Accounting information systems test bank by romney

One of these components, which includes both manual and automated activities that involve collecting, processing, and storing data, is known as a Information or data b Procedures and i

Chapter 1 (new version)

2 This results when a subsystem achieves its goals while contributing to the

organization's overall goal

a) Goal conflict

b) Goal congruence

c) Value of information

d) Systems congruence

3 Goal conflict may result when

a) A decision or action of a subsystem is inconsistent with the system as a whole b) A subsystem achieves its goals while contributing to the organization's overall goal

c) Duplicate recording, storage and processes are eliminated

d) The data exceeds the amount the human mind can absorb and process

4 Facts that are collected, recorded, stored and processed by an information system a) Information

a) facts entered, stored, and processed by an information system

b) processed output that is useful to decision makers

c) another word for information

d) quantitative facts that are not qualitative by nature

7 Which of the following statements below shows the contrast between data and

information?

a) Data is the output of an AIS

b) Information is the primary output of an AIS

c) Data is more useful in decision-making than information

d) Data and information are the same

8 Information is

a) basically the same as data

b) raw facts about transactions

c) potentially useful facts when processed in a timely manner

d) data that has been organized and processed so that it's meaningful

9 Humans can absorb and process only so much information Information occurs when those limits are passed

a) overload

b) excess

c) anxiety

d) discretion

10 The value of information can best be defined as

a) how useful it is to decision makers

b) the benefits produced by possessing and using the information minus the cost of producing it

c) how relevant it is

d) the extent to which it maximizes the value chain

11 The benefit produced by the information minus the cost of producing it

a) People, hardware and programs

b) Information, programs and computers

c) People, procedures, data, software and information technology infrastructure d) Internal controls and accounting records

15 Information that reduces uncertainty, improves decision makers' ability to make predictions, or confirms or corrects their prior expectations, is said to be

18 When two knowledgeable people acting independently each produce the same

information, this information is said to be

c) Mandatory information

d) Value of information

21 An AIS is a system of six interrelated components that interact to achieve a goal One of these components, which includes both manual and automated activities that involve collecting, processing, and storing data, is known as

a) Information or data

b) Procedures and instructions

c) Software

d) Information technology infrastructure

22 An accounting information system must be able to perform which of the following tasks?

a) collect transaction data

b) process transaction data

c) provide adequate controls

d) all of the above

23 Which of the following is not an example of a common activity in an AIS?

a) buy and pay for goods and services

b) sell goods and services and collect cash

c) summarize and report results to interested parties

d) recording of sales calls for marketing purposes

24 Which of the following is not one of the components of an AIS?

a) Internal controls and security measures

b) People

c) Procedures and instructions

d) Software and hardware

25 An AIS must be able to fulfill three important functions in any organization One such function is the collecting and storing of data about activities performed by the organization One group that relies on both the adequate collection and

transformation of data for decision-making purposes for an organization is

a) management

b) interested outsiders

c) competitors

d) the government

26 The primary objective of accounting is to

a) implement strong internal controls

b) provide useful information to decision makers

c) prepare financial statements

d) ensure the profitability of an organization

27 The Financial Accounting Standards Board (FASB), in its Statement of Financial Accounting Concepts No 2, has defined accounting as

a) an information identification, development, measurement, and communication process

b) a way to provide adequate controls to safeguard an organization's assets

c) being an information system

d) a way to collect and transform data into useful information

28 Which activity below would not be considered to be a "top" accountant work

activity?

a) process improvement

b) input into future product marketing initiatives

c) long-term strategic planning

d) computer systems and operations

29 The American Institute of Certified Public Accountants (AICPA) has recognized the importance of AIS and the major impact information technology has on the area of accounting To recognize individual CPAs who have met educational and

experiential requirements in this area, the group formally created the designation known as

a) the Certified Management Accountant

b) the Certified Information Technology Professional

c) the Certified Internal Auditor

d) the Certified Data Processing Professional

30 An analysis conducted by the Institute of Management Accountants shows that the most important activities performed by corporate accountants relate to

a) customer and product profitability

b) internal consulting

c) process improvement

d) accounting systems and financial reporting

31 The primary focus of an AIS course, as opposed to other IS courses, is on

a) application of information technology

b) use of accounting software

c) understanding how information technology can be used to improve AIS

processes

d) preparation of financial statements

32 The AIS must include controls to ensure

a) safety and availability of data

b) marketing initiatives match corporate goals

c) information produced from data is accurate

35 The value chain concept is composed of two types of activities known as

a) primary and support

b) primary and secondary

c) support and value

d) technology and support

36 Which of the following is a primary activity in the value chain?

a) infrastructure

b) technology

c) purchasing

d) marketing and sales

37 In value chain analysis, what is the activity of arranging the delivery of products to customers called?

a) outbound logistics

b) inbound logistics

c) shipping

d) delivery

38 An AIS provides value by

a) improving products or services through information that increases quality and reduces costs

b) providing timely and reliable information to decision makers

c) creating new products

d) both A and B

39 In Chapter 1, Figure 1-2 shows the factors that influence the design of AIS The diagram shows a bi-directional arrow between the organizational culture and the AIS The reason for this two-way interchange between organizational culture and AIS is a) that the AIS should not influence the values of the organizational culture

b) because the organization's culture influences the AIS, and likewise the AIS

influences the organization's culture by controlling the flow of information within the organization

c) due to the transfer of managers between the two corporate elements

d) the AIS impacts the organization's key strategies

40 The objective of the majority of organizations is to provide value to their customers The activities that support such an objective can be conceptualized as forming a value chain Within this value chain, logistics plays an important role Logistics is both inbound and outbound in nature An example of inbound logistics would consist of a) the activities that transform inputs into final products or services

b) the activities that help customers to buy the organization's products or services c) the activities that provide post-sale support to customers

d) the activities that consist of receiving, storing, and distributing the materials used

as inputs by the organization to create goods and/or services it sells

41 A good example of how an AIS is used to share knowledge within an organization is a) the use of an expert system to help staff identify the relevant experts who can help with a particular client

b) the use of laptop computers to access a network for messaging worldwide

c) the monitoring of production equipment to watch for defects

d) the use of point-of-sale data to determine hot-selling items

42 Within the value chain conceptual framework, organizations also perform a number

of other support activities that enable the five primary value chain activities to be performed efficiently and effectively One such support activity is research and development This activity can be identified as a

a) firm infrastructure activity

b) human resources activity

b) improving the quality and reducing the costs of products or services

c) improving efficiency

d) All of the above

44 A decision situation that is non-routine and for which no established framework exists for making the decision is called a(n) decision

46 Which of the following is an example of a strategic planning decision?

a) setting financial and accounting policies

b) conducting a performance evaluation

c) budgeting

d) developing human resource practices

47 Decisions about the effective and efficient execution of specific tasks are concerned with

49 Accounting information plays major roles in managerial decision making by

a) identifying situations requiring management action

b) reducing uncertainty

c) providing a basis for choosing among alternative actions

d) all of the above

50 Business activities that pertain to product pricing, discount and credit terms, and identifying the most and least profitable items are part of the activity in the organization's value chain

a) service

b) marketing and sales

c) operations

d) inbound logistics

51 A principal focus of AIS is to assist with the decision-making function of an

organization The degree of support AIS can provide depends on the type of decision being made Decisions are categorized in terms of the degree of existing structure or the effect of their scope From the items below, select the description that is an example of a semi-structured decision

a) selecting basic research projects to undertake

b) setting a marketing budget for a new product

c) extending credit to an established customer

d) hiring a senior manager

52 Regarding decision scope, which statement below is true?

a) Operational control is concerned with the effective and efficient use of resources for accomplishing organizational objectives

b) Management control is concerned with the effective and efficient performance of specific tasks

c) Strategic planning is concerned with establishing organizational objectives and policies for accomplishing those objectives

d) There is no real correlation between a manager's level in an organization and his

or her decision-making responsibilities

53 A well-designed AIS can improve the decision-making function within the

organization Which statement below would describe a limitation, rather than a benefit, of an efficient AIS?

a) An AIS reduces uncertainty, and therefore accounting information can provide a basis for choosing among alternative courses of action

b) An AIS identifies situations requiring management action

c) An AIS provides to its users an abundance of information without any filtering or condensing of such information

d) An AIS provides information about the results of previous decisions which provides decision makers with feedback that can be used in future decision making

54 A strategic position is important to the success and growth of any organization Harvard professor Michael Porter has identified three basic strategic positions

Which statement below is false regarding these basic strategic positions?

a) The three basic strategic positions are mutually exclusive of each other

b) Part of a needs-based strategic position is to identify a target market

c) An access-based strategic position involves serving a subset of customers who differ from other customers in terms of geographic location or size

d) A variety-based strategic position involves producing or providing a subset of the industry's products or services

55 A strategic position is important to the success and growth of any organization Harvard professor Michael Porter has identified two basic business strategies Which

statement below is false regarding these basic strategies?

a) A product differentiation strategy entails adding features or services not provided

by competitors to a product so customers can be charged a premium price

b) A low-cost strategy entails striving to be the most efficient producer of a product

or service

c) Sometimes a company can succeed in both producing a better product and

achieving low costs

d) The two basic strategic positions are mutually exclusive

56 According to Michael Porter, to be successful in the long run, a company must a) deliver greater value to customers and/or create comparable value at a lower cost b) maximize profits

c) maximize shareholder value

d) both B and C

57 A variety-based strategic position involves

a) trying to serve most or all of the needs of a particular group of customers

b) serving a subset of customers who differ from other customers

c) providing a subset of the industry's products or services

d) serving all needs of all customers

58 A needs-based strategic position involves

a) trying to serve most or all of the needs of a particular group of customers

b) serving a subset of customers who differ from other customers

c) providing a subset of the industry's products or services

d) serving all needs of all customers

59 An access-based strategic position involves

a) trying to serve most or all of the needs of a particular group of customers

b) serving a subset of customers who differ from other customers

c) providing a subset of the industry's products or services

d) serving all needs of all customers

60 The Internet has changed the way many processes are performed in business today The Internet has had a material effect on the five primary characteristics in the value chain and on the strategy adopted by businesses that incorporate use of the Web into their business systems Which statement below is true regarding the Internet relative

to a strategic position that a business may adopt?

a) Use of the Internet has reduced the power of buyers

b) The Internet has increased the barriers to entry in many industries

c) Use of the Internet reduces pressure to compete on price

d) The most important effect of the development of the Internet in business is the increased importance of adopting a viable business strategy

SHORT ANSWER

61 Define the concept of a system

62 Define data, information, and how the value of information is determined

63 Define an accounting information system

64 Identify the components of an accounting information system

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

66 Differentiate between an AIS course and other accounting courses

67 Harvard professor Michael Porter contends that for a company to be successful in the long run it "must deliver greater value to customers or create comparable value at a lower cost, or do both" and suggests three strategic positions Describe these strategic positions How do these strategic positions relate to financial and managerial

accounting information given?

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

69 Name the primary activities of a firm's 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?

ESSAY

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 steps in the 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?

61 A system is a set of two or more components that are somehow interrelated and interact together to achieve a specific goal

62 Data: facts that are collected, entered, recorded, stored, and processed by an AIS Information: data that has been organized and processed and is meaningful to its users Such information is relevant, timely, reliable, verifiable, complete, and

understandable Information is of value when the benefits received from using or acting upon it outweighs the cost to produce the information

63 An AIS is a system that collects, records, stores, and processes data to produce

information for decision makers An AIS is a valuable tool when integrated with the strategic planning initiatives of an organization

64 A well-designed AIS consists of people, procedures and instructions, data, software, information technology infrastructure, and internal controls and security measures

65 The CITP designation stands for "Certified Information Technology Professional." It

is awarded to CPAs who have demonstrated a broad range of knowledge and skill sets

in the areas of accounting and information systems and technology The AICPA (American Institute of CPAs) has acknowledged the importance and close

relationship that accounting and information systems share in creating this specialty designation for accounting information system professionals

66 Other accounting courses assume the preparation or reporting of accounting

information is for external or internal users However, the AIS course focuses on the flow of accounting information in the organization from a systems perspective The AIS course traces the origin, processing, storing, and ultimate disposal of

information An AIS course also focuses on business processes, organization

structure, information systems, and corporate planning and goals

67 The three strategic positions described are: a) a variety-based strategic position that involves producing or providing a subset of the industry's products or services; b) a needs-based strategic position that involves trying to serve most or all of the needs of

a particular group of customers; and c) an access-based strategic position that

involves serving a subset of customers who differ from other customers in terms of factors such as geographic location or size which create different requirements for serving those customers AIS that has been properly designed can support an

organization in attaining and maintaining a strategic position Such an information system can be a valuable asset in helping the organization to maintain a competitive position in the marketplace

68 The goal of the five primary activities in the value chain is to facilitate the business in providing value to its customers The five primary activities allow the business to create, market, and deliver its products and services to its customers, as well as

providing postsale support

69 Inbound logistics, operations, outbound logistics, marketing and sales, and service

70 An AIS can increase the efficiency and effectiveness of the value chain by improving the quality and lowering costs of products or services, improving efficiency of

operations, improving decision making, enhancing the sharing of knowledge,

improving the efficiency and effectiveness of its supply chain and improving the internal control structure

71 The AIS can be designed to allow customers direct access to a company's inventory and sales order entry systems This allows the customer to do more of the work that traditionally has been done by sales, marketing, and administration personnel This allows for faster ordering, and cuts the company’s labor costs It may also have the effect of allowing the customer more control in a purchase transaction that may bring more satisfaction and value to the customer

72 A system is a set of two or more components that are somehow interrelated and interact together to achieve a specific goal A system usually consists of smaller components called subsystems These subsystems have specific and defined

functions, which interact with and support the larger system The concept of systems

is key to information technology and AIS All systems, including the AIS, must work

to achieve one or more organizational goals Goal conflict results when a decision or action of a subsystem is inconsistent with another subsystem or the system

(organization) as a whole Goal congruence results when a subsystem achieves its goals while contributing to the organization's overall goal Subsystems should

maximize organizational goals

73 The seven characteristics of useful information are: relevant, reliable, complete, timely, understandable, verifiable and accessible These characteristics are qualities that information should possess to be useful in a business environment Briefly stated, in order for information to be useful it must be: 1) relevant, meaning that it reduces uncertainty and adds to the decision-making process; 2) reliable information

is information that is free from error, and is accurate in its nature; 3) complete

information is information that does not omit any important data, facts, or aspects about events or activities; 4) information is timely when it is fully available to enable the decision-making process to proceed; 5) understandable information must be both

in an intelligible and useful format; 6) information is considered verifiable if two people, acting independently of each other, produce the same information or the same results Information is accessible if it is available to users when they need it and in a format they can use

74 An AIS consists of six components: people, procedures, instructions, data, software, and information technology infrastructure and internal controls and security

measures The AIS performs three major functions: 1) it collects and stores data about activities and transactions so that the organization's management, employees, and interested outsiders can review what has happened; 2) the AIS processes data (that is, facts that have been collected and stored) into information that is useful for making decisions, and is of value to the organization; and 3) the AIS provides

adequate controls designed to safeguard the organization's assets, including its data and information Common examples of accounting transactions that an AIS helps to process and track are the sales of products to customers, cash collections, cash

payments, and the recording and payment of the employees' payroll

75 The supply chain shows how an organization interacts with suppliers, distributors, and customers to provide value in the products it sells The supply chain depicts the creation and sale of a product-the chain is somewhat different when a service is involved The supply chain has five components: raw materials; manufacturer; distributor; retailer; and the consumer Raw materials come from any number of suppliers, which in turn become part of a manufacturing process, which produces a product The business then provides the product to distributors, who in turn sell the product to retail businesses The product is ultimately purchased and used by

consumers (who may be individuals or businesses) It is important to realize that AIS can greatly impact the traditional supply chain by creating a more efficient and timely environment in which a business can operate More efficient operations are more effective, which in turn lowers costs, and add greater value and create improved customer satisfaction

76 The AIS can add value by: helping to improve products and services an organization offers for sale; increasing the quality of products and services; creating greater

efficiency by reducing costs and saving time; and improving the overall efficiency of the organization Decision making is enhanced by the better availability of timely, complete, reliable, verifiable, and relevant information A firm can enjoy a

competitive advantage with better customer ordering, billing, and customer service made possible by an improved AIS The AIS can also enhance overall

communication and use of knowledge in a business by making the knowledge readily available to interested parties

77 A well-designed AIS improves the efficiency and effectiveness of the value chain by improving the quality and lowering the overall cost of products or services,

improving efficiency of operations, improving decision making, and enhancing the sharing of knowledge These are the benefits of possessing and using information Drawbacks to possessing and using such information are the costs of obtaining and maintaining such information These costs include investments in people, processes, and computing and networking hardware and software on an ongoing basis Costs of the information are quantifiable to some extent However, some of the benefits of using the information involve numerous estimates and assumptions As such, the quantification of the benefits of utilizing such information depends on the accuracy of the assumptions

Chapter 2 (new version)

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

4 The basic "give and take" functions of a business have been grouped into transaction cycles The cycle that includes the events of hiring employees and paying them is known as the

a) revenue cycle

b) expenditure cycle

c) human resources cycle

d) financing cycle

5 What is the major difference between the revenue and the expenditure cycle?

a) The revenue cycle includes marketing activities; the expenditure cycle does not b) In the revenue cycle, cash is received; in the expenditure cycle cash is paid out c) The expenditure cycle includes paying employees

d) The revenue cycle includes the activity of obtaining funds from investors

6 The business owners obtain financing from outside investors, which results in an inflow of cash into the company This transaction is considered to be part of which cycle?

a) the revenue cycle

b) the payroll cycle

c) the production cycle

d) the financing cycle

7 Which of the following is not a transaction cycle?

a) revenue

b) expenditure

c) human resources

d) general ledger and reporting

8 All transaction cycles feed information directly into the

a) give cash, get cash

b) give cash, get goods

c) give cash, get labor

d) give goods, get cash

10 Transaction cycles can be summarized on a high level as "give-get" transactions An example of "give-get" in the revenue cycle would be

a) give cash, get goods

b) give goods, get cash

c) give cash, get labor

d) give cash, get cash

11 The transaction cycles relate to one another and interface with this to generate

information for both management and external parties

a) general ledger and reporting system

b) accounting information systems

c) computer processor

d) human resources cycle

12 Many modern accounting software packages offer separate transaction cycle modules What is the reason for this?

a) Every organization does not need to implement all of the available transaction cycle modules

b) Most businesses do not need the revenue cycle module as part of their AIS

c) The nature of a given transaction cycle is the same irrespective of the type of organization

d) A properly designed AIS does not use the concept of separate business transaction cycles to process transactions

13 Which of the following statements is false?

a) Retail stores do not have a production cycle

b) Financial institutions have installment-loan cycles

c) A service company does not have an inventory system

d) Every organization should implement every transaction cycle module

14 The operations performed on data to generate meaningful and relevant information are referred to as

a) general ledger and reporting system

b) accounting information system

c) financial reporting

d) data processing cycle

15 One of the steps in the data processing cycle is data input What is the catalyst for data input into a system?

a) The production transaction system automatically checks each hour to see if any new data is available for input and processing

b) The performance of some business activity generally serves as the trigger for data input

c) A general ledger program is queried to produce a trial balance at the end of an accounting period

d) Data is only input when an authorized party permits the input to occur

16 A typical source document could be

a) in some paper form

b) a computer data entry screen

c) the inputs, outputs and processes used

d) who is involved, what was sold, how much was paid

19 Certain documents or forms are generated and/or processed with each transaction cycle The issuing of a purchase order is part of which transaction cycle?

a) the revenue cycle

b) the production cycle

c) the human resources cycle

d) the expenditure cycle

20 Certain documents or forms are generated and/or processed with each transaction cycle The collection of job time tickets or time sheets is part of which transaction cycle?

a) the revenue cycle

b) the production cycle

c) the human resources cycle

d) the expenditure cycle

21 Common source documents for the revenue cycle include all of the following except a) sales order

a) turnaround documents

b) source documents

c) source data automation

d) rubber or bounce-back documents

24 What is a primary example of source data automation?

a) a utility bill

b) POS (point-of-sale) scanners in retail stores

c) a bill of lading

d) a subsidiary ledger

25 Pre-numbering of source documents helps to verify that

a) all transactions have been recorded since the numerical sequence serves as a control

b) no inventory has been misplaced

c) documents have been used in order

d) all cash has been collected

26 Source documents generally help to improve accuracy in transaction processing because

a) they specify which information to collect due to their structure

b) standard information is preprinted on the document

c) they provide directions and steps for completing the form

d) All of the above are correct

27 When the sum of all entries in the subsidiary ledger equals the amount in the

corresponding general ledger account, it is assumed that (select all that apply)

a) the recording and posting processes are accurate

b) all of the transaction cycles have been completed

c) since the ledgers are in balance, adjusting entries are not required

d) no errors exist in the subsidiary ledger and corresponding general ledger account

28 The general ledger account that corresponds to a subsidiary ledger account is known

d) subsidiary accounts

34 Regarding codes, which of the following is false?

a) The code should be consistent with its intended use

b) Codes should allow for growth in the number of items to be coded

c) Coding systems should be as simple as possible

d) Coding systems need not be consistent across divisions of an organization

35 To be effective, the chart of accounts must

a) be as concise as possible

b) contain only five account categories

c) limit account codes to 10 digits or less

d) contain sufficient detail to meet the information needs of the specific

organization's AIS

36 The chart of accounts for a manufacturing corporation would include

a) retained earnings

b) common stock

c) raw materials inventory

d) all of the above

37 The chart of accounts of a corporate retail bookstore would probably include

a) first

b) second

c) third

d) fourth

39 In transaction processing, generally which activity comes first?

a) recording data in a journal

b) posting items to special journals

c) capturing data on source documents

d) posting data to a ledger

40 The efficiency of recording numerous business transactions can be best improved by the use of

a) prenumbered source documents

b) specialized journals

c) posting references

d) segregation of duties

41 A general journal

a) is used to record infrequent or non-routine transactions

b) simplifies the process of recording large numbers of repetitive transactions c) records all detailed data for any general ledger account that has individual sub- accounts

d) contains summary-level data for every account of the organization

42 The general ledger

a) is used to record infrequent or non-routine transactions

b) simplifies the process of recoding large numbers of repetitive transactions c) records all detailed data for any general ledger account that has individual sub- accounts

d) contains summary-level data for every account of the organization

43 A subsidiary ledger

a) is used to record infrequent or non-routine transactions

b) simplifies the process of recoding large numbers of repetitive transactions c) records all detailed data for any general ledger account that has individual sub- accounts

d) contains summary-level data for every account of the organization

44 A specialized journal

a) is used to record infrequent or non-routine transactions

b) simplifies the process of recording large numbers of repetitive transactions c) records all detailed data for any general ledger account that has individual sub- accounts

d) contains summary-level data for every account of the organization

45 An audit trail

a) provides the means to check the accuracy and validity of ledger postings

b) is provided by the ledger and the general journal

c) is automatically created in every computer-based information system

47 Characteristics of interest that need to be stored are

51 Concerning a master file, which of the following statements is false?

a) It is conceptually similar to a ledger in a manual AIS

b) It stores cumulative information about an organization's resources

c) It exists across fiscal periods

d) Its individual records are not changed

52 Basic data storage concepts define both entities and attributes An entity is something

about which information is stored Which item below would not be considered an

54 Which of the following is not one of the four types of file processing?

56 Concerning processing, which of the following statements is true?

a) Batch processing ensures that stored information is always current

b) Batch input is more accurate than on-line data entry

c) On-line batch processing is a combination of real-time and batch processing d) Batch processing is almost never used

57 Federal Express stated in one of its mission statements that "positive control of each package will be maintained by utilizing electronic tracking and tracing systems." This is an example of which type of data processing?

a) real-time processing which features immediate updating as to the location of packages

b) batch processing which features updating at fixed time periods

c) real-time processing which features updating at fixed time periods such as at the end of an accounting period

d) batch processing which features immediate updating as to the location of

d) All of the above reports are important to decision makers

60 Which statement below regarding the AIS and managerial reports is false

a) The AIS must be able to provide managers with detailed and operational

information about the organization's performance

b) Both traditional financial measures and operational data are required for proper and complete evaluation of performance

c) Most source documents capture both financial and operational data about business transactions

d) Traditionally, most AIS systems have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports

61 A formal expression of goals and objectives in financial terms is called a(n)

b) staff salaries as a percentage of sales

c) satisfaction of employees with their work environment

d) sales revenue divided by the number of hours worked by the sales staff

64 Some information will have to be collected from sources to determine, for example, customer satisfaction

budget-a) managers will largely ignore budgets

b) budgets must be too tight to encourage high aspirations

c) budget slack will exist in almost every budget and is negotiated by all managers d) measurement affects behavior

69 Which managerial tool below is used to provide the organization with financial control?

71 Name the major transaction cycles

72 What is the purpose of source documents? What controls are embedded in source documents? Give two examples of source documents

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

74 Describe the purpose of subsidiary and control accounts

75 What is an audit trail?

76 A well-designed data processing cycle should collect data connected with three facets

of business activity Name the three facets

77 Source documents are usually generated in the process of conducting common

business activities Name a source document connected with the revenue cycle

78 Source documents are usually generated in the process of conducting common

business activities Name a source document connected with the human resources cycle

79 What operational information should an AIS be capable of providing to management?

80 An AIS stores data by organizing smaller units of data into larger, more meaningful units Briefly explain how data is stored in AIS

accounting department is overworked at times, the cashier is allowed to post cash payments to customer accounts and reconcile the bank account Outline how a

dishonest cashier could misuse all these responsibilities to steal cash from the

company

85 It has been said "measurement affects behavior." What does this mean as it applies to business?

70 The concept of "Give and Take" transactions has been used to classify business transactions into

"cycles" that have starting points, processes, and end points (or closure) The majority of business transactions can be classified as revenue, expenditure, human resources (payroll), production, and financing cycles AIS has been modeled after these transaction cycles to achieve its basic functions of collecting and processing data, providing information useful for decision making, and establishing adequate controls

71 The major transaction cycles are revenue, expenditure, human resources (or payroll), production, and financing

72 The primary purpose of source documents is to record data about business activities Source

documents standardize data collection procedures for an organization and provide better control and accuracy Source documents are generally pre-numbered, which helps to verify that all transactions have been recorded and there is no missing document; if a document is missing, then which one(s) can

be determined Proper design of source documents ensures which information to collect, preprints standard information such as addresses, and provides directions for completing the form Examples include: invoices, timecards, sales orders, and purchase orders

73 Since every organization does not necessarily use all of the transaction cycles in its operations, it is to the advantage of the organization to be able to "pick and choose" from among various software modules that track and record different transaction cycles For example, a law firm would have no need to implement a production cycle module Also, the nature of a transaction cycle varies across the broad spectrum of business organizations Again, a law firm would have a revenue cycle, but it would not involve the purchase, receipt, and payment for products or merchandise; likewise a retail store chain may not sell any consulting services to its customers

74 A subsidiary ledger is used when many sub-accounts (such as customers or vendors) must be tracked

in detail These types of accounts are used frequently for accounts receivable and accounts payable applications The control account gives the overall or total picture for the subsidiary accounts The control account will show total balances only and must balance to the sum of the individual detail amounts in the subsidiary accounts

75 An audit trail provides a means to check the accuracy and validity of postings to the ledger The posting references and document numbers help provide the audit trail An audit trail exists when company transactions can be traced through the AIS from where originate to where they end up on the financial statements

76 The three facets of business activity are: 1) the event of interest; 2) the resource(s) affected by the

event; and 3) the agents who participate in the event

77 Revenue cycle source documents include sales orders, delivery tickets or bills of lading, remittance advice or remittance list, deposit slip, and credit memo

78 Human resources (or payroll) cycle documents include employee's W-4 form, time cards, or job time tickets or time sheets

79 Some examples are - reports about inventory status, relative profitability of products, percentage of revenue generated by new products, relative performance of each salesperson, cash collections and pending obligations, and an organization's performance in meeting its delivery and service

commitments The AIS should also be able to provide non-financial information connected with various transactions such as addresses, purchasing histories, telephone and fax numbers, e-mail addresses, Web sites, etc

80 The smallest unit of data is known as a data value A data value is physically stored in a space called a field Any number of fields can be grouped together to form a record Related records are grouped together to form a file Files are then combined to form a database

ESSAY

81 Revenue - sell goods and services to customers and collect cash Expenditure - obtain goods and services from vendors and pay cash Human resources - hire qualified employees, train them, pay them, evaluate them, withhold and pay taxes, file tax forms, and comply with government regulations

on employment Financing - investments in company, procuring and repayment of loans, and payment

of dividends and interest

82 The following guidelines will result in a better coding system First, the code should be consistent with its intended use Second, the code should allow for growth in the number of items to be coded The coding system should be as simple as possible The coding system should be consistent with the company's organizational structure and it should be consistent across the different divisions of an organization

83 The general ledger contains summary-level information about every asset, liability, equity, revenue, and expense account in an organization The balances in general ledger accounts form the starting point for preparation of financial statements and various other financial reports A subsidiary ledger account provides support for any general ledger account that has need of maintaining individual subaccounts (for example, accounts receivable, accounts payable, inventory, and fixed assets) The subsidiary ledger records and maintains the detail-level information for a general ledger account by having a separate record for each customer, vendor, inventory item, or fixed asset The individual subaccount balances in a subsidiary ledger should equal the balance found in the general ledger account A general ledger account that corresponds to a subsidiary ledger account is known as a control account

84 This procedure represents a gross violation of the "segregation of duties" principle The cashier could steal cash in any number of ways For example, the cashier could misapply payments from other customers to cover the theft (this is better known as lapping) The cashier could steal cash by writing off the balances as bad debts or cover over the balances with illegitimate discounts Also, the cashier could steal cash and then cover it up with entries to expense accounts or by preparing a "bogus" bank reconciliation This is why it is critically important that there is a clear, unequivocal separation of duties when dealing with any aspect of cash in a business

85 Generally speaking, when employees become aware of the tasks that are under evaluation and

measurement, the employees will focus their efforts primarily on those tasks This could be good or bad depending on the task being measured and the goals of the business A business should not be merely focused on obtaining expectations from measuring certain tasks to the detriment of the

operation of the business as a whole Consider for example the measurement of the number of units of

a product produced each hour If the business is only concerned with maximizing output, employees may indeed produce more, but the quality of each unit produced may be unacceptable If the units are shipped without knowledge of the lower quality, a higher failure rate per unit may occur This will impact the users of the units, and so a customer service problem may arise due to the "push for higher output." It is important for the organization to balance measurement goals and objectives with the overall mission and values of the organization and its strategic objectives

d) oral descriptions from management

3 The graphic description of the flow of data within an organization is called a

a) systems flowchart

b) data flow diagram

c) context diagram

d) document flowchart

4 A graphical representation of the flow of documents and information between

departments or areas of responsibility within an organization is called

a) a data flow diagram

b) a document flowchart

c) a system flowchart

d) a program flowchart

5 A graphical representation of the relationship among the input, processing and output

in an information system is called

a) a data flow diagram

7 SAS No 94 requires that independent auditors be able to

a) draw computerized flowcharts

b) prepare flowcharts and decision tables before conducting an audit

c) understand a client's system of internal controls before conducting an audit

d) prepare and understand any type of system documentation

8 The passage of the Sarbanes Oxley Act

a) Made documentation skills even more important

b) Requires public companies to prepare an annual internal control report

c) Means that auditors must be able to prepare, evaluate and read documentation tools such as flowcharts

d) All of the above

9 Which of the following is not a true statement?

a) Documentation tools save an organization both time and money

b) Documentation tools are used extensively in the systems development process

c) Data flow diagrams and flowcharts are the two most frequently used systems development documentation tools

d) Data flow diagrams and flowcharts are difficult to prepare and revise using software packages

10 A data flow diagram

a) is a graphical description of the source and destination of data that shows how data flow within an organization

b) is a graphical description of the flow of documents and information between departments or areas

11 In a DFD, a square box represents

a) data sources and destinations

a) data sources and destinations

b) the direction of data flows

c) transformation processes

d) data stores

14 In a DFD, a circle represents

a) data sources and destinations

b) the direction of data flows

c) transformation processes

d) data stores

15 In preparing a DFD, when data are transformed through a process, the symbol used should be

a) a circle

b) an arrow

c) a square

d) two horizontal lines

16 In a DFD, lines that are horizontal and parallel to each other represent

a) data sources and destinations

18 An entity that sends or receives data used or produced by the system is called a

a) data source or destination

22 In general, a data destination will be shown by

a) an arrow pointing away

b) an arrow pointing in

c) arrows pointing both ways

d) no arrows, only two horizontal lines

23 In the data flow diagram of the customer payment process, "update receivables" will appear in

a) a square

b) a circle

c) two horizontal lines

d) none of the above

24 In the data flow diagram of the customer payment process, "Customer" will appear in

a) a square

b) a circle

c) two horizontal lines

d) none of the above

25 In the data flow diagram of the customer payment process, "Customer payment" will appear above or in

a) a square

b) a circle

c) two horizontal lines

d) an arrow

26 Most processes on a DFD can be identified by

a) data in-flows only

b) data out-flows only

c) data flows both into or out of a process

d) always being followed by a data store

27 Data flows between two symbols on a DFD have more than one data item More than one arrow is needed if

a) data elements always flow together

b) data elements flow at different times

c) data elements flow to different locations

d) there is no guideline on use of single or multiple arrows

28 The transformation of data in a DFD is represented as a

a) process

b) data dictionary

c) data stores

d) data source and destination

29 The storage of data on a DFD is shown by

30 Creating a DFD is an iterative process Each DFD iteration helps the designer to refine the diagram and identify the fine points A DFD created at a high-level or summary view is referred to as a

a) data process diagram

b) data dictionary diagram

c) content diagram

d) context diagram

31 In creating DFDs, a context diagram

a) Includes major transformation processes

b) Depicts systems boundaries

c) Is not necessary

d) Is very detailed

32 In a payroll processing DFD, the "prepare reports" activity will be represented by , the "employee payroll file" will be represented by , and the

"bank" will be represented by

a) a circle; two horizontal lines; a square

b) a circle; two horizontal lines; two horizontal lines

c) a rectangle; a square; a circle

d) a square; two horizontal lines; a circle

33 How should control processes and control actions be represented in a data flow diagram?

a) using a square to represent a data source and destination

b) using a circle to represent a transformation process

c) using two horizontal lines to represent a data store

d) control processes and actions should be ignored in a DFD

34 The term used to refine a high-level or summary view data flow diagram into

successively lower levels to provide greater amounts of detail is

a) input/output

b) processing

c) storage

d) flow and maintenance

37 What should be the first thing the creator of a flowchart does before beginning a flowchart?

a) understand the system to be flowcharted

b) identify the entries to be flowcharted

c) design the flowchart so that it proceeds from left to right and top to bottom

d) use standard flowcharting symbols

38 When designing either a DFD or a flowchart, a good rule to follow is

a) to proceed from left to right

b) to proceed from top to bottom

c) to proceed from left to right and top to bottom

d) to identify exception procedures by using a rectangle

39 Which is a true statement regarding the use of the manual processing symbol in a flowchart?

a) If a document is moved from one column to another, show the document only in the last column b) Each manual processing symbol should have an input and an output

c) Do not connect two documents when moving from one column to another

d) Each manual processing symbol should have an off-page connector

40 Which is a true statement regarding the document flowchart?

a) It illustrates the sequence of logical operations performed by a computer

b) It is particularly useful in analyzing the adequacy of internal control procedures

c) It should ignore control processes and actions

d) It is not normally used in the systems design process

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

41 Which symbol would be used in a flowchart to represent a computer process?

a) #1

b) #2

c) #5

46 Which symbol would be used in a flowchart to represent a connection to another part

of the flowchart on the same page?

a) #4

b) #13

c) #14

d) #15

47 Which symbol would be used in a flowchart to represent a connection to another part

of the flowchart on a different page?