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Chapter 1—The Information System: An Accountant’s Perspective

MULTIPLE CHOICE

1. Which of the following is not a business resource?
a. raw material
b. labor
c. information
d. all are business resources
ANS: D

2. Which level of management is responsible for short-term planning and coordination of activities
necessary to accomplish organizational objectives?
a. operations management
b. middle management
c. top management
d. line management
ANS: B

3. Which level of management is responsible for controlling day-to-day operations?
a. top management
b. middle management
c. operations management
d. executive management
ANS: C

4. The ability to achieve the goals of a system depends upon the effective functioning and harmonious
interaction between its subsystems. This is called
a. system decomposition
b. system redundancy
c. backup system
d. subsystem interdependency
ANS: D

5. The value of information for users is determined by all of the following but
a. reliability
b. relevance
c. convenience
d. completeness
ANS: C

6. An example of a nonfinancial transaction is
a. sale of products
b. cash disbursement
c. log of customer calls
d. purchase of inventory

ANS: C

7. An example of a financial transaction is
a. the purchase of computer
b. a supplier’s price list
c. a delivery schedule
d. an employee benefit brochure
ANS: A

8. Which subsystem is not part of the Accounting Information System?
a. Transaction Processing System
b. Expert System
c. General Ledger/Financial Reporting System
d. Management Reporting System
ANS: B

9. The major difference between the Financial Reporting System (FRS) and the Management Reporting
System (MRS) is the
a. FRS provides information to internal and external users; the MRS provides information to
internal users
b. FRS provides discretionary information; the MRS provides nondiscretionary information
c. FRS reports are prepared using information provided by the General Ledger System; the
MRS provides information to the General Ledger System
d. FRS reports are prepared in flexible, nonstandardized formats; the MRS reports are
prepared in standardized, formal formats
ANS: A

10. The purpose of the Transaction Processing System includes all of the following except
a. converting economic events into financial transactions
b. recording financial transactions in the accounting records
c. distributing essential information to operations personnel to support their daily operations
d. measuring and reporting the status of financial resources and the changes in those
resources
ANS: D

11. The Transaction Processing System includes all of the following cycles except
a. the revenue cycle
b. the administrative cycle
c. the expenditure cycle
d. the conversion cycle
ANS: B

12. The primary input to the Transaction Processing System is
a. a financial transaction
b. an accounting record
c. an accounting report
d. a nonfinancial transaction

ANS: A

13. When designing the data collection activity, which type of data should be avoided?
a. data that is relevant
b. data that is efficient
c. data that is redundant
d. data that is accurate
ANS: C

14. The most basic element of useful data in the database is
a. the record
b. the key
c. the file
d. the attribute
ANS: D

15. In a database, a complete set of attributes for a single occurrence of an entity class is called
a. a key
b. a file
c. a record
d. a character
ANS: C

16. Effective information has all of the following characteristics except
a. relevance
b. completeness
c. summarization
d. structure
ANS: D

17. Database management tasks do not include
a. summarization
b. storage
c. retrieval
d. deletion
ANS: A

18. The author distinguishes between the Accounting Information System and the management Information
System based on
a. whether the transactions are financial or nonfinancial
b. whether discretionary or nondiscretionary reports are prepared
c. the end users of the reports
d. the organizational structure of the business
ANS: A

19. Which activity is not part of the finance function?
a. cash receipts

Market research and advertising are part of which business function? a. computer services are organized into small information processing units under the control of end users ANS: D 25. providing safe storage for off-line data files . and cash receipts and disbursements? a. finance c. portfolio management c. capturing and recording transactions in the database c. managing the financial information resource of the firm b. general ledger ANS: D 20. accounting b. managing the physical information system of the firm ANS: D 23. credit evaluation. such as record keeping and custody of physical resources c. data integrity b. marketing d. banking. business segmentation by function ANS: B 24. production ANS: C 21. the computer service function is a cost center c. In the distributed data processing approach a. distributing transaction information to operations personnel d. credit d. finance c. The term “accounting independence” refers to a. distribution ANS: B 22. Which of the following is not part of the accounting function? a. Which function manages the financial resources of the firm through portfolio management. computer services are consolidated and managed as a shared organization resource b. separation of duties. materials management d. The data control group is responsible for a. materials management b. the end users are billed using a charge-back system d. liaison between the end user and data processing d. generation of accurate and timely information d. performing the day-to-day processing of transactions b. b. security and integrity of the database c.

Data processing does not involve a. Which individuals may be involved in the Systems Development Life Cycle? a. system maintenance d. ANS: C 26. third-party accountants ANS: A 28. data librarian ANS: D 29. support for the day-to-day operations of the firm d. internal auditing b. The objectives of all information systems include all of the following except a. Advantages of a database system include all of the following except . end user d. support for the stewardship function of management b. licensed auditors d. all of the above ANS: D 31. accountants b. external auditors b. Independent auditing is performed by a. An appraisal function housed within the organization that performs a wide range of services for management is a. database administration ANS: A 32. end users d. external auditing d. internal accountants c. data conversion ANS: C 27. data control b. computer operations c. systems analyst b. Which individual is least involved in new systems development? a. evaluating transaction data c. external auditor c. systems professionals c. data control group c. support for management decision making ANS: B 30.

elimination of data redundancy b. a. Useful information must possess all of the following characteristics except a. timelessness c. human resources b. possible mismanagement of organization resources b. confidence that all data is current ANS: B 33. Disadvantages of the distributed data processing approach include all of the following except a. accuracy d. cost accountants b. hardware and software incompatibility c. general ledger c. software incompatibility d. Disadvantages of distributed data processing include all of the following except a. mismanagement of organizationwide resources b. stockholders d. they include all of the above ANS: D 37. All of the following are external end users except a. increased user satisfaction ANS: B 35. improved operational efficiency d. single update for changes in data d. tax authorities ANS: A 38. Advantages of distributed data processing include each of the following except a. system is not responsive to the user’s situation ANS: D 36. redundancy of tasks c. cost reductions d. difficulty in hiring qualified IT professionals ANS: C 34. completeness . creditors c. inventory management d. open access to all data by all users c. cost reductions b. relevance b. better management of organization resources c. ERP packages include all of the following modules except a.

purchases/accounts payable ANS: C 2. remittance advice b. system designers c. sales order c. and make-buy decisions? a. production planning/control d. support for management decision making d. budgeting. payroll check ANS: A 4. support for the stewardship responsibilities of management b. support for the firm’s day-to-day operations ANS: B 40. system converters ANS: D Chapter 2—Introduction to Transaction Processing MULTIPLE CHOICE 1. cost accounting ANS: D 3. cash disbursements d. The order of the entries made in the ledger is by a. Which of the following is a turn-around document? a. transaction number . payroll c. cost control. system users b. ANS: B 39. Which system is not part of the expenditure cycle? a. cash disbursements b. furthering the financial interests of shareholders c. The objectives of an information system include each of the following except a. Accountants play many roles relating to the accounting information system. purchases/accounts payable c. sales order processing b. including all of the following except a. performance reporting. system auditors d. purchase order d. Which system produces information used for inventory valuation.

Which account is least likely to have a subsidiary ledger? a. reference file c. account number c. transaction file d. What file is comparable to a journal in a computerized environment? a. Subsidiary ledgers are used in manual accounting environments. purchases ANS: C 7. master file ANS: C 10. b. What file is comparable to a subsidiary ledger in a computerized environment? a. date d. reference file d. user d. A journal is used in manual accounting environments. master file b. In a computerized environment. archive file . transaction file c. account number c. sales b. fixed assets d. transaction file d. date b. reference file c. customer number ANS: A 6. sales b. inventory ANS: A 8. a list of authorized suppliers would be found in the a. cash disbursements c. depreciation d. archive file b. master file ANS: D 9. The order of the entries made in the general journal is by a. user ANS: B 5. In general a special journal would not be used to record a. archive file b. accounts receivable c.

describe the logic of the process ANS: B . serve as a source document b. represent relationships between key elements of the computer system d. describe in detail the logic of the process ANS: A 16. a sales order b. document flowchart c. provide an audit trail for the external auditor d. a file of accounts receivable that have been written off ANS: D 12. illustrate the relationship between processes. data flow diagram b. a sales return receipt ANS: C 13. depict logical tasks that are being performed. Document flowcharts a. but not who is performing them b. inform a customer of the outstanding amount payable c. Which of the following is an archive file? a. ANS: C 11. a cash receipts file c. an accounts payable subsidiary ledger b. represent relationships between key elements of the computer system d. and the documents that flow between them and trigger activities c. an employee time card c. a sales journal d. and the documents that flow between them and trigger activities c. but not who is performing them b. illustrate the relationship between processes. Which document is not a type of source document? a. inform the bank of electronic funds deposits ANS: A 14. Data flow diagrams a. system flowchart d. a paycheck d. Which type of graphical documentation represents systems at different levels of detail? a. program flowchart ANS: A 15. The most important purpose of a turn-around document is to a. depict logical tasks that are being performed.

input and output . processing takes place when the economic event occurs ANS: A 19. a greater resource commitment per unit of output is required d. immediate feedback of data entry errors ANS: D 23. relatively fewer hardware. programming. sort runs c. credit authorization c. physical and financial c. The type of transaction most suitable for real-time processing is a. manual and computerized b. edit runs d. recording a sale on account ANS: D 22. a lag occurs between the time of the economic event and when the transaction is recorded b. Which step is not found in batch processing using sequential files? a. The type of transaction most suitable for batch processing is a. in a batch processing system a. which consideration is the least important? a. achieving economies by grouping together large numbers of transactions b. Both the revenue and the expenditure cycle can be viewed as having two key parts. balancing the trade off between batch size and error detection ANS: B 18. a lesser resource commitment per unit of output is required d.17. and training resources are required c. recording interest earned on long-term bonds c. relatively more resources are required c. in a real-time system a. there is a lag between the time when the economic event occurs and the financial records are updated b. adjustments to perpetual inventory ANS: C 21. In contrast to a batch processing system. adjusting prepaid insurance d. processing takes place when the economic event occurs ANS: D 20. control totals b. These are a. When determining the batch size. In contrast to a real-time system. payroll processing d. recording fixed asset purchases b. complying with legal mandates c. airline reservations b. providing control over the transaction process d.

c. product document ANS: C 25. batch and real-time ANS: B 24. b. . d. d. master document d. ANS: B 27. Which symbol represents a manual operation? a. c. b. All of the following can provide evidence of an economic event except a. real-time processing c. turn-around document c. batch processing using direct access files b. Which method of processing does not use the destructive update approach? a. source document b. batch processing using sequential files d. all of the above use the destructive update approach ANS: C 26. Which symbol represents a data store? a.

d.

ANS: D

28. Which symbol represents accounting records?
a.

b.

c.

d.

ANS: A

29. Which symbol represents a document?
a.

b.

c.

d.

ANS: B

30. Which symbol represents a magnetic tape (sequential storage device)?
a.

b.

c.

d.

ANS: D

31. Which symbol represents a decision?
a.

b.

c.

d.

ANS: A

32. The characteristics that distinguish between batch and real-time systems include all of the following
except
a. time frame
b. resources used
c. file format
d. efficiency of processing
ANS: C

33. A file that stores data used as a standard when processing transactions is
a. a reference file
b. a master file

c. a transaction file
d. an archive file
ANS: A

34. Sequential storage means
a. data is stored on tape
b. access is achieved through an index
c. access is direct
d. reading record 100 requires first reading records 1 to 99
ANS: D

35. Real-time processing would be most beneficial in handling a firm’s
a. fixed asset records
b. retained earning information
c. merchandise inventory
d. depreciation records
ANS: C

36. Which accounting application is least suited for batch processing?
a. general ledger
b. vendor payments
c. sales order processing
d. payroll
ANS: C

37. Which accounting application is best suited for batch processing?
a. general ledger
b. vendor payments
c. sales order processing
d. payroll
ANS: D

38. Operational inefficiencies occur because
a. accounts both common and unique to many concurrent transactions need to be updated in
real time.
b. accounts common to many concurrent transactions need to be updated in real time.
c. accounts unique to many concurrent transactions need to be updated in real time.
d. None of the above are true statements
ANS: B

39. Operational efficiencies can be improved by
a. updating accounts both common and unique to many concurrent transactions in real time.
b. updating accounts both common and unique to many concurrent transactions in batch
mode.
c. updating accounts unique to many concurrent transactions in real time and updating
common accounts in batch mode.
d. None of the above are true statements

Which ethical principle states that the benefit from a decision must outweigh the risks. minimize risk b. ANS: C Chapter 3—Ethics. false representation c. justice c. poor judgment b. proportionality ANS: D 2. practical computer ethics ANS: A 3. informed consent d. theoretical computer ethics d. Which characteristic is not associated with software as intellectual property? a. For an action to be called fraudulent. all of the following conditions are required except a. and that there is no alternative decision that provides the same or greater benefit with less risk? a. Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved in which level of computer ethics? a. permitting computer operators unlimited access to the computer room c. and Internal Control MULTIPLE CHOICE 1. Fraud. possibility of exact replication c. ease of dissemination ANS: C 5. uniqueness of the product b. is perpetrated at a level to which internal controls do not apply . intent to deceive d. para computer ethics b. One characteristic of employee fraud is that the fraud a. automated monitoring to detect intruders d. pop computer ethics c. releasing incorrect data to authorized individuals b. injury or loss ANS: A 6. providing correct data to unauthorized individuals ANS: B 4. permitting access to data by unauthorized individuals d. All of the following are issues of computer security except a.

fraud occurs because of collusion between two employees c. a gambling addiction b. creating a false transaction ANS: A 9. management instructs the bookkeeper to make fraudulent journal entries . The concept of reasonable assurance suggests that a. applying cash receipts to a different customer’s account in an attempt to conceal previous thefts of funds b. Operations fraud includes a. expensing an asset that has been stolen d. management d. questionable integrity of employees ANS: C 8. b. destroying or corrupting a program’s logic using a computer virus d. centralized decision making environment d. involves the direct conversion of cash or other assets to the employee’s personal benefit d. misusing the firm’s computer resources c. Forces which may permit fraud to occur do not include a. inflating bank balances by transferring money among different bank accounts c. Which of the following best describes lapping? a. the accountant c. Who is responsible for establishing and maintaining the internal control system? a. lack of segregation of duties c. altering program logic to cause the application to process data incorrectly b. the objectives achieved by an internal control system vary depending on the data processing method d. errors are made due to employee fatigue b. involves misappropriating assets in a series of complex transactions involving third parties ANS: C 7. the effectiveness of internal controls is a function of the industry environment ANS: A 12. the cost of an internal control should be less than the benefit it provides b. the internal auditor b. creating illegal programs that can access data files to alter. a well-designed system of internal controls will detect all fraudulent activity c. the external auditor ANS: C 11. or insert values ANS: B 10. the industry is inherently risky d. Which of the following is not a limitation of the internal control system? a. involves misstating financial statements c. delete.

The most cost-effective type of internal control is a. Which of the following is not an element of the internal control environment? . A well-designed purchase order is an example of a a. detective control c. The bank reconciliation uncovered a transposition error in the books. credit check before approving a sale on account b. none of the above ANS: B 18. detective control c. feedforward control ANS: B 17. comparing the accounts receivable subsidiary ledger to the control account ANS: A 15. self interest c. justice b. none of the above ANS: A 16. bank reconciliation c. A physical inventory count is an example of a a. preventive control b. risk minimization d. detective control d. In balancing the risks and benefits that are part of every ethical decision. managers receive guidance from each of the following except a. Which of the following is a preventive control? a. preventive control b. proportionality ANS: B 19. corrective control d. preventive control b. physical inventory count d. accounting control c. preventive control b. corrective control d. detective control c. ANS: C 13. This is an example of a a. corrective control d. corrective control ANS: A 14.

separating the programmer from the computer operator b. the audit committee meets quarterly with the external auditors ANS: C 21. performance evaluations are prepared every three years d. organizational structure of the firm c. to prevent the record keeper from authorizing transactions d. records financial transactions in the appropriate accounting period c. Which of the following is the best reason to separate duties in a manual system? a. separating the inventory process from the billing process d. Which of the following suggests a weakness in the internal control environment? a. Which of the following is not an internal control procedure? a. to avoid collusion between the programmer and the computer operator b. identifies and records all valid financial transactions b. authorization b. management philosophy and operating style b. there is no segregation of duties between organization functions c. According to SAS 78. well-designed documents and records d. monthly reports comparing actual performance to budget are distributed to managers c. the internal audit group reports to the audit committee of the board of directors b. Segregation of duties in the computer-based information system includes a. the firm has an up-to-date organizational chart b. Which of the following indicates a strong internal control environment? a. to ensure that supervision is not required c. there are questions about the integrity of management d. performing independent verifications by the computer operator ANS: A 25. preventing management override c. records all financial transactions promptly ANS: C 23. a. separates the duties of data entry and report generation d. independent verification d. management’s operating style c. to enable the firm to function more efficiently ANS: C 24. accounting records . the functioning of the board of directors and the audit committee ANS: C 20. adverse business conditions exist in the industry ANS: A 22. an effective accounting system performs all of the following except a.

the most important internal control procedure is a. segregation of functions c. When duties cannot be segregated. An accounting system that maintains an adequate audit trail is implementing which internal control procedure? a. supervision ANS: B 27. firms are required to have an effective internal control system d. independent verification b. permitting authorized users only to access the accounting system ANS: D 31. misstating financial statements d. bribery will be eliminated b. access controls d. converting the asset to a usable form ANS: C 30. ANS: B 26. The board of directors consists entirely of personal friends of the chief executive officer. The importance to the accounting profession of the Foreign Corrupt Practices Act of 1977 is that a. comparing fixed assets on hand to the accounting records b. concealing the crime to avoid detection b. accounting records ANS: A 28. accounting records ANS: D 29. independent verification d. Which of the following is not an example of independent verification? a. segregation of functions d. performing a bank reconciliation c. authorization c. This indicates a weakness in . management will not override the company’s internal controls c. Employee fraud involves three steps. comparing the accounts payable subsidiary ledger to the control account d. Of the following. which is not involved? a. firms will not be exposed to lawsuits ANS: C 32. independent verification c. The decision to extend credit beyond the normal credit limit is an example of a. supervision b. access controls b. stealing something of value c.

access controls ANS: A 35. All of the following are conditions for fraud except a. a. or misappropriation of computer equipment c. segregation of duties b. material reliance ANS: D 38. Which control procedure would most likely prevent or detect this error? a. both a and b d. bribery b. accounting records d. accounting system d. Which control procedure would most likely prevent this irregularity? a. The four principal types of fraud include all of the following except a. the control environment c. intent d. how managers decide on what is right in conducting business b. supervision ANS: B 36. independent verification c. theft. The office manager forgot to record in the accounting records the daily bank deposit. accounting records c. theft. misuse. Computer fraud can take on many forms. or misappropriation of assets by altering computer-readable records and files d. When certain customers made cash payments to reduce their accounts receivable. control procedures d. the accounting system b. misuse. injury or loss c. misuse. the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. none of the above ANS: C 37. gratuities . segregation of duties b. theft. false representation b. theft or illegal use of computer-readable information b. Business ethics involves a. this is not a weakness ANS: B 33. or misappropriation of printer supplies ANS: D 34. including each of the following except a. how managers achieve what they decide is right for the business c.

c. Legal Compliance d. accuracy. possibility of honest error b. summarization. b. circumvention c. timeliness. economic extortion ANS: B 39. d. and completeness b. Full and Fair Disclosures c. Internal Reporting of Code Violations e. These include a. Which of the following benefits is least likely to occur? a. availability of reliable data for decision-making purposes. prevents employee collusion to commit fraud. conflict of interest d. management override d. Which of the following is not an issue to be addressed in a business code of ethics required by the SEC? a. accuracy. All of the above are issues to be addressed . relevance. The characteristics of useful information include a. 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. reduced cost of an external audit. The sales manager has the responsibility to approve credit and the authority to write off accounts. some assurance of compliance with the Foreign Corrupt Practices Act of 1977. Internal control system have limitations. and completeness c. relevance. relevance. e. disaggregation. timeliness. e. and conciseness d. and completeness ANS: A 40. accuracy. The warehouse clerk. timelessness. some assurance that important documents and records are protected. ANS: B 43. timeliness. ANS: B 42. who has the custodial responsibility over inventory in the warehouse. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine. Management can expect various benefits to follow from implementing a system of strong internal control. summarization. c. c. relevance. accuracy. b. The department time clerk is given the undistributed payroll checks to mail to absent employees. Conflicts of interest b. stability of systems ANS: D 41. Which of the following situations is not a segregation of duties violation? a. summarization. d. selects the vendor and authorizes purchases when inventories are low.

and cash receipts ANS: B 2. Copies of the sales order can be used for all of the following except a. record reduction of inventory b. inventory records are reduced for the goods shipped ANS: C 3. ANS: E Chapter 4—The Revenue Cycle MULTIPLE CHOICE 1. two subsystems–order entry and inventory control d. the sales invoice d. shipping notice d. shipping department c. The reconciliation that occurs in the shipping department is intended to ensure that a. warehouse b. The revenue cycle consists of a. inventory control department ANS: D 4. the goods shipped match the goods ordered d. credit has been approved b. select items from inventory for shipment . bill the customer d. packing slip ANS: A 6. transfer goods from seller to shipper c. purchase order b. The purpose of the sales invoice is to a. the sales order b. three subsystems–sales order processing. billing department d. credit authorization c. the journal voucher ANS: B 5. the customer purchase order c. The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in the a. two subsystems–sales order processing and cash receipts c. credit authorization. Which document triggers the revenue cycle? a. one subsystem–order entry b. the customer is billed for the exact quantity shipped c.

sending the invoice to the customer ANS: A 11. record any out-of-stock items c. sales on account which exceed the credit limit b. updating the inventory subsidiary records b. fill the customer order c. The customer open order file is used to a. opening the mail and making the journal entry to record cash receipts . sales of goods at the list price c. a cash refund for goods returned without a receipt d. locate and pick the items from the warehouse shelves b. record the reduction of inventory ANS: D 9. The stock release copy of the sales order is not used to a. the backordered goods are shipped c. write off of an uncollectible account receivable ANS: B 13. recording the sale in the sales journal c. customers are not billed for backorders because a backorder is a lost sale ANS: B 12. is always prepared by the shipping clerk d. the customer purchase order is received b. authorize customer credit ANS: A 8. The shipping notice a. the original goods are shipped d. Which of following functions should be segregated? a. authorize the warehouse clerk to release custody of the inventory to shipping d. informs the billing department of the quantities shipped ANS: D 10. is a formal contract between the seller and the shipping company c. Customers should be billed for backorders when a. Usually specific authorization is required for all of the following except a. respond to customer queries b. ship the customer order d. is mailed to the customer b. notifying accounts receivable of the sale d. The billing department is not responsible for a. ANS: C 7.

credit b. maintaining the subsidiary ledgers and handling customer queries d. Which situation indicates a weak internal control structure? a. reconcile total sales on account to the debits in the accounts receivable subsidiary ledger ANS: C 17. limit access to credit memoranda c. require management approval for all credit memoranda ANS: D 16. Which procedure will not detect this fraud? a. the warehouse clerk obtains a signature before releasing goods for shipment d. supervise the accounts receivable department b. all sales are profitable b. reconcile the accounts receivable control to the accounts receivable subsidiary ledger c. prenumber and sequence check all credit memoranda d. Which document is included with a shipment sent to a customer? a. The accounts receivable clerk destroys all invoices for sales made to members of her family and does not record the sale in the accounts receivable subsidiary ledger. providing information on inventory levels and reconciling the bank statement ANS: A 14. stock release form c. all sales are recorded c. sales invoice b. b. billing d. accounts payable c. the mailroom clerk authorizes credit memos b. prenumber and sequence check all invoices b. The most effective internal control procedure to prevent or detect the creation of fictitious credit memoranda for sales returns is to a. packing slip d. shipping notice ANS: C 19. Good internal controls in the revenue cycle should ensure all of the following except a. prepare monthly customer statements d. shipping ANS: B 18. authorizing credit and determining reorder quantities c. the record keeping clerk maintains both accounts receivable and accounts payable subsidiary ledgers c. credit is authorized . the accounts receivable clerk prepares customer statements every month ANS: A 15. Which department is least likely to be involved in the revenue cycle? a.

is retained by the customer to show proof of payment d. authorizing the credit memo by management d. d. authorize credit c. A remittance advice is a. shipping d. journal vouchers from accounts receivable and general ledger ANS: A . visual verification that all sales invoices were prepared d. none of the above will detect this error ANS: A 23. The printer ran out of preprinted sales invoice forms and several sales invoices were not printed. the cash prelist with remittance advices c. the cash prelist with bank deposit slips b. A weekly reconciliation of cash receipts would include comparing a. Internal controls for handling sales returns and allowances do not include a. The best internal control to detect this error is a. none of the above ANS: B 25. using the original sales invoice to prepare the sales returns slip ANS: A 22. segregate custody of inventory from record keeping d. warehouse c. sales b. inventory to be shipped is not stolen ANS: A 20. verifying that the goods have been returned c. segregate record keeping duties of general ledger from accounts receivable ANS: B 21. is a turn-around document c. a batch total of sales invoices to be prepared compared to the actual number of sales invoices prepared b. credit ANS: C 24. Which department prepares the bill of lading? a. sequentially numbered sales invoices c. Which control does not help to ensure that accurate records are kept of customer accounts and inventory? a. computing bad debt expense using the percentage of credit sales b. bank deposit slips with remittance advices d. reconcile accounts receivable control to accounts receivable subsidiary b. used to increase (debit) an account receivable by the cash received b.

separate entries are made in the general ledger accounts and the subsidiary ledgers ANS: B 31. Which of the following is not a risk exposure in a microcomputer accounting system? a. A cash prelist is a. real-time file processing d. person to authorize transactions ANS: D 28. accounts receivable b. none of the above ANS: D 29. current inventory information is available c. reliance on paper documentation is increased b. transfer of information among modules occurs automatically c. a document returned by customers with their payments c. data entry errors are corrected at the end of each batch ANS: B 30. segregation of duties is not possible b. batch processing is not an option d. direct access file processing c. An advantage of real-time processing of sales is a. functions that are segregated in a manual environment may be combined in a microcomputer accounting system . a document that records sales returns and allowances b.26. The word “integrated” means that a. quantities to be sold c. general ledger c. mail room d. At which point is supervision most critical in the cash receipts system? a. payment terms d. batch. Commercial accounting systems have fully integrated modules. sequential file processing b. The data processing method that can shorten the cash cycle is a. cash receipts ANS: C 27. the source of information used to prepare monthly statements d. batch. the cash cycle is lengthened b. selling price b. EDI trading partner agreements specify all of the following except a. hard copy documents provide a permanent record of the transaction d. none of the above ANS: C 32.

Up-to-date information can provide a competitive advantage in the marketplace ANS: C . Periodically. total of all sales d. none of the above ANS: C 36. total of all sales backorders c. sales history file c. credit memo file b. authorizes the granting of credit to customers d. Paper work is reduced c. the remittance advice that accompanies payment d. backup procedures require human intervention d. c. the cash prelist c. the general ledger department receives all of the following except a. the customer’s check b. All of the following are advantages of real-time processing of sales except a. total decreases in inventory ANS: B 35. The cash cycle is shortened b. approves credits to accounts receivable when payments are received c. Adjustments to accounts receivable for payments received from customers is based upon a. shipping report file d. sales journal c. cash receipts journal b. general journal ANS: C 34. Which journal is not used in the revenue cycle? a. purchases journal d. a memo prepared in the mailroom ANS: C 37. data are easily accessible ANS: A 33. total increases to accounts receivable b. Incorrect data entry is difficult to detect d. The credit department a. prepares credit memos when goods are returned b. The revenue cycle utilizes all of the following files except a. cost data reference file ANS: D 38.

Chapter 5—The Expenditure Cycle Part I: Purchases and Cash Disbursements
Procedures

MULTIPLE CHOICE

1. The purpose of the purchase requisition is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. bill for goods delivered
ANS: C

2. The purpose of the receiving report is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. bill for goods delivered
ANS: B

3. All of the following departments have a copy of the purchase order except
a. the purchasing department
b. the receiving department
c. accounts payable
d. general ledger
ANS: D

4. The purpose of the purchase order is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. approve payment for goods received
ANS: A

5. The open purchase order file in the purchasing department is used to determine
a. the quality of items a vendor ships
b. the best vendor for a specific item
c. the orders that have not been received
d. the quantity of items received
ANS: C

6. The purchase order
a. is the source document to make an entry into the accounting records
b. indicates item description, quantity, and price
c. is prepared by the inventory control department
d. is approved by the end-user department

ANS: B

7. The reason that a blind copy of the purchase order is sent to receiving is to
a. inform receiving when a shipment is due
b. force a count of the items delivered
c. inform receiving of the type, quantity, and price of items to be delivered
d. require that the goods delivered are inspected
ANS: B

8. The receiving report is used to
a. accompany physical inventories to the storeroom or warehouse
b. advise the purchasing department of the dollar value of the goods delivered
c. advise general ledger of the accounting entry to be made
d. advise the vendor that the goods arrived safely
ANS: A

9. When a copy of the receiving report arrives in the purchasing department, it is used to
a. adjust perpetual inventory records
b. record the physical transfer of inventory from receiving to the warehouse
c. analyze the receiving department’s process
d. recognize the purchase order as closed
ANS: D

10. The financial value of a purchase is determined by reviewing the
a. packing slip
b. purchase requisition
c. receiving report
d. supplier’s invoice
ANS: D

11. Which document is least important in determining the financial value of a purchase?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
ANS: A

12. In a merchandising firm, authorization for the payment of inventory is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements
ANS: C

13. In a merchandising firm, authorization for the purchase of inventory is the responsibility of
a. inventory control
b. purchasing

c. accounts payable
d. cash disbursements
ANS: A

14. When purchasing inventory, which document usually triggers the recording of a liability?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
ANS: D

15. Because of time delays between receiving inventory and making the journal entry
a. liabilities are usually understated
b. liabilities are usually overstated
c. liabilities are usually correctly stated
d. none of the above
ANS: A

16. Usually the open voucher payable file is organized by
a. vendor
b. payment due date
c. purchase order number
d. transaction date
ANS: B

17. Which of the following statements is not correct?
a. the voucher system is used to improve control over cash disbursements
b. the sum of the paid vouchers represents the voucher payable liability of the firm
c. the voucher system permits the firm to consolidate payments of several invoices on one
voucher
d. many firms replace accounts payable with a voucher payable system
ANS: B

18. In the expenditure cycle, general ledger does not
a. post the journal voucher from the accounts payable department
b. post the account summary from inventory control
c. post the journal voucher from the purchasing department
d. reconcile the inventory control account with the inventory subsidiary summary
ANS: C

19. The documents in a voucher packet include all of the following except
a. a check
b. a purchase order
c. a receiving report
d. a supplier’s invoice
ANS: A

on the discount date d. the income statement is changed c. by the end of the month ANS: C 21. accounts payable d. adequate supervision is most critical in a. signs checks d. as soon as possible b. inventory control b. purchasing b. inspect shipments received b. purchasing c. reviews the supporting documents for completeness and accuracy b. cash disbursements ANS: C 24. purchasing and accounts receivable ANS: B 25. Authorization for payment of an accounts payable liability is the responsibility of a. the cash account is unchanged d. marks the supporting documents paid ANS: C 22. To maintain a good credit rating and to optimize cash management. When a cash disbursement in payment of an accounts payable is recorded a. accounts payable d. In a firm with proper segregation of duties. warehouse from stores b. The receiving department is not responsible to a. warehouse from inventory control c. it is most important to separate a. on the due date c. cash disbursements should arrive at the vendor’s place of business a. the liability account is increased b. prepares checks c. Of the following duties. The cash disbursement clerk performs all of the following tasks except a. the liability account is decreased ANS: D 23.20. receiving c. count items received from vendors . general ledger ANS: B 26. accounts payable and accounts receivable d.

purchases from fictitious vendors will be detected c. all checks manually signed by the treasurer b. In regards to the accounts payable department. inventories are not secured on the receiving dock d. the risk of purchasing agents receiving kickbacks and bribes will be reduced ANS: C 32. there is no inspection for goods damaged in shipment c. the purchase requisition shows that the transaction was authorized b. the supplier’s invoice indicates the financial value of the transaction ANS: B 30. the receiving report file ANS: B 29. who determines when to reorder inventory? a. the purchasing department c. the purchase order proves that the purchase was required c. the cash receipts file c. the vendor d. the computer system ANS: D 31. checks over a certain dollar amount manually signed by the treasurer . When searching for unrecorded liabilities at the end of an accounting period. the purchase order file d. safeguard goods until they are transferred to the warehouse ANS: C 27. the best and most practical control over cash disbursements is to have a. the accountant would search all of the files except a. all checks signed by check-signing equipment c. the purchase requisition file b. the audit trail is destroyed ANS: D 28. the most competitive price will be obtained d. The major risk exposures associated with the receiving department include all of the following except a. Firms can expect that proper use of a valid vendor file will result in all of the following benefits except a. c. which statement is not true? a. order goods from vendors d. In a computerized system that uses an economic order quantity (EOQ) model and the perpetual inventory method. purchasing agents will be discouraged from improperly ordering inventory from related parties b. goods are accepted without a physical count b. the inventory control clerk b. In a real-time processing system with a high number of transactions. the receiving report provides evidence of the physical receipt of the goods d.

checks over a certain dollar amount manually signed by the cash disbursements clerk ANS: C 33. vendor invoice b. vendor invoice b. The document which will close the open purchase requisition file is the a. determine the quantity of goods received c. purchase order b. inventory records can be updated from the a. Goods received are inspected and counted to a. receiving report d. none of the above ANS: C 34. purchase order c. Copies of a purchase order are sent to all of the following except a. The receiving report a. general ledger d. receiving c. is used to update the actual cost inventory ledger b. vendor invoice c. is returned to the vendor to acknowledge receipt of the goods ANS: B 39. preclude payment for goods not received or received in poor condition d. inventory records can first be updated from the a. inventory control b. purchase requisition ANS: C 36. determine that the goods are in good condition b. is sent to general ledger d. accounts payable ANS: C 38. accompanies the goods to the storeroom c. all of the above ANS: D 35. d. A supplier invoice . purchase requisition ANS: A 37. receiving report d. If a company uses a standard cost system. receiving report d. purchase order c. If a company uses an actual cost system.

personnel compares the number of employees authorized to receive a paycheck to the number of paychecks prepared c. c. Paychecks are distributed by an independent paymaster. The document that captures the total amount of time that individual workers spend on each production job is called a a. General ledger reconciles the labor distribution summary and the payroll disbursement voucher. part of the general ledger department ANS: C Chapter 6—The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures MULTIPLE CHOICE 1. a. part of accounts payable b. payroll compares the labor distribution summary to the hours reported on time cards ANS: A 3. Supervisors verify the accuracy of employee time cards. An important reconciliation in the payroll system is a. The cash disbursement function is a. shows what was ordered even if all was not shipped c. is included with the goods b. an independent accounting function c. Which internal control is not an important part of the payroll system? a. production compares the number of hours reported on job tickets to the number of hours reported on time cards d. is sent by vendor to accounts payable d. labor distribution form ANS: B 2. b. a treasury function d. none of the above ANS: C 40. d. job ticket c. time card b. general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable b. ANS: C . personnel action form d. Accounts payable verifies the accuracy of the payroll register before transferring payroll funds to the general checking accounting.

development of an economic order quantity model d. purchase of raw materials d. personnel b. Acquisitions are routine transactions requiring general authorization. sale of company van ANS: C 5. authorizing the acquisition of fixed assets b. c. allocates the cost of the asset over its useful life c. maintaining a record of the fair market value of all fixed assets ANS: D 9. Transfer of fixed assets among departments is recorded in the fixed asset subsidiary ledger. results in book value approximating fair market value ANS: B 6. review of the assumptions used in the capital budgeting model c. recording depreciation expense c. is recorded weekly d. Which of the following is not a characteristic of the Fixed Asset System? a. the economic benefit of purchasing the asset b. improvement of equipment c. the cost of the asset c. 4. the location of the asset ANS: A 7. Which control is not a part of the Fixed Asset System? a. timekeeping c. is calculated by the department that uses the fixed asset b. Which transaction is not processed in the Fixed Asset System? a. b. paymaster . which function should distribute paychecks? a. Depreciation a. d. Acquisition cost is allocated over the expected life of the asset. formal analysis of the purchase request b. purchase of building b. estimates of anticipated cost savings ANS: C 8. ANS: A 10. Depreciation records include all of the following information about fixed assets except a. Retirements are reported on an authorized disposal report form. Objectives of the Fixed Asset System do not include a. In the payroll subsystem. the depreciation method being used d. computing gain and/or loss on disposal of fixed assets d.

Cash disbursements signs paychecks and forwards them to the paymaster for distribution. Which of the following situations represents a serious control weakness? a. Routine payroll processing begins with the submission of time cards. ANS: B 16. employees use time cards and job tickets. Where does the responsibility lie for reconciling the labor distribution summary and the payroll disbursement voucher? a. personnel d. treasurer c. In a manufacturing firm. to prevent an absent employee’s check from being lost c. personnel d. The time reported on job tickets should reconcile with the time reported on time cards. ANS: B 13. b. b. Which department is responsible for approving changes in pay rates for employees? a. d. Payroll reconciles personnel action forms with time cards and prepares paychecks. Timekeeping is independent of the payroll department. cash disbursements ANS: C 15. payroll ANS: C 11. Payroll clerks must verify the hours reported on the time cards. to avoid paying absent employees for payday . general ledger ANS: D 12. c. cash disbursements b. to detect a “phantom employee” for whom a check was produced b. d. cost accounting c. Paychecks should be prepared from the job tickets. c. d. payroll b. Time cards are reconciled with job tickets. b. ANS: D 14. d. Which of the following statements is not true? a. An individual employee will have only one time card. so an employee may have more that one job ticket on a given day. including creation of records for new hires. Job tickets are prepared by employees for each job worked on. Why would an organization require the paymaster to deliver all unclaimed paychecks to the internal audit department? a. c. Paychecks are distributed by the employees immediate supervisor. Which of the following statements is not correct? a. Personnel is responsible for updating employee records.

petty cash ANS: B 21. update employee payroll records c. d. a wages payable account d. prepare paychecks ANS: C 20. a payroll imprest account c. time cards b. The personnel action form provides authorization control by a. Proper authorization is required for acquisition and disposal of fixed assets. job tickets d. preventing paychecks for terminated employees b. Depreciation policies are in writing. Payroll checks are typically drawn on a. to prevent the paymaster from cashing unclaimed checks ANS: A 17. Fixed asset records show the location of each asset. Which of the following is not a reasonable control for fixed assets? a. d. informing payroll of new hires d. accounts payable register ANS: D 23. personnel action forms ANS: C 19. job tickets c. Accounting records that provide the audit trail for payroll include all of the following except a. prepare the labor distribution summary d. prepare the payroll register b. Payroll uses time card data to do all of the following except a. all of the above ANS: D 22. ANS: C 18. Personnel actions forms are used to do all of the following except . the regular checking account b. b. c. payroll register d. time cards b. the labor distribution summary c. verifying pay rates for employees c. Cost accounting updates work-in-process accounts from a. Fully depreciated assets are immediately disposed of.

records retirement and disposal of assets d. reconciles time cards and employee records d. repair of production equipment d. prepares paychecks ANS: B 25. updates employee payroll records d. a. time card b. prepares the payroll register b. The payroll department performs all of the following except a. a security camera viewing the time clock b. change pay rates ANS: C 24. The document that records the total amount of time spent on a production job is the a. All of the following are processed by the Fixed Asset System except a. terminate employees c. purchase of a new plant ANS: B 29. distributes paychecks to employees ANS: B 28. paychecks being distributed by an independent paymaster d. sale of unneeded equipment b. Accounts payable a. the supervisor taking role during the shift c. determines the need for new assets b. reconciliation of time cards and job tickets ANS: C 27. A control technique that can reduce the risk of a terminated employee being paid is a. prepares the payroll voucher c. job ticket c. maintains depreciation records c. tracks the physical location of fixed assets . activate new employees b. labor distribution summary d. personnel action form ANS: C 26. The Fixed Asset System performs all of the following except a. purchase of raw materials c. signs paychecks b. distributes paychecks c. record hours worked d.

fixed assets are capitalized. updates employee payroll records d. fixed asset transactions are non-routine and require special authorization and controls b. estimates the fair market value of assets in service d. none of the above ANS: C 33. prepares the payroll register ANS: B 31. is discretionary for many firms c. not expensed c. transfers adequate funds to the payroll imprest account c. occurs as soon as an asset is fully depreciated b. Asset maintenance involves a. records acquisition of assets b. is the responsibility of the department using the asset ANS: C 32. the recording of periodic depreciation b. all of the above ANS: D 34. both a and b d. Depreciation a. keeping track of the physical location of the assets d. must follow formal authorization procedures ANS: D . assures that assets are reported at fair market value b. records improvements to assets c. The Fixed Asset Systems does all of the following except a. Asset disposal a. prepares paychecks b. adjusting the asset records to reflect the cost of physical improvements c. requires no special authorization c. automatically initiates the purchase of a replacement asset d. ANS: A 30. records the disposal of assets ANS: C 35. allocates the cost of an asset over its useful life d. The Fixed Asset System is similar to the expenditure cycle except a. The payroll department performs all of the following except a.

jet aircraft d. produce information for inventory valuation b.Chapter 7—The Conversion Cycle MULTIPLE CHOICE 1. determine material requirements ANS: A 4. authorize release of raw materials c. authorizing work to be performed d. The purpose of the cost accounting system is to a. monitoring the flow of cost information related to production ANS: D 3. batch process b. none of the above ANS: C 5. All of the following are characteristics of batch processing except a. the goal of a world-class company is to delight its customers b. setting up and retooling is required for different batches ANS: B . a world-class company has a flat organizational structure ANS: B 2. batches are produced to replenish depleted inventory levels d. world-class companies work in cross-functional teams d. determining raw material requirements c. make-to-order process c. all of the above ANS: B 6. directing the movement of work through the process b. each item in the batch is similar b. continuous process d. An example of a continuous process is the production of a. Which subsystem is not a part of the production system? a. customers in a world-class company are external departments only c. batches are produced in accordance with detailed customer specifications c. direct the movement of work-in-process d. Which process creates a homogeneous product through a continuous series of standard procedures? a. milk products c. wedding invitations b. Which item does not describe a world-class company? a.

The internal control significance of the excess materials requisition is that it a. The production schedule is a. indicates the amount of material released to work centers b. materials requisition c. indicates the standard quantities required for production d. bill of materials ANS: B 13. records the work done in each work center d. work order d. raw material inventory levels c. a firm must know a. last year’s production level b. specifies the materials and production required for each batch c. production schedule b. prepares a materials requisition for each production batch d. the sales forecast ANS: D 8. a description of the type and quantity of raw materials and subassemblies used to produce a single unit of finished product d. When determining which items to produce. The storekeeper releases raw materials based on the a. provides production planning and control with the inventory status report of finished goods b. total cost per year of placing orders is fixed . updates the raw material inventory records c. demand for the product is known with certainty b. records the completed production as an increase to finished goods inventory ANS: C 12. 7. documents the return to raw materials inventory of unused production materials ANS: B 11. the expected demand for the firm’s finished goods for a given year b. Inventory control performs all of the following tasks except it a. the formal plan and authority to begin production c. authorizes the storekeeper to release materials to work centers ANS: C 10. is the formal plan and authority to begin production b. the sequence of operations during manufacturing ANS: B 9. Which of the following is not an assumption of the Economic Order Quantity model? a. the standard cost of the item d. identifies materials used in production that exceed the standard amount allowed c. A move ticket a.

uncertainty in the estimation of ordering costs ANS: B 15. general ledger posts summary information about the manufacturing process based on a journal voucher prepared by cost accounting d. 123 c. computer aided design . lead time is known and is constant d. none of the above ANS: C 17. c. 48 units c. product quality b. customer service c. fluctuations in carrying costs d. mathematical weaknesses of the Economic Order Quantity model b. robotics b. cost accounting computes variances and applies overhead to individual cost records ANS: A 18. If the daily demand is 40 units and the lead time is 12 days. the reorder point is a. there are no quantity discounts ANS: B 14. resource management ANS: C 19. What is the economic order quantity if the annual demand is 10. Computer integrated manufacturing groups all of the following technologies except a.000 units. 174 b. materials requirements planning c. automated storage and retrieval systems d. Firms hold safety stock to compensate for a. general ledger creates a new cost record upon receipt of a work order from production planning and control b. cost accounting updates the cost record with data gathered from the materials requisition c. none of the above ANS: A 16. 245 d. variations in lead time or daily demand c. 480 units d. 52 units b. revenue generation d. Which of the following is not a category of critical success factors in most manufacturing companies? a. Which statement is not correct? a. set up cost of placing each order is $3 and the holding cost per unit per year is $2? a.

Which situation violates the segregation of functions control procedure? a. physical count of inventory items on hand d. work centers record direct labor on job tickets ANS: B 22. ANS: B 20. using Computer Numerical Controlled machines which stand alone within a traditional setting b. Computer Numerical Control d. robotics ANS: A . completely automating the manufacturing environment c. All of the following are internal control procedures that should be in place in the conversion cycle except a. A manufacturing process that is organized into group technology cells utilizing no human labor is called a. The SAP R/3 system provides pre-defined modules to support business processes in the all of the following categories except a. human resources b. Computer Integrated Manufacturing d. reducing the complexity of the physical manufacturing layout of the shop floor d. islands of technology b. business process support c. production planning and control is located apart from the work centers b. financial ANS: C 21. retention of excess materials by work centers c. organizing the process into functional departments ANS: C 24. process simplification c. limited access to raw material and finished goods inventories ANS: B 23. strategic d. Process simplification focuses on a. inventory control maintains custody of inventory items c. traditional manufacturing ANS: C 25. Automated Storage and Retrieval Systems c. calculation and analysis of direct material and direct labor variances b. Computer Aided Engineering b. An example of automation of manufacturing design is a. cost accounting has custody of and makes entries on cost records d.

is organized along functional lines ANS: C 31. The cost of poor quality includes all of the following except a. ensure overproduction of inventory ANS: A 28. immediate feedback about deviations from the norm ANS: D 32. Computer Aided Engineering b. an emphasis on standard costs d. Automated Storage and Retrieval Systems c. creates bottlenecks in the process b. activities cause costs d. zero defects c. A flexible manufacturing system a. cost object describes the work performed in a firm c. cost objects create a demand for activities . inaccurate cost allocations c. shortens the physical distance between activities d. Firms implement a Just-In-Time inventory approach to a. reduce investment in inventories b. scheduling delays d. an emphasis on financial performance b. Deficiencies of the traditional cost accounting information system include all of the following except a. an activity driver is a means to measure the activity used by the cost object b. Computer Numerical Control ANS: C 27.26. proceeds from the sale of scrap ANS: D 30. reduced setup time and small lot sizes d. reliable vendors ANS: A 29. push manufacturing b. Which statement is not correct? a. cost of rework b. Materials Requirements Planning d. determine the optimum inventory level using the EOQ model c. camouflage production problems d. An example of automation of manufacturing planning is a. leads to an “us” versus “them” attitude among workers c. warranty claims c. Characteristics of Just-In-Time manufacturing include all of the following except a.

the financial nature of the reports permits comparisons to be made among different types of products ANS: B 34. production planning and control initiates production with a work order b. presents detailed information about activities c. critical success factors include product and process quality c. In traditional firms. ANS: B 33. materials requisition d. Transaction authorization occurs in a traditional manufacturing environment in all of the following ways except a. Types of information provided by Activity Based Costing include a. details of the components of the single overhead cost pool ANS: C 36. the ABC model includes two perspectives: an allocation of cost perspective and a process perspective d. quality control activities at the end of the process are essential ANS: D 37. a description of the single activity driver used for overhead application b. the materials requisition authorizes the storekeeper to release materials to the work centers . it recognizes the importance of direct labor as a component of total manufacturing cost d. movement of the work through the production process follows the move ticket c. the benchmark approach compares key activities with similar activities in other firms b. the dollar value of the direct material usage variance c. in world-class manufacturing firms. purchase order ANS: D 38. identification of cost drivers d. All of the following are documents in batch process production systems except a. Firms are adopting Activity Based Costing (ABC) because a. route sheet c. identifies nonessential activities ANS: A 35. it more accurately allocates costs to products c. shows the allocation of costs first to activities and then to cost objects d. production schedule b. it facilitates the analysis of variances b. provides financially oriented information relating to operations b. Which statement is not correct? a. the sales department modifies work orders to match changes in demand d. information reporting a.

process simplification. identifying fixed assets ANS: C 3. computer-integrated manufacturing. high inventory levels c. process simplification. creating the chart of accounts b. computer-integrated manufacturing d. missing or unrecorded documents can be identified b. traditional. Manufacturing flexibility incorporates four characteristics. block code c. Financial Reporting. process simplification. ANS: C 39. The coding scheme most appropriate for a chart of accounts is a. group code d. traditional. These include all of the following except a. sequential code b. computer-integrated manufacturing. islands of technology. islands of technology. process simplification b. the code itself lacks informational content c. traditional. identifying inventory items c. The most important advantage of sequential coding is that a. computer-integrated manufacturing c. islands of technology. mnemonic code ANS: B 2. automation of manufacturing processes d. The stages of the automation continuum are (in order) a. and Management Reporting Systems MULTIPLE CHOICE 1. deletions affect the sequence ANS: A . items cannot be inserted d. physical reorganization of production facilities ANS: B 40. high product quality b. A common use for sequential coding is a. traditional. islands of technology ANS: C Chapter 8—General Ledger. identifying documents d.

it would choose a. tax return d. is based on the firm’s chart of account b. Which report is not an output of the Financial Reporting System (FRS)? a. The most important advantage of an alphabetic code is that a. unusual transaction d. prepare the adjusted trial balance. 4. enter adjusting entries. What type of data is found in the general ledger master file? a. sorting is simplified c. a journal voucher which represents a single. missing documents can be identified ANS: C 6. budget records for each account in the chart of accounts d. the balance of each account in the chart of accounts c. a group code d. an alphabetic code b. a journal voucher which represents a summary of similar transactions c. record adjusting journal . Which statement is not correct? The general ledger master file a. post to the ledger. comparative balance sheet ANS: A 10. variance analysis report b. the capacity to represent items is increased d. record the transaction. subsidiary details supporting a control account ANS: B 9. meaning is readily conveyed to users b. contains a record for control accounts c. supplies information for management decision making ANS: C 8. record the transaction. Entries into the General Ledger System (GLS) can be made using information from a. all of the above ANS: D 7. a chronological record of all transactions b. prepare financial statements b. When a firm wants its coding system to convey meaning without reference to any other document. a mnemonic code c. statement of cash flows c. prepare the unadjusted trial balance. is an output of the Financial Reporting System (FRS) d. Which steps in the Financial Accounting Process are in the correct sequence? a. a block code ANS: B 5. the general journal b.

What account appears on the postclosing trial balance? a. record the transaction. the employee who maintains the cash journal computes depreciation expense b. trial balance b. prepare financial statements c. income summary b. prepare the unadjusted trial balance. adjusted trial balance c. the cash receipts journal voucher is approved by the Treasurer c. Financial statements are prepared from the a. interest income ANS: B 13. loss of physical assets d. entries. financial statements are prepared based on the unadjusted trial balance d. general journal ANS: B 14. the unadjusted trial balance reports control account balances but omits subsidiary ledger detail ANS: C 12. record closing entries. record closing entries ANS: D 11. Which statement is not correct? a. machinery c. record the transaction. prepare the adjusted trial balance. loss of the audit trail b. the cash receipts journal vouchers are prenumbered and stored in a locked safe d. the post-closing trial balance reports the ending balance of each account in the general ledger b. one purpose of preparing the unadjusted trial balance is to ensure that debits equal credits c. rent expense d. post to the ledger. post to the ledger. prepare financial statements d. record adjusting entries. general ledger d. Risk exposures in the General Ledger and Financial Reporting Systems include all of the following except a. prepare financial statements. the employee who maintains the cash receipts journal records transactions in the accounts receivable subsidiary ledger ANS: D . unauthorized access to the general ledger c. Which situation indicates an internal control risk in the General Ledger/Financial Reporting Systems (GL/FRS)? a. general ledger account out of balance with the subsidiary account ANS: C 15.

Which statement is not true? a. fulfills governmental regulations d.16. it is a legal requirement that the MRS be installed and functioning properly c. updates and reconciliation of transactions occur as a step within the transaction cycle d. The audit trail fulfills all of the following purposes except a. maintaining the inventory ledger and recording the inventory journal voucher in the general ledger b. which combination of duties performed by a single individual presents the least risk exposure? a. if an employee is given the responsibility for a task. preparing the accounts payable journal voucher and recording it in the general ledger ANS: C 17. there is a time lag between transaction processing and posting to the general ledger d. recording the inventory journal voucher in the general ledger and maintaining custody of inventory c. paper documents are eliminated b. ensures the accuracy of the application software c. errors and out-of-balance conditions are identified at the end of the month ANS: C 20. detecting. With a limited work force and a desire to maintain strong internal control. no direct access or querying of the General Ledger is possible ANS: C 19. the general ledger master file is recreated with each update c. and correcting errors ANS: B 18. the general ledger master file is updated each night c. provides the ability to answer inquiries b. maintaining the cash disbursements journal and recording direct labor costs applied to specific jobs d. Which best describes a batch process General Ledger System (GLS) a. separation between authorization and transaction processing is strictly enforced b. authority refers to an individual’s obligation to achieve desired results b. offers a means for preventing. the MRS operates in conformity with generally accepted accounting principles b. that employee should be given authority to make decisions within the limits of that task c. all of the above are true ANS: A . the MRS is developed by implementing SEC requirements d. A characteristic of the Management Reporting System (MRS) is a. the MRS focuses on internal decision-making information ANS: D 21. An advantage of a batch General Ledger System (GLS) is that a. the level of detail provided to an employee is a function of the employee’s position with the firm d.

determining the scope of the activity b. top management b. planning the marketing and promotion for a product b. planning the production schedule for the next quarter c. have a shorter time frame . can affect employee morale and motivation ANS: A 23.22. operations management d. front-line management ANS: B 26. evaluating performance d. setting operating standards c. is related to the number of layers of management c. strategic planning decisions usually a. Which statement is not true? The manager’s span of control a. and operational control decisions. presenting department heads with budgetary goals for the next year c. In contrast to tactical planning decisions. taking corrective action when necessary ANS: A 28. deciding the optimum size of the firm ANS: D 25. middle management c. The decision to enter a new market is an example of a. deciding on the degree of diversification among the firm’s products ANS: B 24. management control decisions. All of the following are elements of operational control decisions except a. management control d. Short-range planning involves a. Long-range planning involves a. setting goals and objectives of the firm b. are more focused b. operational control ANS: A 27. preparing a work force utilization budget for the next quarter d. strategic planning b. is narrow for routine and repetitive tasks b. affects the amount of detail provided to a manager d. tactical planning c. The level of management that makes tactical planning decisions is a. planning the growth of the firm d.

equipment utilization reports for Plant M ANS: B 32. Which statement is not true? Responsibility accounting a. All of the following are elements of problem structure except a. span of control d. managers are accountable only for items they control b. the information flow is in one direction. What mechanism is used to convey to managers the standards by which their performance will be measured? a. objectives ANS: A 31. Which of the following management principles affects the management reporting system? a. year-to-date local income tax payments made by all employees living in City X and working in City Y c. authorization c. c. are unstructured d. acknowledges that some economic events cannot be traced to any manager c. compares actual performance with budget ANS: B 34. have a high degree of certainty ANS: C 29. data c. procedures d. top-down ANS: A 33. cash flow reports for Division B b. the budget d. all of the above ANS: D 30. creates a budget d. formalization of tasks b. the responsibility report b. all of the above . structured reports should be prepared weekly d. certainty b. inventory exception reports for Division G d. a manager’s span of control should not exceed eight people c. All of the following are examples of programmed reports except a. A fundamental principle of responsibility accounting is that a. involves both a top-down and bottom-up flow of information b. the scheduled report c.

authority to make decisions over the most significant costs of operations. budget master file c. Which file has as its primary purpose to present comparative financial reports on a historic basis? a. authority and responsibility c. ANS: A 39. ROI d. Which of the following performance measures can not result in dysfunctional behavior? a. emphasis on both the short and long run. including the power to choose its markets and sources of supply. c. ANS: B 37. responsibility file d. All of the following concepts encourage goal congruence except a. Which of the following best describes a profit center: a. authority to provide specialized support to other units within the organization. b. d. b. Sequential codes carry no information content beyond their order in the sequence. c. All of the following are characteristics of the strategic planning process except the a. authority to make decisions affecting the major determinants of profit. analysis of external economic factors. . Sorting records that are coded alphabetically tends to be more difficult for users than sorting numeric sequences. journal voucher history file b. d. and significant control over the amount of invested capital. formalization of tasks d. responsibility accounting ANS: A 36. net income e. Mnemonic coding requires the user to memorize codes. all of the above can result in dysfunctional behavior ANS: E 40. general ledger history file ANS: D 38. review of the attributes and behavior of the organization’s competition. quotas c. b. analysis of consumer demand. Mnemonic codes are limited in their ability to represent items within a class. including the power to choose its markets and sources of supply. price variance b. Which of the following statements is NOT true? a. ANS: C 35. authority to make decisions affecting the major determinants of profit. including the power to choose the sources of supply. c. d. detailed information reporting at all management levels b.

Which of the following is not a problem usually associated with the flat-file approach to data management? a. the ability to control access to the data c. Which of the following is not one of the components? a. data attribution d. The task of searching the database to locate a stored record for processing is called a. currency of information ANS: B 4. data redundancy d. Which characteristic is associated with the database approach to data management? a. e. data redundancy b. the Database Management System . constant production of backups d. All of the following are basic data management tasks except a. excessive storage costs ANS: A 5. the inability to determine what data is available ANS: D 6. data attribution d. data storage d. data storage c. responsibility for combining the raw materials. multiple storage procedures c. data deletion b. ANS: A Chapter 9—Database Management Systems MULTIPLE CHOICE 1. data retrieval ANS: C 2. data retrieval ANS: D 3. The textbook refers to four interrelated components of the database concept. the ability to process data without the help of a programmer b. restricting access to data to the primary user c. and other factors of production into a final product. direct labor. Which characteristic is not associated with the database approach to data management? a. data deletion b. data storage c. data sharing b.

describes every data element in the database ANS: A 12. the external view ANS: A 9. the user view d. and files that comprise the database b. A description of the physical arrangement of records in the database is a. the schema b. by direct query b. permits users to process data in the database without the need for conventional programs d. all of the above ANS: A 11. The Data Definition Language a. for the Database Management System. the internal view c. the names and relationships of all data elements. the conceptual view c. Which of the following is not a responsibility of the Database Management System? a. Which of the following may provide many distinct views of the database? a. records. the conceptual database ANS: D 7. Users access the database a. the conceptual view ANS: C 10. transfers data to the buffer area for manipulation c. enables application programs to interact with and manipulate the database d. the subschema d. provide an interface between the users and the physical database b. authorize access to portions of the database ANS: C 8. b. by developing operating software c. identifies. ensure that the internal schema and external schema are consistent d. defines the database to the Database Management System b. the internal view b. the Database Administrator c. inserts database commands into application programs to enable standard programs to interact with and manipulate the database c. by constantly interacting with systems programmers d. The Data Manipulation Language a. provide security against a natural disaster c. describes every data element in the database . the physical database d.

In the relational database model a. the way to access data is by following a predefined data path c. the user perceives that files are linked using pointers c. to design application programs d. Which term is not associated with the relational database model? a. to design the subschema ANS: C 15. Which duty is not the responsibility of the Database Administrator? a. is written in a fourth-generation language b. to implement security controls c. the user’s view of the physical database is the same as the physical database . ANS: C 13. data is represented as a tree structure ANS: C 18. data is presented to users as tables b. allows users to retrieve and modify data d. a new table can be built by joining two tables d. an owner (parent) record may own just one member (child) record d. collision d. In a hierarchical model a. attribute c. a member (child) record may have more than one owner (parent) ANS: B 16. requires user familiarity with COBOL c. relation ANS: C 17. to develop and maintain the Data Dictionary b. data is represented on two-dimensional tables d. tuple b. Which statement is not correct? A query language like SQL a. links between related records are implicit b. In the relational database model all of the following are true except a. only one-to-many relationships can be supported ANS: D 19. relationships are explicit b. reduces reliance on programmers ANS: B 14. data can be extracted from specified rows from specified tables c. In a relational database a.

deletion of a key record could result in the destruction of the audit trail d. in a normalized database. the accountant is responsible for database normalization c. complicates adding records to the database d. is easily detected by users b. project c. join d. hierarchical b. a programming language (COBOL) is used to create a user’s view of the database ANS: B 20. The deletion anomaly in unnormalized databases a. often results in excessive record insertions ANS: A 21. deletion anomaly d. sequential d. The update anomaly in unnormalized databases a. may result in the loss of important data d. The most serious problem with unnormalized databases is the a. restrict b. insertion anomaly c. relational ANS: C 25. network c. Which of the following is a relational algebra function? a. Which statement is correct? a. users perceive that they are manipulating a single table c. connections between M:M tables is provided by a link table ANS: D 24. all are relational algebra functions . complicates adding records to the database c. Which of the following is not a common form of conceptual database model? a. none of the above ANS: C 22. in a normalized database. b. data about vendors occur in several locations b. update anomaly b. a virtual table exists in the form of rows and columns of a table stored on the disk d. may result in the loss of important data c. requires the user to perform excessive updates ANS: B 23. occurs because of data redundancy b.

An example of a distributed database is a. d. data definition language ANS: B 28. The advantages of a partitioned database include all of the following except a. internal view d. partitioning the database b. During processing. using a lockout procedure c. data redundancy b. networked database d. user control is enhanced . The DBMS is special software that is programmed to know which data elements each user is authorized to access. The DBMS does not control access to the database. the DBMS periodically makes backup copies of the physical database. Data currency is preserved in a centralized database by a. data replication c. All of the following are elements of the DBMS which facilitate user access to the database except a. implementing concurrency controls ANS: B 31. centralized database c. data manipulation language d. b. Which statement is false? a. ANS: D 26. all are examples of distributed databases ANS: A 30. data access language c. partitioned database b. Which procedure will prevent two end users from accessing the same data element at the same time? a. c. schema c. Which of the following is a level of the database that is defined by the data definition language? a. none of the above ANS: C 32. replicating the database d. User programs send requests for data to the DBMS. all are levels or views of the database ANS: D 29. ANS: D 27. user view b. query language b. data lockout d.

Entities are a. data that describe the characteristics of properties of resources c. deadlocks are eliminated c. risk of destruction of entire database is reduced ANS: B 33. there is no risk of the deadlock phenomenon d. is the logical abstract structure of the database c. is implemented using timestamping c. specifies the relationship of data elements in the database d. defines how a particular user sees the database ANS: D 38. Data concurrency a. gateway control ANS: C 35. and consistent data at all information processing units? a. data transmission volume is increased c. there exists a high degree of data sharing and no primary user c. All of the following are advantages of a partitioned database except a. may result in data lockout d. current. occurs when a deadlock is triggered ANS: B 36. associations among elements d. A replicated database is appropriate when a. partitioning can reduce losses in case of disaster ANS: B . there is minimal data sharing among information processing units b. is a security issue in partitioned databases b. presents the physical arrangement of records in a database for a particular user b. most data sharing consists of read-write transactions ANS: B 34. deadlock control b. concurrency control d. sets of data needed to make a decision ANS: A 37. nouns that are depicted by rectangles on an entity relationship diagram b. transaction processing response time is improved d. increased user control by having the data stored locally b. replication control c. response time is improved d. What control maintains complete. b. A user view a.

storage of both financial and nonfinancial data in the same database c. Each of the following is a relational algebra function except a. The REA approach leads to more efficient operations in all of the following ways except a. join b. under the organization’s control ANS: B 2. planning c. operating b. decision c. link d. scarce d. record keeping b. Decision/management events involve decisions relating to all of the following except a. acts of evaluating d. project c. 39. storage of detailed data to support a wider range of management decisions d. assets b. Which type of events are included in an REA model? a. Economic resources possess all of the following characteristics except a. measure expected future receipts c. evaluation d. standardizing data forms for simplicity ANS: D 3. acts of updating c. restrict ANS: C Chapter 10—The REA Approach to Business Process Modeling MULTIPLE CHOICE 1. acts of recording b. Information events involve all of the following except a. identifying non-value-added activities b. information ANS: A 4. management d. control ANS: A 5. acts of maintaining .

All of the following are examples of operating events except a. shipping product to a customer ANS: B 11. resources d. information events c. preparing a cash disbursement voucher for payment to the supplier c. The ‘E’ in REA stands for a. paying for inventories received d. requesting a report c. preparing cost estimates for a new product b. ratios b. economics d. reserves ANS: C 7. organize events in order. entities ANS: A 8. all of the above ANS: D 12. Which types of events are included in entity relationship diagrams? a. preparing performance reports ANS: B 10. decision events d. agents ANS: D 9. events b. The ‘A’ in REA stands for a. identify operating events. identify resources and agents. preparing sales invoices d. identify links. assets b. ANS: C 6. Which of the following represents the order of the steps in the preparation of an REA model? a. allocation d. Which of the following is an example of a decision/management event? a. relationships c. The ‘R’ in REA stands for a. apportionment c. operating events b. receiving raw materials from a supplier b. estimates c. assign cardinalities .

simpler database creation ANS: D 15. organize events in order. Which of the following is not correct? a. b. ease of analysis d. identify links. Information events trigger operating events. When developing an REA model. The REA model requires that phenomena be characterized in a manner consistent with the development of a single user view. The REA model requires that phenomena be characterized in a manner consistent with the development of a multiple user view. Decision/management events trigger operating events. events are described from the perspective of a. d. identify links. the organization b. length c. Operating events trigger information events. Information events trigger decision/management events. completion b. Which of the following statement is correct? a. the user d. greater efficiency b. identify operating events. ANS: B 16. organize events in order. assign cardinalities ANS: C 13. increased productivity c. Which of the following is not an advantage of using the REA model? a. c. identify operating events. occurrence ANS: D 17. c. b. assign cardinalities d. identify resources and agents. more relevant and timely information d. the designer c. The REA model requires that phenomena be characterized in a manner consistent with the development of a unique user view. The REA model requires that phenomena be characterized in a manner consistent with the development of a selected user view. d. the customer ANS: A . identify links. identify resources and agents. ANS: D 14. b. In an REA model. events need to be organized in sequence of a. assign cardinalities. identify operating events. organize events in order c. identify resources and agents.

improved customer service b. preparing cost estimates for new products d. sales and distribution b. business planning c. modeling data b. 18. OLAP applications ANS: D 5. shop floor control and logistics d. preparing sales invoices ANS: B Chapter 11—Enterprise Resource Planning Systems MULTIPLE CHOICE 1. what-if analysis ANS: A . logistics b. Goals of ERP include all of the following except a. extracting data d. all of the above ANS: D 3. improvements of legacy systems c. updating inventory records after a sale b. reduced production time d. Which of the following is usually not part of an ERP’s core applications? a. decision support systems c. OLTP applications b. ad hoc analysis d. transforming data ANS: B 4. Which of the following is not an example of an information event? a. condensing data c. increased production ANS: B 2. requesting a report c. Core applications are a. Data warehousing processes does not include a. sales and distribution applications c. Which of the following is usually not part of an ERP’s OLAP applications? a. business planning applications d.

Which of the following statements is not true? a. may feel that the data warehouse is too clean and free from errors. The better ERP can handle any problems an organization can have. Drill-down is a data-mining tool available to users of OLAP. When a business is diversified. d. b. b. d. Auditors of ERP systems a. The database and application functions are separate in the three-tier model. The data warehouse should be separate from the operational system. d. Data cleansing is a process of transforming data into standard form. ANS: B 7. Performance problems usually stem from technical problems. Which statements about data warehousing is not correct? a. the server handles both application and database duties. need not worry about segregation of duties. ERP systems can be modified using bolt-on software. Client computers are responsible for presenting data to the user and passing user input back to the server. not business process reengineering. little is gained from ERP installation. ANS: B . d. d. ANS: D 9. It is constructed for quick searching and ad hoc queries. It contains data that are normally extracted periodically from the operating databases. ERP fails because some important business process is not supported. and the third is for Internet access. It was an original part of all ERP systems. c. ERPs are infinitely scalable. Which of the following statements is least likely to be true about a data warehouse? a. ANS: C 10. For the ERP to be successful. one is for database and applications. b. need not worry about system access since the ERP determines it. c. 6. process reengineering must occur. one tier is for user presentations. c. b. ANS: D 11. In three-tier client server architecture. c. b. Which statement is true? a. It may be deployed by organizations that have not implemented an ERP. The phased-in approach is more suited to diversified businesses. c. d. ANS: C 8. c. find independent verification easy. Normalization is an requirement of databases included in a data warehouse. In a typical two-tier client server system. b. Which statement about ERP installation is least accurate? a.

Most ERPs are based on which network model? a. b. c.12. allow users to analyze complex data relationships. ANS: B 13. b. old manual systems that are still in place. is typically under the control of external partners in the chain. Extracting data for a data warehouse a. are bolt-on programs used with commercially available ERSs. bus topology ANS: B 15. all of the above ANS: D 18. should only involve active files. d. Legacy systems are a. c. The setup of a data warehouse includes a. including vendors. a database that provides data to an organization’s customers. c. carriers. links all of the partners in the chain. ANS: D 14. stable database systems after debugging. cleansing the data d. another name for a data warehouse. . client-server c. handle large numbers of relatively simple transactions. a data warehouse created for a single function or department. c. extracting data from operational databases c. b. flat file mainframe systems developed before client-server computing became standard. none of the above ANS: B 17. advanced systems without a data warehouse. requires that the files be out of service. b. d. an enterprise resource planning system. b. are available in two models–two-tier and three-tier. third-party firms. On-line transaction processing programs a. cannot be integrated into an overall ERP. A data mart is a. ANS: C 16. ring topology d. peer to peer b. d. cannot be done from flat files. d. c. and information systems providers. Supply chain management software a. modeling the data b.

d. the size of the company ANS: A 2. ANS: C 19. transforming data into standard business terms d. to increase the efficiency of data mining processes c. bridges and gateways connect one workstation with another workstation b. the transmission technology used c. The primary difference between a LAN and a WAN is a. to make the management of the databases more economical b. Separating the data warehouse from the operations databases occurs for all of the following reasons except a. file servers permit software and data to be shared with other network users d. the type of workstation used d. formatting data from legacy systems ANS: B 20. filtering out or repairing invalid data b. to permit the integration of data from diverse sources ANS: A Chapter 12—Electronic Commerce Systems MULTIPLE CHOICE APPENDIX QUESTION 1. file server b. to integrate legacy system data into a form that permits entity-wide analysis d. follows the cleansing of data. the network interface card permits different networks to share data c. the geographical area covered by the network b. summarizing data for ease of extraction c. multiplexer d. Data cleansing involves all of the following except a. To physically connect a workstation to a LAN requires a a. bridge ANS: B 3. network interface card c. a universal topology facilitates the transfer of data among networks ANS: C . One advantage of network technology is a.

b. Intranet ANS: D 8. is most effective used with a bus topology. is best suited to the token-ring topology because the random-access method used by this model detects data collisions. In a ring topology a. distributes both data and processing tasks to the server’s node. Which of the following statements is correct? The client-server model a. used by network administrators to analyze network traffic c. shared resources are managed by a file server which is a node on the ring . used by bus topology Intranets to sniff for a carrier before transmitting a message to avoid data collisions d. a. c. LAN b. client/server topology ANS: A 5. bus topology c. when the central site fails a. illegal programs downloaded from the Net to sniff passwords from the encrypted data of Internet customers ANS: B 9. multidrop network d. the functions of the central site are taken over by a designated workstation ANS: B 6. In a star topology. individual workstations cannot function locally and cannot communicate with other workstations d. Which topology has a large central computer with direct connections to a periphery of smaller computers? Also in this topology. all nodes are of equal status b.4. individual workstations can communicate with each other b. ring topology d. nodes manage private programs and databases locally c. d. Sniffer software is a. What do you call a system of computers that connects the internal users of an organization that is distributed over a wide geographic area? a. ANS: B 7. star topology b. is more efficient than the bus or ring topologies. the central computer manages and controls data communications among the network nodes. software used by malicious Web sites to sniff data from cookies stored on the user’s hard drive b. individual workstations can function locally but cannot communicate with other workstations c. decentralized network c.

In a ring topology a. has a host computer connected to several levels of subordinate computers c. eliminates the need for nodes to communicate with each other c. for centralized databases only c. provide a basis for error checking and measuring network performance c. reduces the number of records that must be locked by having the file server perform record searches d. facilitate physical connection between network devices b. functions only with a ring and bus topology ANS: C 11. responsibility for managing communications is distributed among the nodes d. result in inflexible standards ANS: D 15. increases the amount of data that is transmitted between the central file and the network node b. Which method does not manage or control data collisions that might occur on a network? a. for a wide area network with a mainframe for a central computer b. d. within one node different layers communicate with other layers at that node b. A star topology is appropriate a. all nodes are of equal status. multiplexing b. one protocol is developed and applied to all the OSI layers c. the network consists of a central computer which manages all communications between nodes b. specific layers are dedicated to hardware tasks and other layers are dedicated to software tasks . Network protocols fulfill all of the following objectives except a. all of the above ANS: D 10. promote compatibility among network devices d. All of the following are true about the Open System Interface (OSI) protocol except a. for environments where network nodes routinely communicate with each other d. information processing units rarely communicate with each other ANS: C 13. when the central database does not have to be concurrent with the nodes ANS: A 12. polling c. carrier sensing d. token passing ANS: A 14. The client/server technology a.

spreadsheets. b. c. is used to transfer text files. XBRL a. c. ANS: C 21. is the file format used to produce Web pages. b. controls Web browsers that access the Web. b. Internet protocol spoofing . is the document format used to produce Web pages. is used to transfer text files. ANS: D 18. and databases across the Internet. ANS: D 19. is a low-level encryption scheme used to secure transmissions in higher-level (HTTP) format. ANS: A 20. is the basic protocol that permits communication between Internet sites. programs. HTML a. c. controls Web browsers that access the WWW. is used to connect to Usenet groups on the Internet. e. ANS: A 17. b. is a low-level encryption scheme used to secure transmissions in HTTP format. e. and databases across the Internet. is used to connect to Usenet groups on the Internet d. programs. layers at each node communicate logically with their counterpart layers across nodes ANS: B 16. d. is the document format used to produce Web pages. is a low-level encryption scheme used to secure transmissions in higher-level () format. is the document format used to produce Web pages. d. d. c. digital signature forging c. Which of the following statements is correct? TCP/IP a. was designed to provide the financial community with a standardized method for preparing e. Cookies are text files and never contain encrypted data. spreadsheets. controls Web browsers that access the Web. Which one of the following statements is correct? a. Cookies contain the URLs of sites visited by the user. FTP a. c. is the basic protocol that permits communication between Internet sites. d. Web browsers cannot function without cookies. is a low-level encryption scheme used to secure transmissions in higher-level () format. controls Web browsers that access the Web. Cookies always contain encrypted data. a denial of service attack b. A message that is made to look as though it is coming from a trusted source but is not is called a. d. b.

b. controls Web browsers that access the Web. and databases across the Internet. HTTP a. At the receiving end. b. is the document format used to produce Web pages. c. NNTP a. ANS: C 25. is the document format used to produce Web pages. programs. d. It will resolve itself when the primary computer completes processing its transaction and releases the data needed by other users. e. Packet switching combines the messages of multiple users into a “packet” for transmission. is used to connect to Usenet groups on the Internet d. ANS: B 24. d. programs. is used to connect to Usenet groups on the Internet d. c. ANS: C . A digital signature is a. is used to transfer text files. and databases across the Internet. the packet is disassembled into the individual messages and distributed to the intended users. derived from the digest of a document that has been encrypted with the sender’s private key c. the computed digest of the sender’s digital certificate d. Message switching is used to establish temporary connections between network devices for the duration of a communication session. Which of the following statements is correct? a. The decision to partition a database assumes that no identifiable primary user exists in the organization. c. is a low-level encryption scheme used to secure transmissions in higher-level () format. URL masquerading ANS: C 22. the encrypted mathematical value of the message sender’s name b. controls Web browsers that access the Web. spreadsheets. is a low-level encryption scheme used to secure transmissions in higher-level (HTTP) format. allows digital messages to be sent over analog telephone lines ANS: B 23. is used to transfer text files. spreadsheets. A deadlock is a temporary phenomenon that disrupts transaction processing. e. b.

operational feasibility study b. insurance c. operational feasibility study b. supplies d. A cost-benefit analysis is a part of the detailed a. legal feasibility study d. systems design ANS: C 6. legal feasibility study d. software acquisition b. freight charges c. data conversion c. reinforcement of the building floor ANS: C . crane used to install equipment b. economic feasibility study ANS: C 3. schedule feasibility study c. schedule feasibility study c. Examples of recurring costs include a. programming ANS: B 5. Protection from inadvertent disclosures of confidential information is part of the detailed a. the need for user training will influence the schedule feasibility analysis c. Site preparation costs include all of the following except a. prototyping does not affect the schedule feasibility analysis b. When studying the detailed feasibility of a new project a.Chapter 13—Managing the Systems Development Life Cycle MULTIPLE CHOICE 1. personnel costs d. economic feasibility study ANS: D 4. a cost-benefit review will affect the schedule feasibility analysis ANS: B 2. site preparation d. protection from fraud and errors will influence the schedule feasibility analysis d. hardware acquisition b. Examples of one-time costs include all of the following except a.

An example of a tangible benefit is a. a systems design cost d. An example of an intangible benefit is a. all of the above ANS: D 12. data conversion costs d. A tangible benefit a. Intangible benefits a. a programming cost ANS: B 9. programming costs ANS: D 8. professional judgment . expansion into other markets b. are of relatively little importance in making information system decisions c. a data conversion cost c. systems design costs c. might decrease costs d. reduced equipment maintenance ANS: C 11. are sometimes estimated using customer satisfaction surveys d. a recurring cost b. 7. do not lend themselves to manipulation ANS: C 13. reduction in supplies and overhead c. might increase revenues c. faster response to competitor actions ANS: C 10. can be measured and expressed in financial terms b. simulation models c. software acquisition costs b. reduced inventories d. increased customer satisfaction b. The testing of individual program modules is a part of a. more current information c. When implementing a new system. opinion surveys b. when measured. the costs associated with transferring data from one storage medium to another is an example of a. are easily measured b. Which technique is least likely to be used to quantify intangible benefits? a. more efficient operations d.

insurance d. analyzing the technical feasibility of the project d. system development techniques are ineffective ANS: C 18. budgeting funds for systems development ANS: C 19. Strategic systems planning is important because the plan a. d. Recurring costs include all of the following except a. programming and testing d. the systems selection report c. the user is not involved in the development of the system b. the detailed system design d. the report of systems analysis b. All of the following are reasons why new systems fail except a. determining whether and when to terminate systems projects c. provides authorization control for the Systems Development Life Cycle b. supplies ANS: A 17. data conversion ANS: B 16. insurance c. provides a static goal to be attained within a five-year period d. will eliminate any crisis component in systems development c. The systems steering committee is responsible for all of the following except a. The formal product of the systems evaluation and selection phase of the Systems Development Life Cycle is a. One time costs include all of the following except a. data conversion b. review of accounting transaction data ANS: D 14. systems analysts rely on prototyping models d. system requirements are not clearly specified c. assigning priorities b. software maintenance c. site preparation b. the systems plan ANS: B 15. all of the above ANS: A .

feasibility factors b. prioritizes the proposal in relation to other system proposals ANS: A 24. system development team members include representatives from end-user departments ANS: D 26. operational feasibility d. Which step is not used to evaluate a systems proposal? An analysis of the project’s a. ability to eliminate nonessential activities and costs c. operational feasibility c. legal feasibility d. economic feasibility ANS: C 23. organizational restructuring required by the new system results in displaced workers b. legal feasibility ANS: B 22. The ability of a system to protect individual privacy and confidentiality is an example of a. does not include a review of the current system . technical feasibility b. use of Computer Aided Software Engineering (CASE) tools in developing the system proposal ANS: D 25.20. Project feasibility includes all of the following except a. end users do not understand the strategic merits of the new system c. employees are not trained to use the system d. ability to provide a competitive advantage to the firm d. conceptual feasibility c. The degree of compatibility between the firm’s existing procedures and personnel skills and the requirements of the new system is called a. Typically a systems analysis a. technical feasibility b. The systems project proposal a. Reasons that a new systems implementation may be unsuccessful include all of the following except a. schedule feasibility d. operational feasibility c. links the objectives of the proposed system to the system’s scheduling requirements d. provides management with a basis for deciding whether or not to proceed with the project b. schedule feasibility ANS: B 21. schedule feasibility b. supplies an input to the project planning activity c. results in a formal project schedule b.

ensure mandated procedures are part of the design ANS: B 32. a comparison of alternative implementation procedures for the new system ANS: C 31. approving the accounting procedures to be implemented ANS: B . The systems analysis report does not a. is performed by the internal auditor ANS: C 27. users’ needs and requirements for the new system d. reviewing key documents ANS: C 29. suggest inclusion of advanced audit features d. it highlights elements of the current system that are worth preserving c. all of the above are advantages of surveying the current system ANS: A 28. redesigning bottleneck activities d. it pinpoints the causes of the current problems d. an evaluation of the new system c. c. specify the system processing methods ANS: D 30. selecting the programming techniques to be used d. Systems analysis involves all of the following except a. identify user needs b. resolving conflicts that arise from a new system c. prepare data gathering questionnaires c. specify audit trail requirements b. it constrains the generation of ideas about the new system b. designing the system outputs b. After the systems analysis phase of the System Development Life Cycle (SDLC) is complete. specify requirements for the new system c. The role of the steering committee includes a. formally state the goals and objectives of the system d. the conceptual design of the new system b. A disadvantage of surveying the current system is a. surveying the current system c. The accountant’s role in systems analysis includes all of the following except a. the company will have a formal systems analysis report on a. identifies user needs and specifies system requirements d. gathering facts b.

and Maintain Systems Projects MULTIPLE CHOICE 1. the accountant is responsible for designing the physical system b. all similarities and differences between competing systems are highlighted b. the accountant is responsible to ensure that audit trails are preserved c. schedule feasibility ANS: C 35. preparing a formal project proposal c. Project planning includes all of the following except a. inputs. personal interviews ANS: C 36. Which statement is not true? a. the format for input screens and source documents is decided d. and outputs that distinguish one alternative from another are identified ANS: D 37. a prototype is an inexpensive. structure diagrams are commonly used c. Which of the following is not a tool of systems analysts? a. processes. observation b. audit reports d. economic feasibility c. producing a project schedule ANS: C 34. specifying system objectives b. the internal auditor is responsible to confirm that embedded audit modules are included in the conceptual design d. The role of the accountant/internal auditor in the conceptual design phase of the Systems Development Life Cycle includes all of the following except a. a. selecting hardware vendors d. logistic feasibility d. simplified model of a system . When developing the conceptual design of a system. prototypes do not include internal control features b. Deliver. task participation c. 33. Aspects of project feasibility include all of the following except a. the accountant is responsible to make sure that the accounting conventions that apply to the module are considered by the system designers ANS: A Chapter 14—Construct. technical feasibility b.

user prototype screens c. presents an overview model of the primary transactions processed b. all of the above ANS: D 4. systems designers always discard prototypes and do not develop them into finished systems ANS: D 2. Which statement is not true? Computer Aided Software Engineering (CASE) technology a. reduces the productivity but increases the quality of the work of systems professionals c. context level b. Which level of a data flow diagram is used to produce program code and database tables? a. is prepared by the systems analyst ANS: C 7. is commercially available software b. context level c. c. it reduces the analysis required in designing the system . it facilitates the auditors review of the system b. expedites the System Development Life Cycle d. a structure diagram a. consists of upper and lower tools ANS: B 3. conceptual level b. data flow diagrams d. intermediate level d. Which is not a level of a data flow diagram? a. The central repository of the Computer Aided Software Engineering (CASE) system contains a. An advantage of the Computer Aided Software Engineering (CASE) model tool. it ensures that firm will use a specific CASE tool and vendor c. the program code b. prototype level ANS: B 6. is a. elementary level c. presents a model of the program code that constitutes the physical system d. intermediate level d. a throwaway prototype is discarded after the requirements are established d. elementary level ANS: A 5. which transforms the structure diagram into machine language. In a Computer Aided Software Engineering (CASE) environment. graphically depicts the iceberg effect c. it forces all system changes to be made through the data flow diagrams d.

system maintenance activities are simplified ANS: A 13. ANS: C 8. the ability to easily revise the model during the development stage b. a class . development time is reduced c. When maintaining a system that was developed using Computer Aided Software Engineering (CASE) tools. is documented by data flow diagrams and structure diagrams c. changes should be made directly to the structure diagram c. the requirement that all program code and documentation be regenerated for each module c. the employee pay rate is an example of a. starts with an abstract description of the system and redefines it to produce a more detailed description of the system ANS: C 12. is a top-down approach b. Which of the following is an advantage of the Computer Aided Software Engineering (CASE) approach? a. user involvement is restricted to final stages of development ANS: A 10. The benefits of the object-oriented approach to systems design include all of the following except a. an object b. Which statement is not correct? The structured design approach a. In the object-oriented systems design approach. an operation d. the programmer must thoroughly review the program code b. alternative designs cannot be reviewed prior to implementation c. Which of the following is a disadvantage of the Computer Aided Software Engineering (CASE) approach? a. this approach does not require input from accountants and auditors b. an attribute c. the cost of software engineering programs d. a standard module once tested does not have to be retested until changes are made d. system users are reluctant to become involved with the CASE approach d. source code produced by CASE tools is less efficient than code written by a skilled programmer b. the need for testing the modified application is eliminated ANS: C 9. assembles reusable modules rather than creating systems from scratch d. a. significantly less time is required compared to maintenance activities for a system developed without using Computer Aided Software Engineering (CASE) tools d. maintenance costs are increased ANS: A 11.

A commercial software system that is completely finished. can be easily modified to the user’s exact specifications c. benchmark system d. Andrews is a customer of the Edsell Company. can be installed faster than a custom system b. tested. Ms. Andrews ANS: A 15. the internal auditor b. objects possess two characteristics–attributes and instances b. is less likely to have errors than an equivalent system developed in-house ANS: B . the amount Ms. Ms. vendor-supported system c. and ready for implementation is called a a. the entity relationship diagram is used to create a program which can be used in other systems d. the system designer ANS: D 18. each module can inherit from other modules the attributes and operations it requires c. ANS: B 14. Andrews is an instance in the object class accounts receivable b. turnkey system ANS: D 19. operations performed on objects always change attributes ANS: C 16. Evaluators of the detailed feasibility study should not include a. is significantly less expensive than a system developed in-house d. a user representative d. In the object-oriented systems design approach. determining the amount past due is an attribute d. inheritance means that each object instance inherits the attributes and operations of the class to which it belongs d. the project manager c. In the object-oriented design approach a. Which statement is not correct? In the object-oriented design approach a. backbone system b. Which of the following is not an advantage of commercial software? Commercial software a. the object class accounts receivable inherits all the attributes of Ms. the control module must be recreated for each program ANS: D 17. Andrews owes the Edsell Company is an operation c. a. an instance is a logical grouping of individual objects c. a single change to an attribute or operation in one object class is automatically changed for all the object instances and subclasses that inherit the attribute b.

Which step is least likely to occur when choosing a commercial software package? a. conciseness d. accuracy and timeliness c. systems analysis report ANS: C 22.20. detailed system design report d. a detailed review of the source code b. completeness b. contact with user groups c. The output of the detailed design phase of the Systems Development Life Cycle (SDLC) is a a. summarization c. timeliness and conciseness b. When each element of information supports the user’s decision or task. exception orientation ANS: D 26. alternative conceptual designs c. systems selection report c. input errors are reduced . There is often a conflict between the attributes of a. economies of scale in data collection are avoided c. fully documented system report b. preparation of a request for proposal d. the output is said to possess a. a. completeness and exceptions orientation ANS: B 25. summarization b. When hardcopy forms are used as the source for electronic data input. A report of accounts that are past due has many information attributes. process logic ANS: B 23. timeliness c. comparison of the results of a benchmark problem ANS: A 21. The detailed design report contains all of the following except a. relevance and summarization d. conciseness d. report layouts d. The most important attribute is a. a paper audit trail is maintained b. input screen formats b. relevance ANS: D 24.

Which statement is not true? A systems design walkthrough a. well-defined task c. expresses the detailed logic of the module in programming language c. sufficient copies of the form are prepared ANS: B 28. a point-of-sale terminal is required ANS: A 27. the source document and the input screen are identical c. simulates the operation of the system in order to uncover errors and omissions d. occurs in the implementation phase of the Systems Development Life Cycle b. workers who use direct data input forms must be highly trained and skilled ANS: D 29. d. System documentation is designed for all of the following groups except a. and output files? . calculations are automatically performed on intelligent forms c. end users c. Which is not true of direct data input forms? a. cohesive modules perform a single. The most important design element for a hardcopy form that is used for electronic data input is that a. loosely coupled modules are independent of other modules b. systems designers and programmers b. the form is a standard size b. Which type of documentation shows the detailed relationship of input files. programs. reduces costs by reducing the amount of reprogramming ANS: B 32. maintenance of a module with weak cohesion is simple d. permits individuals with few technical skills to understand the logic of the module ANS: D 31. errors caused by transcription are reduced b. occurs just after system implementation c. many data entry errors are detected and corrected immediately d. Which statement is not true? a. instructions use active voice d. an error made in a tightly coupled module will affect other modules ANS: C 30. is conducted by a quality assurance group b. Translating the system modules into pseudocode a. all of the above require systems documentation ANS: D 33. discourages end users from becoming actively involved in designing the system d. accountants d.

Modeling is the task of formalizing the data requirements of the business process as a physical model. data coupling cutover ANS: C 38. structure diagrams b. logic flowchart c. a list of all master files used in the system d. Typical contents of a run manual include all of the following except a. file requirements d. validating the database c. Computer operators should have access to all of the following types of documentation except a. Relationships are the degree of association between two entities. b. system flowchart d. which cutover method is the most conservative? a. events. run schedule b. When converting to a new system. program flowchart ANS: C 34. parallel operation cutover d. d. c. a program code listing c. a. overview diagram c. or agents involved in the business. explanation of error messages ANS: B 35. backing up the original files ANS: A 37. Which task is not essential during a data conversion procedure? a. ANS: D . a list of users who receive output b. Attributes are data that describe the characteristics or properties of entities. Entities are resources. cold turkey cutover b. What is not true about data modeling? a. reconciliation of new and old databases d. a list of required hardware devices ANS: B 36. decomposing the system b. phased cutover c.

program operations from program maintenance c. or is likely to. d. systems professionals and their supervisors work at the same physical location ANS: D 5. In a computer-based information system. Supervision in a computerized environment is more complex than in a manual environment for all of the following reasons except a. A statement identifying the framework used by management to conduct their assessment of internal controls. Corporate management (including the CEO) must certify monthly and annually their organization’s internal controls over financial reporting. natural disasters such as fires b. c. Auditors must interview management regarding significant changes in the design or operation of internal control that occurred since the last audit. d. materially affect internal control over financial reporting. An explicit written conclusion as to the effectiveness of internal control over financial reporting. c. many systems professionals have direct and unrestricted access to the organization's programs and data c. all of the above duties should be separated ANS: D 4. Which of the following is NOT an implication of section 302 of the Sarbanes-Oxley Act? a. whether changes in internal control has. A statement that the organizations internal auditors has issued an attestation report on management’s assessment of the companies internal controls.Chapter 15—IT Controls Part I: Sarbanes-Oxley and IT Governance MULTIPLE CHOICE 1. rapid changes in technology make staffing the systems environment challenging d. program coding from program operations b. b. program maintenance from program coding d. unauthorized access . Auditors must determine. ANS: C 2. which of the following duties needs to be separated? a. Which of the following is NOT a requirement in management’s report on the effectiveness of internal controls over financial reporting? a. ANS: B 3. rapid turnover of systems professionals complicates management's task of assessing the competence and honesty of prospective employees b. A statement of management’s responsibility for establishing and maintaining adequate internal control user satisfaction. Management must disclose any material changes in the company’s internal controls that have occurred during the most recent fiscal quarter. b. Adequate backups will protect against all of the following except a.

data control from data librarian ANS: A 7. weakens database access security b. Systems development is separated from data processing activities because failure to do so a. critical applications identified ANS: B 11. separate systems development from data processing d. recovery operations center c. All of the following are control risks associated with the distributed data processing structure except a. computer services function c. separate systems development from systems maintenance b. Which is the most critical segregation of duties in the centralized computer services function? a. Which organizational structure is most likely to result in good documentation procedures? a. lack of separation of duties b. system interdependency d. data preparation from data control d. system incompatibilities c. lack of documentation standards ANS: C 10. separate systems analysis from application programming c. separate database administrator from data processing ANS: A 9. c. second site backup d. data corruption caused by program errors d. A second site backup agreement between two or more firms with compatible computer facilities to assist each other with data processing needs in an emergency is called a. system crashes ANS: B 6. results in master files being inadvertently erased ANS: B 8. allows programmers access to make unauthorized changes to applications during execution c. internally provided backup b. results in inadequate documentation d. systems development from data processing b. empty shell d. off-site storage of backups b. Which of the following is not an essential feature of a disaster recovery plan? a. data operations from data librarian c. mutual aid pact .

which of the following is the least critical application for disaster recovery purposes? a. illegal lines of code are hidden among legitimate code and a fraud is covered up for a long period of time c. systems documentation is inadequate because of pressures to begin coding a new program before documenting the current program b. the initial recovery period is very quick c. the host site may be unwilling to disrupt its processing needs to process the critical applications of the disaster stricken company b. clearly marked exits b. order entry/billing ANS: A 15. backups of application software c. An advantage of a recovery operations center is that a. The least important item to store off-site in case of an emergency is a. Some companies separate systems analysis from programming/program maintenance. documentation and blank forms d. accounts payable d. For most companies. the company has sole control over the administration of the center d. All of the following are control weaknesses that may occur with this organizational structure except a. none of the above are advantages of the recovery operations center ANS: B 14. automatic and manual alarms in strategic locations . the control of the shell site is an administrative drain on the company ANS: B 13. maintenance of excess hardware capacity d. All of the following are recommended features of a fire protection system for a computer center except a. results of the latest test of the disaster recovery program ANS: D 16. intense competition for shell resources during a widespread disaster c. manual fire extinguishers in strategic locations d. month-end adjustments b. The major disadvantage of an empty shell solution as a second site backup is a. this is an inexpensive solution b. ANS: D 12. an elaborate water sprinkler system c. accounts receivable c. a new systems analyst has difficulty in understanding the logic of the program d. backups of systems software b. inadequate systems documentation is prepared because this provides a sense of job security to the programmer ANS: C 17.

internal auditors represent the interests of management and external auditors represent outsiders b. represent the interests of management d. ANS: C 20. internal auditors perform all of the above tasks ANS: D 21. the statement is not true. b. internal auditors focus on financial statement audits and external auditors focus on operational audits and financial statement audits d. review of compliance with legal obligations d. evaluating internal controls b. IT auditors attest to the integrity of the computer system. Internal auditors assist external auditors with financial audits to a. analyzing financial data ANS: B 19. b. d. external auditors assist internal auditors but internal auditors cannot assist external auditors ANS: A 22. Which statement is not correct? a. Which statement is not true? a. IT auditing can be performed by both external and internal auditors. internal auditors are not permitted to assist external auditors with financial audits ANS: A 23. The fundamental difference between internal and external auditing is that a. Auditors express an opinion in their audit report. reduce audit fees b. c. expressing an opinion d. . c. IT auditing is independent of the general financial audit. preparing financial statements c. ensure independence c. internal auditors perform all of the following tasks except a. Auditors gather evidence using tests of controls and substantive tests. The most important element in determining the level of materiality is the mathematical formula. internal auditors perform IT audits and external auditors perform financial statement audits c. Typically. Which concept is not an integral part of an audit? a. Auditors compare evidence to established criteria. IT audits b. d. evaluation of operational efficiency c. Auditors must maintain independence. ANS: B 18.

control risk b. information is gathered by all of the following methods except a. legal risk c. All of the following are components of audit risk except a. post-audit testing d. ANS: B 24. counting inventory c. observing activities d. counting cash ANS: C 28. inherent risk ANS: B 29. When planning the audit. reviewing systems documentation c. completing questionnaires d. the probability that the auditor will render an unqualified opinion on financial statements that are materially misstated b. Control risk is a. completing questionnaires b. Tests of controls include a. completing questionnaires d. the likelihood that the control structure is flawed because controls are either absent or inadequate to prevent or detect errors in the accounts d. confirming accounts receivable ANS: D 26. detection risk d. observation ANS: A 27. tests of controls c. audit planning ANS: C 25. examining the safety deposit box for stock certificates b. interviewing management c. the risk that auditors are willing to take that errors not detected or prevented by the control structure will also not be detected by the auditor ANS: C . associated with the unique characteristics of the business or industry of the client c. All of the following are steps in an IT audit except a. substantive testing b. Substantive tests include a. confirming accounts receivable b.

c. b. the formal establishment of measurements criteria d. review of the test of the backup power supply c. d. ANS: B 33. The financial statement of an organization reflects a set of management assertions about the financial health of the business. the engagement is designed to conduct risk assessment of the client’s systems to verify their degree of SOX compliance c. that all employees are properly trained to carry out their assigned duties c. review of fire marshal records b. Which of the following is true? a. the engagement is limited to examination. ANS: C 34. IT auditors prepare the audit report if the system is computerized. Inherent risk a. not the reliability of the computer system. inspection of the second site backup b. composition of the disaster recovery team ANS: B 32. that all of the assets and equities on the balance sheet exist b. analysis of the fire detection system at the primary site c. review. In the CBIS environment. auditors gather evidence relating only to the contents of databases. All of the following tests of controls will provide evidence about the physical security of the computer center except a. verification of the second site backup location d. b. Substantive tests establish whether internal controls are functioning properly. All of the following described types of assertions except a. Conducting an audit is a systematic and logical process that applies to all forms of information systems. Attestation services require all of the following except a. d. that all allocated amounts such as depreciation are calculated on a systematic and rational . c. and application of agreed-upon procedures ANS: B 35. observation of procedures surrounding visitor access to the computer center ANS: C 31. exists because all control structures are flawed in some ways. is the likelihood that the auditor will not find material misstatements.30. review of the critical applications list d. is the likelihood that material misstatements exist in the financial statements of the firm. is associated with the unique characteristics of the business or industry of the client. written assertions and a practitioner’s written report b. All of the following tests of controls will provide evidence about the adequacy of the disaster recovery plan except a. that all transactions on the income statement actually occurred d.

A software program that allows access to a system without going through the normal logon procedures is called a a. translates third-generation languages into machine language b. Trojan horse c. worm d. schedules job processing ANS: C 2. install public-domain software from reputable bulletin boards ANS: D 6. Which of the following is considered an unintentional threat to the integrity of the operating system? a. none of the above ANS: B 4. A software program that replicates itself in areas of idle memory until the system fails is called a a. All of the following will reduce the exposure to computer viruses except a. install antivirus software b. assigns memory to applications c. a hardware flaw that causes the system to crash c. grandfather-father-son approach . logic bomb d. logic bomb b. Which backup technique is most appropriate for sequential batch systems? a. install factory-sealed application software c. basis ANS: B Chapter 16—IT Controls Part II: Security and Access MULTIPLE CHOICE 1. the systems programmer accessing individual user files ANS: B 3. Trojan horse b. a virus that formats the hard drive d. The operating system performs all of the following tasks except a. worm c. back door ANS: D 5. authorizes user access d. a hacker gaining access to the system because of a security flaw b. assign and control user passwords d.

ANS: A 9. b. spooling. database authorization table c. the number of backup versions retained depends on the amount of data in the file b. retina prints c. backup files can never be used for scratch files d. Which of the following is not a basic database backup and recovery feature? a. antivirus software b. passwords d. spoofing. processing a transaction file against a maser file creates a backup file c. screening. backups are created using the grandfather-father-son approach b. Which of the following is not an access control in a database system? a. it cannot be reconstructed ANS: C 10. the more significant the data. a. When creating and controlling backups for a sequential batch system. backup database c. off-site backups are not required c. files are backed up immediately before an update run d. signature characteristics ANS: A 12. In a direct access file system a. checkpoint b. transaction log d. Which is not a biometric device? a. remote site. c. the greater the number of backup versions ANS: D 8. password b. Hackers can disguise their message packets to look as if they came from an authorized user and gain access to the host’s network using a technique called a. b. d. direct backup d. voice prints ANS: A 11. voice prints d. intermittent backup ANS: A 7. if the master file is destroyed. dual-homed. staggered backup approach c. database authority table .

vertical parity check d. All of the following are objectives of operating system control except a. reduce the need for other forms of security d. public key encryption d. ANS: D 13. promote personal accountability ANS: C 16. protecting the environment from users ANS: D 14. message sequencing ANS: C 18. selecting passwords that can be easily detected by computer criminals ANS: B 15. message transaction log b. parity bit c. recording passwords in obvious places d. Which control will not reduce the likelihood of data loss due to a line error? a. value added networks can compare passwords to a valid customer file before message . Audit trails cannot be used to a. Security can be compromised by all of the following except a. failure to change passwords on a regular basis b. encryption c. protesting users from each other c. echo check b. data encryption standard c. detect unauthorized access to systems b. Which method will render useless data captured by unauthorized receivers? a. protecting users from themselves d. All of the following techniques are used to validate electronic data interchange transactions except a. request-response technique ANS: A 19. using obscure passwords unknown to others c. facilitate reconstruction of events c. echo check b. protecting the OS from users b. horizontal parity bit ANS: B 17. Which method is most likely to detect unauthorized access to the system? a. vertical parity bit d. Passwords are secret codes that users enter to gain access to systems.

verifying that the security group monitors and reports on fault tolerance violations b. When auditors examine and test the call-back feature. reconciling program version numbers c. incompatible functions have been segregated b. ensuring that authorized users access only those files they need to perform their duties d. the vendor's price list file b. application programs are protected from unauthorized access . In an electronic data interchange environment. comparing job descriptions with access privileges stored in the authority table d. All of the following tests of controls will provide evidence that access to the data files is limited except a. transmission b. verifying that unauthorized users cannot access data files ANS: A 23. prior to converting the message. the recipient's application software can validate the password after the transaction has been processed ANS: D 20. the recipient's application software can validate the password prior to processing d. customers routinely access a. all of the above ANS: D 25. procedures that render intercepted messages useless d. detection and correction of message loss due to equipment failure b. confirming that antivirus software is in use d. All of the following tests of controls will provide evidence that adequate computer virus control techniques are in place and functioning except a. none of the above ANS: A 21. reviewing system maintenance records c. verifying that only authorized software is used on company computers b. confirming that backup procedures are adequate c. they are testing which audit objective? a. attempting to retrieve unauthorized data via inference queries ANS: B 24. prevention and detection of illegal access to communication channels c. Audit objectives for the database management include all of the following except a. the vendor's accounts payable file c. the vendor's open purchase order file d. Audit objectives for communications controls include all of the following except a. the translation software of the receiving company can compare the password against a validation file in the firm's database c. examining the password policy including a review of the authority table ANS: B 22. inspecting biometric controls b.

customers routinely a. In an electronic data interchange environment. c. the policy that permits users to take files home to work on them ANS: D 29. physical security measures are adequate to protect the organization from natural disaster d. Which of the following is not a test of access controls? a. access the vendor's open purchase order file with read-only authority ANS: C 31. translated. all EDI transactions are authorized b. In determining whether a system is adequately protected from attacks by computer viruses. backup procedures are in place and functioning properly ANS: D 28. access the vendor's inventory file with read-only authority d. encryption controls c. the audit trail a. the policy that all software upgrades are checked for viruses before they are implemented c. the policy that current versions of antivirus software should be available to all users d. is a computer resource authority table d. unauthorized trading partners cannot gain access to database records c. all of the following policies are relevant except a. is a printout of all incoming and outgoing transactions b. access the vendor's price list file with read/write authority c. all EDI transactions are authorized b. illegal access to the system is prevented and detected ANS: D 26. access the vendor's accounts receivable file with read/write authority b. when the auditor compares the terms of the trading partner agreement against the access privileges stated in the database authority table. In an Electronic Data Interchange (EDI) environment. backup controls d. consists of pointers and indexes within the database . biometric controls b. a complete audit trail of EDI transactions is maintained d. a complete audit trail is maintained ANS: C 27. unauthorized trading partners cannot gain access to database records c. Audit objectives in the Electronic Data Interchange (EDI) environment include all of the following except a. and processed by the system c. the policy on the purchase of software only from reputable vendors b. authorized trading partners have access only to approved data d. the auditor is testing which audit objective? a. In an electronic data interchange environment. inference controls ANS: C 30. is an electronic log of all transactions received.

all of the above ANS: D 35. database management system. Which of the following deal with transaction legitimacy? a. a system that enforces access control between two networks c. operating system. EDI audit trail d. . All of the following are designed to control exposures from subversive threats except a. special software used to screen Internet access d. access controls c. ANS: B 32. e. data encryption ANS: C 33. b. one-time passwords c. user manual. ANS: D 37. utility system d. Many techniques exist to reduce the likelihood and effects of data communication hardware failure. c. field interrogation d. c. The database attributes that individual users have permission to access are defined in a. Firewalls are a. none of the above ANS: B 36. application listing. special materials used to insulate computer facilities b. An integrated group of programs that supports the applications and facilitates their access to specified resources is called a (an) a. data encryption ANS: C 34. b. e. object system. antivirus software c. hardware access procedures b. database schema. d. transaction authorization and validation b. parity checks d. user view. facility system. firewalls b. One of these is a. operating system.

internal audit participation ANS: A 3. Which control is not a part of the source program library management system? a. Computer Services Function . Routine maintenance activities require all of the following controls except a. program testing c. user involvement d. may take the form of pointers. Which control ensures that production files cannot be accessed without specific permission? a. Which statement is correct? a. assigning a test name to all programs undergoing maintenance c. is a function of the quality and integrity of the application programs d. documentation updates b. testing c. combining access to the development and maintenance test libraries d. traces transactions from their source to their final disposition c. compiled programs are very susceptible to unauthorized modification b. using passwords to limit access to application programs b. Which statement is not correct? The audit trail in a computerized environment a. internal audit approval ANS: D 4. Recovery Operations Function c. Program Changes. indexes. modifications are made to programs in machine code language d. reconciling program version numbers b. assigning version numbers to programs to record program modifications ANS: C 6. the source program library stores application programs in source code form c. and embedded keys ANS: A 2. ANS: A Chapter 17—IT Controls Part III: Systems Development. and Application Controls MULTIPLE CHOICE 1. formal authorization d. consists of records that are stored sequentially in an audit file b. Which control is not associated with new systems development activities? a. the source program library management system increases operating efficiency ANS: B 5. Source Program Library Management System d. Database Management System b.

total payroll checks–$12. The correct purchase order number. is primarily concerned with usability ANS: B 8. control figures in the record may be adjusted during processing e. check digits do not affect processing efficiency d. Which statement is not correct? The goal of batch controls is to ensure that during processing a. contains a hash total d. was incorrectly recorded as shown in the solutions. An example of a hash total is a. an audit trail is created ANS: C 11. check digits are always placed at the end of a data code c. need not be repeated once the system is implemented d. none of the above ANS: C 12. not the full system b. involves individual modules only. requires creation of meaningful test data c.437. Which of the following is correct? a. transactions are free from clerical errors d. records the record count c.315 b. 123456. check digits should be used for all data codes b. 123454 ANS: C 9. Program testing a. transactions are not added c. total number of employees–10 c. transactions are not omitted b. sum of the social security numbers–12. All the above are true ANS: E . 124356 d. check digits are designed to detect transcription and transposition errors ANS: D 10. Which statement is not true? A batch control record a. All of the following are transcription errors except a. 1234567 b.555. ANS: C 7. contains a transaction code b. 12345 c.251 d.

the data entry clerk mistakenly entered 20 items sold. numeric/alphabetic check c. hash total. An inventory record indicates that 12 items of a specific product are on hand. range check d. Which input control check would detect a payment made to a nonexistent vendor? a. check digit ANS: D 14. missing data check ANS: C 17. range check d. Which check would detect this unintentional error? a. validity check. d. spooling check d. reasonableness check b. record count. missing data check ANS: C . numeric/alphabetic data checks b. validity check ANS: D 16. c. range check ANS: D 15. missing data check b. Which of the following is an example of input control test? a. A customer purchased two of the items. Which check is not an input control? a. numeric/alphabetic data check b. The employee entered "40" in the "hours worked per day" field. b. batch total. reasonableness check ANS: B 18.13. sign check c. c. Which check could detect this error? a. limit check c. sequence check b. zero value check c. spooling check d. Which of the following is not an example of a processing control? a. limit check d. but when recording the order.

Which control would prevent this from happening? a. version check d. a transaction log is a temporary file d. header label check b. to ensure that no transaction is omitted ANS: A 21. check digits b. data encryption d. only successful transactions are recorded on a transaction log b. c. A computer operator was in a hurry and accidentally used the wrong master file to process a transaction file. to ensure that all data input is validated b. Which statement is not correct? a. Methods used to maintain an audit trail in a computerized environment include all of the following except a. immediate correction . transaction logs b. c. to ensure that only transactions of a similar type are being processed c.19. Run-to-run control totals can be used for all of the following except a. a hardcopy transaction listing is provided to users ANS: C 24. using a remote printer and incurring operating inefficiencies c. gaining access to the output file and changing critical data values b. making a copy of the output file and using the copy to produce illegal output reports d. Transaction Listings. As a result. the accounts receivable master file was erased. log of automatic transactions ANS: C 22. to ensure the records are in sequence and are not missing d. Limit check. printing an extra hardcopy of the output file ANS: B 23. Which of the following is an example of an input error correction technique? a. validity check ANS: A 20. Risk exposures associated with creating an output file as an intermediate step in the printing process (spooling) include all of the following actions by a computer criminal except a. Input controls include all of the following except a. unsuccessful transactions are recorded in an error file c. spooling check d. expiration date check c. missing data check ANS: C 25.

a cost-benefit analysis was conducted b. Which statement is not true? a. An audit objective for systems maintenance is to verify that user requests for maintenance reconcile to program version numbers. ensure incompatible functions have been identified and segregated ANS: A 29. An audit objective for systems maintenance is to ensure that applications are free from errors. ensure applications are free from error c. When the auditor reconciles the program version numbers. c. the auditor reconciles previously produced output results with production input transactions d. all are examples of input error correction techniques ANS: D 26. All of the following concepts are associated with the black box approach to auditing computer applications except a. ANS: A 28. they are performing a. When auditors do not rely on a detailed knowledge of the application's internal logic. protect applications from unauthorized changes b. black box tests of program controls b. Which test of controls will provide evidence that the system as originally implemented was free from material errors and free from fraud? Review of the documentation indicates that a. tests were conducted at the individual module and total system levels prior to implementation d. creation of error file d. substantive testing d. which audit objective is being tested? a. An audit objective for systems maintenance is to detect unauthorized access to application databases. d. b. the detailed design was an appropriate solution to the user's problem c. An audit objective for systems maintenance is to ensure that the production libraries are protected from unauthorized access. the application need not be removed from service and tested directly b. auditors do not rely on a detailed knowledge of the application's internal logic c. this approach is used for complex transactions that receive input from many sources ANS: D . b. protect production libraries from unauthorized access d. white box tests of program controls c. intuitive testing ANS: A 30. rejection of batch c. problems detected during the conversion period were corrected in the maintenance phase ANS: C 27.

this method causes minimal disruption to the firm's operations c. identify transactions to be analyzed using white box tests. ensuring that passwords are valid c. can be turned on and off by the auditor. updated master files d. All of the following are disadvantages of the test data technique except a. ANS: D 37. c. output reports ANS: A 33. ITF permits ongoing application auditing d. d. the auditor cannot be sure that the application being tested is a copy of the current application used by computer services personnel c. ITF databases contain "dummy" records integrated with legitimate records c. auditors need minimal computer expertise to use this method b. the test transactions b. All of the following are advantages of the test data technique except a. Which test is not an example of a white box test? a. reduce operating efficiency. All of the following statements are true about the integrated test facility (ITF) except a. the auditor cannot be sure that the application being tested is the same application used throughout the entire year d. Generalized audit software packages perform all of the following tasks except . b. preparation of the test data is time-consuming ANS: A 35. may lose their viability in an environment where programs are modified frequently. When analyzing the results of the test data method.31. verifying that all pay rates are within a specified range d. the test data is easily compiled d. the auditor would spend the least amount of time reviewing a. the auditor obtains explicit evidence concerning application functions ANS: C 34. production reports are affected by ITF transactions b. determining the fair value of inventory b. error reports c. ITF does not disrupt operations or require the intervention of computer services personnel ANS: A 36. the test data technique requires extensive computer expertise on the part of the auditor b. reconciling control totals ANS: A 32. Which statement is not true? Embedded audit modules a.

a. compare files and identify differences c. stratify statistical samples d. analyze results and form opinions ANS: D . recalculate data fields b.