UNIVERSITY OF THE EAST Caloocan College of Business Administration Department of Accountancy, Law and Taxation Accounting Information Systems

s Part 1 (AC 417N) Preliminary Examinations

Name: ________________________________________Yr & Section___________

Prof. J. B. JORDAS, CPA

Instructions: In the following questions, choose the best answer and encircle the choice it corresponds. IMULTIPLE CHOICES

1. Which of the following procedures is most effective in providing reasonable assurance that payroll checks
are distributed only to bonafide employees? a. An employee independent of payroll preparation compares endorsement on canceled payroll checks with employee signatures in personnel records b. All changes in pay rates and deductions are reviewed and approved by a responsible official independent of payroll preparation and distribution c. All unclaimed paychecks are returned to an employee independent of payroll preparation and distribution

d. All personnel and payroll records and documents are pre-numbered and physically protected from unauthorized access

2. Which of the following statements is most likely to be true?

Document flowcharts are used to represent systems at different levels of detail. Data flow diagrams represent the physical system. Document flowcharts are often used to depict processes that are handled in batches. The general journal is used to record recurring transactions that are similar in nature. a. III and IV c. III only e. None of the above b. IV only d. I and II 3. Which of the following procedures best prevents direct labor from being charged to manufacturing overhead? a. Comparison of daily journal entries with factory labor summary b. Examination of routing tickets from finished goods on delivery c. Reconciliation of work in process inventory with cost records d. Recomputation of direct labor based on inspection of time cards 4. Which of the following statements is most likely to be false?

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A control account is a general ledger account which is supported by a subsidiary ledger. The most significant characteristic of direct access files is access speed. Backups are automatically produced in a direct access file environment. Auditors may prepare program flowcharts to verify the correctness of program logic.

a. I and II c. IV only e. All of the above b. III only d. III and IV 5. Evidence of the arrival of fixed asset additions might be found in a. Receiving reports c. the cash disbursement journal b. Board of directors minutes d. purchase orders 6. Which of the following is the best reason to separate duties in a manual system? a. to avoid collusion between the programmer and the computer operator b. to ensure that supervision is not required c. to prevent the record keeper from authorizing transactions d. to enable the firm to function more efficiently 7. Segregation of duties in the computer-based information system includes a. separating the programmer from the computer operator b. preventing management override c. separating the inventory process from the billing process d. performing independent verifications by the computer operator 8. Which of the following is not an internal control procedure? a. Authorization b. managements operating style c. independent verification d. accounting records 9. When duties cannot be segregated, the most important internal control procedure is a. Supervision b. independent verification c. access controls d. accounting records 10. An accounting system that maintains an adequate audit trail is implementing which internal control procedure? a. access controls b. segregation of functions c. independent verification d. accounting records 11. Employee fraud involves three steps. Of the following, which is not involved? a. concealing the crime to avoid detection b. stealing something of value c. misstating financial statements d. converting the asset to a usable form 12. Which of the following is not an example of independent verification? a. comparing fixed assets on hand to the accounting records b. performing a bank reconciliation c. comparing the accounts payable subsidiary ledger to the control account d. permitting authorized users only to access the accounting system 13. The board of directors consists entirely of personal friends of the chief executive officer. This indicates a weakness in a. the accounting system b. the control environment c. control procedures d. this is not a weakness 14. Computer fraud can take on many forms, including each of the following except a. theft or illegal use of computer-readable information b. theft, misuse, or misappropriation of computer equipment c. theft, misuse, or misappropriation of assets by altering computer-readable records and files d. theft, misuse, or misappropriation of printer supplies 15. When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity? a. segregation of duties b. accounting records c. accounting system

d. access controls

16. The office manager forgot to record in the accounting records the daily bank deposit. Which control
procedure would most likely prevent or detect this error? a. segregation of duties b. independent verification c. accounting records d. Supervision 17. The characteristics of useful information include a. summarization, relevance, timeliness, accuracy, and completeness b. relevance, summarization, accuracy, timelessness, and completeness c. timeliness, relevance, summarization, accuracy, and conciseness d. disaggregation, relevance, timeliness, accuracy, and completeness 18. Management can expect various benefits to follow from implementing a system of strong internal control. Which of the following benefits is least likely to occur? a. reduced cost of an external audit. b. prevents employee collusion to commit fraud. c. availability of reliable data for decision-making purposes. d. some assurance of compliance with the Foreign Corrupt Practices Act. e. some assurance that important documents and records are protected. 19. Which of the following situations is not a segregation of duties violation? a. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine. b. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, selects the vendor and authorizes purchases when inventories are low. c. The sales manager has the responsibility to approve credit and the authority to write off accounts. d. The department time clerk is given the undistributed payroll checks to mail to absent employees. e. The accounting clerk who shares the record keeping responsibility for the accounts receivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger and the control account. 20. Which of the following control procedures is preventive in its nature? a. authorizing a credit sale ?A b. c. d. e. preparing a bank reconciliation independent verification preparing a trial balance counting inventory

For items number 21 to 27, choose on the following internal control procedures listed below to complete the statements: segregation of duties general authorization access controls Supervision specific authorization accounting records independent verification

21. A clerk reorders 250 items when the inventory falls below 25 items. This is an example of __________________________ general authorization 22. The internal audit department recalculates payroll for several employees each pay period. This is an example of __________________________ independent verification 23. Locking petty cash in a safe is an example of __________________________. access controls 24. Approving a price reduction because goods are damaged is an example of __________________________. specific authorization 25. Using cameras to monitor the activities of cashiers is an example of ______________________ supervision

26. Not permitting the computer programmer to enter the computer room is an example of _______________________________. segregation of duties 27. Sequentially numbering all sales invoices is an example of __________________________. accounting records For items number 28 to 33, categorize each of the following activities into the expenditure, conversion or revenue cycles and identify the applicable subsystem. 28. Preparing the weekly payroll for manufacturing personnel. 29. Releasing raw materials for use in the manufacturing cycle. 30. Recording the receipt of payment for goods sold. 31. Recording the order placed by a customer. 32. Ordering raw materials. 33. Determining the amount of raw materials to order. ANS: 28. Expenditure cycle-payroll subsystem. 29. Conversion cycle-production system subsystem. 30. Expenditure cycle-accounts payable subsystem. 31. Revenue cycle-sales order processing subsystem. 32. Expenditure cycle-purchases subsystem. 33. Conversion cycle-production subsystem. 34. To improve accountability for fixed asset retirements, management most likely would implement internal control that include a. continuous analysis of the repairs and maintenance account. b. periodic inquiry of plant executives by external auditors as to whether any plant assets have been retired. c. sequentially numbered fixed asset retirement forms d. periodic inspection of insurance policies by internal auditors 35. Accounting independence as contemplated simply states that IAccounting activities must be separate and independent of the functional areas that maintain custody of physical resources Accounting should not actively participate in the physical activities functions Accounting function only acts as information supports unit and not a party to function activity a. True, false, false b. True, true, true c. True, true, false d. False, true, true

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36. Controls in the design of information system within an organization has to be in place prior, during and after its development phase because a. It actually provides a reasonable assurance that a certain transaction has met the accounting minimum in its recognition and therefore it is what has really transpired that is entered into the system b. It precludes the management in making invalid or fictitious transactions, and what is really processed by the information system is the accurate set of events that occurred c. It rationalizes the recording of transactions into a manner consistent with applicable standards

d. It gives the management no free hand in the manipulation of the accounting records because controls are deterrent to fraudulent activities, and it ensures that no such activity is being concocted by anybody.

37. Accountants, particularly CPAs are not involved in the design, installation and maintenance of the information systems because of the following except a. They constitute smallest users of information technology in most organizations b. They are responsible for a design system that requires a historic perspective that predates the computer as the business information tool c. They are in some instances asked to find all the errors and misstatements in the financial reporting

d. They filter and sort the application errors through the use of applicable standards in the analysis, design, programming and testing of prototypes for use in the organization 38. Essentially, the REA as an accounting framework for modeling an organizations critical resources, events and agents is built on the premise that IIIIt captures the transactions in a series to emphasize events rather than accounts It involves summarizing the events to accommodate the account structure

III- It identifies, captures and stores both accounting and non accounting data in a relational database a. True, true, true b. False, true, true c. True, true, false d. False, false, true

39. Which of the following functions occurs in relation to revenue / receipt transactions? a. Resources are acquired from vendors and employees in exchange for obligations to pay b. Resources are sold to customers in exchange for promises for future payments c. Resources are acquired from employees in contemplation of benefit payments

d. Capital funds are received from investors and creditors 40. Tracing copies of sales invoice to shipping documents provides evidence that all a. Shipments to customers were recorded as receivables b. Billed sales were shipped c. Debits to subsidiary accounts receivable ledger are for sales shipped

d. Shipment to customers were billed 41. Which of the following would be considered an incompatible operation if the cashier receives remittances from the mailroom? a. The cashier posts the receipts to the accounts receivable subsidiary ledger b. The cashier makes the daily deposit at a local bank c. The cashier prepares the daily deposit

d. The cashier endorses the checks

42. The sales invoice

a. Is submitted to the client by the customer, advising the client of the goods ordered b. Is returned to the client with the customers payment c. Notifies the customer of the amount and terms of payment

d. Is a contract between the client and the trucking company, which carries the goods to the customer 43. Which of the following best prevents lapping? a. Have the customers send payments directly to a lock box at the companys bank b. Request that customer checks be made payable to the company and be addressed to the treasurer c. Segregate duties so that no employee has no access to both checks from customers and to currency from daily cash deposits

d. Segregate duties so that accounting personnel have no access to incoming mail containing remittances 44. The company erroneously recorded large purchases twice. Which of the following control procedures would be most likely to detect this error? a. Footing the purchases journal b. Reconciling vendors monthly statements with subsidiary payable ledger accounts c. Tracing totals from the purchases journal to the ledger accounts

d. Sending written quarterly confirmations to all vendors 45. Which of the following is the company least likely to outsource? a. Payroll b. Information technology c. forms management d. core business services

46. Matching the suppliers invoice, the purchase order and the receiving report normally should be the responsibility of the a. Receiving department b. Purchasing department c. payables function d. treasury function

47. Which of the following is a necessary control procedure for cash disbursements? a. Checks should be signed by the controller and at least one other employee of the company. b. Checks should be sequentially numbered and the numerical sequence should be accounted for. c. Checks and supporting documents should be marked Paid immediately after the check is returned with the bank statement

d. Checks should be sent directly to the payee by the employee who prepares documents that authorize check preparation 48. Which of the following functions is not appropriate for the accounts payable department? a. Compare purchase requisitions, purchase orders, receiving reports and vendors invoices b. Prepare purchase orders c. Prepare payable vouchers

d. File voucher package by due date 49. When goods are received, the receiving clerk should match the goods with the a. Purchase order and vendors invoice b. Vendors invoice and the receiving report c. Vendors shipping document and the purchase order

d. Receiving report and the vendors shipping document 50. To minimize the opportunities for fraud, unclaimed payroll checks should be a. Held by the controller b. Mailed to family members c. deposited in a safe deposit box d. investigated by the internal auditors

That in all things, GOD maybe glorified