) an electronic lockbox.
C) electronic funds transfer (EFT).
D) electronic data interchange (EDI).
Answer:
Page Ref: 354
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

38) Customers that send their payments electronically directly to the company’s bank are using
A) electronic data interchange (EDI).
B) electronic funds transfer (EFT).
C) procurement cards.
D) an electronic lockbox.
Answer:
Page Ref: 354
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

39) A way to incorporate the advantages of Electronic Data Interchange with the Electronic Funds Transfer is
A) Financial Electronic Data Interchange.
B) e-commerce.
C) to use procurement cards.
D) an electronic lockbox.
Answer:
Page Ref: 354
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

40) Key differences exist when an integrated Enterprise Resource Planning system (ERP) replaces an existing AIS or legacy system. For example, ________ are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates.
A) inventory records
B) cash receipts
C) credit approval decisions
D) exception reports
Answer:
Page Ref: 342
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

41) When an ERP is used, it is assumed that there will be increases in efficiency and the effectiveness of the activities related to the revenue cycle. However, what must be in place and functioning well to fully realize these benefits?
A) an effective marketing staff
B) all the components of the expenditure cycle
C) adequate controls
D) adequate system flowchart documentation
Answer:
Page Ref: 335
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

42) The activities involved in soliciting and processing customer orders within the revenue cycle are known as the ________.
A) sales order entry process
B) shipping order process
C) revenue process
D) marketing process
Answer:
Page Ref: 337
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
43) To ensure proper segregation of duties, only the ________ has authority to issue credit memos.
A) accounts receivable supervisor
B) controller
C) credit manager
D) cashier
Answer:
Page Ref: 352
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

44) It has been discovered that credit sales have been made to customers with a poor credit rating. If this continues, the company will face increasing uncollectible receivables and losses due to bad debts. Separation of duties between ________ and ________ should help resolve the problem.
A) shipping; billing duties
B) credit approval; marketing
C) billing; credit approval
D) marketing; accounts receivable
Answer:
Page Ref: 340
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

45) Consider the following revenue cycle scenario: The company has been exposed to customer dissatisfaction and the suggested control procedure to be implemented is to install and use bar-code scanners. What is the threat?
A) The company may be shipping the wrong merchandise.
B) The company may be shipping the wrong quantities of merchandise.
C) The company may be shipping orders to the wrong address.
D) All of the above threats may apply to this scenario.
Answer:
Page Ref: 345
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
46) Which of the following would be the least effective control to minimize the loss of inventory?
A) Secure the storage location of inventory.
B) Release inventory only with proper documentation.
C) Periodically back up all perpetual inventory records.
D) Reconcile the physical counts with and perpetual records.
Answer:
Page Ref: 345
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

47) Separating the shipping and billing functions is designed to reduce the threat of
A) failure to bill customers.
B) billing customers for wrong quantities.
C) billing customers before merchandise has been shipped.
D) shipping the wrong merchandise.
Answer:
Page Ref: 350
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

48) All of the following edit checks for online editing of accounts receivable transactions would probably be included except
A) validity checks on customer ID and invoice numbers.
B) check digit verification on the amount of the sale.
C) closed loop verification on the customer ID.
D) field checks on the values in dollar fields.
Answer:
Page Ref: 352
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
49) When a proper segregation of duties exists in the area of handling cash receipts, the ________, who reports to the ________, actually handles the cash and is not the same person who posts cash receipts to customer accounts.
A) cashier; treasurer
B) cashier; controller
C) accountant; treasurer
D) accountant; controller
Answer:
Page Ref: 355
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

50) In a revenue cycle with proper controls, the ________ who reports to the ________, is not involved in any cash handling activities.
A) accounts receivable clerk; treasurer
B) accounts receivable clerk; controller
C) cashier; controller
D) cashier; treasurer
Answer:
Page Ref: 355
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

51) A serious exposure in the revenue cycle is loss of assets. What is the related threat and applicable control procedure that address this exposure?
A) shipping errors; reconciliation of sales order with picking ticket and packing slip
B) theft of cash; segregation of duties and minimization of cash handling
C) making sales that turn out to be uncollectible; force sales people to make collection calls on customers with past due balances
D) poor performance; preparation and review of performance reports
Answer:
Page Ref: 337
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
52) Which of the following duties could be performed by the same individual and not violate segregation of duty controls?
A) handling cash and posting to customer accounts
B) issuing credit memos and maintaining customer accounts
C) handling cash and authorizing credit memos
D) handling cash receipts and mailing vendor payments
Answer:
Page Ref: 355
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

53) To prevent the loss of valuable data in the revenue cycle, internal file labels can be used to
A) keep competitors from accessing files.
B) record off-site storage locations.
C) organize the on-site physical storage site.
D) reduce the possibility of erasing important files.
Answer:
Page Ref: 277, 335
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

54) The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He ordered 100 one-size fits all pajama bottoms, but when he ordered 1000 one-size fits all pajama tops, the following error message popped up: “Did you mean to enter a quantity of 1000 for your order?” This message is the result of a
A) reasonableness test.
B) validity check.
C) limit check.
D) closed-loop verification.
Answer:
Page Ref: 339
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Reflective Thinking
55) The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He entered all the items and quantities, completed the checkout and payment process, but the following error message popped up when he tried to exit the site: “Please enter your email address.” This message is likely the result of a
A) customer relationship management software application.
B) validity check.
C) completeness test.
D) closed-loop verification.
Answer:
Page Ref: 339
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Reflective Thinking

56) Sad Clown Pajamas is an Internet-based wholesaler. Customers enter their orders online. The manager of Callow Youth Clothing was entering an order when the following error message popped up: “Your total order exceeds your available credit. A Credit Department representative will contact you within 24 hours.” This message is the result of a
A) validity check.
B) reasonableness test.
C) limit check.
D) sign check.
Answer:
Page Ref: 340
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

57) 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. The customers are provided with a remittance advice, which is a
A) warning that failure to pay by the due date will result in a late charge.
B) confirmation of the firm’s privacy policy.
C) turnaround document.
D) bill.
Answer:
Page Ref: 350
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
58) Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company. He is a product packer. The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order. These instructions are the equivalent of a
A) picking ticket.
B) bill of lading.
C) packing slip.
D) sales order.
Answer:
Page Ref: 342
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

59) The shipping department at Squishy Things Toy Company follows policies that determine which carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit. The terms of the agreements are documented on
A) picking tickets.
B) bills of lading.
C) packing slips.
D) RFID tags.
Answer:
Page Ref: 345
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

60) Sad Clown Pajamas is an Internet-based wholesaler. The manager of Callow Youth Clothing received an order from Sad Clown and found that the wrong product had been shipped. He repackaged the order and sent it back for a refund. When Sad Clown Pajamas received the returned product, they mailed a ______ to Callow Youth Clothing’s manager.
A) packing slip
B) letter requesting an explanation
C) remittance advice
D) credit memo
Answer:
Page Ref: 352
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
61) A customer service manager at Sad Clown Pajamas, Bob, received a call from the manager at Callow Youth Clothing, who informed Bob that Callow was entering bankruptcy liquidation and it was unlikely that they would be able to pay the outstanding balance on their account. Bob should
A) document the phone conversation and forward it to the billing department manager.
B) prepare a credit memo.
C) approve a credit memo.
D) document the phone conversation and forward it to the credit department manager.
Answer:
Page Ref: 352
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking

62) Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls is
A) minimization of cash handling.
B) lockbox arrangements.
C) segregation of duties.
D) frequent reconciliation of records.
Answer:
Page Ref: 355
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

63) A sales clerk at an electronics store scanned the bar code for a low cost set of headphones and then substituted a high cost set of headphones for his friend, who paid the lower price. Which of the following controls would best help to prevent this sort of fraud?
A) Use of RFID tags
B) Physical inventory count
C) Segregation of duties
D) Limited physical access to bar codes
Answer:
Page Ref: 342
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
64) The accounts receivable management method typically used by credit card companies is
A) balance forward.
B) postbilling.
C) monthly statement.
D) open-invoice.
Answer:
Page Ref: 351
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

65) The accounts receivable clerk destroys all invoices for sales made to family and friends and does not record the sales in the accounts receivable subsidiary ledgers. The family and friends usually give the clerk cash as a”thank you”. Which procedure will not prevent or detect this fraud?
A) Send monthly statements to all customers with balances owed.
B) Reconcile sales invoices in the billing department to the total debits to accounts receivable subsidiary ledgers.
C) Sequentially prenumber all invoices and prepare a sequence check at the end of each day.
D) Reconcile the accounts receivable control account to the accounts receivable subsidiary ledger.
Answer:
Page Ref: 350
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

66) Which of the following poses an internal control problem?
A) Physical inspection of inventory quantity and condition is outsourced to a firm that specializes in this service.
B) Products are released from inventory after a warehouse employee and a shipping clerk both sign the pick list.
C) Sales representatives have authority to increase customers’ credit limits in $1,000 increments.
D) When customer payments are received in the mail, checks are sent to the cashier’s office and remittance advices are sent to the accounts receivable department.
Answer:
Page Ref: 340
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
67) For sales returns, the least effective control to prevent fraudulent processing of a credit memo is to
A) reconcile total of credit memos to total debits posted to customers’ subsidiary ledgers.
B) require approval for each credit memo by the credit manager.
C) sequentially prenumber all credit memos and perform a sequence check at the end of each day.
D) match each credit memo with a receiving report.
Answer:
Page Ref: 352
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

68) Describe the basic revenue cycle activities.

69) Explain how validity checks, completeness tests and reasonableness tests can be implemented to ensure accuracy of customer orders.

70) Define and describe benefits of a CRM system.

71) How can Electronic Data Interchange (EDI) facilitate the billing and accounts receivable process?

72) Describe typical credit approval procedures.

73) Describe the two methods to manage accounts receivable.

74) Describe cycle billing and identify how an organization might benefit by using cycle billing.

75) Failure to collect cash on credit sales is a threat in the revenue cycle. What controls can be used to help neutralize this threat?

76) Discuss ways in which technology can be used to streamline cash collections.

77) Describe four threats in the revenue cycle and identify appropriate controls for each threat.

78) Discuss the general control issue of the loss of data, as it relates to the revenue cycle.

79) Explain how to effectively segregate duties in the sales order activity.

80) Discuss the revenue cycle threat of stockouts, carrying costs, and markdowns.

81) You have been hired by a catalog company to computerize its sales order entry process. Approximately 70% of all orders are received over the telephone by a sales person. The other 30% of orders are received by a sales person through mail or fax. The catalog company wants the phone orders processed real-time. The mail and fax orders will be processed in batches of 50 orders. The following attributes are collected for every sales order:
Customer number (if the order is from a new customer, a new number needs to be assigned)
Customer name
Address
Payment method (credit card for phone and fax orders and check for mailed orders)
Credit card number and expiration date
Items ordered and quantity of each
Unit price of each item ordered
Identify and describe at least ten specific control policies and procedures you will implement for the sales order process. Be very specific describing the controls and number each new control you suggest.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 13 The Expenditure Cycle: Purchasing to Cash Disbursements

1) The Squishy Things Toy Company was established in 1948. It recently signed a large contract with a chain of retail toy stores. As a condition of the contract, the Squishy will be required to track and forecast product sales by linking in to the chain’s sales database. Squishy will then be responsible for shipping products to the chain’s regional warehouses as needed. The relationship between Squishy and the chain is an example of
A) vendor-managed inventory.
B) sales force automation.
C) electronic data interchange.
D) optical character recognition.
Answer:
Page Ref: 382
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) Requiring all packing slips be reconciled to purchase orders before accepting a delivery of inventory would be most likely to prevent which of the following situations?
A) A supplier delivers more inventory than ordered at the end of the year and sends an invoice for the total quantity delivered.
B) An employee mails a fake invoice to the company, which is then paid.
C) The inventory records are incorrectly updated when a receiving department employee enters the wrong product number on the receiving report.
D) Receiving department employees steal inventory and then claim the inventory was received and delivered to the warehouse.
Answer:
Page Ref: 386
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

3) Comparing quantities on a vendor invoice to quantities on the receiving report would not prevent or detect which of the following situations?
A) Receiving and accepting inventory not ordered
B) Theft of inventory by receiving department employees
C) Update of wrong inventory items due to data entry error
D) Order for an excessive quantity of inventory
Answer:
Page Ref: 386
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

4) Which of the following would probably be the least effective control to mitigate the risk of paying an invoice payable to a phony vendor for inventory purchases, mailed to the company by an employee attempting to commit fraud?
A) Only pay from original invoices.
B) Cancel all invoices and supporting documentation when paid.
C) Strict access and authorization controls for the approved vendor master file.
D) Require three-way match for all inventory purchase invoices.
Answer:
Page Ref: 387
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

5) Which of the following would be the least effective control to prevent paying the same vendor invoice twice?
A) Allow only the accounts payable department to authorize payment for vendor invoices and allow only the cash disbursements department to cut and mail checks to vendors.
B) Only pay from original invoices.
C) Cancel each document in the voucher package once the check is prepared and mailed.
D) Only pay vendor invoices that have been matched and reconciled to a purchase order and a receiving report.
Answer:
Page Ref: 391
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

6) To accomplish the objectives set forth in the expenditure cycle, a number of key management decisions must be addressed. Which of the decisions below is not ordinarily found as part of the expenditure cycle?
A) How can cash payments to vendors be managed to maximize cash flow?
B) What is the optimal level of inventory and supplies to carry on hand?
C) Where should inventories and supplies be held?
D) What are the optimal prices for each product or service?
Answer:
Page Ref: 372
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

7) One of the basic activities in the expenditure cycle is the receiving and storage of goods, supplies, and services. What is the counterpart of this activity in the revenue cycle?
A) sales order entry process
B) shipping function
C) cash collection activity
D) cash payments activity
Answer:
Page Ref: 373
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

8) The traditional approach to inventory management to ensure sufficient quantity on hand to maintain production is known as
A) safety stock.
B) just-in-time production.
C) economic order quantity.
D) optimal inventory quantity.
Answer:
Page Ref: 378
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) Economic Order Quantity (EOQ) includes several variables that must be taken into consideration when calculating the optimal order size. One variable, the costs associated with holding inventory, is referred to as
A) ordering costs.
B) carrying costs.
C) the reorder point.
D) stockout costs.
Answer:
Page Ref: 378
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
10) The need to place an order for inventory is specified by the
A) company inventory policies.
B) economic order quantity.
C) stockout point.
D) reorder point.
Answer:
Page Ref: 378
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) When goods are being ordered from a vendor, which electronic files are either read or updated?
A) inventory, vendors, and accounts payable
B) vendors and accounts payable
C) open purchase orders and accounts payable
D) inventory, vendors, and open purchase orders
Answer:
Page Ref: 374
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

12) What is a key feature of materials requirements planning (MRP)?
A) minimize or entirely eliminate carrying and stockout costs
B) reduce required inventory levels by scheduling production rather than estimating needs
C) determine the optimal reorder point
D) determine the optimal order size
Answer:
Page Ref: 378
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
13) Materials requirements planning (MRP)
A) reduces the uncertainty about when materials are needed, thereby reducing the need to carry large levels of inventory.
B) is able to compute exactly the cost of purchasing by taking into account all costs associated with inventory carrying.
C) requires vendors to deliver inventory to the production site exactly when needed and in the correct quantities.
D) None of the above are correct.
Answer:
Page Ref: 378
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

14) The inventory management approach that attempts to minimize, if not eliminate, carrying and stockout costs is
A) materials requirements planning.
B) economic order quantity.
C) just-in-time inventory.
D) evaluated receipt settlement.
Answer:
Page Ref: 378
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

15) What aspect below best characterizes a Just-In-Time (JIT) inventory system?
A) frequent deliveries of smaller quantities of items to the work centers
B) frequent deliveries of large quantities to be held at the work centers
C) less frequent deliveries of large quantities of goods to central receiving
D) infrequent bulk deliveries of items directly to work centers
Answer:
Page Ref: 378-379
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
16) What is the key difference between the MRP and JIT inventory management approaches?
A) Only JIT reduces costs and improves efficiency.
B) MRP is especially useful for products such as fashion apparel.
C) JIT is more effectively used with products that have predictable patterns of demand.
D) MRP schedules production to meet estimated sales needs; JIT schedules production to meet customer demands.
Answer:
Page Ref: 379
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

17) MRP will be a preferred method over JIT when the
A) demand for inventory is fairly predictable.
B) demand for inventory is mostly unpredictable.
C) product has a short life cycle.
D) MRP is always a preferred method over JIT.
Answer:
Page Ref: 379
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

18) A key decision in ordering is selecting a suitable vendor. Which of the following would not be a major criterion in vendor selection?
A) prices of goods
B) quality of goods
C) credit rating of the vendor
D) ability to deliver on time
Answer:
Page Ref: 380
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

19) Once a vendor is selected for a product, the vendor’s identity is recorded in the
A) purchase requisition transaction file.
B) purchase requisition master file.
C) inventory transaction file.
D) inventory master file.
Answer:
Page Ref: 381
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
20) A purchase order is
A) a document formally requesting a vendor to sell a certain product at a certain price.
B) a request for delivery of certain items and quantities.
C) a contract between the buyer and vendor once accepted by the vendor.
D) All of the above are true.
Answer:
Page Ref: 381
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

21) Stepanek Sales and Service provides free coffee to employees. Stepanek arranged with Ingebrigtson’s Joe to deliver as many coffee packages, sugar, creamer, and filters as needed each week. Ingebrigtson’s sends a monthly invoice for Stepanek to pay. This arrangement is best described as a
A) blanket purchase order.
B) set purchase order.
C) fixed purchase order.
D) standard purchase order.
Answer:
Page Ref: 381
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

22) A major cost in the purchasing function is the number of purchase orders processed. One technique that may reduce purchasing-related expenses is to have suppliers compete with each other to meet demand at the lowest price. This name of this technique is
A) an EDI auction.
B) a trading exchange.
C) a reverse auction.
D) a supplier consortium.
Answer:
Page Ref: 382
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

23) One of the major responsibilities of the receiving department is
A) deciding if the delivery should be accepted.
B) verifying any purchase discounts for the delivery.
C) deciding on the location where the delivery will be stored until used.
D) updating inventory subsidiary ledgers.
Answer:
Page Ref: 384
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

24) Which of the following is generally not shown on a receiving report?
A) price of the items
B) quantity of the items
C) purchase order number
D) counted and inspected by
Answer:
Page Ref: 384
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

25) A receiving clerk notes that a delivery of 10 units has been received, but the purchase order specified 12 units. A debit memo will need to be prepared to adjust for the difference between the quantity ordered and received. Who should prepare this document?
A) the receiving clerk
B) the controller
C) the vendor
D) the purchasing department manager
Answer:
Page Ref: 385
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

26) Identify in which of the following scenarios a company could adjust the balance due the vendor by issuing a debit memo.
A) quantity different from that ordered
B) damage to the goods
C) goods that fail inspection for quality
D) All of the above are possible scenarios.
Answer:
Page Ref: 385
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

27) What is one of the best ways to improve the overall efficiency and effectiveness of the receipt and storage of ordered items?
A) requiring all suppliers to have the carrier verify quantities and item numbers before shipment
B) requiring all suppliers to include RFID tags on their items
C) requiring all suppliers to use EDI to expedite the receiving department function
D) requiring all delivery trucks to have satellite data terminals to expedite the receiving department function
Answer:
Page Ref: 385
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

28) Vendor invoices are approved by the ________, which reports to the ________.
A) purchasing department; controller
B) accounts payable department; treasurer
C) purchasing department; treasurer
D) accounts payable department; controller
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

29) The disbursement voucher and supporting documents are sent to the ________ for payment prior to the due date.
A) cashier
B) treasurer
C) controller
D) accounts payable department
Answer:
Page Ref: 390
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
30) A(n) ________ system posts an approved invoice to the vendor account and stores it in an open invoice file until payment is made by check.
A) nonvoucher
B) voucher
C) cycle
D) evaluated receipt settlement
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

31) A disbursement voucher contains
A) a list of outstanding invoices.
B) the net payment amount after deducting applicable discounts and allowances.
C) the general ledger accounts to be debited.
D) All of the above are correct.
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

32) One objective of accounts payable is to authorize payment only for goods or services actually ordered and received. The best way to process supplier invoices is to use
A) electronic funds transfer for small, occasional purchases from suppliers.
B) a nonvoucher system.
C) EDI for all small, occasional purchases from suppliers.
D) a disbursement voucher system.
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
33) What is not an advantage of using disbursement vouchers?
A) Disbursement vouchers reduce the number of checks written.
B) Disbursement vouchers can be prenumbered which simplifies the tracking of all payables.
C) Disbursement vouchers facilitate separating the time of invoice approval from the time of invoice payment.
D) There are no disadvantages to using disbursement vouchers.
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

34) Which of the following is not an advantage of a voucher system?
A) Several invoices may be included on one voucher, reducing the number of checks.
B) Disbursement vouchers may be pre-numbered and tracked through the system.
C) The time of voucher approval and payment can be kept separate.
D) It is a less expensive and easier system to administer than other systems.
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

35) Duties in the expenditure cycle should be properly segregated to promote internal control. This means that the authorization function is performed by ________, the recording function is performed by ________, and cash handling is performed by the ________.
A) accounts payable; purchasing; cashier
B) purchasing; accounts payable; cashier
C) purchasing; cashier; accounts payable
D) purchasing; accounts payable; treasurer
Answer:
Page Ref: 375
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
36) A voucher package should include
A) a purchase requisition, vendor invoice, and receiving report.
B) a purchase order, vendor invoice, and receiving report.
C) a purchase requisition, purchase order, and receiving report.
D) a bill of lading and vendor invoice.
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

37) Evaluated receipt settlement (ERS) approves payment of vendor invoices after reconciling the purchase order and the
A) vendor invoice.
B) sales invoice.
C) receiving report.
D) disbursement voucher.
Answer:
Page Ref: 388
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

38) All of the following are opportunities to improve efficiency of the accounts payable function except
A) use blanket purchase orders.
B) convert a manual AIS system to EDI and EFT.
C) streamline noninventory purchases.
D) use evaluated receipt settlement.
Answer:
Page Ref: 387-388
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

39) When purchasing miscellaneous supplies, companies can reduce costs, improve efficiency, and combat employee fraud by
A) using procurement cards.
B) implementing a JIT inventory system.
C) requiring employees to personally purchase items then reimbursing employees at the end of each month.
D) paying amounts out of petty cash.
Answer:
Page Ref: 389
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

40) If available, a 1% discount for payment within 10 days instead of 30 days represents an approximate savings of ________ % annually.
A) 1
B) 12
C) 18
D) 36
Answer:
Page Ref: 390
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

41) What is the best control to mitigate the threat of paying prices that are too high for goods ordered?
A) require the receiving department to verify the existence of a valid purchase order
B) use only approved suppliers and solicit competitive bids
C) only pay invoices that are supported by the original voucher package
D) use bar-code technology to eliminate data entry errors
Answer:
Page Ref: 382
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
42) What is probably the most effective control for the prevention of kickbacks to purchasing agents?
A) purchasing from approved vendors
B) diligent supervision in the purchasing department
C) a corporate policy to prohibit purchasing agents from accepting kickbacks
D) reviews of vendor performance
Answer:
Page Ref: 383
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

43) One of the threats associated with the process and activity of receiving and storing goods is
A) errors in counting.
B) kickbacks.
C) requests for unnecessary items.
D) errors in vendor invoices.
Answer:
Page Ref: 385
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

44) What is the best way to prevent the acceptance of unordered goods?
A) Order only from approved vendors.
B) Match the packing slip to a purchase order before accepting delivery.
C) Enforce an appropriate conflict of interest policy in place.
D) Require specific authorization from the purchasing manager before accepting any goods.
Answer:
Page Ref: 386
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

45) Which of the following is not a common control for ensuring inventory is secure and inventory counts are accurate?
A) control of physical access to the inventory storage areas
B) transfers of inventory with proper documentation
C) sending “blind” copies of purchase orders to inventory control for data entry
D) making physical counts of inventory at least once per year
Answer:
Page Ref: 376
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
46) Double-checking the accuracy of an invoice is a control that can help to neutralize a threat in the expenditure cycle. What activity would specifically be associated with this control?
A) ordering goods
B) receiving and storing goods
C) paying for goods and services
D) requesting goods be ordered
Answer:
Page Ref: 389
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

47) What control would best mitigate the threat of paying an invoice twice?
A) never authorize payment of a photocopy of an invoice
B) double-check mathematical accuracy of invoices
C) approval of purchase orders
D) maintaining adequate perpetual inventory records
Answer:
Page Ref: 391
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

48) Which control would best prevent payments made to fictitious vendors?
A) Allow payments only to approved vendors.
B) Restrict access to any payment or approval documents.
C) Have an independent bank reconciliation.
D) Make sure all documents are in order before approving payments.
Answer:
Page Ref: 392
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

49) In the expenditure cycle, good control dictates that expenditures should be paid by check. This may not be feasible when minor purchases are made. To facilitate quick payment for minor purchases, a(n) ________ should be set up and maintained using ________.
A) special bank account; disbursement vouchers
B) imprest fund; vouchers
C) cash box; small denomination bills
D) petty cash fund; procurement cards
Answer:
Page Ref: 392
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
50) A surprise count of an imprest petty cash fund should find the total of ________ equal to the amount authorized for the fund.
A) cash and credit memos
B) cash and vouchers
C) cash
D) cash and checks
Answer:
Page Ref: 392
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

51) What control should be put in place that assigns responsibility for EFT payments made to vendors?
A) Encrypt all EFT transmissions.
B) Time stamp all EFT transactions.
C) Establish a control group to monitor EFT transactions for validity and accuracy.
D) Number all EFT transactions.
Answer:
Page Ref: 391
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

52) Which of the following threats is not specific to the purchase requisition process of the expenditure cycle?
A) stockouts
B) purchasing from unauthorized vendors
C) requisitioning goods not needed
D) All of the above are threats in the purchase requisition process.
Answer:
Page Ref: 380
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
53) There is a symmetrical interdependence between a firm’s expenditure cycle and its suppliers’
A) production cycle.
B) revenue cycle.
C) expenditure cycle.
D) general ledger and reporting system.
Answer:
Page Ref: 372
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

54) The Squishy Things Toy Company was established in 1948. It recently signed a large contract with a chain of retail toy stores. As a condition of the contract, the Squishy will be required to track and forecast product sales by linking in to the chain’s sales database. Squishy will then be responsible for shipping products to the chain’s regional warehouses as needed. The technology that is used for communication between Squishy and the chain is
A) vendor-managed inventory.
B) sales force automation.
C) electronic data interchange.
D) optical character recognition.
Answer:
Page Ref: 372
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

55) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on ensuring that the amounts purchased minimize these costs, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
Answer:
Page Ref: 378
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
56) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on ensuring that orders are placed with sufficient lead time to prevent stockouts, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
Answer:
Page Ref: 378
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

57) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on forecasting demand for Sad Clown’s products, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
Answer:
Page Ref: 378
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

58) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on reducing or completely eliminating carrying costs, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
Answer:
Page Ref: 378
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking
59) Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he proudly announced that he had negotiated a(n) ________ with a client that defined a long-term commitment to buy components from Folding Squid.
A) purchase order
B) blanket purchase order
C) evaluated receipt settlement
D) voucher
Answer:
Page Ref: 381
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

60) Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he proudly announced that he had received a ________ from a client to buy a large quantity of components from Folding Squid.
A) purchase order
B) blanket purchase order
C) voucher
D) purchase requisition
Answer:
Page Ref: 381
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

61) Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he complained that a recent shipment from a vendor had been unsatisfactory and so had to be returned. That required the purchasing manager to send a ________ to the supplier.
A) purchase order
B) blanket purchase order
C) receiving report
D) debit memo
Answer:
Page Ref: 385
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
62) To minimize the number of checks that need to be written to pay vendor invoices a company should use a
A) voucher system.
B) just-in-time inventory system.
C) nonvoucher system.
D) evaluated receipt settlement system.
Answer:
Page Ref: 387
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

63) Evaluated receipt settlement increases efficiency by
A) eliminating the need for receiving reports.
B) eliminating the need for vendor invoices.
C) eliminating the need for purchase orders.
D) eliminating the need to prepare and mail checks.
Answer:
Page Ref: 388
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

64) In the expenditure cycle, Financial Electronic Data Interchange (FEDI) increases efficiency by
A) eliminating the need for receiving reports.
B) eliminating the need for vendor invoices.
C) eliminating the need for purchase orders.
D) eliminating the need to prepare and mail checks.
Answer:
Page Ref: 390
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

65) Procurement cards differ from corporate credit cards in which of the following ways?
A) Credit limits can be set for procurement cards, but not corporate credit cards.
B) Credit cards can be used to make purchases without an explicit sign off by supervisors, but procurement cards require a sign off.
C) Procurement cards can only be used with approved vendors, but credit cards can be used anywhere.
D) Procurement card invoices are sent separately for each card, whereas corporate credit cards are consolidated into a single invoice.
Answer:
Page Ref: 389
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

66) The purchasing manager at Folding Squid Technologies has responsibility for reviewing and authorizing purchase orders. He also reviews receiving reports, approves or corrects them, and authorizes the cashier to pay vendor invoices. Which of the following would correct control weaknesses, if any, related to these activities?
A) Vendor invoices should be reviewed by the purchasing manager to ensure that they are correct.
B) Accounts payable should reconcile purchase orders, receiving reports, and invoices.
C) Vendor invoices should be reviewed by accounts receivable and then cancelled when paid.
D) Controls are adequate under the current system.
Answer:
Page Ref: 387
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

67) The purchasing manager at Folding Squid Technologies has responsibility for reviewing and authorizing purchase orders. Receiving reports are prepared by shipping and receiving based on the relevant purchase order(s). Purchase orders, receiving reports, and vendor invoices are reconciled by accounts payable, which authorizes payment. Which of the following would correct control weaknesses, if any, related to these activities?
A) Vendor invoices should be reviewed by the purchasing manager to ensure that they are correct.
B) Accounts payable should authorize purchase orders.
C) Receiving reports should be reviewed and corrected by the purchasing manager.
D) Controls are adequate under the current system.
Answer:
Page Ref: 387
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

68) The receiving clerk at Folding Squid Technologies examines incoming shipments and reconciles their contents with the relevant purchase orders. A receiving report is then sent to accounts receivable and the vendor’s invoice is approved for payment. Which of the following would correct control weaknesses, if any, related to these activities?
A) The invoice should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled.
B) Accounts payable should reconcile the purchase order and the receiving report.
C) Invoices, purchase orders, and receiving reports should be reconciled by the receiving clerk.
D) Controls are adequate under the current system.
Answer:
Page Ref: 387
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

69) The receiving clerk at Folding Squid Technologies examines incoming shipments and checks their purchase order numbers. A receiving report is then sent to accounts payable, where it is reconciled with the relevant purchase orders and invoices and payment is authorized. Which of the following would correct control weaknesses, if any, related to these activities?
A) Vendor invoices should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled.
B) Vendor invoices should be approved for payment by the purchasing manager.
C) Purchase orders and receiving reports should be reconciled by the purchasing manager.
D) Controls are adequate under the current system.
Answer:
Page Ref: 387
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

70) Which of the controls below would be least effective to prevent ordering goods at higher than market prices?
A) Variance analysis of actual expenses to budgeted expenses
B) For high-dollar goods, solicit competitive bids from possible vendors
C) Only place orders with vendors on an approved vendor list
D) Frequent review of, and update to, vendor price lists stored in the AIS
Answer:
Page Ref: 382
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

71) The document below would be known as what by Alpha Omega Electronics?

A) Receiving report
B) Purchase order
C) Purchase requisition
D) Packing slip
Answer:
Page Ref: 384
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

72) Which of the following would be the best control to prevent receiving department employees from stealing inventory and claiming the ordered quantity wasn’t received from the vendor?
A) Reconcile quantity on packing slip to physical count when accepting delivery.
B) Restrict physical access to the receiving area.
C) Require all deliveries be made at the receiving area.
D) Require dual signatures on the move ticket when receiving delivers the inventory to the warehouse.
Answer:
Page Ref: 386
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

73) Define and describe the EOQ approach to inventory management.

74) Discuss the differences between EOQ, MRP, and JIT.

75) a) What is the major cost driver in the purchasing function? b) Describe how information technology can be used to control this cost driver.

76) Explain what is meant by the expenditure cycle as a “mirror image” of the revenue cycle.

77) Identify possible problems associated with receiving goods and appropriate actions in response to the problems.

78) How can information technology be used to improve the vendor invoice approval process?

79) Under what conditions is MRP more suitable than JIT and vice versa?

80) In the expenditure cycle, the majority of payments made are by check. What are some control issues related to payment of vendors by check?

81) Identify ten threats and applicable control procedures in the expenditure cycle.

82) What types of decision-making and strategic information should the AIS provide in the expenditure cycle?

83) How can using RFID tags or bar codes on goods or products provide significant benefit in the expenditure cycle?

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 14 The Production Cycle

1) The AIS compiles and feeds information among the business cycles. What is the relationship between the revenue and production cycles regarding the exchange of information?
A) The revenue cycle provides sales forecast and customer order information to the production cycle, but the production cycle sends information back to revenue about finished goods production.
B) The revenue cycle receives information from the production cycle about raw materials needs.
C) The production cycle sends cost of goods manufactured information back to the revenue cycle.
D) The production cycle does not exchange information with the revenue cycle.
Answer:
Page Ref: 406
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) Which of the following is a key feature of materials requirements planning (MRP-II)?
A) Reducing required inventory levels by scheduling production, rather than estimating needs
B) Minimizing or eliminating carrying and stockout costs
C) Determining the optimal reorder points for all materials
D) Determining economic order quantity for all materials
Answer:
Page Ref: 411
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

3) The production cycle is different than the revenue and expenditure cycles for all the following reasons except
A) there are no direct external data sources or destinations.
B) cost accounting is involved in all activities.
C) not all organizations have a production cycle.
D) very little technology exists to make activities more efficient.
Answer:
Page Ref: 406
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking
4) An MRP inventory system reduces inventory levels by
A) reducing the uncertainty about when materials are needed.
B) computing exact costs of purchasing and carrying inventory.
C) delivering materials to the production floor exactly when needed and in exact quantities.
D) none of the above
Answer:
Page Ref: 411
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) Which of the following is not a product design objective?
A) Design a product that meets customer requirements.
B) Design a quality product.
C) Minimize production costs.
D) Make the design easy to track for cost accounting purposes.
Answer:
Page Ref: 409
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) The operations list shows
A) the labor and machine requirements.
B) the steps and operations in the production cycle.
C) the time expected to complete each step or operation.
D) all of the above
Answer:
Page Ref: 410
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

7) Push manufacturing is officially known as
A) manufacturing resource planning (MRP).
B) just-in-time manufacturing system (JIT).
C) the economic order quantity (EOQ) system.
D) ahead-of-time production implementation (ATPI).
Answer:
Page Ref: 411
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
8) Pull manufacturing is officially known as
A) manufacturing resource planning (MRP).
B) just-in-time manufacturing system (JIT).
C) the economic order quantity (EOQ) system.
D) ahead-of-time production implementation (ATPI).
Answer:
Page Ref: 411
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) What is the main difference between MRP-II and JIT manufacturing systems?
A) The length of the planning horizon.
B) JIT uses long-term customer demand for planning purposes, but MRP-II uses short-term customer demand for planning purposes.
C) MRP-II relies on EDI, but JIT does not.
D) There are no significant differences between MRP-II and JIT.
Answer:
Page Ref: 411
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

10) A master production schedule is used to develop detailed
A) timetables of daily production and determine raw material needs.
B) reports on daily production and material usage.
C) daily reports on direct labor needs.
D) inventory charts.
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

11) The production cycle document that specifies the quantity of each product to be produced and when production should begin is the
A) bill of materials.
B) bill of lading.
C) master production schedule.
D) operations list.
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
12) What information is necessary to create the master production schedule?
A) engineering department specifications and inventory levels
B) engineering department specifications and sales forecasts
C) special orders information and engineering department specifications
D) sales forecasts, special orders information, and inventory levels
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

13) The document that authorizes the transfer of raw materials from the storeroom to the production floor is referred to as
A) a bill of materials.
B) a production order.
C) a materials requisition.
D) a move ticket.
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

14) ______ is an efficient way to track and process information about raw materials used in production.
A) A just-in-time inventory system
B) Identifying materials with bar codes or RFID tags
C) A materials resources planning inventory system
D) Job-order costing
Answer:
Page Ref: 414
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

15) The use of various forms of information technology in the production process is referred to as
A) computerized investments and machines.
B) computerized integration of machines.
C) computer-integrated manufacturing.
D) computer intense manufacturing.
Answer:
Page Ref: 416
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
16) Using technology such as robots and computer-controlled machinery to shift from mass production to custom order manufacturing is referred to as
A) computer integrated manufacturing (CIM).
B) lean manufacturing.
C) Six Sigma.
D) computer-aided design (CAD).
Answer:
Page Ref: 416
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

17) Which objective listed below is not a cost accounting objective for the production cycle?
A) provide information for planning, controlling, and evaluating the performance of production operations
B) provide cost data about products used in pricing and product mix decisions
C) collect and process the information used to calculate inventory and cost of goods sold amounts that appear in the financial statements
D) provide tests of audit control functions as part of the AIS
Answer:
Page Ref: 418
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

18) Which type of information below should not be maintained by the AIS in accounting for fixed assets?
A) identification/serial number
B) cost
C) improvements
D) market value
Answer:
Page Ref: 417
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
19) Direct labor must be tracked and accounted for as part of the production process. Traditionally, direct labor was tracked using ________ but an AIS enhancement is to use ________ to record and track direct labor costs.
A) job-time tickets; coded identification cards
B) move tickets; coded identification cards
C) employee earnings records; job-time tickets
D) time cards; electronic time entry terminals
Answer:
Page Ref: 419
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

20) Detailed data about reasons for warranty and repair costs is considered an applicable control used to mitigate the threat of
A) underproduction.
B) overproduction.
C) poor product design.
D) suboptimal investment of fixed assets.
Answer:
Page Ref: 410
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

21) For replacement of inventories and assets destroyed by fire or other disasters, an organization needs
A) stand-by facilities.
B) adequate insurance coverage.
C) source data automation.
D) All of the above are correct.
Answer:
Page Ref: 417
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Reflective Thinking
22) Overproduction or underproduction can be a threat to an organization. To which process or activity does this threat relate?
A) product design
B) planning and scheduling
C) production operations
D) cost accounting
Answer:
Page Ref: 415
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

23) What specific control can help restrict the rights of authorized users to only the portion of a database needed to complete their specific job duties?
A) an access control matrix
B) passwords and user IDs
C) closed-loop verification
D) specific authorization
Answer:
Page Ref: 408
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

24) To reduce the threat of theft or destruction of inventories and other fixed assets, the organization may wish to implement which of the following controls?
A) review and approval of fixed asset acquisitions
B) improved and more timely reporting
C) better production and planning systems
D) document all movement of inventory through the production process
Answer:
Page Ref: 416
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

25) The best control procedure for accurate data entry is
A) the use of on-line terminals.
B) an access control matrix.
C) passwords and user IDs.
D) automation of data collection.
Answer:
Page Ref: 409
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
26) Which of the following organization controls should be implemented and maintained to counteract the general threat that the loss of production data will greatly slow or halt production activity?
A) Store key master inventory and production order files on-site only to prevent their theft.
B) Back up data files only after a production run has been physically completed.
C) Access controls should apply to all terminals within the organization.
D) Allow access to inventory records from any terminal within the organization to provide efficient data entry.
Answer:
Page Ref: 420
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

27) The threat of loss of data exposes the company to
A) the loss of assets.
B) ineffective decision making.
C) inefficient manufacturing.
D) All of the above are correct.
Answer:
Page Ref: 409
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

28) What is the primary drawback to using a volume-driven base, such as direct labor or machine hours, to apply overhead to products in a traditional cost accounting system?
A) The cost accountant may not fully understand how to track direct labor or machine hours.
B) It is difficult for an AIS to incorporate such a measurement into its system.
C) It is difficult for an ERP to incorporate such a measurement into its integrated system.
D) Many overhead costs are incorrectly allocated to products since they do not vary with production volume.
Answer:
Page Ref: 420
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

29) ________ identifies costs with the corporation’s strategy for production of goods and services.
A) Activity-based costing
B) Job-order costing
C) Process costing
D) Manufacturing costing
Answer:
Page Ref: 420
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

30) In an Activity-Based Costing (ABC) system, a cause-and-effect relationship is known as a
A) cost stimulator.
B) overhead stimulator.
C) cost driver.
D) cost catalyst.
Answer:
Page Ref: 421
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

31) What does the first term in the throughput formula, productive capacity, represent?
A) the maximum number of units that can be produced given current technology
B) the percentage of total production time used to manufacture a product
C) the percentage of “good” units produced given current technology
D) the percentage of “bad” units produced given current technology
Answer:
Page Ref: 423
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

32) ________ are incurred to ensure that products are created without defects the first time.
A) External failure costs
B) Inspection costs
C) Internal failure costs
D) Prevention costs
Answer:
Page Ref: 423
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

33) ________ are associated with testing to ensure that products meet quality standards.
A) External failure costs
B) Inspection costs
C) Internal failure costs
D) Prevention costs
Answer:
Page Ref: 423
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

34) The cost of a product liability claim can be classified as a(n)
A) prevention cost.
B) inspection cost.
C) internal failure cost.
D) external failure cost.
Answer:
Page Ref: 423
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

35) Dolly Salem owns and operates a bakery in Charleston, South Carolina. She maintains a file of recipes that list the ingredients used to make her famous cakes and cookies. These recipes are examples of a(an)
A) bill of materials.
B) operations list.
C) production order.
D) materials requisition.
Answer:
Page Ref: 410
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
36) Dolly Salem owns and operates a bakery in Charleston, South Carolina. She maintains a file that lists the sequence of procedures required to make each of her famous cakes and cookies. These instructions are examples of a(an)
A) bill of materials.
B) operations list.
C) production order.
D) materials requisition.
Answer:
Page Ref: 410
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

37) Dolly Salem owns and operates a bakery in Charleston, South Carolina. Each morning she prepares a list that describes the quantity and variety of cakes and cookies that will be prepared during the day. This list is an example of a(an)
A) bill of materials.
B) operations list.
C) production order.
D) materials requisition.
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

38) Dolly Salem owns and operates a bakery in Charleston, South Carolina. Each afternoon, she prepares a shopping list that describes the quantity and variety of ingredients that she will purchase in the evening from a local food wholesaler. The shopping list is an example of a(an)
A) bill of materials.
B) operations list.
C) production order.
D) materials requisition.
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking
39) Wee Bee Trucking determines the cost per delivery by summing the average cost of loading, unloading, transporting, and maintenance. This is an example of ________ costing.
A) job-order
B) unit-based
C) activity-based
D) process
Answer:
Page Ref: 418
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

40) Wee Bee Trucking determines the cost per delivery by averaging total cost over number of deliveries. This is an example of ________ costing.
A) job-order
B) unit-based
C) activity-based
D) process
Answer:
Page Ref: 418
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

41) Wee Bee Trucking determines the cost per delivery by identifying variables as cost drivers, and allocating overhead accordingly. This is an example of ________ costing.
A) job-order
B) unit-based
C) activity-based
D) process
Answer:
Page Ref: 420
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
42) In activity-based costing, expenses associated with the purchase of health care insurance for employees are ________ overhead.
A) batch-related
B) product-related
C) companywide
D) expenditure-based
Answer:
Page Ref: 421
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

43) In activity-based costing, the expenses associated with planning and design of new products are ________ overhead.
A) batch-related
B) product-related
C) companywide
D) expenditure-based
Answer:
Page Ref: 421
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

44) At the end of each production run, preventive maintenance is done on the assembly line. The expenses associated with this maintenance are ________ overhead.
A) batch-related
B) product-related
C) companywide
D) department-based
Answer:
Page Ref: 420
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

45) Which of the following is not a benefit of activity-based costing?
A) Lower cost
B) Better decisions
C) Improved cost management
D) Identification of cost drivers
Answer:
Page Ref: 421
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
46) The expenses associated with a product recall are ________ costs.
A) prevention
B) inspection
C) internal failure
D) external failure
Answer:
Page Ref: 423
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

47) The expenses associated with quality assurance activities are ________ costs.
A) prevention
B) inspection
C) internal failure
D) external failure
Answer:
Page Ref: 423
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

48) The expenses associated with the use of clean rooms in the production of computer hard drives are ________ costs.
A) prevention
B) inspection
C) internal failure
D) external failure
Answer:
Page Ref: 423
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

49) The expenses associated with disposal of defective products are ________ costs.
A) prevention
B) inspection
C) internal failure
D) external failure
Answer:
Page Ref: 423
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
50) Labor productivity is measured by the quantity produced divided by the labor time required to produce it. All other things held constant, an increase in labor productivity will increase throughput by
A) increasing productive capacity.
B) increasing productive processing time.
C) increasing yield.
D) increasing all components of throughput.
Answer:
Page Ref: 423
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

51) In addition to identifying and dealing with defective products before they reach customers, quality management is concerned with initiating process changes that will reduce the number of defective units produced. All other things held constant, a decrease in the number of defective units will increase throughput by
A) increasing productive capacity.
B) increasing productive processing time.
C) increasing yield.
D) increasing all components of throughput.
Answer:
Page Ref: 423
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

52) Folding Squid Technologies has installed a new production monitoring system that is expected to reduce system breakdowns by 28%. This system will increase throughput by
A) increasing productive capacity.
B) increasing productive processing time.
C) increasing yield.
D) increasing all components of throughput.
Answer:
Page Ref: 423
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

53) 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. Which of the following is most likely to be a cost driver for the allocation of utility costs?
A) Number of units produced
B) Number of labor hours
C) Number of projects completed
D) Sales revenue
Answer:
Page Ref: 421
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking

54) Folding Squid Technologies initiated a just-in-time inventory system in 2010. Now the production manager, Chan Ziaou, wants to apply the same principles to the entire production process. His recommendation is for the company adopt a
A) lean manufacturing system.
B) master production scheduling system.
C) manufacturing resource planning system.
D) computer-integrated manufacturing system.
Answer:
Page Ref: 411
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
55) This document appears to be a

A) Materials Requisition.
B) Production Order.
C) Bill of Materials.
D) Move Ticket between production and warehouse functions.
Answer:
Page Ref: 412
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

56) How many side panels should the company budget for use in week two?

Bill of Materials
Finished Product: DVD Player
Part Number
105
125
148
155
173
195
199 Description
Control Unit
Back Panel
Side Panel
Top/Bottom Panel
Timer
Front Panel
Screw Quantity
1
1
2
2
1
1
6

Operations List for: Create Side Panel
Operation Number
105
106
124
142
155 Description
Cut to shape
Corner cut
Turn and shape
Finish
Paint Machine Number
ML15-12
ML15-9
S28-17
F54-5
P89-1 Standard Time (m:s)
2:00
3:15
4:00
7:10
9:30

57) How many labor hours should the company budget in week three to produce all side panels needed? Round to the nearest hour, if necessary.

Bill of Materials
Finished Product: DVD Player
Part Number
105
125
148
155
173
195
199 Description
Control Unit
Back Panel
Side Panel
Top/Bottom Panel
Timer
Front Panel
Screw Quantity
1
1
2
2
1
1
6

Operations List for: Create Side Panel
Operation Number
105
106
124
142
155 Description
Cut to shape
Corner cut
Turn and shape
Finish
Paint Machine Number
ML15-12
ML15-9
S28-17
F54-5
P89-1 Standard Time (m:s)
2:00
3:15
4:00
7:10
9:30

58) Identify and discuss the two documents that are the result of product design activities.

59) Explain what CIM means and its benefits.

60) What types of data are accumulated by cost accounting? What is the accountant’s role in cost accounting?

61) What role does the AIS play in the production cycle?

62) Discuss the role the accountant can play in the production cycle.

63) Identify and discuss the two common methods of production planning.

64) What are the two major types of cost accounting systems and what are the differences between the two?

65) Describe five threats in the production cycle and the applicable control procedures used to mitigate each threat.

66) Discuss two measures that can address the threats of inefficiencies and quality controls problems.

67) Discuss the criticisms of traditional cost accounting methods.

68) What is activity-based costing (ABC)? How does it compare with the traditional costing methods? What are the benefits of activity-based costing?

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 15 The Human Resources Management and Payroll Cycle

1) Which activity below is not performed by the HRM?
A) compensation
B) training
C) discharge
D) recruitment and hiring
Answer:
Page Ref: 435
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) The sales department administrative assistant has been assigning phone order sales to her brother-in-law, a company sales person. Company policy is to pay commissions only on orders directly received by sales people, not on orders received over the phone. The resulting fraudulent commission payments might best have been prevented by requiring that
A) sales commission statements be supported by sales order forms signed by the customer and approved by the sales manager.
B) sales order forms be prenumbered and accounted for by the sales department manager.
C) sales orders and commission statements be approved by the accounting department.
D) disbursement vouchers for commission payments be reviewed by the internal audit department and compared to sales commission statements and sales orders.
Answer:
Page Ref: 443
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

3) Which department should have the sole ability to provide information to the AIS about hiring, terminations, and pay rate changes?
A) payroll
B) timekeeping
C) production
D) HRM
Answer:
Page Ref: 436
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
4) Which of the following is not one of the major sources of input to the payroll system?
A) payroll rate changes
B) time and attendance data
C) checks to insurance and benefits providers
D) withholdings and deduction requests from employees
Answer:
Page Ref: 441
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) In the payroll system, checks are issued to
A) employees and to banks participating in direct deposit.
B) a company payroll bank account.
C) government agencies.
D) All of the above are correct.
Answer:
Page Ref: 441
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) Experts estimate that on average the costs associated with replacing an employee are about ________ that of the employee’s annual salary.
A) one-quarter
B) one-half
C) one and one-half
D) twice
Answer:
Page Ref: 438
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

7) For recording time spent on specific work projects, manufacturing companies usually use a
A) job time ticket.
B) time card.
C) time clock.
D) labor time card.
Answer:
Page Ref: 443
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

8) Regarding the use of incentives, commissions and bonuses in payroll, which of the following statements is false?
A) Using incentives, commissions, and bonuses requires linking the payroll system and the information systems of sales and other cycles in order to collect the data used to calculate bonuses.
B) Bonus/incentive schemes must be properly designed with realistic, attainable goals that can be objectively measured.
C) Incentive schemes can result in undesirable behavior.
D) All of the above are true.
Answer:
Page Ref: 443
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

9) What is not a desired result of an employee bonus/incentive system?
A) Employees may recommend unnecessary services to customers in order to exceed set sales quotas and earn a bonus.
B) Employees may look for ways to improve service.
C) Employees may analyze their work environment and find ways to cut costs.
D) Employees may work harder and may be more motivated to exceed target goals to earn a bonus.
Answer:
Page Ref: 444
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

10) These are used to transmit time and attendance data directly to the payroll processing system.
A) Badge readers
B) Electronic time clocks
C) Magnetic cards
D) none of the above
Answer:
Page Ref: 444
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
11) Payroll deductions fall into the broad categories of ________ and ________.
A) payroll tax withholdings; voluntary deductions
B) unemployment; social security taxes
C) unemployment taxes; income taxes
D) voluntary deductions; income taxes
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) Which of the following deductions is not classified as a voluntary deduction?
A) pension plan contributions
B) social security withholdings
C) insurance premiums
D) deductions for a charity organization
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

13) Which type of payroll report contains information such as the employees’ gross pay, payroll deductions, and net pay in a multicolumn format?
A) payroll register
B) deduction register
C) employee earnings statement
D) federal W-4 form
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) Which type of payroll report lists the voluntary deductions for each employee?
A) payroll register
B) deduction register
C) earnings statement
D) federal W-4 form
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
15) Which type of payroll report includes the details of the current paycheck and deductions as well as year-to-date totals?
A) payroll register
B) deduction register
C) earnings statement
D) federal W-4 form
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

16) Why is a separate payroll account used to clear payroll checks?
A) for internal control purposes to help limit any exposure to loss by the company
B) to make bank reconciliation easier
C) banks don’t like to commingle payroll and expense checks
D) All of the above are correct.
Answer:
Page Ref: 450
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

17) One good way to eliminate paper paychecks is to
A) pay in cash only.
B) pay with money orders.
C) use direct deposit.
D) use Electronic Funds Transfer.
Answer:
Page Ref: 449
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

18) What step can be taken to reduce the distribution of fraudulent paychecks?
A) have internal audit investigate unclaimed paychecks
B) allow department managers to investigate unclaimed paychecks
C) immediately mark “void” across all unclaimed paychecks
D) match up all paychecks with time cards
Answer:
Page Ref: 450
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
19) Companies that specialize in processing payroll are known as
A) paycheck distribution companies.
B) payroll service bureaus.
C) professional employer organizations.
D) semi-governmental organizations.
Answer:
Page Ref: 451
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

20) This organization provides payroll processing as well as other HRM services, such as employee benefit design and administration.
A) Cashier
B) Payroll service bureau
C) Professional employer organization
D) Paycheck distribution companies
Answer:
Page Ref: 451
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

21) Which of the following is not a benefit of using a payroll service bureau or a professional employer organization?
A) Freeing up of computer resources
B) Increased internal control
C) Reduced costs
D) Wider range of benefits
Answer:
Page Ref: 452
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
22) Many companies offer their employees a “cafeteria” approach to voluntary benefits in which employees can pick and choose the benefits they want. This plan is normally called a(n)
A) elective plan.
B) menu options benefit plan.
C) flexible benefit plan.
D) buffet plan.
Answer:
Page Ref: 451
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

23) Pay rate information is stored in
A) employees’ personnel files.
B) employee subsidiary ledgers.
C) the payroll master file.
D) electronic time cards.
Answer:
Page Ref: 442
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

24) The payroll transaction file would contain
A) entries to add new hires.
B) time card data.
C) changes in tax rates.
D) All of the above are correct.
Answer:
Page Ref: 443
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

25) The document that lists each employee’s gross pay, payroll deductions, and net pay in a multicolumn format is called
A) an employee earnings statement.
B) the payroll register.
C) a deduction register.
D) an employee time sheet summary.
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
26) As the payroll system processes each payroll transaction, the system should also perform which activity listed below?
A) allocate labor costs to appropriate general ledger accounts
B) use cumulative totals generated from a payroll to create a summary journal entry to be posted to the general ledger
C) both A and B above
D) The HRM system should not perform either activity A or B.
Answer:
Page Ref: 447
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

27) Direct deposit of employee paychecks is one way an organization can improve efficiency and reduce payroll-processing costs. Which statement regarding direct deposit is false?
A) The cashier does not authorize the transfer of funds from the organization’s checking account to a payroll checking account.
B) The cashier does not have to sign employee paychecks.
C) Employees who are part of a direct deposit program receive a copy of their paycheck indicating the amount deposited.
D) Employees who are part of a direct deposit program receive an earnings statement on payday rather than a paper check.
Answer:
Page Ref: 449
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

28) The employer pays a portion of some payroll taxes and employee benefits. Both the employee and employer pay which benefit or tax listed below?
A) social security taxes
B) federal income taxes
C) state income taxes
D) none of the above
Answer:
Page Ref: 450
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
29) When using electronic documents, ________ increase the accuracy of data entry.
A) access controls
B) separation of duties
C) general controls
D) application controls
Answer:
Page Ref: 444
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

30) The key to preventing unauthorized changes to the payroll master file is
A) hiring totally honest people to access and make changes to this file.
B) segregation of duties between the preparation of paychecks and their distribution.
C) segregation of duties between the authorization of changes and the physical handling of paychecks.
D) having the controller closely review and then approve any changes to the master file.
Answer:
Page Ref: 452
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

31) Which of the following is not a potential effect of inaccurate data on employee time cards?
A) increased labor expenses
B) erroneous labor expense reports
C) damaged employee morale
D) inaccurate calculation of overhead costs
Answer:
Page Ref: 444
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

32) Which control would be most appropriate to address the problem of inaccurate payroll processing?
A) encryption
B) direct deposit
C) cross-footing of the payroll register
D) an imprest payroll checking account
Answer:
Page Ref: 449
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking
33) What is the purpose of a general ledger payroll clearing account?
A) to check the accuracy and completeness of payroll recording and its allocation to cost centers
B) to make the bank reconciliation easier
C) to make sure that all employees are paid correctly each week
D) to prevent the cashier from having complete control of the payroll cycle
Answer:
Page Ref: 449
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

34) A “zero balance check” refers to which of the following control procedures?
A) a type of batch total
B) cross-footing the payroll register
C) the payroll clearing account shows a zero balance once all entries are posted
D) trial balance showing that debits equal credits
Answer:
Page Ref: 449
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

35) All of the following are controls that should be implemented in a payroll process, except
A) supervisors distribute paychecks since they should know all employees in their department.
B) someone independent of the payroll process should reconcile the payroll bank account.
C) sequential numbering of paychecks and accounting for the numbers.
D) restrict access to blank payroll checks and documents.
Answer:
Page Ref: 450
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

36) What is the best control to reduce the risk of losing payroll data?
A) passwords
B) physical security controls
C) backup and disaster recovery procedures
D) encryption
Answer:
Page Ref: 441
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
37) The threat of violation of employment laws relates directly to which activity?
A) payroll processing
B) collecting employee time data
C) hiring and recruiting
D) all of the above
Answer:
Page Ref: 441
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

38) What is a potential threat to the specific activity of payroll processing?
A) hiring unqualified employees
B) poor system performance
C) violations of employment laws
D) unauthorized changes to the payroll master file
Answer:
Page Ref: 443
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

39) The results of an internal audit finds that there is a problem with inaccurate time data being entered into the payroll system. What is an applicable control that can help prevent this event from occurring in the future?
A) proper segregation of duties
B) automation of data collection
C) sound hiring procedures
D) review of appropriate performance metrics
Answer:
Page Ref: 444
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

40) Which of the following is a control that can be implemented to help prevent paychecks being issued to a “phantom” or “ghost” employee?
A) The cashier should sign all payroll checks.
B) Sequentially prenumber all payroll checks.
C) Use an imprest account to clear payroll checks.
D) Paychecks should be physically distributed by someone who does not authorize time data or record payroll.
Answer:
Page Ref: 450
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

41) The average annual middle-management salary at Folding Squid Technologies is $60,000. If the average turnover rate for middle management is ten employees per year, what is the approximate average annual cost of turnover?
A) $300,000
B) $600,000
C) $900,000
D) $1,200,000
Answer:
Page Ref: 438
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

42) Which of the following will contribute to the efficiency of a payroll system?
A) Segregation of check distribution from payroll duties
B) Prompt redeposit of unclaimed paychecks
C) A separate payroll bank account
D) Direct deposit of checks
Answer:
Page Ref: 449
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
43) Which of the following will limit a firm’s potential loss exposure from paycheck forgery?
A) Segregation of check distribution from payroll duties
B) Prompt redeposit of unclaimed paychecks
C) A separate payroll bank account
D) Direct deposit of checks
Answer:
Page Ref: 450
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

44) Which of the following is a control that addresses the threat of unauthorized changes to the payroll master file?
A) Field checks
B) Batch totals
C) Segregation of duties
D) Sound hiring procedures
Answer:
Page Ref: 443
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

45) Which of the following documents would be likely to yield the greatest cost saving by converting from paper to electronic?
A) Payroll register
B) Earnings statement
C) Deduction register
D) Time card
Answer:
Page Ref: 444
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
46) For the payroll register below, all the following data entry controls would be useful except

A) Validity check on Fed. Tax
B) Sequence check on Employee No.
C) Limit check on Hours
D) Field check on Pay Rate
Answer:
Page Ref: 449
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

47) For the payroll register below, all the following processing controls would be useful except

A) Concurrent update control
B) Cross-footing balance test
C) Mathematical accuracy test
D) Hash total on Employee No.
Answer:
Page Ref: 449
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
48) Describe the basic activities in an HRM/payroll cycle.

49) Identify the two types of payroll deductions and give two examples of each type.

50) Why are accurate cumulative earnings records important?

51) Explain the functions of the payroll register, deduction register, and earnings statement.

52) What is the difference between a payroll service bureau and a professional employer organization?

53) Discuss the various types and sources of input into the HRM/payroll cycle.

54) Describe benefits and threats of incentive and bonus programs.

55) Explain benefits to companies and to employees of using electronic direct deposit for payroll.

56) What factors should be considered in outsourcing payroll to a payroll service bureau? Discuss the advantages and disadvantages of using a payroll service bureau to process a payroll.

57) Discuss the threat of unauthorized changes to the payroll master file and its consequences.

58) What controls are available to address the threat of payroll errors?

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 16 General Ledger and Reporting System

1) The general ledger and reporting system consists of the ________ involved in ________ the general ledger and ________ reports.
A) business transactions; updating; processing
B) data processing; business transactions for; printing
C) information processing; updating; creating
D) business transactions; data processing; preparing
Answer:
Page Ref: 463
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) Which item below is not considered a major input to the general ledger and reporting system?
A) summary entries from the major subsystems
B) reports from managers
C) adjusting entries
D) financing and investing activities
Answer:
Page Ref: 463
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

3) Who provides the adjusting entries for a well-designed general ledger and reporting system?
A) various user departments
B) the treasurer’s area
C) the other major AIS subsystems
D) the controller’s area
Answer:
Page Ref: 463
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
4) The general ledger and reporting system is designed to provide information for which of the following user groups?
A) internal users
B) external users
C) inquiry processing by internal or external users
D) all of the above
Answer:
Page Ref: 465
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) The general ledger system of an organization should be designed to serve the information requirements of both internal and external users. This means that the system should support
A) producing expansive regular periodic reports to cover all information needs.
B) the real-time inquiry needs of all users.
C) producing regular periodic reports and respond to real-time inquiry needs.
D) access by investors and creditors of the organization to general ledger balances.
Answer:
Page Ref: 465
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

6) How is general ledger updating accomplished by the various accounting subsystems?
A) Individual journal entries for each accounting subsystem transaction update the general ledger every 24 hours.
B) Summary journal entries that represent the results of all transactions for a certain time period are used to update the general ledger.
C) The controller or treasurer must approve accounting subsystem journal entries before any updating may occur.
D) Nonroutine transactions are entered into the system by the treasurer’s office.
Answer:
Page Ref: 467
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic
7) When updating the general ledger, sales, purchases, and production are examples of ________ entries, and issuance or retirement of debt and the purchase or sale of investment securities are examples of ________ entries.
A) adjusting; controller originated
B) accounting subsystem; treasurer originated
C) adjusting; special journal
D) controller generated; special journal
Answer:
Page Ref: 467
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

8) Entries to update the general ledger are often documented by which of the following?
A) general journal
B) subsidiary journal
C) subsidiary ledgers
D) journal vouchers
Answer:
Page Ref: 467
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) Adjusting entries that reflect events that have already occurred, but for which no cash flow has taken place are classified as
A) accruals.
B) deferrals.
C) revaluations.
D) corrections.
Answer:
Page Ref: 470
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
10) Recording interest earned on an investment is an example of which type of adjusting journal entry?
A) accrual entry
B) deferral entry
C) revaluation entry
D) correcting entry
Answer:
Page Ref: 470
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

11) An adjusting entry made at the end of an accounting period that reflects the exchange of cash prior to performance of a related event is classified as a(n)
A) accrual entry.
B) deferral entry.
C) revaluation entry.
D) correcting entry.
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) Depreciation expense and bad debt expense are examples of which type of adjusting journal entry?
A) deferrals
B) accruals
C) revaluations
D) estimates
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

13) Adjusting entries that are made to reflect differences between the actual and recorded value of an asset or a change in accounting principle are called
A) reconciliations.
B) revaluations.
C) estimates.
D) accruals.
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) Adjusting entries that are made to counteract the effects of errors found in the general ledger are called
A) accruals.
B) corrections.
C) deferrals.
D) estimates.
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

15) Corrections are entries made to correct errors found in ________.
A) all journals
B) special journals
C) the general ledger
D) the financial statements
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

16) Immediately after the adjusting entries are posted, the next step in the general ledger and reporting system is to prepare
A) an adjusted trial balance.
B) closing entries.
C) financial statements.
D) an unadjusted trial balance.
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

17) Financial statements are prepared in a certain sequence. Which statement is prepared last in the sequence?
A) the adjusted trial balance
B) the income statement
C) the balance sheet
D) the statement of cash flows
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

18) A listing of journal vouchers by numerical sequence, account number, or date is an example of
A) a general ledger control report.
B) a budget report.
C) a batch to be processed.
D) responsibility accounting.
Answer:
Page Ref: 469
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

19) If you believe not all adjusting entries were posted in the general ledger, you should prepare a general ledger control report listing journal vouchers in
A) numerical sequence.
B) chronological order.
C) general ledger account number order.
D) any order, since you have to review them all anyway.
Answer:
Page Ref: 469
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking
20) If you believe a general ledger account was not adjusted properly or at all, you should prepare a general ledger control report listing journal vouchers in
A) numerical sequence.
B) chronological order.
C) general ledger account number order.
D) any order, since you have to review them all anyway.
Answer:
Page Ref: 469
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking

21) The managerial report that shows planned cash inflows and outflows for major investments or acquisitions is the
A) journal voucher list.
B) statement of cash flows.
C) operating budget.
D) capital expenditures budget.
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

22) The operating budget
A) compares estimated cash flows from operations with planned expenditures.
B) shows cash inflows and outflows for each capital project.
C) depicts planned revenues and expenditures for each organizational unit.
D) is used to plan for the purchase and retirement of property, plant, and equipment.
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

23) Budgets and performance reports should be developed on the basis of
A) responsibility accounting.
B) generally accepted accounting principles.
C) financial accounting standards.
D) managerial accounting standards.
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
24) Performance reports for cost centers should compare actual versus budget ________ costs.
A) controllable
B) uncontrollable
C) fixed
D) variable
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

25) Performance reports for sales deparments should compare actual versus budget
A) revenue.
B) cost.
C) return on investment.
D) profit.
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

26) Departments that mostly provide services to other units and charge those units for services rendered should be evaluated as ________ centers.
A) cost
B) profit
C) investment
D) revenue
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

27) As responsibility reports are rolled up into reports for higher level executives, they
A) become less detailed.
B) become more detailed.
C) become narrower in scope.
D) look about the same.
Answer:
Page Ref: 477
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking
28) Variances for variable costs will be misleading when the planned output differs from budgeted output. A solution to this problem would be
A) calling all costs fixed.
B) to use flexible budgeting.
C) better prediction of output.
D) to eliminate the budgeting process.
Answer:
Page Ref: 478
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

29) Concerning XBRL, which of the following statements is not true?
A) XBRL is a variant of XML.
B) XBRL is specifically designed for use in communicating the content of financial data.
C) XBRL creates unique tags for each data item.
D) XBRL’s adoption will require accountants and systems professionals tag data for their clients.
Answer:
Page Ref: 472
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

30) The benefits of XBRL include:
A) organizations can publish financial information only once, using standard XBRL tags.
B) tagged data is readable and interpretable by computers, so users don’t need re-enter data into order to work with it.
C) Both are benefits of XBRL.
D) Neither are benefits of XBRL.
Answer:
Page Ref: 472
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
31) Communications technology and the Internet can be used to reduce the time and costs involved in disseminating financial statement information. Users of such financial information still struggle in that many recipients have different information delivery requirements and may have to manually reenter the information into their own decision analysis tools. The ideal solution to solve these problems and efficiently transmit financial information via the Internet is to use
A) HTML code.
B) XML.
C) pdf file.
D) XBRL.
Answer:
Page Ref: 472
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

32) Which of the following statements is not true about an XBRL instance document?
A) An instance document includes instruction code as to how the document should be physically arranged and displayed.
B) An instance document contains facts about specific financial statement line items.
C) An instance document uses separate tags for each specific element.
D) An instance document can be used to tag financial and nonfinancial elements.
Answer:
Page Ref: 472
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

33) Which of the following are appropriate controls for the general ledger and reporting system?
A) using well-designed documents and records
B) online data entry with the use of appropriate edit checks
C) prenumbering documents and accounting for the sequence numbers
D) All of the above are appropriate.
Answer:
Page Ref: 468
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
34) A type of data entry control that would ensure that adjusting entries are posted to existing general ledger accounts is called a(n) ________ check.
A) validity
B) existence
C) closed loop verification
D) reasonableness
Answer:
Page Ref: 468
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

35) One way of ensuring that recurring adjusting journal entries are made each month would be to
A) make all the entries a month in advance.
B) rotate the responsibility among the accounting staff.
C) program the entries to be made automatically.
D) create a standard adjusting journal entry file.
Answer:
Page Ref: 471
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

36) Which of the following tasks are facilitated by maintaining a strong and secure audit trail?
A) tracing a transaction from original source document to the general ledger to a report
B) tracing an item in a report back through the general ledger to the original source document
C) tracing changes in general ledger accounts from beginning to ending balances
D) All of the above are facilitated by the audit trail.
Answer:
Page Ref: 469-470
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

37) Which of the following balanced scorecard dimensions provides measures on how efficiently and effectively the organization is performing key business processes?
A) financial
B) internal operations
C) innovation and learning
D) customer
Answer:
Page Ref: 479
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

38) Which of the following is not one of the principles of proper graph design for bar charts?
A) Include data values with each element.
B) Use 3-D rather than 2-D bars to make reading easier.
C) Use colors or shades instead of patterns to represent different variables.
D) Use titles that summarize the basic message.
Answer:
Page Ref: 481
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

39) Information about financing and investing activities for use in making general ledger entries is typically provided by the
A) budget department.
B) controller.
C) treasurer.
D) chief executive officer.
Answer:
Page Ref: 463
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

40) Adjusting entries that are made to recognize revenue that has been received but not yet earned are classified as
A) estimates.
B) deferrals.
C) accruals.
D) revaluations.
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

41) Adjusting entries that reflect a change in accounting principle used to value inventories are classified as
A) corrections.
B) estimates.
C) deferrals.
D) revaluations.
Answer:
Page Ref: 471
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

42) Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message, “The account number referenced in your journal entry does not exist. Do you want to create a new account?” This message was the result of a
A) validity check.
B) closed loop verification.
C) zero-balance check.
D) completeness test.
Answer:
Page Ref: 468
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

43) Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message, “Your journal entry must be a numeric value. Please reenter.” This message was the result of a
A) validity check.
B) field check.
C) zero-balance check.
D) completeness test.
Answer:
Page Ref: 468
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
44) Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message when she tried to save her entry, “The amounts debited and credited are not equal. Please correct and try again.” This message was the result of a
A) validity check.
B) field check.
C) zero-balance check.
D) completeness test.
Answer:
Page Ref: 468
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

45) Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message when she tried to save her entry, “The data you have entered does not include a source reference code. Please enter this data before saving.” This message was the result of a
A) validity check.
B) field check.
C) zero-balance check.
D) completeness test.
Answer:
Page Ref: 468
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

46) IFRS is an acronym for what?
A) International Financial Reporting Standards
B) Internal Forensic Response System
C) Input and Financial Reporting Standards
D) Internal Fault Recovery System
Answer:
Page Ref: 471
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
47) Which of the following is true about IFRS?
A) Financial statements likely must be prepared using IFRS beginning in 2015.
B) The switch to IFRS is required by the Sarbanes-Oxley Act.
C) IFRS is only slightly different than US GAAP.
D) The switch to IFRS is cosmetic onlythere isn’t any real impact on AIS.
Answer:
Page Ref: 471
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

48) Which of the following scenarios will not be allowed under IFRS?
A) A landscaping and garden retail store keeps piles of river rock, gravel, paving stones, and small decorative rocks in a fenced area on the side of the store. The store uses the most recent inventory costs when calculating cost of goods sold, since new inventory is piled on top of the older inventory.
B) A grocery store strictly enforces a shelf rotation policy, so that older inventory is always at the front and sold first. The store uses the oldest inventory costs to calculate cost of goods sold.
C) A farm chemical supplier maintains a large holding tank of chemicals, into which deliveries are periodically combined with the older chemicals. The supplier averages the cost of all inventory to calculate cost of goods sold.
D) All of the above are acceptable under IFRS.
Answer:
Page Ref: 472
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

49) Which of the following is true about accounting for fixed assets?
A) Depreciation expense under IFRS will likely be higher than under GAAP, because acquisitions of assets with multiple components must be separately depreciated under IFRS, whereas under GAAP assets could be bundled and depreciated over the longest of the useful life for any of the components.
B) IFRS doesn’t allow capitalization of any asset that separately accounts for less than 20% of total assets.
C) Depreciation expense under IFRS will likely be less than under GAAP, because standards for depreciable lives on asset classes are much longer than under GAAP.
D) IFRS and GAAP account for fixed assets in much the same way.
Answer:
Page Ref: 472
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

50) Which of the following statements is true about the chart below?

A) The x-axis is in reverse chronological order, which violates a principle of proper graph design.
B) The chart appears to conform to the principles of proper graph design.
C) The vertical axis doesn’t appear to start at the origin (zero).
D) The chart used 2-D bars instead of 3-D, which violates a principle of proper graph design.
Answer:
Page Ref: 481
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

51) Explain the purpose of a journal voucher file.

52) What is responsibility accounting?

53) How is a balanced scorecard used to assess organizational performance?

54) How is an audit trail used in the general ledger and reporting system?

55) Explain the benefits of XBRL.

56) Discuss the value and role of budgets as managerial reports.

57) Describe three threats in the general ledger and reporting system and identify corresponding controls for each threat.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 17 The REA Data Model

1) Which of the following statements about REA modeling and REA diagrams is false?
A) REA is an acronym for Resources, Entities, and Agents.
B) REA data modeling does not include traditional accounting elements such as ledgers, chart of accounts, debits and credits.
C) REA data modeling could be referred to as an events-based model.
D) REA diagrams must include at least two activities, which together represent a give-get economic exchange.
Answer:
Page Ref: 496
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) What is the standard cardinality pattern for a relationship between an event and an agent?
A) 1:1
B) 0:1
C) 0:N
D) 1:N
Answer:
Page Ref: 506
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

3) The REA data model approach facilitates efficient operations by all the following except
A) standardizing source document format.
B) identifying non-value added activities.
C) storing financial and nonfinancial data in the same database.
D) organizing data to simplify data retrieval and analysis.
Answer:
Page Ref: 496
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
4) The process of defining a database so that it faithfully represents all aspects of the organization including its interactions with the external environment is called
A) data modeling.
B) data designing.
C) data development.
D) data definition.
Answer:
Page Ref: 494
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) In which stage(s) of the database design process does data modeling occur?
A) only in the systems analysis stage
B) only in the design stage
C) in both the systems analysis and design stages
D) neither the systems analysis nor the design stages
Answer:
Page Ref: 494
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) A(n) ________ diagram graphically depicts a database’s contents by showing entities and relationships.
A) data flow
B) flowchart
C) entity-relationship
D) REA
Answer:
Page Ref: 494
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

7) On an entity-relationship (E-R) diagram, anything about which an organization wants to collect and store information is called
A) a data model.
B) an entity.
C) a schema.
D) a tuple.
Answer:
Page Ref: 494
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
8) An entity-relationship (E-R) diagram represents entities as ________ and the relationships between them as lines and ________.
A) circles; squares
B) squares; diamonds
C) rectangles; diamonds
D) rectangles; circles
Answer:
Page Ref: 495
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) An entity-relationship (E-R) diagram
A) can represent the contents of any database.
B) are only used in conjunction with REA models.
C) can show a limited number of entities and relationships.
D) are used only to design new databases.
Answer:
Page Ref: 495
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

10) The REA data model
A) is used in many areas of business and science.
B) was developed solely for use in designing accounting information systems.
C) classifies data into relationships, entities and accounts.
D) all of the above
Answer:
Page Ref: 496
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

11) Which of the following is not one of the rules in creating an REA data model?
A) Each event is linked to at least one resource that it affects.
B) Each event is linked to at least one other event.
C) Each event is linked to at least two participating agents.
D) All of the above are important rules.
Answer:
Page Ref: 497
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
12) Which is a true statement about the REA data model?
A) The REA data model classifies entities into three distinct categories.
B) The term REA is an acronym that stands for resources, entities, and agents.
C) Using an REA data model is not helpful when creating an R-E diagram.
D) The “E” in the REA data model stands for things that have an economic value to the organization.
Answer:
Page Ref: 496
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

13) An REA diagram must link every event to at least one ________ and two ________.
A) resource; agents
B) agent; resources
C) transaction; entities
D) resource; relationships
Answer:
Page Ref: 497
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

14) Each event in an REA model will in most cases have at least one ________ agent and one ________ agent involved with the event.
A) internal; resource
B) external; entity
C) internal; employee
D) internal; external
Answer:
Page Ref: 501
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

15) Relationships that affect the quantity of a resource are sometimes referred to as ________ relationships.
A) commitment
B) exchange
C) stockflow
D) duality
Answer:
Page Ref: 497
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
16) The “give” event represents an activity which
A) includes a promise to engage in future economic exchanges.
B) increases the organization’s stock of an economic resource.
C) reduces the organization’s stock of a resource that has economic value.
D) none of the above
Answer:
Page Ref: 497
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

17) The “get” event represents an activity which
A) includes a promise to engage in future economic exchanges.
B) increases the organization’s stock of an economic resource.
C) reduces the organization’s stock of a resource that has economic value.
D) none of the above
Answer:
Page Ref: 497
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

18) Which of the following statements is true about the development of an REA model?
A) Events that pertain to the entry of data are included in the REA model.
B) The objective is to model basic value-chain activities.
C) REA diagrams model individual transactions and data collections.
D) Information retrieval events are modeled as events in the REA model.
Answer:
Page Ref: 501
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

19) Developing an REA diagram for a specific transaction cycle begins by identifying
A) relevant events.
B) agents involved.
C) resources affected.
D) relationship cardinalities.
Answer:
Page Ref: 499
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
20) Which of the following is false about cardinalities?
A) Cardinalities describe the nature of the relationship between two entities.
B) No universal standard exists for representing information about cardinalities in REA diagrams.
C) The minimum cardinality can be zero or one.
D) The maximum cardinality can be zero, one, or many.
Answer:
Page Ref: 502-503
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

21) The minimum cardinality of a relationship in an REA diagram can be either
A) 0 or 1.
B) 0 or N.
C) 1 or N.
D) none of the above
Answer:
Page Ref: 503
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) The maximum cardinality of a relationship in an REA diagram can be either
A) zero or one.
B) one or many.
C) zero or many.
D) none of the above
Answer:
Page Ref: 503
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

23) How many types of relationships are possible between entities?
A) one
B) two
C) three
D) an infinite number
Answer:
Page Ref: 504
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
24) A relationship in which cardinalities have zero minimums and N maximums would most likely be an
A) agent-event relationship.
B) resource-event relationship.
C) event-event relationship.
D) All of the above are equally likely.
Answer:
Page Ref: 504
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

25) Concerning REA diagrams, which of the following is false?
A) Each organization will have its own unique REA diagram.
B) An REA diagram for a given organization will change over time.
C) Data modeling and REA diagram development involve complex and repetitive processes.
D) Redrawing an REA diagram several times during development is uncommon.
Answer:
Page Ref: 508
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

26) Data modeling is an element of
A) systems analysis.
B) conceptual design.
C) both A and B
D) none of the above
Answer:
Page Ref: 494
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
27) Which of the following graphical symbols represents a minimum cardinality of zero and a maximum cardinality of one?
A)

B)

C)

D)

Answer:
Page Ref: 502
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

28) Which of the following graphical symbols represents a minimum cardinality of zero and a maximum cardinality of many?
A)

B)

C)

D)

Answer:
Page Ref: 502
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
29) Which of the following graphical symbols represents a minimum cardinality of one and a maximum cardinality of one?
A)

B)

C)

D)

Answer:
Page Ref: 502
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

30) Which of the following graphical symbols represents a minimum cardinality of one and a maximum cardinality of many?
A)

B)

C)

D)

Answer:
Page Ref: 502
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

31) Which of the following transactions is represented by the diagram below?

A) An automobile salvage business holds weekly auctions at which it sells its entire inventory.
B) A grocery store sells products to consumers.
C) A hobbyist restores antique cars. When a car is finished, she sells it on eBay.
D) A firm sells movies to consumers through an online downloading service.
Answer:
Page Ref: 506-507
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking
32) Which of the following transactions is represented by the diagram below?

A) An automobile salvage business holds weekly auctions at which it sells its entire inventory.
B) A grocery store sells products to consumers.
C) A hobbyist restores antique cars. When a car is finished, she sells it on eBay.
D) A firm sells movies to consumers through an online downloading service.
Answer:
Page Ref: 506-507
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

33) Which of the following transactions is represented by the diagram below?

A) An automobile salvage business holds weekly auctions at which it sells its entire inventory.
B) A grocery store sells products to consumers.
C) A hobbyist restores antique cars. When a car is finished, she sells it on eBay.
D) A firm sells movies to consumers through an online downloading service.
Answer:
Page Ref: 506-507
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Analytic

34) Which of the following transactions is represented by the diagram below?

A) An automobile salvage business holds weekly auctions at which it sells its entire inventory.
B) A grocery store sells products to consumers.
C) A hobbyist restores antique cars. When a car is finished, she sells it on eBay.
D) A firm sells movies to consumers through an online downloading service.
Answer:
Page Ref: 506-507
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Reflective Thinking
35) Which of the following transactions is represented by the diagram below?

A) Cash and carry consumer retail sales
B) Consumer retail sales paid in installments to the seller
C) Business to business sales of nondurable goods
D) Business that allows customers to carry a balance and make installment payments
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

36) Which of the following transactions is represented by the diagram below?

A) Cash and carry consumer retail sales
B) Consumer retail sales paid in installments to the seller
C) Business to business sales of nondurable goods
D) Business that allows customers to carry a balance and make installment payments
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

37) Which of the following transactions is represented by the diagram below?

A) Cash and carry consumer retail sales
B) Consumer retail sales paid in installments to the seller
C) Business to business sales of nondurable goods
D) Business that allows customers to carry a balance and make installment payments
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking
38) Which of the following transactions is represented by the diagram below?

A) Cash and carry consumer retail sales
B) Consumer retail sales paid in installments to the seller
C) Business to business sales of nondurable goods
D) Business that allows customers to carry a balance and make installment payments
Answer:
Page Ref: 505-506
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

39) Which of the following transactions is represented by the diagram below?

A) Vendors send a bill for each inventory item purchased which is payable on receipt.
B) A single purchase of inventory is paid for with multiple payments.
C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept or allow installment payments.
D) Some inventory purchases are paid for with multiple payments and some payments may apply to multiple purchases.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

40) Which of the following transactions is represented by the diagram below?

A) Vendors send a bill for each inventory item purchased which is payable on receipt.
B) A single purchase of inventory is paid for with multiple payments.
C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept or allow installment payments.
D) Some inventory purchases are paid for with multiple payments and some payments may apply to multiple purchases.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking
41) Which of the following transactions is represented by the diagram below?

A) Vendors send a bill for each inventory item purchased which is payable on receipt.
B) A single purchase of inventory is paid for with multiple payments.
C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept or allow installment payments.
D) Some inventory purchases are paid for with multiple payments and some payments may apply to multiple purchases.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

42) Which of the following transactions is represented by the diagram below?

A) Each sale is associated with a single order and there is a time lag between the time an order is taken and delivery of the product.
B) Each sale can be comprised of multiple orders and each order can be associated with multiple sales or no sales.
C) Each sale can be comprised of multiple orders and each order can be associated with one or more multiple sales.
D) Each sale is associated with a single order and there is no time lag between the time an order is taken and delivery of the product.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

43) Which of the following transactions is represented by the diagram below?

A) Each sale is associated with a single order and there is a time lag between the time an order is taken and delivery of the product.
B) Each sale can be comprised of multiple orders and each order can be associated with multiple sales or no sales.
C) Each sale can be comprised of multiple orders and each order can be associated with one or more sales.
D) Each sale is associated with a single order and there is no time lag between the time an order is taken and delivery of the product.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

44) Which of the following transactions is represented by the diagram below?

A) Each sale is associated with a single order and there is a time lag between the time an order is taken and delivery of the product.
B) Each sale can be comprised of multiple orders and each order can be associated with multiple sales or no sales.
C) Each sale can be comprised of multiple orders and each order can be associated with one or more sales.
D) Each sale is associated with a single order and there is no time lag between the time an order is taken and delivery of the product.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

45) Which of the following transactions is represented by the diagram below?

A) Each sale is associated with a single order and there is a time lag between the time an order is taken and delivery of the product.
B) Each sale can be comprised of multiple orders and each order can be associated with multiple sales or no sales.
C) Each sale can be comprised of multiple orders and each order can be associated with one or more sales.
D) Each sale is associated with a single order and there is no time lag between the time an order is taken and delivery of the product.
Answer:
Page Ref: 505
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking

46) A relationship is diagrammed below using the [Min, Max] notation. Which of the diagrams below represents the same relationship using the “crow’s fee” notation?

A)

B)

C)

D)

Answer:
Page Ref: 502-503
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

47) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

A well-planned and correctly drawn REA diagram for Cosgrove Art & Antiques, related to purchasing inventory and supplies, renting booths, and paying for all items, would
A) include eight unique entities.
B) include nine unique entities.
C) include seven unique entities.
D) include ten unique entities.
Answer:
Page Ref: 499
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking
48) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

A well-planned and correctly drawn REA diagram for Cosgrove Art & Antiques, related to purchasing inventory and supplies, renting booths, and paying for all items, would
A) reflect nine 1:N relationships.
B) reflect two M:N relationships.
C) reflect ten 1:N relationships.
D) include two 1:1 relationships.
Answer:
Page Ref: 502
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

49) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

A well-planned and correctly drawn REA diagram for Cosgrove Art & Antiques, related to purchasing inventory and supplies, renting booths, and paying for all items, would
A) reflect minimum cardinalities of 1 for the relationship between Vendor and Cash Disbursement entities.
B) reflect the same number of 0 and 1 minimum cardinalities.
C) reflect more maximum cardinalities of M than of 1.
D) reflect maximum cardinalities of M for the relationship between Inventory and Purchase entities.
Answer:
Page Ref: 502
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking
50) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

A well-planned and correctly drawn REA diagram for Cosgrove Art & Antiques, related to purchasing inventory and supplies, renting booths, and paying for all items, what entities would reflect economic duality?
A) Purchases and Cash Disbursements
B) Booth Rental and Cash Disbursements
C) Inventory and Purchases
D) Cash and Cash Disbursements
Answer:
Page Ref: 498
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Reflective Thinking

51) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

Draw an REA diagram for Cosgrove Art & Antiques, related to purchasing inventory and supplies, renting booths, and paying for all items.

52) Describe data modeling.

53) Describe an REA data model.

54) Define cardinality.

55) Describe the three basic rules that apply to the REA model pattern.

56) Describe the steps in developing an REA diagram.

57) Explain how an AIS system can be viewed as a set of “give-to-get” exchanges.

58) Define minimum and maximum cardinalities.

59) Describe the possible relationships between entities, in terms of cardinalities.

60) Explain specifically what is meant by the following statement, “Accountants can and should participate in all stages of the database design process.”

61) A dental office employs three dentists and five dental hygienists. One of the dentists is a very recent dental school graduate and can’t yet see patients on her own until she passes boards and obtains a license. Dentists perform all procedures personally, except for regular cleaning and x-rays, which are performed exclusively by dental hygienists. Three of the five dental hygienists perform only regular cleaning and x-rays. The other two hygienists each assist a specific dentist during procedures, as well as performing regular cleaning and x-rays. One of the hygienists will be assigned to the new dentist when she begins seeing patients. Hygienists usually ‘shadow’ other hygienists and dentists for two weeks prior to seeing patients.

Patients schedule appointments directly with dentists and hygienists, depending on the type of dental service needed. Patients do not have to choose a dentist until they need service other than routine cleaning or x-rays. Patients are assigned to a specific dental hygienist when they schedule their first appointment. The customer master file has 549 records. Diagram the agents described, relationships between agents, and the cardinality pairs for each relationship.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 18 Implementing an REA Model in a Relational Database

1) Integrating separate REA diagrams developed for individual transaction cycles into a single, comprehensive enterprise-wide data model
A) is possible.
B) requires understanding what the cardinalities in each separate diagram reveal about the organization’s business policies and activities.
C) provides a single comprehensive enterprise-wide model of the organization.
D) All of the above are true.
Answer:
Page Ref: 525
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) The primary key for a Sales-Inventory table that consists of the Sales Invoice Number and the Inventory Item Number, is known as a
A) concatenated key.
B) condensed key.
C) double key.
D) dual key.
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

3) When using an REA diagram to develop a database, many-to-many relationships must be
A) broken into multiple one-to-one relationships.
B) combined into a single one-to-one relationship.
C) combined into a one-to-many relationship.
D) broken into multiple one-to-many relationships.
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
4) The type of relationship between two entities is determined by
A) maximum cardinalities only.
B) minimum cardinalities only.
C) minimum and maximum cardinalities.
D) median cardinalities.
Answer:
Page Ref: 543
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

5) Which of the following is not one of the steps in implementing an REA diagram in a relational database?
A) implement many-to-many relationships with foreign keys
B) create tables for entities
C) assign attributes to tables and identify primary keys
D) implement one-to-many relationships with foreign keys
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

6) An integrated REA diagram merges multiple copies of ________ and ________ entities but retains multiple copies of ________ entities.
A) resource; event; agent
B) event; agent; resource
C) resource; agent; event
D) None of the above. An integrated REA diagram merges multiple copies of all entities.
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

7) An integrated REA diagram could contain multiple copies of
A) customers.
B) sales.
C) inventory.
D) sales-inventory.
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
8) An integrated REA diagram merges multiple copies of some entities in order to
A) minimize the repetition of agent entities.
B) maximize the legibility of the diagram by avoiding the need to have relationship lines cross one another.
C) Both A and B are true.
D) Both A and B are false.
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking

9) Combining REA diagrams for individual transaction cycles into a single, enterprise-wide model adds two more rules to the three basic principles for drawing REA diagrams. Which of the following is not one of those two new rules?
A) Every resource must be linked to at least one event that increments that resource and to at least one event that decrements that resource.
B) If a specific event can be linked to more than one other type of event, but cannot be linked simultaneously to all of those other events, then the minimum cardinality between that event and every other event with which it may be associated must be 0.
C) If a specific event can be linked to more than one other type of event, but cannot be linked simultaneously to all of those other events, then the maximum cardinality between that event and every other event with which it may be associated must be 0.
D) All of the above are new rules for drawing integrated REA diagrams.
Answer:
Page Ref: 530
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

10) Concerning a correctly drawn enterprise-wide REA diagram, which of the following statements is not true?
A) Every event must be linked to at least one resource.
B) Merging two transaction cycles on a common event may affect the minimum cardinalities between the merged event and the other events.
C) Events can only be merged if they share the same resources and events.
D) Creating a set of tables from an REA diagram automatically results in a well-structured relational database.
Answer:
Page Ref: 530
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
11) Which of the following is not one of the three steps to implementing an REA diagram in a relational database?
A) Assign attributes to appropriate tables.
B) Create a table for each distinct entity in the diagram and for each many-to-many relationship.
C) Every event must be linked to at least one resource.
D) Use foreign keys to implement one-to-one and one-to-many relationships.
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

12) REA diagrams for different organizations may be similar, but will likely result in different relationship cardinalities because of
A) differences in business policies.
B) different designers of REA diagrams.
C) different methods of drawing REA diagrams.
D) errors in drawing REA diagrams.
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

13) What is the first step to implementing an REA diagram in a relational database?
A) Assign attributes to appropriate tables.
B) Create a table for each distinct entity in the diagram and for each many-to-many relationship.
C) Identify cardinalities.
D) Use foreign keys to implement one-to-one and one-to-many relationships.
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
14) Concerning REA diagrams and relational databases, which of the following is true?
A) A well-designed relational database is the starting point for creating an REA diagram.
B) A well-designed REA diagram minimizes update, insert or delete anomaly problem when the diagram is implemented into a relational database.
C) REA diagrams and database design are generic across organizations.
D) The design of a relational database is specific to the organization being modeled.
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

15) Concerning the creation of tables from an REA diagram, which of the following is false?
A) A properly designed relational database has a table for each distinct entity in an REA diagram.
B) A properly designed relational database has a table for each many-to-many relationship in an REA diagram.
C) To reduce confusion, table names should not duplicate REA diagram entities’ names.
D) Many-to-many relationships will be shown in tables with hyphenated concatenations of the entities’ names.
Answer:
Page Ref: 530-532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

16) When assigning attributes to each table,
A) the database designer must interview users to identify which facts should be included in the database.
B) the database designer must interview management to identify which facts should be included in the database.
C) the database designer must use the REA diagram to help determine in which tables those facts belong.
D) the database designer must do all of the above.
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
17) The primary key for M:N relationship tables
A) is a single attribute.
B) always consists of two attributes.
C) is the primary key of the most important entity linked to that relationship.
D) does not exist. Many-to-many relationship tables only use foreign keys.
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

18) Attributes other than the primary key are
A) included to satisfy transaction processing requirements.
B) included to meet management’s information needs.
C) both A and B
D) none of the above
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

19) Concerning tables for M:N relationships, which of the following statements is false?
A) Non-key attributes may be included.
B) Multiple attribute primary keys are used.
C) Single attribute primary keys may be used.
D) Concatenated keys are used.
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

20) Nonfinancial information should be collected because
A) it may indicate events that may affect resources.
B) it can be used to plan other activities.
C) it can be used in transaction processing.
D) both A and B
Answer:
Page Ref: 536-537
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
21) Concerning the creation of tables from an REA diagram, which of the following is false?
A) M:N relationships must be implemented as separate tables.
B) 1:N relationships are implemented with the primary key of the 1 side becoming a foreign key on the N side.
C) 1:1 relationships are implemented with the primary key of either entity included as a foreign key in the table representing the other entity.
D) All of the above are true.
Answer:
Page Ref: 533-534
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

22) Which of the following is not part of a “final accuracy check” when creating relational tables from an REA diagram?
A) Every attribute in every table is single-valued (i.e., each table is a flat file).
B) Every event must be linked to at least one resource.
C) Every table must have a primary key.
D) Other non-key attributes in each table must be either a fact about the thing designated by the primary key or foreign keys used to link that table to another table.
Answer:
Page Ref: 535
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

23) When comparing REA diagrams used to design an AIS with a traditionally designed AIS,
A) traditional AIS information, such as journals and ledgers no longer exist.
B) similar information is present as in a traditional AIS, but stored in a different format.
C) queries are used to input data into the AIS.
D) an REA designed AIS cannot recreate a traditional journal.
Answer:
Page Ref: 535
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

24) Concerning the use of REA diagrams to retrieve information from a database
A) although neither journals nor ledgers appear explicitly in an REA diagram, each can be created through appropriate queries.
B) the information normally found in a journal is contained in the tables used to record data about events.
C) much of the information about an organization’s assets that is traditionally recorded in ledgers is stored in resource tables in an REA-based relational database.
D) all of the above
Answer:
Page Ref: 535
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

25) Much of the information about an organization’s assets that is traditionally recorded in ledgers is stored in ________ tables in an REA-based relational database.
A) Account
B) Agent
C) Event
D) Resource
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

26) In an REA-based relational database, the information normally found in a ________ is contained in the tables used to record data about ________.
A) journal, events
B) journal, resources
C) ledger, events
D) ledger, resources
Answer:
Page Ref: 535
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
27) Concerning REA models, which of the following is false?
A) Many financial statement accounts are represented as resources in the REA model.
B) Accounts such as Accounts Receivable show up as entities in the REA model.
C) Some accounts represent an imbalance between two related events in the REA model.
D) Much of the information about an organization’s assets that is traditionally recorded in ledgers is stored in resource tables in an REA-based relational database.
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

28) Because information about temporal imbalances between two ________, such as accounts receivable and accounts payable, is needed so frequently, such calculated values are sometimes stored as ________ in the appropriate tables.
A) events, agents
B) events, attributes
C) resources, agents
D) resources, attributes
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

29) Concerning the generation of financial statements from an REA-based relational database, which of the following is false?
A) It is possible to use a completed REA diagram to guide the writing of queries to produce the information that would be included in financial statements.
B) Many financial statement items can be displayed by querying a single table.
C) It is unnecessary to understand the REA data model to know which tables need to be included in each query to generate the correct answers to financial statement questions.
D) A major advantage of the REA data model is that it integrates non-financial and financial data.
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
30) In comparing the REA model to the traditional AIS, which of the following is false?
A) Traditional AISs contain only data about the financial aspects of transactions.
B) A major advantage of the REA data model is that it integrates non-financial and financial data in the AIS and makes both types of data easily accessible to management.
C) In the REA model, many financial statement items can be displayed by querying a single table.
D) Accounts in the traditional AIS are analogous to resources in the REA-based relational database.
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

31) The major benefits of using the REA model as the basis for designing an AIS include all of the following except
A) the REA data model integrates non-financial and financial data in the AIS.
B) the REA data model makes both non-financial and financial data easily accessible to management.
C) the REA data model provides the basis for building the kind of flexible AIS that is responsive to management’s changing information needs.
D) the REA data model reduces the need for accountants to understand the underlying accounting journals and ledgers.
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

32) Concerning REA diagrams for individual transaction cycles, which of the following is false?
A) They depict basic give-to-get economic duality relationships.
B) They usually provide only a partial view of resources.
C) They need to be combined in order to provide a comprehensive enterprise-wide data model.
D) They show both how resources are acquired and how they are used.
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
33) Concerning enterprise-wide REA diagrams, which of the following is false?
A) Merging two or more REA diagrams that contain the same resource entity does not require any changes to the cardinality pairs in the individual diagrams.
B) Merging two or more diagrams that contain a common event entity, however, often requires changing the minimum cardinalities associated with the other events to 0, to reflect the fact that the merged event may be connected to any one of several different events, but not to all of them simultaneously.
C) The minimum cardinalities associated with agents may also have to be changed to 0.
D) All of the above are true.
Answer:
Page Ref: 530
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

34) Concatenated keys are
A) only needed when combining two or more REA diagrams.
B) foreign keys used to implement 1:N or 1:1 relationships.
C) multiple attribute keys used to implement 1:N relationships.
D) required to implement M:N relationships.
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

35) How many tables are needed to implement an REA data model that has six distinct entities, three M:N relationships and four 1:N relationships in a relational database?
A) 6
B) 9
C) 11
D) 13
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
36) How many tables are needed to implement an REA data model that has five distinct entities, two M:N relationships and three 1:N relationships in a relational database?
A) 5
B) 7
C) 8
D) 10
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

37) When combining two REA diagrams by merging common entities, changes in the cardinality of the merged entity is needed when it is a(n)
A) agent.
B) event.
C) relationship.
D) resource.
Answer:
Page Ref: 529
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

38) Information traditionally found in journals are stored where in an REA database?
A) Event entity
B) Agent entity
C) Relationship
D) Resource entity
Answer:
Page Ref: 535
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

39) Which table is most likely to have a concatenated key?
A) customer
B) sales
C) customer-sales
D) accounts receivable
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
40) Integrating separate REA diagrams into a single comprehensive enterprise-wide model of the organization requires understanding what the ________ in each separate diagram reveal about the organization’s business policies and activities.
A) cardinalities
B) data
C) events
D) transactions
Answer:
Page Ref: 525
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

41) When integrating separate REA diagrams,
A) common resources are placed between the events that affect them.
B) each resource is connected to two agents.
C) resources are duplicated to show the give and get of economic duality relationships.
D) resources are merged if both events in the stockflow relationship are modeled.
Answer:
Page Ref: 529
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

42) In which of the following cases is the number of tables required to represent the relationship equal to three?
A)

B)

C)

D)

Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
43) Which entity is likely to be part of both the revenue cycle and the expenditure cycle?
A) Receive Goods
B) Customer
C) Receive Cash
D) Inventory
Answer:
Page Ref: 529
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

44) In which of the following cases is the relationship between entities not implemented by foreign keys?
A)

B)

C)

D)

Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

45) Which entity is likely to be part of both the payroll cycle and the expenditure cycle?
A) Receive Goods
B) Customer
C) Disburse Cash
D) Inventory
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
46) Which entity is likely to be part of both the payroll cycle and the revenue cycle?
A) Cash
B) Customer
C) Receive Goods
D) Inventory
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

47) Which entity is likely to be part of the payroll cycle, expenditure cycle, and the revenue cycle?
A) Customer
B) Cash
C) Supplier
D) Inventory
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

48) Which of the following is a redundant entity that would be merged when two cycles are combined?
A) Customer
B) Employee
C) Vendor
D) Inventory
Answer:
Page Ref: 528
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

49) In an integrated REA diagram, every event must be linked to
A) at least two resources.
B) at least two agents.
C) at least one other event.
D) at least two other events.
Answer:
Page Ref: 530
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
50) In an integrated REA diagram, every resource must be must be linked to
A) at least two events.
B) at least two agents.
C) at least one other resource.
D) at least two other resources.
Answer:
Page Ref: 530
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

51) In an integrated REA diagram, every agent must be must be linked to
A) at least one resource.
B) at least two resources.
C) at least one event.
D) at least two events.
Answer:
Page Ref: 530
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

52) In a relational database, which of the following attributes would typically be included in the table that stores data about the Customer entity?
A) Invoice number
B) Credit limit
C) Product code
D) Backorder
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

53) In a relational database, which of the following attributes would typically be included in the table that stores data about the Vendor entity?
A) Invoice number
B) Outstanding balance
C) Product code
D) Inventory
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
54) In a relational database, which of the following attributes would typically be represented by a foreign key in the table that stores data about a Receive Inventory entity?
A) Purchase order number
B) Payment terms
C) Product code
D) Date
Answer:
Page Ref: 533
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

55) In a relational database, which of the following attributes would typically be represented by a foreign key in the table that stores data about a Disburse Cash entity?
A) Amount
B) Date
C) Vendor number
D) Product number
Answer:
Page Ref: 533
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

56) A query that extracts, for a given time period, the total amount of all sales events for which there is no corresponding receive cash event will yield
A) a cash account ledger.
B) a credit sales journal.
C) an accounts receivable ledger.
D) an accounts payable journal.
Answer:
Page Ref: 536
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
57) A query that extracts, for a given time period, all sales events for which there is no corresponding receive cash event on the date of the sales event will yield
A) a cash account ledger.
B) a credit sales journal.
C) an accounts receivable ledger.
D) an accounts payable journal.
Answer:
Page Ref: 535
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

58) A query that extracts, for a given time period, all purchases for which there is no corresponding disburse cash event will yield
A) a cash account ledger.
B) a credit sales journal.
C) an accounts receivable ledger.
D) an accounts payable journal.
Answer:
Page Ref: 535
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

59) Implementation of this REA diagram into a relational database would require how many tables?

A) 12
B) 13
C) 8
D) 9
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

60) Which of the following would be true when implementing this REA diagram into a relational database?

A) The primary key for Employee would be a foreign key for Cash Receipts.
B) The primary key for Cash Receipts would be a foreign key for Cash.
C) The primary key for Parts would be a foreign key for Service Request.
D) The primary key for Sales would be a foreign key for Service Request.
Answer:
Page Ref: 530
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
61) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

Which of the following would not be an attribute in the Purchases table?
A) Address of place purchase was made
B) Person’s name from whom the purchase was made.
C) Date of purchase
D) Total amount of purchase
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking
62) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

Which of the following would not be an attribute in the Inventory table?
A) Total amount of purchase
B) Price paid
C) Asking price
D) Inventory number
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking
63) Cosgrove Art & Antiques sells unique art and antiques exclusively at antique shows. Cosgrove purchases inventory from individuals and other dealers at garage sales, flea markets, antique malls, and estate sales. Each time Cosgrove makes a purchase, she records the person’s name, address, date, specific items purchased and price paid, and total amount spent. Later at home, Cosgrove cleans, researches and prices the inventory items. She assigns an inventory number to each item and records the “asking” price. Cosgrove buys price tags and display supplies from a company that sells at flea market and antique shows. All inventory and supplies purchases are paid immediately with cash, or with checks from a bank account in the business’ name, to which sales are also deposited. Several times a year Cosgrove rents a booth at an antique show. A deposit is always required, with the balance due at the start of the show. Cosgrove records the deposit and final payment, along with the show organizer’s name and address, in the same worksheet on which purchases of inventory and supplies are recorded.

Which of the following would be an attribute in the table for booth rental?
A) Organizer’s name
B) Deposit paid
C) Balance paid
D) Organizer’s address
Answer:
Page Ref: 532
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Reflective Thinking

64) Explain the five rules for drawing integrated REA diagrams.

65) Explain a completeness check.

66) Explain where in the REA model you can find the information normally found in a ledger.

67) Explain where in the REA model you can find the information normally found in a journal.

68) What are the advantages of the REA data model over the traditional AIS model?

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 19 Special Topics in REA Modeling

1) Explicitly identifying the different employees who participate in each event by their job functions is helpful when verifying
A) internal controls.
B) job descriptions.
C) proper supervision.
D) segregation of duties.
Answer:
Page Ref: 555
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) Many companies sell software, music, or digital photographs over the Internet. They give up a digital copy of those resources, but not the actual resource itself. How will this company’s REA model differ from those selling traditional inventory?
A) These companies do not need an Inventory table.
B) The structure of Inventory table is completely different from that of mass-produced merchandise.
C) The Inventory table is only different in that it doesn’t need attributes such as quantity-on-hand, quantity-available, reorder point, and standard reorder quantity.
D) The Inventory table need not include information about the standard list price of each item and its description.
Answer:
Page Ref: 553
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

3) In an expanded revenue cycle REA diagram, sales order number is most likely to be a foreign key in
A) Call on Customer.
B) Fill Customer Order.
C) Ship Order.
D) Take Customer Order.
Answer:
Page Ref: 549
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

4) In an expanded revenue cycle REA diagram, sales order number is most likely to be a primary key in
A) Call on Customers.
B) Fill Customer Order.
C) Ship Order.
D) Take Customer Order.
Answer:
Page Ref: 549
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) In an expanded revenue cycle REA diagram, customer number is least likely to be a foreign key in
A) Call on Customers.
B) Customers.
C) Fill Customer Order.
D) Take Customer Order.
Answer:
Page Ref: 549
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) In an expanded revenue cycle REA diagram, picking ticket number is most likely to be a primary key in
A) Call on Customers.
B) Fill Customer Order.
C) Ship Order.
D) Take Customer Order.
Answer:
Page Ref: 549
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
7) In an expanded revenue cycle REA diagram, picking ticket number is most likely to be a foreign key in
A) Customers.
B) Fill Customer Order.
C) Ship Order.
D) Take Customer Order
Answer:
Page Ref: 549
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

8) In an REA model, rental transactions differ from sales transactions in that
A) each rental has a part number.
B) each rental has a unique serial number.
C) rental transactions require completely different REA models than sales transactions.
D) All of the above are ways in which rental transactions differ from sales transactions.
Answer:
Page Ref: 553
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) Concerning the relationship from the Rent Item to the Receive Cash events: The minimum cardinality is ________ because customers typically pay first, prior to taking possession of the item. The maximum cardinality is ________ because there may be additional charges imposed when the item is returned.
A) 0,1
B) 1,1
C) 1,N
D) N,M
Answer:
Page Ref: 554
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
10) The relationship between the Rent Item and Return Item events is most likely 1:1 for all except which of the following reasons?
A) A return must be for a rented item.
B) A rented item can only be returned once.
C) Rented items are accounted for separately.
D) All rented items must be returned.
Answer:
Page Ref: 554
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

11) In an expenditure cycle diagram, which of the following is an example of an event that larger organizations might want to include in their extended REA model?
A) Request
B) Order
C) Ship Order
D) Fill Order
Answer:
Page Ref: 549
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

12) Concerning cost data, which of the following is false?
A) Cost information is stored in several tables.
B) Standard cost is stored as an attribute of the Inventory table because it is the same for all units of a given inventory item for a fiscal year.
C) In contrast, the actual cost of inventory is stored in a relationship table because prices can vary over time.
D) Actual cost can be stored as an attribute of the Inventory table for organizations that value inventory based on the most recent amount paid.
Answer:
Page Ref: 550-551
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
13) Which is the most likely primary key for the Inventory–Request_Goods table?
A) Product number
B) Product number – Purchase order number
C) Product number – Purchase requisition number
D) Purchase requisition number
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

14) Which is the most likely primary key for the Pay for Goods table?
A) Cash transaction number
B) Check number
C) Invoice number
D) Receiving report number, check number
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

15) For a service business, the minimum cardinalities between Sales event and Inventory entity are most likely both 0 for all except which of the following reasons?
A) Service businesses don’t sell inventory, they only use inventory to perform services.
B) A sale doesn’t have to include any inventory.
C) Inventory can exist that hasn’t been part of a sale yet.
D) Some services only require labor.
Answer:
Page Ref: 552
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

16) The minimum cardinality from the Sales event to the Services entity is most likely 1 because
A) every sale includes performing a service.
B) a service is only recorded once a sale has occurred.
C) only 1 service is provided for each sale.
D) the minimum cardinality would not be 1; it would most likely be 0.
Answer:
Page Ref: 552
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
17) A dental office would likely model the relationships between the Sales event and both the Services and Supplies Resource entities as
A) M:N
B) 1:1
C) 1:N
D) 0:1
Answer:
Page Ref: 552
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

18) In a relational database, details about activities such as Cleaning, X-Rays, Fillings, Root Canals, Crowns, and Extractions would all be stored in which table?
A) Services
B) Sales
C) Inventory
D) Those activities would be stored as part of a relationship, not a table.
Answer:
Page Ref: 552
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

19) M:N agent-event relationships occur whenever an activity is performed by ________ employee and management wants to retain the ability to monitor ________ performance.
A) more than one; group
B) more than one; individual
C) one; group
D) one; individual
Answer:
Page Ref: 555
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

20) The minimum cardinalities between a location, such as Warehouse, and a resource, like Inventory, will likely be 0 for all except which of the following reasons?
A) One specific inventory item could be stored at several different warehouses.
B) A warehouse could be currently empty.
C) Not all kinds of inventory are stored at each warehouse.
D) Inventory could include products not yet available for sale.
Answer:
Page Ref: 555
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

21) Since the same inventory items may be stored in several different warehouses, the maximum cardinality from Inventory to Warehouse is most likely ________.
A) 0
B) N
C) 1
D) determined by the number of warehouses compared to the number of inventory items
Answer:
Page Ref: 555
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

22) Relationships between resources and agents, such as Inventory and Supplier, reflect the best practice of identifying preferred and alternative suppliers for specific inventory items. Similar relationships between resources and employees can be used to model ________ and ________.
A) cost; revenue
B) performance; behavior
C) responsibility; accountability
D) segregation of duties; internal control
Answer:
Page Ref: 555
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking
23) Warehouse number is most likely to be a foreign key in:
A) Order Inventory
B) Disburse Cash
C) Receive Inventory
D) Inventory
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

24) Supplier number is least likely to be a foreign key in:
A) Order Inventory
B) Disburse Cash
C) Receive Inventory
D) Warehouse
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

25) Financial Institution number is most likely to be a foreign key in:
A) Cash
B) Disburse Cash
C) Receive Inventory
D) Warehouse
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

26) The cardinality pair from the Financial Institution entity to the Cash resource has a ________ minimum and an ________ maximum because companies will probably only keep information about financial institutions with which they have accounts but may have more than one account at the same financial institution.
A) 0; N
B) 0; 1
C) 1; N
D) M; N
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
27) Supplier number is most likely to be a foreign key in:
A) Inventory–Request_Inventory
B) Receive Inventory
C) Supplier
D) Warehouse
Answer:
Page Ref: 551
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

28) In an REA diagram for HRM/payroll cycles, the ________ entity is linked to almost every other entity in the diagram.
A) Employee
B) Job title
C) Payroll
D) Worker I.D.
Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

29) In the human resources REA model, the relationship between Skills and Employees is typically modeled as M:N because
A) one employee may possess many skills, and one skill may be possessed by more than one employee.
B) many employees possess skills, and many skills are possessed by employees.
C) employees can be trained to learn all skills, and all skills are possessed by at least one employee.
D) the relationship would be 1:N not M:N, because most employees are hired for a specific job that requires a specific skill, even though a specific job could be done by many employees.
Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic
30) The ________ entity stores much of the data typically found in the employee (payroll) master file.
A) Time Worked
B) Employee
C) HR
D) Payroll
Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

31) In an REA diagram for the HR/Payroll cycle, the relationship between Employees and Training is typicallty M:N for all except which of the following reasons?
A) One employee may attend the same training event more than once.
B) Each employee may attend more than one training event.
C) Each training event may have more than one employee attend.
D) One training event may be offered more than once.
Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

32) In an REA diagram for the HR/Payroll cycle, the ________ relationship between Skills and Recruiting reflects the fact that one specific advertisement may list several specific skills and, over time, there may be several advertisements for one specific skill.
A) 1:1
B) 1:N
C) M:N
D) 0:N
Answer:
Page Ref: 560
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
33) The Interview event stores detailed data about each job interview. Since hiring only happens once, but there may have been several interviews, Interview is linked to the Hire Employees event in a(n) ________ relationship.
A) 1:N
B) 1:1
C) M:N
D) 0:N
Answer:
Page Ref: 560
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

34) When modeling the issuance of debt, the maximum cardinality from Disburse Cash to Issue Debt is 1 because
A) interest is usually only paid at the maturity date.
B) one check is written for the total interest due.
C) the Issue Debt event is not related to Disburse Cash event; cash is received, not given.
D) the minimum cardinality would be 1, but the maximum cardinality should be N.
Answer:
Page Ref: 561
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

35) The temporal difference between Request Inventory and Order Inventory is reflected by the
A) Request Inventory minimum cardinality of 1.
B) Request Inventory maximum of N.
C) Order Inventory maximum of N.
D) Order Inventory minimum of 0.
Answer:
Page Ref: 561
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Reflective Thinking

36) The relationship between the Disburse Cash and Issue Stock events is modeled as being M:N for all except which of the following reasons?
A) One dividend check could be paid to shareholders that purchased stock at different times.
B) Shareholders could receive several dividend checks over time.
C) Checks must be written to each shareholder for dividend payments.
D) Stock can be issued more than once over a period of time.
Answer:
Page Ref: 561
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

37) The relationship between the Acquire Services and Disburse Cash events is modeled as ________ to reflect the common situation in which the organization obtains the use of a specific service for a particular period of time and makes a payment each month for the services it acquired and used that month.
A) 1:1
B) 1:N
C) M:N
D) none of the above
Answer:
Page Ref: 553
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

38) It is not necessary to connect the Time Used entity to specific business events, however, doing so facilitates
A) evaluating performance at a very detailed level.
B) general performance evaluation.
C) evaluating the quality of the services received.
D) determining productivity of employees, such as how many customer calls were made, or how many sales were made.
Answer:
Page Ref: 560
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic
39) An REA diagram for the production cycle models the relationships between the Perform Job Operations event and the Job Operations List entity, as 1:N because
A) time standards change over time.
B) one specific activity has only one standard time for completion.
C) activities are only performed once on work in process jobs.
D) many activities are usually required for specific work in process jobs.
Answer:
Page Ref: 558
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

40) Data about actual raw materials used in production is stored in the ________ entity.
A) Finished goods
B) Raw materials
C) Raw materials issuance
D) Work-in-process
Answer:
Page Ref: 557
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

41) The ________ entity is used to collect and summarize data about the raw materials, labor, and machine operations used during production of inventory.
A) Finished Goods Inventory
B) Raw Materials
C) Issue Raw Materials
D) Work-in-Process
Answer:
Page Ref: 558
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

42) In the table called Perform Machine Operations, which is the most likely primary key?
A) Equipment number
B) Job Operation number
C) Machine Operation Number
D) Machine Operations List Number
Answer:
Page Ref: 557
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
43) Employee number is most likely to be a foreign key in
A) Perform Job Operations.
B) Perform Machine Operations.
C) Machine Operations List.
D) Work in Process.
Answer:
Page Ref: 557
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

44) There are four main events of interest included in a typical production cycle REA diagram. Which of the following is not one of them?
A) Issuance of raw materials
B) Order raw materials
C) Use of labor in production
D) Use of machinery and equipment in production
Answer:
Page Ref: 556
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

45) One of the benefits of an integrated enterprise-wide data model is that
A) auditors can use it to guide the development of queries to validate the completeness and accuracy of transaction processing.
B) journals and ledgers will be more accurate than in a traditional AIS data model.
C) workers can understand information flows better.
D) all of the above are benefits of an integrated enterprise-wide data model.
Answer:
Page Ref: 562
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
46) Which of the following diagrams represents the cardinality pairs for a typical, hierarchical organization?
A)

B)

C)

D)

Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

47) Which of the following diagrams represents the cardinality pairs for a CPA firm where managers drop off tax files in a ‘check out’ area, and any available employee can check out the file and complete the return for the manager. Of course, employees are always working on more than one return at a time, and all managers are dropping off files.
A)

B)

C)

D)

Answer:
Page Ref: 560
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
48) Which of the following diagrams represents the cardinality pairs in a situation where a specific skill is taught at training sessions held periodically, but training is not offered for all skills?
A)

B)

C)

D)

Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

49) Which of the following accurately represents typical cardinalities for two entities in the finance cycle?
A)

B)

C)

D)

Answer:
Page Ref: 561
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
50) Which of the following accurately represents typical cardinalities for two entities in the finance cycle?
A)

B)

C)

D)

Answer:
Page Ref: 561
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

51) Which of the following diagrams represents the cardinality pairs in a situation where a finished product requires one or more machine operations, and machines usage is recorded to specific production runs?
A)

B)

C)

D)

Answer:
Page Ref: 556
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

52) Which of the following diagrams represents the cardinality pairs in a situation where a finished product requires one or more labor operations, and labor usage is recorded to specific production runs?
A)

B)

C)

D)

Answer:
Page Ref: 556
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

53) Which of the following diagrams represents the cardinality pairs in a situation where a specific production run results in a specific finished good, and a specific finished good is produced periodically?
A)

B)

C)

D)

Answer:
Page Ref: 556
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
54) Which of the following diagrams represents the cardinality pairs in a situation where some services are offered that have not been performed, other services have been performed many times, and sometimes several services are provided together for a client?
A)

B)

C)

D)

Answer:
Page Ref: 552
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

55) Which of the following accurately represents typical cardinalities for two entities in the production cycle?
A)

B)

C)

D)

Answer:
Page Ref: 556
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
56) Which of the following accurately represents typical cardinalities for two entities in the HR/Payroll cycle?
A)

B)

C)

D)

Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

57) Which of the following diagrams represents the cardinality pairs in a situation where interviews are conducted individually and potential employees are able to interview for more than one position, or the same position at different times?
A)

B)

C)

D)

Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
58) Which of the following diagrams represents the cardinality pairs in a situation where many people will apply for a specific position, and some of the applicants have applied in the past?
A)

B)

C)

D)

Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

59) Which of the following diagrams represents the cardinality pairs in a situation where supervisors conduct individual performance evaluations with each of the employees they supervise?
A)

B)

C)

D)

Answer:
Page Ref: 559
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
60) Which of the following diagrams represents the cardinality pairs in a situation where a business that rents power tools (not all of which get rented) writes separate rental agreements for each tool, so renters don’t have to return all items at the same time?
A)

B)

C)

D)

Answer:
Page Ref: 554
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

61) Which of the following diagrams represents the cardinality pairs in a situation where rented items must be returned intact, and several rented items could be returned at the same time?
A)

B)

C)

D)

Answer:
Page Ref: 554
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
62) Which of the following diagrams represents the cardinality pairs in a situation where deliveries are frequently made to the specific warehouse where the goods will be stored?
A)

B)

C)

D)

Answer:
Page Ref: 550
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

63) Which of the following diagrams represents the cardinality pairs in a situation where one or more warehouses are currently empty due to downsizing, and production of new products has been delayed due to difficulty obtaining materials?
A)

B)

C)

D)

Answer:
Page Ref: 550
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic
64) Which of the following diagrams represents the cardinality pairs in a situation where goods don’t have to be requisitioned, but if they are, requisitions are approved and processed before purchase orders are issued?
A)

B)

C)

D)

Answer:
Page Ref: 550
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

65) Which of the following diagrams represents the cardinality pairs in a situation where customer orders are filled one by one, but not all ordered items may be available at all times?
A)

B)

C)

D)

Answer:
Page Ref: 548
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

66) Give an example of an M:N Agent-Event relationship.

67) Why is the event Issue Debt often modeled as a separate event entity?

68) Why might an REA diagram show relationships between agents?

69) Why might an REA diagram show relationships between resources and agents?

70) Why is cost information stored in several relational tables?

71) What are the benefits of an integrated enterprise-wide data model?

72) Describe the relationships between Recruiting event and Skills, and between Recruiting event and Job Applicants.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 20 Introduction to Systems Development; Systems Analysis

1) A system change that results in an improved product or service and helps lower costs provided a(n)
A) competitive advantage.
B) improved business process.
C) productivity gain.
D) technological change.
Answer:
Page Ref: 580
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) An antiquated information system used by an office supply manufacturer caused customer dissatisfaction since it took two days to process a telephone order. After the system was upgraded and redesigned, the time to process a telephone order was reduced to three minutes. This is a prime example of
A) a competitive advantage.
B) a technological change.
C) an improved business process.
D) growth.
Answer:
Page Ref: 579
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

3) What is the correct sequence of the phases in the systems development life cycle?
A) conceptual design, physical design, system analysis, implementation and conversion, and operations and maintenance
B) conceptual design, system analysis, physical design, implementation and conversion
C) system analysis, conceptual design, physical design, implementation and conversion, and operations and maintenance
D) system analysis, physical design, conceptual design, and operations and maintenance
Answer:
Page Ref: 581
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
4) In which phase of the systems development life cycle are the broad needs of the users converted into detailed specifics that are coded and tested?
A) conceptual design
B) implementation and conversion
C) physical design
D) systems analysis
Answer:
Page Ref: 582
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

5) The purpose of systems analysis is to
A) identify the problem to be solved by the new (or redesigned) system and the causes of the problem in the current system.
B) determine design specifications for the new (or redesigned) system.
C) communicate information needs to consider during business process reengineering.
D) discover any violations of policies established by the information systems steering committee.
Answer:
Page Ref: 582
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Reflective Thinking

6) Which of the following statements about systems development is true?
A) Planning throughout the systems development life cycle promotes coordination between systems and strategic plans.
B) Organizations should conduct systems development activities at least once every five years.
C) The systems development steps are critical for profit-oriented businesses, but are too expensive and time consuming for most not-for-profit organizations.
D) Diligently following the steps and suggestions in the systems development life cycle ensures the final system will meet user needs and be implemented at or below the budgeted cost.
Answer:
Page Ref: 583
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Reflective Thinking

7) Which of the following about planning for systems development is false?
A) Project plans are developed for each new system and each system modification, and together the project plans comprise the master plan.
B) A project development plan includes an economic feasibility analysis and a schedule of activities.
C) The master plan identifies system goals, who will develop the system, and the resources that will be needed.
D) The master plan includes details about organizational goals, existing systems and resources, projects being conducted, and predictions of future needs and requirements.
Answer:
Page Ref: 583
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

8) Which of the following activities is performed during the systems development life cycle?
A) assessing the ongoing feasibility of the project
B) managing the behavioral reactions to change
C) planning
D) All of the above activities are performed during the life cycle.
Answer:
Page Ref: 582
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) Which group of individuals listed below can be the most effective in generating employee support and encouraging the development and acceptance of an AIS project?
A) accountants
B) information systems steering committee
C) management
D) project development team
Answer:
Page Ref: 582
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
10) Who of the following is responsible for ensuring that the new system will meet the needs of users?
A) accountants
B) the information system steering committee
C) the project development team
D) the system analysts and programmers
Answer:
Page Ref: 583
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

11) Who is responsible for preparing the specifications that are used to create the programs?
A) management
B) programmers
C) systems analysts
D) the information systems steering committee
Answer:
Page Ref: 583
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

12) One step in the systems development life cycle (SDLC) identifies and evaluates design alternatives and to develop design specifications. This step is called
A) conceptual design.
B) implementation and conversion.
C) physical design.
D) systems analysis.
Answer:
Page Ref: 582
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

13) In which step of the SDLC do all of the elements of the system come together?
A) conceptual design
B) implementation and conversion
C) physical design
D) systems analysis
Answer:
Page Ref: 582
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
14) What is the role of the information systems steering committee?
A) It is a team of systems specialists, managers, accountants, and auditors that guides project development.
B) Since AIS development spans functional and divisional boundaries, an executive-level group is established to plan and oversee the IS function.
C) The group takes an active role in designing system controls and periodically monitoring and testing the system to verify the controls are implemented and functioning properly.
D) None of the descriptions above are appropriate.
Answer:
Page Ref: 582
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

15) Which group of professionals is responsible for planning and monitoring a project to ensure timely and cost-effective completion?
A) information systems steering committee
B) management
C) project development team
D) system analysts
Answer:
Page Ref: 583
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

16) All of the following are benefits of planning and managing systems development except
A) controlling costs.
B) ensuring that the system is consistent with the organization’s goals.
C) guaranteeing use of the system.
D) helping keep the organization abreast of technological change.
Answer:
Page Ref: 583
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
17) In which plan within planning systems development is the prioritized list of projects contained?
A) project development plan
B) scheduled project plan
C) the master plan
D) all of the above
Answer:
Page Ref: 583
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

18) What is the basic building block of information systems planning?
A) the master plan
B) the project development plan
C) systems analysis
D) adaptability
Answer:
Page Ref: 583
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

19) A planning horizon of at least ________ years is reasonable for any master plan; however, the plan should be updated at least ________ each year.
A) 3; twice
B) 5; twice
C) 7; once
D) 5; once
Answer:
Page Ref: 583
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

20) ________ requires that all activities and the precedent and subsequent relationships among them be identified.
A) CASE
B) The Gantt chart
C) The PERT diagram
D) The SDLC cycle
Answer:
Page Ref: 583-584
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
21) A network of arrows and nodes representing project activities that require an expenditure of time and resources and the completion of initiation of activities, respectively, is called
A) a Gantt chart.
B) a PERT diagram.
C) a SDLC cycle.
D) CASE.
Answer:
Page Ref: 584
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) Which planning technique does not show the relationships among various activities?
A) Gantt chart
B) PERT
C) the critical path method
D) VAN
Answer:
Page Ref: 585
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

23) In which phase of the systems development life cycle is the feasibility study first performed?
A) conceptual design
B) implementation and conversion
C) physical design
D) system analysis
Answer:
Page Ref: 585
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
24) A federal law demands that certain information about foreign customers should be maintained in the information system. In which part of a feasibility study should this requirement be considered?
A) economic feasibility
B) legal feasibility
C) operational feasibility
D) technical feasibility
Answer:
Page Ref: 586
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

25) Which of the following parts of a feasibility study is generally considered the most important and is frequently re-analyzed?
A) economic feasibility
B) operational feasibility
C) scheduling feasibility
D) technical feasibility
Answer:
Page Ref: 586
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

26) What is the basic model used to create a framework for economic feasibility analysis?
A) the capital budgeting model
B) the cash budgeting model
C) the cost/benefit model
D) All of the above models are used to create a framework.
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

27) What is most difficult to quantify when assessing economic feasibility?
A) benefits
B) costs
C) Costs, benefits, and the payback period are all of equal difficulty.
D) the payback period
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
28) When using the payback method to determine economic feasibility of projects, the company usually accepts the project with the
A) longest payback period.
B) mid-range payback period.
C) payback period that is equal to the project’s economic life.
D) shortest payback period.
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

29) There are several important aspects to be considered during a feasibility study. The aspect that asks the question, “Can people use the system and will they use it?” is called
A) economic feasibility.
B) operational feasibility.
C) scheduling feasibility.
D) technical feasibility.
Answer:
Page Ref: 586
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

30) Accountants can contribute to feasibility study analysis by evaluating cost savings and other benefits versus operating costs and other cash outflows. This is better known as
A) the “best guess” model of benefit analysis.
B) the “value added” benefit model.
C) the capital budgeting model.
D) the estimated benefits model.
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

31) The capital budgeting technique where estimated future cash flows are discounted back to the present is referred to as
A) the future value method.
B) the internal rate of return.
C) the net present value method.
D) the payback method.
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

32) The type of user resistance in which data are erroneously entered into a system is called
A) acceptance.
B) aggression.
C) avoidance.
D) projection.
Answer:
Page Ref: 589
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

33) Continuing to use a manual system instead of the new AIS is a form of resistance known as
A) acceptance.
B) aggression.
C) avoidance.
D) projection.
Answer:
Page Ref: 589
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

34) One behavioral problem occurs when there is insufficient explanation of why a change must take place. This problem is a result of
A) communication.
B) natural resistance to change.
C) the manner in which the change is introduced.
D) top management support of change.
Answer:
Page Ref: 588
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

35) Major resistance to change takes one of several forms. What is the name of the form of resistance where the new system is blamed for any and every unpleasant occurrence?
A) aggression
B) avoidance
C) procrastination
D) projection
Answer:
Page Ref: 589
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

36) One behavioral problem occurs when there is insufficient explanation of why a change must take place. In order to curtail this resistance from occurring within the organization, what guideline should be implemented and followed?
A) attempt to meet the users’ needs
B) avoid emotionalism
C) keep communication lines open
D) keep the system simple
Answer:
Page Ref: 590
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

37) A good rule to follow to prevent behavioral problems associated with implementing a new system is “Avoid complex systems that cause radical changes.” What expression is used to describe this system design rule?
A) allay fears and stress new opportunities
B) keep the system simple and humanize it
C) control users’ expectations
D) test the system
Answer:
Page Ref: 590
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic
38) During what step in systems analysis is an examination made of each development activity to define the problem to be solved?
A) information needs and systems requirements
B) the feasibility study
C) the initial investigation
D) the systems survey
Answer:
Page Ref: 590
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

39) When is a proposal to conduct a systems analysis prepared?
A) after a written request for systems development is prepared
B) after the development team completes the survey of the existing AIS
C) after the initial investigation of the project is approved
D) before the initial investigation
Answer:
Page Ref: 591
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

40) During which phase of systems analysis does modeling of the existing system occur?
A) information needs and system requirements
B) the feasibility study
C) the initial investigation
D) the systems survey
Answer:
Page Ref: 591
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

41) Which data gathering method is most helpful to deal with the question: “Why?”
A) interviews
B) observation by the analyst
C) questionnaires
D) system documentation
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

42) Significant system changes were implemented two months ago. The changes were well-planned, well-designed, thoroughly tested before and after conversion, and several employee training sessions were conducted. Still, the changes haven’t resulted in any productivity increases, cost savings, or process improvements. Management is puzzled and needs to find out why the system isn’t successful. The best action for management to take is
A) conduct face-to-face interviews with managers, key personnel, and randomly selected employees from each functional area impacted by the system changes in an attempt to discover why the changes aren’t effective.
B) make sure the system changes were well documented and review the documentation to see if perhaps some important feature or process was overlooked during the design phase.
C) email a series of questions to all employees, asking for input about further changes that would bring about the desired results.
D) advise employees that consultants will be conducting observation sessions over the next two weeks to determine if employees have fully implemented changes and whether there is any evidence of resistance to the changes.
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Difficult
AACSB: Reflective Thinking

43) Which method of data gathering is most likely to result in information that represents the personal biases and opinions of the person giving the information?
A) a questionnaire
B) an interview
C) observation by the analyst
D) system documentation
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

44) When the information is brief and well defined, which is the best data-gathering approach to use?
A) a questionnaire
B) an interview
C) observation by the analyst
D) system documentation
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

45) Which is the best data-gathering approach to use when information must be obtained from many different people?
A) a questionnaire
B) an interview
C) observation by the analyst
D) system documentation
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

46) The ________ method of gathering information helps to determine how a system actually works.
A) interview
B) observation
C) questionnaire
D) system documentation
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

47) The ________ method of gathering information helps to determine how a system should work.
A) interview
B) observation
C) questionnaire
D) system documentation
Answer:
Page Ref: 593
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
48) What are the best strategies for determining system requirements?
A) analyze existing systems, ask users what they need, prototyping, and monitoring
B) ask users what they need, analyze existing systems, develop concept of new system, and prototyping
C) ask users what they need, analyze existing systems, examine existing system utilization, and prototyping
D) ask users what they need, analyze existing systems, examine existing system utilization, and develop concept of new system
Answer:
Page Ref: 595
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

49) When would a company go through a systems development life cycle?
A) only when major changes are needed
B) only when minor changes are needed
C) Usually a company only goes through one complete systems development life cycle, after which the only phase that is repeated is the operations and maintenance phase.
D) whenever minor or major changes are needed
Answer:
Page Ref: 579
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

50) What report serves as a repository of data from which systems designers can draw information?
A) the executive steering committee report
B) the initial investigation report
C) the systems analysis report
D) the systems survey report
Answer:
Page Ref: 596
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
51) Which group is responsible for preparing a systems analysis report?
A) computer analysts
B) management
C) the project development team
D) the steering committee
Answer:
Page Ref: 596
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

52) In which systems analysis step do analysts conduct an extensive study of the present system to gain a thorough understanding of how it works?
A) feasibility study
B) information needs and requirements
C) systems analysis report
D) systems survey
Answer:
Page Ref: 591
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

53) The question of what the project should and should not accomplish is determined in what step of systems analysis?
A) feasibility study
B) initial investigation
C) systems analysis report
D) systems survey
Answer:
Page Ref: 590
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

54) A Logical model used to gather information about an existing system
A) comes only after a physical model of the existing system is created.
B) describes how a system actually works, rather than how it should work.
C) illustrates how a system functions by describing the flow of documents and computer processes.
D) illustrates what is being done, regardless of how that flow is actually accomplished.
Answer:
Page Ref: 593
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
55) The system objective concerned that crucial information be produced first, and then less important items as time permits is known as
A) flexibility.
B) reliability.
C) timeliness.
D) usefulness.
Answer:
Page Ref: 595
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

56) A prototype
A) is expensive to create and is therefore only created once user needs are well-defined.
B) is making an internal and external review of the system to be analyzed, noting that users may not use the existing AIS as intended.
C) is typically created during the physical design phase of systems development.
D) can be used to help users identify and communicate their system needs.
Answer:
Page Ref: 595
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

57) A project development team at Midwest Construction was assigned the task of improving the efficiency of the firm’s accounting information system. As part of the ________ step in the systems development life cycle, the team has determined that implementation of the new system will yield an internal rate of return of 24.8%.
A) systems analysis
B) operations and maintenance
C) implementation and conversion
D) conceptual design
Answer:
Page Ref: 581
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
58) A project development team at Midwest Construction was assigned the task of improving the efficiency of the firm’s accounting information system. As part of the ________ step in the systems development life cycle, the team has determined that the objectives of the project can be accomplished by installing a new computer system or by upgrading the existing system.
A) systems analysis
B) implementation and conversion
C) physical design
D) conceptual design
Answer:
Page Ref: 582
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

59) A project development team at Midwest Construction was assigned the task of improving the efficiency of the firm’s accounting information system. As part of the ________ step in the systems development life cycle, the team has initiated an end user training program in preparation for switching over to the new system.
A) systems analysis
B) operations and maintenance
C) implementation and conversion
D) physical design
Answer:
Page Ref: 582
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

60) A project development team at Midwest Construction was assigned the task of improving the efficiency of the firm’s accounting information system. As part of the ________ step in the systems development life cycle, the team defined the procedures to back up and secure system data.
A) operations and maintenance
B) implementation and conversion
C) physical design
D) conceptual design
Answer:
Page Ref: 582
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
61) Refer to the diagram below, where the numbers next to the arrows refer to the number of days required for completion of the corresponding activity. What is the critical path?

A) A-B-D-F
B) A-C-E-F
C) A-B-D-E-F
D) A-C-B-D-F
E) A-C-B-D-E-F
Answer:
Page Ref: 584
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

62) Refer to the diagram below, where the numbers next to the arrows refer to the number of days required for completion of the corresponding activity. What is the critical path?

A) A-B-D-F
B) A-C-E-F
C) A-B-D-E-F
D) A-C-B-D-F
E) A-C-B-D-E-F
Answer:
Page Ref: 584
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic
63) Refer to the diagram below, where the numbers next to the arrows refer to the number of days required for completion of the corresponding activity. What is the critical path?

A) A-B-D-F
B) A-C-E-F
C) A-B-D-E-F
D) A-C-B-D-F
E) A-C-B-D-E-F
Answer:
Page Ref: 584
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

64) Three months after a new telephone system with voice mail was installed at Modest Expectations College in Pennsylvania, several senior faculty members were contacted by a telecommunications secretary and were told that their voice mail boxes were full. This is an example of dealing with change by
A) deterrence.
B) projection.
C) avoidance.
D) aggression.
Answer:
Page Ref: 589
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic
65) Shortly after a new automated quality assurance system went online, production output declined by three percent. The production manager, a long time employee, blamed the new system. He argued that “after we laid off Tom and Jimmy and put this machine in, things just slowed down. Nothing seems to work right anymore.” This is an example of dealing with change by
A) deterrence.
B) projection.
C) avoidance.
D) aggression.
Answer:
Page Ref: 589
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

66) On March 18, 2008, a newly installed robotic painting system broke down. A technician was called to repair the system. She found that a shoe had been shoved into the system’s innards. This is an example of dealing with change by
A) deterrence.
B) projection.
C) avoidance.
D) aggression.
Answer:
Page Ref: 589
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic

67) Refer to the table below, which shows the results of payback, net present value, and internal rate of return analysis of four projects. Which is preferred by the payback criterion?

A) Project A
B) Project B
C) Project C
D) Project D
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
68) Refer to the table below, which shows the results of payback, net present value, and internal rate of return analysis of four projects. Which is preferred by the net present value criterion?

A) Project A
B) Project B
C) Project C
D) Project D
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

69) Refer to the table below, which shows the results of payback, net present value, and internal rate of return analysis of four projects. Which is preferred by the internal rate of return criterion?

A) Project A
B) Project B
C) Project C
D) Project D
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
70) Refer to the table below, which shows the results of payback, net present value, and internal rate of return analysis of four projects. Which is preferred by the internal rate of return criterion?

A) Project A
B) Project B
C) Project C
D) Project D
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

71) Refer to the table below, which shows the results of payback, net present value, and internal rate of return analysis of four projects. Which is preferred by the net present value criterion?

A) Project A
B) Project B
C) Project C
D) Project D
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
72) Refer to the table below, which shows the results of payback, net present value, and internal rate of return analysis of four projects. Which is preferred by the payback criterion?

A) Project A
B) Project B
C) Project C
D) Project D
Answer:
Page Ref: 587
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

73) Dysfunctional employee behavior in response to implementation of a new computerized information system is likely to be the result of
A) poor human resource policies.
B) lack of communication and training.
C) weak system controls.
D) inadequate compensation policies.
Answer:
Page Ref: 588
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

74) The least time-consuming method of collecting data for use in a systems survey is
A) observation.
B) interviews.
C) questionnaires.
D) reviewing system documentation.
Answer:
Page Ref: 592
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
75) Which of the following is the most important and frequently analyzed aspect of a feasibility study?
A) Economic feasibility
B) Technical feasibility
C) Legal feasibility
D) Operational feasibility
Answer:
Page Ref: 586
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

76) Which of the following aspect of a feasibility study is concerned with meeting external reporting requirements?
A) Technical feasibility
B) Legal feasibility
C) Scheduling feasibility
D) Operational feasibility
Answer:
Page Ref: 586
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

77) Which of the following aspect of a feasibility study is concerned with human resources?
A) Technical feasibility
B) Legal feasibility
C) Scheduling feasibility
D) Operational feasibility
Answer:
Page Ref: 586
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
78) Identify the main reasons why companies change existing systems?

79) Who makes up the project development team and what is the team’s purpose?

80) Describe the five phases of systems analysis.

81) Describe the four primary objectives of a systems survey conducted during systems analysis.

82) Identify and briefly discuss the points at which a “go/no go” decision is made in the systems analysis process.

83) Describe the physical design stage of the systems development life cycle.

84) Describe the importance of the master plan in systems development.

85) Identify and discuss the role of the groups that influence the development and implementation of an AIS.

86) Describe economic feasibility analysis. What techniques are used in economic feasibility analysis?

87) Discuss the relative advantages and disadvantages of the four different methods for gathering data during a systems survey.

88) Identify and describe the five types of feasibility that must be considered throughout the system development life cycle.

89) What are some of the reasons why behavioral problems occur when a new AIS is introduced?

90) For each of the following items, discuss which of the four data gathering methods would be most appropriate and why.
a. Eliciting 300 employees’ opinions on a new incentive program to replace the current bonus program.
b. Identifying how the credit approval process for new customers is supposed to be conducted and by whom.

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 21 AIS Development Strategies

1) Which statement below regarding the development of an AIS is false?
A) A newly designed AIS always meets user needs for a time period.
B) Changes to the AIS are often difficult to make after requirements have been frozen into specifications.
C) The development process can take so long that the system no longer meets company needs.
D) Users are sometimes unable to specify their needs adequately.
Answer:
Page Ref: 613
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

2) When canned software is used for systems acquisition, the conceptual design phase of the SDLC
A) involves a make-or-buy decision.
B) is combined with the physical design phase.
C) is eliminated.
D) is the same.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

3) When canned software is used for systems acquisition, the physical design phase of the SDLC
A) does not involve designing and coding, although modifications may be made.
B) is combined with the conceptual design phase.
C) is eliminated.
D) is the same as for developing custom software.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
4) When canned software is used for systems acquisition, the implementation and conversion phase of the SDLC does not
A) involve the documentation step.
B) require the company to have trained IS personnel.
C) require the develop and test software step.
D) include A and C above.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

5) When canned software is used for systems acquisition, the maintenance aspect of the operations and maintenance phase of the SDLC
A) is more costly.
B) is not necessary and is eliminated.
C) is usually the responsibility of the vendor.
D) requires trained personnel.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) Software development companies write commercial software that can be used by a variety of organizations. Sometimes these companies combine both software and hardware together to sell as one package. Such a package is commonly referred to as
A) a turnkey system.
B) a value-added system.
C) an application service package.
D) canned software.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
7) What is a major problem with “canned software”?
A) A commercial software development company has developed it.
B) Canned software is sold on the open market to a broad range of users with similar requirements.
C) Canned software may not meet all of a company’s information or data processing needs.
D) Canned software may offer easy availability and lower costs.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

8) Which statement is true regarding canned software and the SDLC?
A) Canned software cannot be modified to meet unique user needs.
B) Companies that buy, rather than develop, AIS software can still follow the SDLC process.
C) Most canned software meets all of a company’s information or data processing needs.
D) The SDLC process does not apply to purchasing canned software.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) The reasons for ________ are to simplify the decision-making process, reduce errors, provide timesavings, and avoid potential disagreements.
A) leasing
B) outsourcing
C) prototyping
D) sending out a request for a proposal
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
10) Total costs are usually lower, and less time is required for vendor preparation and company evaluation, when requests for proposal are solicited based on
A) exact equipment needs.
B) generalized software needs.
C) specific hardware and software specifications.
D) None of the above are correct.
Answer:
Page Ref: 615
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

11) Information provided on a Request For Proposal given to vendors should include
A) a budget for software and hardware.
B) detailed specifications for the AIS.
C) timeframe required for completion of the project.
D) All of the above are correct.
Answer:
Page Ref: 615
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

12) The system performance evaluation approach that evaluates systems based on the weighted score of criteria and points totaled is called
A) benchmark problem.
B) point scoring.
C) prototyping.
D) requirements costing.
Answer:
Page Ref: 616
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

13) The approaches to evaluating vendor proposals that do not incorporate dollar estimates of costs or benefits are known as
A) benchmark problem and point scoring.
B) point scoring and requirement costing.
C) requirement costing and benchmark problem.
D) All methods mentioned above include dollar estimates.
Answer:
Page Ref: 616
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
14) A request for proposal sent to software vendors is an important tool since it can reduce errors. Which statement below supports this reason?
A) All responses are in the same format and based on the same information.
B) Both parties possess the same expectations and pertinent information is captured in writing.
C) The chances of overlooking important factors are reduced.
D) The same information is provided to all vendors.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

15) What is the first step a company should take when evaluating requests for proposals?
A) Carefully compare proposals against the proposed AIS requirements.
B) Determine how much of a given proposal meets the desired AIS requirements.
C) Eliminate proposals that are missing important information or fail to meet minimum requirements.
D) Invite vendors to demonstrate their systems.
Answer:
Page Ref: 615
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

16) The ________ method calculates and compares the processing times of different AIS to compare system performance.
A) benchmark problem
B) mandatory requirements
C) point scoring
D) requirements costing
Answer:
Page Ref: 616
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

17) What is a drawback to using the requirement costing method of software and hardware evaluation?
A) Dollar estimates of costs and benefits are not included.
B) Intangible factors such as reliability and vendor support are overlooked.
C) The weights and points used are assigned subjectively.
D) There is no drawback to using the requirements costing method.
Answer:
Page Ref: 616
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

18) A costly and labor-intensive approach to systems acquisition is creating
A) canned software.
B) custom software.
C) modified software.
D) turnkey software.
Answer:
Page Ref: 617
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

19) Which of the following is not appropriate for end user development?
A) performing statistical analyses
B) preparing schedules and lists
C) retrieving information from databases
D) updating database records
Answer:
Page Ref: 618
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

20) What is the basic function of a help desk?
A) control access to corporate data
B) provide technical maintenance and support
C) train end users and assist with application development
D) All of the above are basic functions of a help desk.
Answer:
Page Ref: 619
Objective: Learning Objective 3
Difficulty : Difficult
AACSB: Analytic

21) Why do so many organizations develop their own software, when many canned software packages are available?
A) An organization may have unique requirements.
B) Canned software packages are often less expensive than software developed in house.
C) The organization’s size and complexity necessitates the in-house development of software.
D) A and C above are correct.
Answer:
Page Ref: 617
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

22) Which of the following is not a guideline used to select an outside developer for custom system?
A) The outside developer should have an in-depth understanding of how the company conducts its business.
B) The outside developer should have experience in the company’s industry.
C) The outside developer should possess a good understanding of business in general.
D) The outside developer should be able to complete the system independently, without requiring frequent contact to ask questions.
Answer:
Page Ref: 617
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

23) What term is used to refer to users becoming involved in the hands-on development, control, and employment of information systems?
A) amateur user computing (AUC)
B) competitive intra-organization systems development approach (CIOSDA)
C) end-user computing (EUC)
D) novice information systems development (NISD)
Answer:
Page Ref: 617
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
24) End-user development is inappropriate for some types of systems. What is an example of a system that end users should not be allowed to develop?
A) a payroll processing program
B) a program that performs “what-if” statistical modeling
C) developing an application using prewritten software such as a spreadsheet or database system
D) preparing a schedule or list such as a depreciation schedule
Answer:
Page Ref: 618
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

25) What is an important risk to be considered when allowing end users to develop a system?
A) IS personnel may not have enough work to do.
B) Systems are implemented that have not been adequately tested.
C) Systems are usually easy to use and modify.
D) Users control development process and decide what systems are created and implemented.
Answer:
Page Ref: 618
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

26) Which of the following about end-user computing is true?
A) System users know best what they need, so should be able to create their own applications.
B) End-users, while knowledgeable about their job, are not trained to create systems applications, and should not be allowed to do so.
C) It is inefficient and costly to ask the IS department to create basic applications that only a few users need to use.
D) In most companies, the IS department doesn’t want end-users to create their own applications, for fear IS won’t have enough work to do.
Answer:
Page Ref: 618
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
27) What would be one duty of second-line help desk personnel?
A) handling complicated queries requiring research
B) provide callers with scripted answers
C) using expert systems to quickly find answers
D) None of the duties listed above pertain to second-line help desk personnel.
Answer:
Page Ref: 619
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

28) How does outsourcing improve an organization’s utilization of assets?
A) by allowing a company to completely eliminate its IS department, which will reduce its payroll costs
B) by allowing the company to sell assets to outsourcers and improve their cash position
C) by eliminating the expense of keeping up with the latest technology and, thus, eliminate the drain on cash reserves
D) Both B and C above are correct.
Answer:
Page Ref: 620
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

29) Which of the following is not a benefit of outsourcing?
A) access to greater expertise and more advanced technology
B) greater control
C) improved development time
D) lower costs
Answer:
Page Ref: 621
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

30) A company that has outsourced its AIS function can lose a fundamental understanding of its AIS needs and the strategic uses of AIS with the passing of time. What is this risk called?
A) focus reduction
B) loss of control
C) reduced competitive advantage
D) unfulfilled goals
Answer:
Page Ref: 621
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic
31) Which advantage of outsourcing, given below, may tend to cause resistance on the part of in-house IS staff and other organization employees?
A) Outsourcing allows a company to better use its assets and scarce resources.
B) Outsourcing can lower a company’s overall IS costs.
C) Outsourcing facilitates downsizing.
D) Outsourcing helps eliminate the peaks and valleys of system usage.
Answer:
Page Ref: 620
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

32) The risk of outsourcing concerned with unauthorized disclosure of sensitive information is the risk of
A) a locked-in system.
B) a loss of control.
C) a reduced competitive advantage.
D) inflexibility.
Answer:
Page Ref: 621
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

33) Business Process Management views business processes as
A) strategic organizational assets.
B) a series of small tasks to be closely managed.
C) related activities that, once perfected, should be managed on an exception basis.
D) subsets of organizational strategy that should not be owned by any specific person or department.
Answer:
Page Ref: 622
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

34) Which of the following is not an element of managing a business process “end to end”?
A) identifying process experts to oversee specific functions across units
B) designating a process owner
C) setting performance standards
D) establishing control and monitoring processes
Answer:
Page Ref: 622
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic
35) Which of the following is not true about business process management (BPM) and enterprise resource planning (ERP) systems?
A) ERP systems encompass all functions and processes in an organization, but BPM systems are implemented at process or unit levels in an organization.
B) BPM systems are process-centered, but ERP systems are data-centered.
C) Organizations can use both ERP and BPM systems at the same time.
D) ERP and BPM systems rely heavily technology for communication and coordination.
Answer:
Page Ref: 622
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic

36) Which of the following is not one of the ways in which a Business Process Management System can improve internal control?
A) Innovative technology allows access and authorization controls to be programmed at the transaction level.
B) Documents or transactions that require approval can be electronically routed to a manager.
C) Process rules are used to alert users when actions must be taken.
D) All actions and processes are monitored and documented in a process log for periodic review.
Answer:
Page Ref: 622
Objective: Learning Objective 5
Difficulty : Difficult
AACSB: Analytic

37) The basic premise of ________ is that it is easier for people to express what they like or dislike about an existing system than to imagine what they would like in a system.
A) modified software
B) outsourcing agreements
C) prototyping
D) turnkey systems
Answer:
Page Ref: 623
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
38) Which statement below regarding prototyping is false?
A) Prototypes are considered “first drafts,” which are quickly built and intended to be discarded when the real system is finished.
B) Developers who use prototyping still go through the systems development life cycle.
C) Prototypes help developers and end users make conceptual and physical design decisions.
D) Prototyping allows developers to condense and speed up parts of the analysis and design phases.
Answer:
Page Ref: 624
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

39) What is the emphasis of the first step involved in developing a prototype?
A) develop a good prototype into a fully functional system
B) speed and low cost rather than efficiency of operation
C) users identify changes to be made in an iterative process
D) what output should be produced rather than how it should be produced
Answer:
Page Ref: 623
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

40) The development of which type of system listed below would not benefit from the creation of a prototype?
A) decision support systems
B) executive information systems
C) expert systems
D) systems that cross a number of organizational boundaries
Answer:
Page Ref: 624
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

41) What is a disadvantage to prototyping?
A) developers may shortchange the testing and documentation process
B) errors are likely to be detected and eliminated early in the development process
C) prototyping may be less costly than other approaches
D) prototyping usually produces a better definition of user needs than other approaches
Answer:
Page Ref: 625
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

42) Which is not a problem with CASE technology?
A) cost
B) incompatibility
C) lack of system documentation
D) unmet expectations
Answer:
Page Ref: 626
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

43) Which of the following were CASE tools not designed to do?
A) replace skilled designers
B) plan, analyze, design, program, and maintain an information system
C) automate important aspects of the software development process
D) enhance the efforts of managers in understanding information needs
Answer:
Page Ref: 625
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic

44) Benathir Donathat, director of the project committee, has received approval from management for implementation of a new accounting information system. After putting out an RFP, the committee settled on a vendor that will deliver all hardware and software required on a lease basis. The committee decided to go with
A) canned software.
B) a turnkey system.
C) an outsourced system.
D) an end-user developed system.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

45) Benathir Donathat, director of the project committee, has received approval from management for implementation of a new accounting information system. After putting out an RFP, the committee settled on a Web-based application service provider that will manage all hardware and software required by the system, with fees based on usage. The committee decided to go with
A) canned software.
B) a turnkey system.
C) an outsourced system.
D) an end-user developed system.
Answer:
Page Ref: 619
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

46) Benathir Donathat, director of the project committee, has received approval from management for implementation of a new accounting information system. After putting out an RFP, the committee settled on a vendor that will provide an industry standard software package and post-sale technical support. The committee decided to go with
A) canned software.
B) a turnkey system.
C) an outsourced system.
D) an end-user developed system.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

47) Firms should consider developing custom software only if
A) it will be used for critical functions like accounts receivable.
B) it will contribute to development of a significant competitive advantage.
C) the firm has the necessary expertise available in-house.
D) the available canned software is very expensive.
Answer:
Page Ref: 617
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
48) End-user computing is likely to result in a(n)
A) well tested system.
B) well documented system.
C) rapidly developed system.
D) efficient system.
Answer:
Page Ref: 618
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

49) What is a benchmark problem?
A) A difficulty encountered when attempting to bring an accounting information system up to industry best practices
B) A method used to compare the efficiency of alternative accounting information systems
C) The cost-benefit tradeoff defined by the relationship between increased costs and increased benefits from a system
D) A method used to test the compatibility of a new accounting information system with existing hardware and software
Answer:
Page Ref: 616
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic

50) Which of the following is a method for comparing alternative vendor proposals for development of an accounting information system when the vendors differ with regard to their ability to meet the project criteria?
A) Point scoring
B) Resource clearing
C) Requirements costing
D) Multi-objective optimization.
Answer:
Page Ref: 616
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
51) Where is the responsibility for the development of end-user computing applications typically placed?
A) End users
B) Help desk
C) Information Technology Services Department
D) Programmers
Answer:
Page Ref: 617
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

52) Callow Youth Clothing (CYC) declared bankruptcy in 2007 and has since closed 27 stores, which amounts to over half of its retail outlets. One of the conditions specified for emergence from bankruptcy is a reduction in the cost of operating the firm’s accounting information system. Which of the following may be recommended?
A) Replace the existing system with one of a smaller scale.
B) Customize the existing system.
C) Outsource system operations.
D) Purchase a canned software system.
Answer:
Page Ref: 620
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Reflective Thinking

53) Software as a Service (SaaS) refers to Web-based computing services provided by a(an)
A) application service provider (ASP).
B) Internet service provider (ISP).
C) end-user system (EUS).
D) help desk.
Answer:
Page Ref: 614
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
54) Firms should consider preparing a software prototype if the software
A) will be used for a critical function like accounts receivable.
B) automates an unstructured or semi-structured task.
C) can be produced using expertise available in-house.
D) is available as a canned package.
Answer:
Page Ref: 624
Objective: Learning Objective 6
Difficulty : Difficult
AACSB: Analytic

55) Firms should consider preparing a software prototype if the application
A) will be used for a critical function like inventory management.
B) automates a structured task.
C) can be produced using outside developers.
D) inputs and outputs are not clearly defined.
Answer:
Page Ref: 624
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic

56) Which of the following is an advantage of CASE?
A) It exhibits a high degree of cross-system compatibility.
B) It is an inexpensive technology that is accessible to small businesses.
C) Documentation is generated automatically.
D) It enhances the congruence between user expectations and the final system.
Answer:
Page Ref: 626
Objective: Learning Objective 7
Difficulty : Moderate
AACSB: Analytic

57) As part of the development process for a new job bidding software system for Halide Construction, LLC, Jon Chelide prepared and distributed diagrams that represent input and output screenshots. The diagrams are an example of
A) CASE.
B) an operational prototype.
C) a RFP.
D) a nonoperational prototype.
Answer:
Page Ref: 624
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
58) As part of the development process for a new job bidding software system for Halide Construction, LLC, Jon Chelide prepared and distributed functional programs that simulate the system’s input and output interface. These programs are an example of
A) CASE.
B) an operational prototype.
C) a RFP.
D) a nonoperational prototype.
Answer:
Page Ref: 624
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic

59) In which of the following cases is outsourcing likely to be the best solution to the firm’s data processing needs?
A) Sad Clown Pajamas produces and wholesales clothing products to retailers worldwide. Eighty percent of its sales orders are taken during the months of October and November. Sad Clown requires a system that will manage online ordering and fulfillment.
B) Modest Expectations Investment Services manages highly diverse portfolios and provides personal services to high income investors worldwide. The firm needs a system that will pull together selected investment data from a large variety of sources and allow account managers to prepare customized reports for customers.
C) J.D. Yacht is in the business of buying businesses, managing them for no more than two years, and then selling them at a profit. The firm requires a flexible system that will allow them to effectively manage the various types of businesses it controls.
D) Halide Construction, LLC, manages the design and construction of desalinization plants and requires a system that will allow it to manage the process from bid to billing.
Answer:
Page Ref: 620
Objective: Learning Objective 4
Difficulty : Difficult
AACSB: Reflective Thinking
60) Describe the difficulties that could be encountered when developing an AIS.

61) What are the three methods to obtain a new information system? What is a turnkey system?

62) What guidelines should be followed when contracting with an outside developer to create custom software?

63) Describe the purposes of a help desk.

64) Describe outsourcing and identify the two types of outsourcing agreements.

65) Describe computer-aided software (or systems) engineering (CASE) and identify the advantages and disadvantages of CASE?

66) Explain the concept of an application service provider.

67) Identify the ways an organization can gain full advantage of using a Request For Proposal (RFP).

68) Discuss how an organization can develop custom software.

69) What are the advantages and disadvantages of custom software and of canned software for meeting application software needs?

70) Describe end-user computing and the advantages and risks involved.

71) Describe prototyping and identify when prototyping is appropriate. Identify the steps involved in prototyping. Discuss the advantages and disadvantages of prototyping.

72) Discuss how information system outsourcing can provide the organization with both a business solution and asset management.

73) Describe each of the four important principles underlying Business Process Management (BPM).

Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 22 Systems Design, Implementation, and Operation

1) Developing a general framework for implementing user requirements and solving problems identified in the analysis phase occurs in which phase of the SDLC?
A) conceptual systems design
B) implementation and conversion
C) operations and maintenance
D) physical design
Answer:
Page Ref: 641
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

2) Who is responsible for evaluating the design alternatives and selecting the one that best meets the organization’s needs?
A) design team
B) implementation committee
C) steering committee
D) systems analysts
Answer:
Page Ref: 641
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

3) Which of the following lists represent the sequence of elements in developing the conceptual design specifications?
A) input, data storage, processing procedures and operations, and output
B) input, output, data storage, and processing procedures and operations
C) output, data storage, input, and processing procedures and operations
D) processing procedures and operations, input, data storage, and output
Answer:
Page Ref: 643
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

4) The project team wants to find the most efficient way to collect data in order to prepare a report on sales per store. Which element in design specifications will deal with the decision?
A) data collection
B) input
C) output
D) processing procedures
Answer:
Page Ref: 643
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic

5) One of the purposes of the ________ is to guide physical systems design activities.
A) conceptual systems design report
B) physical systems design report
C) program design
D) systems analysis report
Answer:
Page Ref: 643
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

6) The decision about how often to produce a certain report is part of which conceptual design specification element?
A) data storage
B) input
C) output
D) processing procedures and operations
Answer:
Page Ref: 643
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

7) Which of the following is not a reason for preparing the conceptual systems design report?
A) It can be used to guide physical systems design activities.
B) It communicates how management and user information needs will be met.
C) It discusses the design alternatives that were not selected for the project.
D) It helps the steering committee assess system feasibility.
Answer:
Page Ref: 643
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

8) Which consideration below is not considered important to output design?
A) format
B) location
C) medium
D) source
Answer:
Page Ref: 643
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic

9) All of the following reports have pre-specified content and format except
A) demand reports.
B) scheduled reports.
C) special-purpose analysis reports.
D) triggered exception reports.
Answer:
Page Ref: 644
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

10) For file and database design, it is advantageous to have
A) all data in compatible format.
B) easy access to the system.
C) a printout of the data dictionary.
D) copies of necessary reports.
Answer:
Page Ref: 644
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

11) Physical input design considerations include
A) which transactions to enter.
B) layout of source documents.
C) types of data input and optimal input methods.
D) cost of collecting and storing data.
Answer:
Page Ref: 645
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

12) Program design
A) spans all five stages of the system development life cycle.
B) includes writing computer code.
C) includes debugging logic errors.
D) is described by all the above.
Answer:
Page Ref: 645-646
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

13) Which of the following statements below is correct about modules of computer code created during program design?
A) Modules interact with each other directly and also through the control module.
B) Modules interact with each other directly.
C) Modules interact with only the control module.
D) Modules primarily, but not always, interact with the control module.
Answer:
Page Ref: 646
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

14) Which of the following statements is true?
A) Structured programming divides programs into well-defined segments to reduce complexity.
B) Structured programming is used to debug logic errors in programs.
C) Structured programming is accomplished by using a flowchart to guide design.
D) Structured programming pieces together standard code strings into a completed program.
Answer:
Page Ref: 646
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

15) Which of the following is not a consideration in procedures and controls design?
A) Are customer data stored in alphabetical order in a master file?
B) Are payments made only to legitimate vendors?
C) Are data processed and stored accurately?
D) Can the system be modified without affecting system availability?
Answer:
Page Ref: 648
Objective: Learning Objective 2
Difficulty : Difficult
AACSB: Analytic

16) The accountant wants to make sure that all cash disbursements are made only to legitimate vendors. Which of the following control considerations will deal with this concern?
A) security
B) accuracy
C) authorization
D) validity
Answer:
Page Ref: 648
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

17) The sales department wants to make sure that all customer inquiries are answered in real-time. Which of the following controls design considerations will deal with this concern?
A) security
B) authorization
C) accuracy
D) audit trail
Answer:
Page Ref: 648
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

18) At what point in the systems development life cycle does the company determine how the conceptual AIS design is to be implemented?
A) the conceptual design phase
B) the implementation and conversion phase
C) the physical design phase
D) the systems analysis phase
Answer:
Page Ref: 648
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
19) What is the most time-consuming activity in the physical design stage of the systems development life cycle (SDLC), or perhaps even in the entire SDLC process?
A) controls design
B) input design
C) output design
D) program design
Answer:
Page Ref: 645
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

20) Which of the following is a consideration during file and database design?
A) form size
B) format
C) medium
D) organization
Answer:
Page Ref: 645
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

21) ________ is the process of installing hardware and software and getting the AIS up and running.
A) Conceptual design
B) Physical design
C) Systems analysis
D) Systems implementation
Answer:
Page Ref: 648
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

22) The first step in program design is to
A) determine user needs.
B) develop a plan.
C) hire program users.
D) write program instructions.
Answer:
Page Ref: 646
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
23) Flowcharts, record layouts, decision tables, and related items are part of
A) determining user needs.
B) documenting the program.
C) testing the program.
D) training program users.
Answer:
Page Ref: 647
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

24) Effective AIS training involves
A) instruction on new hardware and software.
B) orientation to new policies and operations.
C) planning and scheduling so it occurs before system testing and conversion.
D) All of the above are correct.
Answer:
Page Ref: 649
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

25) Step-by-step reviews of procedures or program logic early in the system design that focus on inputs, files, outputs, and data flows are called
A) acceptance tests.
B) operating tests.
C) processing of test transactions.
D) walk-throughs.
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

26) One process used to uncover and eliminate program errors is known as
A) black box testing.
B) debugging.
C) desk checking.
D) white box testing.
Answer:
Page Ref: 646
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
27) What is used as the basis for management to make a “go/no go” decision regarding whether to proceed from the physical design phase to the implementation and conversion phase of the systems development life cycle?
A) conceptual system design report
B) physical systems design report
C) systems design report
D) implementation planning design report
Answer:
Page Ref: 648
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

28) Who is responsible for identifying such risk factors in an implementation plan?
A) implementation team
B) steering committee
C) systems analysis team
D) systems development team
Answer:
Page Ref: 648
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

29) Within the implementation planning and conversion phase of the systems development life cycle, analysts must ________ before they can ________.
A) complete documentation; test software programs
B) install and test software; test software programs
C) test software programs; test the system
D) test the system; select and train personnel
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
30) In which phase of the systems development life cycle would changing tax rates in a software program be accomplished?
A) maintenance
B) operations
C) program design
D) implementation
Answer:
Page Ref: 652
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

31) Several types of documentation must be prepared for a new system. The type of documentation that includes the files and databases accessed and file retention requirements is called
A) development documentation.
B) operations documentation.
C) reference documentation.
D) user documentation.
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

32) What type of system test determines whether a program is operating as designed?
A) acceptance test
B) debugging
C) process test data
D) walk-through
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

33) What type of system test uses copies of real transaction and file records?
A) acceptance test
B) debugging
C) process test data
D) walk-through
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
34) In what type of conversion are old and new systems operated simultaneously for a period of time?
A) direct conversion
B) parallel conversion
C) phase-in conversion
D) pilot conversion
Answer:
Page Ref: 651
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

35) Implementing a new system at a branch location before company-wide adoption is called
A) direct conversion.
B) parallel conversion.
C) phase-in conversion.
D) pilot conversion.
Answer:
Page Ref: 652
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

36) Which of the following activities is not part of data conversion?
A) changing data content
B) moving file servers
C) changing file formats
D) moving files to a new storage medium
Answer:
Page Ref: 652
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

37) What type of conversion terminates the old system as soon as the new system is ready?
A) direct conversion
B) parallel conversion
C) phase-in conversion
D) pilot conversion
Answer:
Page Ref: 651
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
38) Which of the following describes a phase-in conversion?
A) Both the old and new AIS are operated simultaneously.
B) Elements of the old AIS are replaced gradually with elements of the new AIS.
C) The new AIS is introduced into a segment, rather than the whole organization.
D) The old AIS is terminated as the new AIS is introduced.
Answer:
Page Ref: 652
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

39) Which of the following is the final step in the data conversion process?
A) data conversion
B) testing the system
C) documentation of conversion activities
D) monitoring of the system after data conversion
Answer:
Page Ref: 652
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

40) Which factor is not investigated during the post-implementation review?
A) accuracy
B) benefits
C) completion
D) costs
Answer:
Page Ref: 652
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

41) Which of the following is the final activity in the systems development life cycle?
A) monitoring of the system
B) ongoing maintenance activities
C) preparation of the post-implementation review report
D) user acceptance of the post-implementation review report
Answer:
Page Ref: 653
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
42) An analyst who asks the question, “Does the system produce actual and complete data?” is investigating what postimplementation factor?
A) accuracy
B) compatibility
C) goals and objectives
D) reliability
Answer:
Page Ref: 652
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic

43) Which of the following is not one of the ways data may need to be modified during data conversion?
A) Resolve data inconsistencies
B) Validate new files
C) Identify files to be converted
D) Remove unnecessary fields from data files
Answer:
Page Ref: 652
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

44) Walk-throughs are system tests that involve
A) managers observing the operation of the system by “walking through” the IT department.
B) processing hypothetical data that are designed to identify errors in the system.
C) processing copies of real transactions in order to determine whether or not the system meets requirements.
D) a thorough review of the procedures and program logic of the system.
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
45) Acceptance tests involve
A) managers observing the operation of the system by “walking through” the IT department.
B) processing hypothetical data that are designed to identify errors in the system.
C) processing copies of real transactions in order to determine whether or not the system meets requirements.
D) a thorough review of the procedures and program logic of the system.
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

46) Processing test data involves
A) managers observing the operation of the system by “walking through” the IT department.
B) processing hypothetical data that are designed to identify errors in the system.
C) processing copies of real transactions in order to determine whether or not the system meets requirements.
D) a thorough review of the procedures and program logic of the system.
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

47) Which of the following is not one of the types of documentation that should be prepared for a new system?
A) Management
B) Operations
C) User
D) Development
Answer:
Page Ref: 650
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic

48) Subdividing program code into small, well-defined modules is
A) called debugging.
B) known as structured programming.
C) part of program maintenance.
D) done during testing.
Answer:
Page Ref: 646
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

49) Performing revisions to existing program code is an example of
A) debugging.
B) structured programming.
C) program maintenance.
D) walk through.
Answer:
Page Ref: 647
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic

50) Chuck in ITS got a call from Phil in Marketing. “Chuck, you know that inventory report I had you guys prepare for me last year? Well, I need you to run it again and send it over in hard copy. Thanks.” This is an example of a
A) scheduled report.
B) special-purpose analysis report.
C) triggered exception report.
D) demand report.
Answer:
Page Ref: 644
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic

51) Phil in Marketing got a call from Chuck in ITS. “Phil, the system just generated a stock-out report. I wanted to give you a heads up. I’m sending it right over.” This is an example of a
A) scheduled report.
B) special-purpose analysis report.
C) triggered exception report.
D) demand report.
Answer:
Page Ref: 644
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

52) Chuck in ITS got a call from Phil in Marketing. “Chuck, I need you to do something for me. Query sales data for the first quarter and pull out all of the invoices that include the snow blower discount. I need a count and the total amount of the discount. Thanks.” This is an example of a
A) scheduled report.
B) special-purpose analysis report.
C) triggered exception report.
D) demand report.
Answer:
Page Ref: 644
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

53) Phil in Marketing got a call from Fred at regional headquarters. “Phil, I just got the quarterly sales report for your district. You beat your quota again, you son of a gun!” This is an example of a
A) scheduled report.
B) special-purpose analysis report.
C) triggered exception report.
D) demand report.
Answer:
Page Ref: 644
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic

54) Which of the following is the most costly and least risky method of converting from one system to another?
A) Direct
B) Parallel
C) Pilot
D) Phase-in
Answer:
Page Ref: 651
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
55) Which of the following is the least costly and most risky method of converting from one system to another?
A) Direct
B) Parallel
C) Pilot
D) Phase-in
Answer:
Page Ref: 651
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic

56) How can accountants help in the systems development life cycle (SDLC) process?

57) What factors does a steering committee consider when evaluating different system designs?

58) What are the purposes of a conceptual systems design report?

59) Describe at least four considerations during controls design.

60) What is systems implementation? How do you plan for it?

61) Describe the different types of documentation that should be prepared for a new system.

62) Describe the different methods of testing a system.

63) Describe the post-implementation review activity.

64) What output design considerations should be analyzed as part of the physical system design phase?

65) Describe structured programming.

66) Describe the conceptual systems design phase and identify the elements of conceptual design specifications?

67) What is the objective of output design? What are the output design considerations? What are the various categories of outputs?

68) Describe the approaches to system conversion.

69) Write one question that should be asked about each of the controls design considerations.

70) Describe the eight basic steps in program design.