ACC 564 Quiz 1 – New

ACC 564 Quiz 1 – Strayer New

ACC 564 Week 3 Quiz 1 Chapter 1, 2, 3 and 5

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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:
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.

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.