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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
b. portfolio management
c. credit
d. general ledger
ANS: D

20. Market research and advertising are part of which business function?
a. materials management
b. finance
c. marketing
d. production
ANS: C

21. Which function manages the financial resources of the firm through portfolio management, banking, credit evaluation,
and cash receipts and disbursements?
a. accounting
b. finance

c. materials management
d. distribution
ANS: B

22. Which of the following is not part of the accounting function?
a. managing the financial information resource of the firm
b. capturing and recording transactions in the database
c. distributing transaction information to operations personnel
d. managing the physical information system of the firm
ANS: D

23. The term “accounting independence” refers to
a. data integrity
b. separation of duties, such as record keeping and custody of physical resources
c. generation of accurate and timely information
d. business segmentation by function
ANS: B

24. In the distributed data processing approach
a. computer services are consolidated and managed as a shared organization resource
b. the computer service function is a cost center
c. the end users are billed using a charge-back system
d. computer services are organized into small information processing units under the
control of end users
ANS: D

25. The data control group is responsible for
a. performing the day-to-day processing of transactions
b. security and integrity of the database
c. liaison between the end user and data processing
d. providing safe storage for off-line data files
ANS: C

26. Data processing does not involve
a. data control
b. computer operations
c. system maintenance
d. data conversion
ANS: C

27. Independent auditing is performed by
a. external auditors
b. internal accountants
c. licensed auditors
d. third-party accountants
ANS: A

28. Which individual is least involved in new systems development?
a. systems analyst
b. external auditor
c. end user
d. data librarian

An appraisal function housed within the organization that performs a wide range of services for management is a. evaluating transaction data c. open access to all data by all users c. software incompatibility d. confidence that all data is current ANS: B 33. difficulty in hiring qualified IT professionals ANS: C 34. elimination of data redundancy b. system is not responsive to the user’s situation ANS: D . all of the above ANS: D 31. cost reductions b. hardware and software incompatibility c. end users d. support for the stewardship function of management b. The objectives of all information systems include all of the following except a. database administration ANS: A 32. Advantages of a database system include all of the following except a. single update for changes in data d. redundancy of tasks c. data control group c. support for the day-to-day operations of the firm d. mismanagement of organizationwide resources b. support for management decision making ANS: B 30. systems professionals c. Disadvantages of the distributed data processing approach include all of the following except a. ANS: D 29. accountants b. improved operational efficiency d. increased user satisfaction ANS: B 35. cost reductions d. Which individuals may be involved in the Systems Development Life Cycle? a. possible mismanagement of organization resources b. external auditing d. internal auditing b. Advantages of distributed data processing include each of the following except a. better management of organization resources c. Disadvantages of distributed data processing include all of the following except a.

relevance b. support for management decision making d. stockholders d. system designers c. Which system produces information used for inventory valuation. purchases/accounts payable . performance reporting. human resources b. and make-buy decisions? a. cost control. system auditors d. sales order processing b. they include all of the above ANS: D 37. All of the following are external end users except a. Which system is not part of the expenditure cycle? a. purchases/accounts payable ANS: C 2. completeness ANS: B 39. creditors c. accuracy d. cost accountants b.36. budgeting. ERP packages include all of the following modules except a. cash disbursements b. furthering the financial interests of shareholders c. system converters ANS: D Chapter 2—Introduction to Transaction Processing MULTIPLE CHOICE 1. inventory management d. Useful information must possess all of the following characteristics except a. support for the firm’s day-to-day operations ANS: B 40. production planning/control d. general ledger c. timelessness c. The objectives of an information system include each of the following except a. Accountants play many roles relating to the accounting information system. payroll c. system users b. tax authorities ANS: A 38. support for the stewardship responsibilities of management b. including all of the following except a.

sales b. cash disbursements d. customer number ANS: A 6. depreciation d. transaction file d. account number c. inventory ANS: A 8. transaction number b. user ANS: B 5. cost accounting ANS: D 3. cash disbursements c. The order of the entries made in the general journal is by a. master file ANS: D 9. c. user d. Which account is least likely to have a subsidiary ledger? a. account number c. The order of the entries made in the ledger is by a. What file is comparable to a journal in a computerized environment? a. accounts receivable c. archive file b. archive file b. sales order c. date b. fixed assets d. remittance advice b. payroll check ANS: A 4. sales b. purchase order d. Which of the following is a turn-around document? a. Subsidiary ledgers are used in manual accounting environments. In general a special journal would not be used to record a. What file is comparable to a subsidiary ledger in a computerized environment? a. date d. transaction file . reference file c. purchases ANS: C 7. A journal is used in manual accounting environments. reference file c.

a sales order b. data flow diagram b. an employee time card c. a sales return receipt ANS: C 13. represent relationships between key elements of the computer system d. and the documents that flow between them and trigger activities c. a list of authorized suppliers would be found in the a. a paycheck d. inform the bank of electronic funds deposits ANS: A 14. inform a customer of the outstanding amount payable c. illustrate the relationship between processes. a file of accounts receivable that have been written off ANS: D 12. d. Which document is not a type of source document? a. In a computerized environment. represent relationships between key elements of the computer system d. Data flow diagrams a. Which type of graphical documentation represents systems at different levels of detail? a. but not who is performing them b. system flowchart d. transaction file c. provide an audit trail for the external auditor d. describe the logic of the process . a sales journal d. Document flowcharts a. depict logical tasks that are being performed. and the documents that flow between them and trigger activities c. Which of the following is an archive file? a. master file ANS: C 10. an accounts payable subsidiary ledger b. reference file d. master file b. program flowchart ANS: A 15. depict logical tasks that are being performed. describe in detail the logic of the process ANS: A 16. illustrate the relationship between processes. serve as a source document b. The most important purpose of a turn-around document is to a. archive file ANS: C 11. document flowchart c. but not who is performing them b. a cash receipts file c.

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

Which symbol represents a data store? a. b. real-time processing c. batch processing using direct access files b. Which symbol represents accounting records? a. d.24. source document b. master document d. b. c. batch processing using sequential files d. turn-around document c. ANS: B 27. Which method of processing does not use the destructive update approach? a. . Which symbol represents a manual operation? a. all of the above use the destructive update approach ANS: C 26. ANS: D 28. All of the following can provide evidence of an economic event except a. product document ANS: C 25. c. d.

d. ANS: B 30. ANS: A 29. c. b. Which symbol represents a document? a. c. Which symbol represents a magnetic tape (sequential storage device)? a. c. b. d. . d. b.

vendor payments c. sales order processing d. reading record 100 requires first reading records 1 to 99 ANS: D 35. b. retained earning information c. Which accounting application is least suited for batch processing? a. Real-time processing would be most beneficial in handling a firm’s a. d. time frame b. Which symbol represents a decision? a. data is stored on tape b. payroll . fixed asset records b. depreciation records ANS: C 36. a master file c. efficiency of processing ANS: C 33. access is achieved through an index c. general ledger b. ANS: D 31. an archive file ANS: A 34. The characteristics that distinguish between batch and real-time systems include all of the following except a. file format d. access is direct d. a reference file b. Sequential storage means a. A file that stores data used as a standard when processing transactions is a. ANS: A 32. c. merchandise inventory d. resources used c. a transaction file d.

Which accounting application is best suited for batch processing? a. Which ethical principle states that the benefit from a decision must outweigh the risks. ANS: C 37. Operational efficiencies can be improved by a. c. permitting computer operators unlimited access to the computer room c. accounts unique to many concurrent transactions need to be updated in real time. theoretical computer ethics d. pop computer ethics c. informed consent d. providing correct data to unauthorized individuals . permitting access to data by unauthorized individuals d. None of the above are true statements ANS: B 39. justice c. Fraud. b. Operational inefficiencies occur because a. and Internal Control MULTIPLE CHOICE 1. practical computer ethics ANS: A 3. accounts both common and unique to many concurrent transactions need to be updated in real time. general ledger b. and that there is no alternative decision that provides the same or greater benefit with less risk? a. minimize risk b. Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved in which level of computer ethics? a. updating accounts both common and unique to many concurrent transactions in real time. vendor payments c. updating accounts unique to many concurrent transactions in real time and updating common accounts in batch mode. d. updating accounts both common and unique to many concurrent transactions in batch mode. d. c. proportionality ANS: D 2. accounts common to many concurrent transactions need to be updated in real time. payroll ANS: D 38. releasing incorrect data to authorized individuals b. sales order processing d. All of the following are issues of computer security except a. para computer ethics b. None of the above are true statements ANS: C Chapter 3—Ethics. b.

poor judgment b. creating a false transaction ANS: A 9. possibility of exact replication c. intent to deceive d. delete. Who is responsible for establishing and maintaining the internal control system? a. or insert values ANS: B 10. lack of segregation of duties c. applying cash receipts to a different customer’s account in an attempt to conceal previous thefts of funds b. Which of the following best describes lapping? a. altering program logic to cause the application to process data incorrectly b. ease of dissemination ANS: C 5. expensing an asset that has been stolen d. involves the direct conversion of cash or other assets to the employee’s personal benefit d. Which characteristic is not associated with software as intellectual property? a. creating illegal programs that can access data files to alter. uniqueness of the product b. involves misappropriating assets in a series of complex transactions involving third parties ANS: C 7. misusing the firm’s computer resources c. destroying or corrupting a program’s logic using a computer virus d. injury or loss ANS: A 6. involves misstating financial statements c. a gambling addiction b. the accountant c. ANS: B 4. automated monitoring to detect intruders d. inflating bank balances by transferring money among different bank accounts c. Operations fraud includes a. is perpetrated at a level to which internal controls do not apply b. centralized decision making environment d. all of the following conditions are required except a. For an action to be called fraudulent. false representation c. Forces which may permit fraud to occur do not include a. the external auditor . One characteristic of employee fraud is that the fraud a. questionable integrity of employees ANS: C 8. the internal auditor b. management d.

The bank reconciliation uncovered a transposition error in the books. A physical inventory count is an example of a a. This is an example of a a. Which of the following is a preventive control? a. accounting control c. the cost of an internal control should be less than the benefit it provides b. none of the above ANS: A 16. credit check before approving a sale on account b. corrective control ANS: A 14. preventive control b. The concept of reasonable assurance suggests that a. detective control c. detective control d. preventive control b. corrective control d. the objectives achieved by an internal control system vary depending on the data processing method d. fraud occurs because of collusion between two employees c. detective control c. the industry is inherently risky d. corrective control d. comparing the accounts receivable subsidiary ledger to the control account ANS: A 15. preventive control b. bank reconciliation c. ANS: C 11. the effectiveness of internal controls is a function of the industry environment ANS: A 12. physical inventory count d. none of the above ANS: B . detective control c. A well-designed purchase order is an example of a a. preventive control b. errors are made due to employee fatigue b. management instructs the bookkeeper to make fraudulent journal entries ANS: C 13. feedforward control ANS: B 17. corrective control d. The most cost-effective type of internal control is a. a well-designed system of internal controls will detect all fraudulent activity c. Which of the following is not a limitation of the internal control system? a.

an effective accounting system performs all of the following except a. the internal audit group reports to the audit committee of the board of directors b. organizational structure of the firm c. there are questions about the integrity of management d. Which of the following is not an internal control procedure? a. the functioning of the board of directors and the audit committee ANS: C 20. Segregation of duties in the computer-based information system includes a. to enable the firm to function more efficiently ANS: C 24. Which of the following indicates a strong internal control environment? a. there is no segregation of duties between organization functions c. well-designed documents and records d. self interest c. In balancing the risks and benefits that are part of every ethical decision. records all financial transactions promptly ANS: C 23. monthly reports comparing actual performance to budget are distributed to managers c. management philosophy and operating style b. to prevent the record keeper from authorizing transactions d. According to SAS 78. records financial transactions in the appropriate accounting period c. Which of the following is not an element of the internal control environment? a. Which of the following suggests a weakness in the internal control environment? a. authorization . Which of the following is the best reason to separate duties in a manual system? a. separates the duties of data entry and report generation d. separating the programmer from the computer operator b. risk minimization d. performing independent verifications by the computer operator ANS: A 25. the firm has an up-to-date organizational chart b. to avoid collusion between the programmer and the computer operator b. identifies and records all valid financial transactions b. managers receive guidance from each of the following except a. the audit committee meets quarterly with the external auditors ANS: C 21.18. proportionality ANS: B 19. to ensure that supervision is not required c. preventing management override c. performance evaluations are prepared every three years d. justice b. adverse business conditions exist in the industry ANS: A 22. separating the inventory process from the billing process d.

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

theft or illegal use of computer-readable information b. accounting records c. theft. accuracy. or misappropriation of printer supplies ANS: D 34. segregation of duties b. economic extortion ANS: B 39. or misappropriation of assets by altering computer-readable records and files d. and conciseness d. accounting records d. timeliness. independent verification c. accuracy. both a and b d. and completeness c. supervision ANS: B 36. timelessness. how managers decide on what is right in conducting business b. and completeness b. none of the above ANS: C 37. segregation of duties b. summarization. The office manager forgot to record in the accounting records the daily bank deposit. accuracy. accounting system d. bribery b. summarization. misuse. disaggregation. timeliness. relevance. The characteristics of useful information include a. gratuities c. including each of the following except a. conflict of interest d. All of the following are conditions for fraud except a. and completeness . material reliance ANS: D 38. Which control procedure would most likely prevent this irregularity? a. summarization. injury or loss c. The four principal types of fraud include all of the following except a. When certain customers made cash payments to reduce their accounts receivable. intent d. Business ethics involves a. relevance. relevance. relevance. how managers achieve what they decide is right for the business c. or misappropriation of computer equipment c. misuse. Which control procedure would most likely prevent or detect this error? a. ANS: B 33. false representation b. Computer fraud can take on many forms. theft. theft. access controls ANS: A 35. timeliness. accuracy. the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. misuse.

Which of the following benefits is least likely to occur? a. Conflicts of interest b. some assurance that important documents and records are protected. The revenue cycle consists of a. and cash receipts ANS: B . management override d. Which of the following situations is not a segregation of duties violation? a. Which of the following is not an issue to be addressed in a business code of ethics required by the SEC? a. some assurance of compliance with the Foreign Corrupt Practices Act of 1977. These include a. d. Internal control system have limitations. ANS: B 42. possibility of honest error b. e. The warehouse clerk. The department time clerk is given the undistributed payroll checks to mail to absent employees. stability of systems ANS: D 41. Management can expect various benefits to follow from implementing a system of strong internal control. credit authorization. ANS: A 40. d. prevents employee collusion to commit fraud. Full and Fair Disclosures c. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine. The sales manager has the responsibility to approve credit and the authority to write off accounts. c. c. Legal Compliance d. b. b. selects the vendor and authorizes purchases when inventories are low. three subsystems–sales order processing. ANS: B 43. two subsystems–order entry and inventory control d. availability of reliable data for decision-making purposes. one subsystem–order entry b. who has the custodial responsibility over inventory in the warehouse. circumvention c. reduced cost of an external audit. e. Internal Reporting of Code Violations e. two subsystems–sales order processing and cash receipts c. All of the above are issues to be addressed ANS: E Chapter 4—The Revenue Cycle MULTIPLE CHOICE 1. 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.

Copies of the sales order can be used for all of the following except a. credit authorization c. inventory records are reduced for the goods shipped ANS: C 3. the goods shipped match the goods ordered d. record the reduction of inventory ANS: D 9. the customer is billed for the exact quantity shipped c. respond to customer queries b. ship the customer order d. The purpose of the sales invoice is to a. authorize the warehouse clerk to release custody of the inventory to shipping d. record any out-of-stock items c. packing slip ANS: A 6. The shipping notice a. The reconciliation that occurs in the shipping department is intended to ensure that a. shipping department c. authorize customer credit ANS: A 8. the journal voucher ANS: B 5. transfer goods from seller to shipper c. The stock release copy of the sales order is not used to a. credit has been approved b. The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in the a. locate and pick the items from the warehouse shelves b. shipping notice d. the sales order b. the customer purchase order c. select items from inventory for shipment ANS: C 7. inventory control department ANS: D 4. bill the customer d. record reduction of inventory b. is mailed to the customer b. warehouse b.2. fill the customer order c. billing department d. the sales invoice d. The customer open order file is used to a. is a formal contract between the seller and the shipping company . purchase order b. Which document triggers the revenue cycle? a.

updating the inventory subsidiary records b. authorizing credit and determining reorder quantities c. notifying accounts receivable of the sale d. Usually specific authorization is required for all of the following except a. sending the invoice to the customer ANS: A 11. Which of following functions should be segregated? a. Which situation indicates a weak internal control structure? a. recording the sale in the sales journal c. write off of an uncollectible account receivable ANS: B 13. the warehouse clerk obtains a signature before releasing goods for shipment d. the backordered goods are shipped c. The most effective internal control procedure to prevent or detect the creation of fictitious credit memoranda for sales returns is to a. Which procedure will not detect this fraud? a. prenumber and sequence check all invoices b. supervise the accounts receivable department b. the mailroom clerk authorizes credit memos b. the customer purchase order is received b. c. The billing department is not responsible for a. is always prepared by the shipping clerk d. reconcile the accounts receivable control to the accounts receivable subsidiary ledger . customers are not billed for backorders because a backorder is a lost sale ANS: B 12. sales of goods at the list price c. a cash refund for goods returned without a receipt d. maintaining the subsidiary ledgers and handling customer queries d. the record keeping clerk maintains both accounts receivable and accounts payable subsidiary ledgers c. prenumber and sequence check all credit memoranda d. the accounts receivable clerk prepares customer statements every month ANS: A 15. opening the mail and making the journal entry to record cash receipts b. sales on account which exceed the credit limit b. limit access to credit memoranda c. Customers should be billed for backorders when a. the original goods are shipped d. 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. require management approval for all credit memoranda ANS: D 16. informs the billing department of the quantities shipped ANS: D 10. providing information on inventory levels and reconciling the bank statement ANS: A 14.

The best internal control to detect this error is a. using the original sales invoice to prepare the sales returns slip ANS: A 22. segregate custody of inventory from record keeping d. none of the above will detect this error ANS: A 23. billing d. warehouse c. Internal controls for handling sales returns and allowances do not include a. c. stock release form c. segregate record keeping duties of general ledger from accounts receivable ANS: B 21. all sales are recorded c. computing bad debt expense using the percentage of credit sales b. Which control does not help to ensure that accurate records are kept of customer accounts and inventory? a. Which document is included with a shipment sent to a customer? a. credit is authorized d. packing slip d. shipping notice ANS: C 19. sales invoice b. authorizing the credit memo by management d. authorize credit c. prepare monthly customer statements d. sales b. shipping . accounts payable c. verifying that the goods have been returned c. all sales are profitable b. inventory to be shipped is not stolen ANS: A 20. Which department is least likely to be involved in the revenue cycle? a. Good internal controls in the revenue cycle should ensure all of the following except a. Which department prepares the bill of lading? a. credit b. reconcile total sales on account to the debits in the accounts receivable subsidiary ledger ANS: C 17. a batch total of sales invoices to be prepared compared to the actual number of sales invoices prepared b. sequentially numbered sales invoices c. shipping ANS: B 18. The printer ran out of preprinted sales invoice forms and several sales invoices were not printed. reconcile accounts receivable control to accounts receivable subsidiary b. visual verification that all sales invoices were prepared d.

selling price b. A remittance advice is a. segregation of duties is not possible b. EDI trading partner agreements specify all of the following except a. quantities to be sold c. accounts receivable b. transfer of information among modules occurs automatically c. current inventory information is available c. payment terms d. a document returned by customers with their payments c. general ledger c. batch processing is not an option d. the cash cycle is lengthened b. the cash prelist with remittance advices c. is retained by the customer to show proof of payment d. a document that records sales returns and allowances b. credit ANS: C 24. Commercial accounting systems have fully integrated modules. At which point is supervision most critical in the cash receipts system? a. none of the above ANS: D 29. cash receipts ANS: C 27. journal vouchers from accounts receivable and general ledger ANS: A 26. The word “integrated” means that a. A cash prelist is a. is a turn-around document c. separate entries are made in the general ledger accounts and the subsidiary ledgers ANS: B . the source of information used to prepare monthly statements d. d. bank deposit slips with remittance advices d. the cash prelist with bank deposit slips b. mail room d. used to increase (debit) an account receivable by the cash received b. An advantage of real-time processing of sales is a. none of the above ANS: B 25. hard copy documents provide a permanent record of the transaction d. person to authorize transactions ANS: D 28. A weekly reconciliation of cash receipts would include comparing a. data entry errors are corrected at the end of each batch ANS: B 30.

batch. sales history file c. sequential file processing b. none of the above ANS: C 36. Which journal is not used in the revenue cycle? a. the customer’s check b. reliance on paper documentation is increased b. sales journal c. The data processing method that can shorten the cash cycle is a. credit memo file b. shipping report file d. prepares credit memos when goods are returned b. total increases to accounts receivable b. Which of the following is not a risk exposure in a microcomputer accounting system? a. none of the above ANS: C 32.31. the remittance advice that accompanies payment d. cash receipts journal b. cost data reference file ANS: D 38. real-time file processing d. approves credits to accounts receivable when payments are received c. Adjustments to accounts receivable for payments received from customers is based upon a. batch. the cash prelist c. direct access file processing c. a memo prepared in the mailroom ANS: C 37. The revenue cycle utilizes all of the following files except a. backup procedures require human intervention d. general journal ANS: C 34. functions that are segregated in a manual environment may be combined in a microcomputer accounting system c. Periodically. purchases journal d. All of the following are advantages of real-time processing of sales except . total of all sales d. total decreases in inventory ANS: B 35. The credit department a. total of all sales backorders c. authorizes the granting of credit to customers d. the general ledger department receives all of the following except a. data are easily accessible ANS: A 33.

record receipt of goods from vendors c. Paper work is reduced c. general ledger ANS: D 4. The cash cycle is shortened b. record receipt of goods from vendors c. authorize the purchasing department to order goods d. the quality of items a vendor ships b. The purpose of the purchase requisition is to a. Incorrect data entry is difficult to detect d. quantity. bill for goods delivered ANS: B 3. approve payment for goods received ANS: A 5. the orders that have not been received d. and price c. is approved by the end-user department . The purpose of the receiving report is to a. record receipt of goods from vendors c. indicates item description. order goods from vendors b. The open purchase order file in the purchasing department is used to determine a. The purchase order a. authorize the purchasing department to order goods d. is prepared by the inventory control department d. bill for goods delivered ANS: C 2. the receiving department c. authorize the purchasing department to order goods d. order goods from vendors b. the purchasing department b. All of the following departments have a copy of the purchase order except a. The purpose of the purchase order is to a. accounts payable d. the quantity of items received ANS: C 6. a. is the source document to make an entry into the accounting records b. Up-to-date information can provide a competitive advantage in the marketplace ANS: C Chapter 5—The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures MULTIPLE CHOICE 1. the best vendor for a specific item c. order goods from vendors b.

accounts payable d. The reason that a blind copy of the purchase order is sent to receiving is to a. advise the purchasing department of the dollar value of the goods delivered c. advise the vendor that the goods arrived safely ANS: A 9. packing slip b. adjust perpetual inventory records b. receiving report d. purchasing c. quantity. purchase requisition c. supplier’s invoice ANS: A 12. Which document is least important in determining the financial value of a purchase? a. The receiving report is used to a. inventory control b. which document usually triggers the recording of a liability? . require that the goods delivered are inspected ANS: B 8. purchase requisition b. it is used to a. analyze the receiving department’s process d. cash disbursements ANS: C 13. receiving report d. cash disbursements ANS: A 14. inventory control b. record the physical transfer of inventory from receiving to the warehouse c. supplier’s invoice ANS: D 11. accompany physical inventories to the storeroom or warehouse b. inform receiving of the type. When purchasing inventory. authorization for the purchase of inventory is the responsibility of a. ANS: B 7. purchasing c. recognize the purchase order as closed ANS: D 10. purchase order c. authorization for the payment of inventory is the responsibility of a. and price of items to be delivered d. The financial value of a purchase is determined by reviewing the a. In a merchandising firm. force a count of the items delivered c. advise general ledger of the accounting entry to be made d. In a merchandising firm. accounts payable d. When a copy of the receiving report arrives in the purchasing department. inform receiving when a shipment is due b.

transaction date ANS: B 17. reconcile the inventory control account with the inventory subsidiary summary ANS: C 19. vendor b. The cash disbursement clerk performs all of the following tasks except a. by the end of the month ANS: C 21. cash disbursements should arrive at the vendor’s place of business a. post the account summary from inventory control c. Which of the following statements is not correct? a. a supplier’s invoice ANS: A 20. a. none of the above ANS: A 16. the sum of the paid vouchers represents the voucher payable liability of the firm c. many firms replace accounts payable with a voucher payable system ANS: B 18. purchase order number d. the voucher system permits the firm to consolidate payments of several invoices on one voucher d. post the journal voucher from the accounts payable department b. the voucher system is used to improve control over cash disbursements b. purchase order c. post the journal voucher from the purchasing department d. In the expenditure cycle. liabilities are usually overstated c. a receiving report d. supplier’s invoice ANS: D 15. Usually the open voucher payable file is organized by a. liabilities are usually understated b. To maintain a good credit rating and to optimize cash management. general ledger does not a. liabilities are usually correctly stated d. a check b. reviews the supporting documents for completeness and accuracy . receiving report d. a purchase order c. The documents in a voucher packet include all of the following except a. as soon as possible b. on the discount date d. Because of time delays between receiving inventory and making the journal entry a. payment due date c. on the due date c. purchase requisition b.

goods are accepted without a physical count b. inspect shipments received b. the purchase requisition file b. purchasing c. purchasing b. the audit trail is destroyed ANS: D 28. adequate supervision is most critical in a. Authorization for payment of an accounts payable liability is the responsibility of a. b. safeguard goods until they are transferred to the warehouse ANS: C 27. accounts payable and accounts receivable d. The receiving department is not responsible to a. marks the supporting documents paid ANS: C 22. the accountant would search all of the files except a. warehouse from inventory control c. accounts payable d. When searching for unrecorded liabilities at the end of an accounting period. accounts payable d. the purchase order file . Of the following duties. the cash receipts file c. the income statement is changed c. prepares checks c. inventory control b. When a cash disbursement in payment of an accounts payable is recorded a. it is most important to separate a. receiving c. inventories are not secured on the receiving dock d. there is no inspection for goods damaged in shipment c. In a firm with proper segregation of duties. count items received from vendors c. purchasing and accounts receivable ANS: B 25. general ledger ANS: B 26. order goods from vendors d. the liability account is increased b. the cash account is unchanged d. cash disbursements ANS: C 24. warehouse from stores b. the liability account is decreased ANS: D 23. signs checks d. The major risk exposures associated with the receiving department include all of the following except a.

In regards to the accounts payable department. receiving report . purchase order b. determine the quantity of goods received c. purchasing agents will be discouraged from improperly ordering inventory from related parties b. the computer system ANS: D 31. Goods received are inspected and counted to a. the receiving report provides evidence of the physical receipt of the goods d. preclude payment for goods not received or received in poor condition d. the purchase requisition shows that the transaction was authorized b. checks over a certain dollar amount manually signed by the cash disbursements clerk ANS: C 33. The document which will close the open purchase requisition file is the a. vendor invoice c. all of the above ANS: D 35. the most competitive price will be obtained d. the risk of purchasing agents receiving kickbacks and bribes will be reduced ANS: C 32. d. Firms can expect that proper use of a valid vendor file will result in all of the following benefits except a. In a computerized system that uses an economic order quantity (EOQ) model and the perpetual inventory method. the purchasing department c. receiving report d. the inventory control clerk b. the purchase order proves that the purchase was required c. inventory records can be updated from the a. the supplier’s invoice indicates the financial value of the transaction ANS: B 30. determine that the goods are in good condition b. If a company uses a standard cost system. all checks manually signed by the treasurer b. which statement is not true? a. all checks signed by check-signing equipment c. the best and most practical control over cash disbursements is to have a. the receiving report file ANS: B 29. checks over a certain dollar amount manually signed by the treasurer d. the vendor d. who determines when to reorder inventory? a. purchase order c. In a real-time processing system with a high number of transactions. purchases from fictitious vendors will be detected c. none of the above ANS: C 34. vendor invoice b.

purchase requisition ANS: A 37. none of the above ANS: C 40. labor distribution form ANS: B 2. An important reconciliation in the payroll system is . inventory records can first be updated from the a. time card b. d. job ticket c. accounts payable ANS: C 38. A supplier invoice a. shows what was ordered even if all was not shipped c. receiving c. part of the general ledger department ANS: C Chapter 6—The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures MULTIPLE CHOICE 1. general ledger d. If a company uses an actual cost system. inventory control b. The document that captures the total amount of time that individual workers spend on each production job is called a a. vendor invoice b. is sent to general ledger d. an independent accounting function c. purchase order c. is used to update the actual cost inventory ledger b. receiving report d. accompanies the goods to the storeroom c. is sent by vendor to accounts payable d. personnel action form d. is included with the goods b. Copies of a purchase order are sent to all of the following except a. part of accounts payable b. The cash disbursement function is a. a treasury function d. The receiving report a. purchase requisition ANS: C 36. is returned to the vendor to acknowledge receipt of the goods ANS: B 39.

Which internal control is not an important part of the payroll system? a. review of the assumptions used in the capital budgeting model c. Accounts payable verifies the accuracy of the payroll register before transferring payroll funds to the general checking accounting. results in book value approximating fair market value ANS: B 6. Supervisors verify the accuracy of employee time cards. estimates of anticipated cost savings ANS: C 8. sale of company van ANS: C 5. personnel compares the number of employees authorized to receive a paycheck to the number of paychecks prepared c. production compares the number of hours reported on job tickets to the number of hours reported on time cards d. the depreciation method being used d. general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable b. General ledger reconciles the labor distribution summary and the payroll disbursement voucher. computing gain and/or loss on disposal of fixed assets d. the location of the asset ANS: A 7. allocates the cost of the asset over its useful life c. Depreciation records include all of the following information about fixed assets except a. payroll compares the labor distribution summary to the hours reported on time cards ANS: A 3. is recorded weekly d. the economic benefit of purchasing the asset b. ANS: C 4. maintaining a record of the fair market value of all fixed assets ANS: D . formal analysis of the purchase request b. improvement of equipment c. Paychecks are distributed by an independent paymaster. the cost of the asset c. Which control is not a part of the Fixed Asset System? a. c. purchase of raw materials d. Depreciation a. Which transaction is not processed in the Fixed Asset System? a. purchase of building b. Objectives of the Fixed Asset System do not include a. a. b. is calculated by the department that uses the fixed asset b. authorizing the acquisition of fixed assets b. development of an economic order quantity model d. d. recording depreciation expense c.

Paychecks are distributed by the employees immediate supervisor. b. Where does the responsibility lie for reconciling the labor distribution summary and the payroll disbursement voucher? a. Routine payroll processing begins with the submission of time cards. Acquisition cost is allocated over the expected life of the asset. which function should distribute paychecks? a. Personnel is responsible for updating employee records. Transfer of fixed assets among departments is recorded in the fixed asset subsidiary ledger. Acquisitions are routine transactions requiring general authorization. Which of the following statements is not true? a. Which of the following statements is not correct? a. c. Which department is responsible for approving changes in pay rates for employees? a. d. personnel d. employees use time cards and job tickets. b. ANS: B 13. c. Which of the following is not a characteristic of the Fixed Asset System? a. cash disbursements ANS: C 15. Payroll clerks must verify the hours reported on the time cards. including creation of records for new hires. cost accounting c. paymaster d. so an employee may have more that one job ticket on a given day. c. Paychecks should be prepared from the job tickets. Cash disbursements signs paychecks and forwards them to the paymaster for distribution. general ledger ANS: D 12. Retirements are reported on an authorized disposal report form. d. In a manufacturing firm. ANS: D 14. Timekeeping is independent of the payroll department. ANS: A 10. treasurer c. d. payroll b. timekeeping c. personnel b. payroll ANS: C 11. Which of the following situations represents a serious control weakness? a. personnel d. In the payroll subsystem. An individual employee will have only one time card. Job tickets are prepared by employees for each job worked on. 9. Time cards are reconciled with job tickets. Payroll reconciles personnel action forms with time cards and prepares paychecks. b. b. c. The time reported on job tickets should reconcile with the time reported on time cards. ANS: B . d. cash disbursements b.

Fixed asset records show the location of each asset. time cards b. to prevent an absent employee’s check from being lost c. job tickets c. to detect a “phantom employee” for whom a check was produced b. Fully depreciated assets are immediately disposed of. Accounting records that provide the audit trail for payroll include all of the following except a. job tickets d. Payroll uses time card data to do all of the following except a. Proper authorization is required for acquisition and disposal of fixed assets. d. Payroll checks are typically drawn on a. update employee payroll records c. verifying pay rates for employees c. the regular checking account b. Why would an organization require the paymaster to deliver all unclaimed paychecks to the internal audit department? a. c. time cards b. Cost accounting updates work-in-process accounts from a. Personnel actions forms are used to do all of the following except a. prepare the payroll register b. Depreciation policies are in writing. payroll register d. the labor distribution summary c. prepare paychecks ANS: C 20. prepare the labor distribution summary d. informing payroll of new hires d. to prevent the paymaster from cashing unclaimed checks ANS: A 17. activate new employees . a payroll imprest account c. b.16. The personnel action form provides authorization control by a. accounts payable register ANS: D 23. Which of the following is not a reasonable control for fixed assets? a. ANS: C 18. a wages payable account d. all of the above ANS: D 22. to avoid paying absent employees for payday d. personnel action forms ANS: C 19. petty cash ANS: B 21. preventing paychecks for terminated employees b.

time card b. The payroll department performs all of the following except a. the supervisor taking role during the shift c. paychecks being distributed by an independent paymaster d. repair of production equipment d. personnel action form ANS: C 26. reconciliation of time cards and job tickets ANS: C 27. prepares the payroll voucher c. record hours worked d. prepares the payroll register b. a security camera viewing the time clock b. purchase of raw materials c. The payroll department performs all of the following except a. prepares paychecks ANS: B 25. updates employee payroll records d. maintains depreciation records c. A control technique that can reduce the risk of a terminated employee being paid is a. updates employee payroll records d. prepares paychecks b. sale of unneeded equipment b. prepares the payroll register . The Fixed Asset System performs all of the following except a. Accounts payable a. labor distribution summary d. 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. change pay rates ANS: C 24. determines the need for new assets b. job ticket c. transfers adequate funds to the payroll imprest account c. distributes paychecks to employees ANS: B 28. signs paychecks b. distributes paychecks c. tracks the physical location of fixed assets ANS: A 30. b. terminate employees c. reconciles time cards and employee records d. purchase of a new plant ANS: B 29. records retirement and disposal of assets d.

the recording of periodic depreciation b. none of the above ANS: C 33. records acquisition of assets b. a world-class company has a flat organizational structure ANS: B 2. The Fixed Asset Systems does all of the following except a. is the responsibility of the department using the asset ANS: C 32. all of the above ANS: D 34. Which item does not describe a world-class company? a. world-class companies work in cross-functional teams d. both a and b d. Which subsystem is not a part of the production system? . requires no special authorization c. assures that assets are reported at fair market value b. The Fixed Asset System is similar to the expenditure cycle except a. is discretionary for many firms c. estimates the fair market value of assets in service d. Asset maintenance involves a. the goal of a world-class company is to delight its customers b. records the disposal of assets ANS: C 35. keeping track of the physical location of the assets d. fixed assets are capitalized. automatically initiates the purchase of a replacement asset d. occurs as soon as an asset is fully depreciated b. fixed asset transactions are non-routine and require special authorization and controls b. records improvements to assets c. customers in a world-class company are external departments only c. not expensed c. Asset disposal a. Depreciation a. must follow formal authorization procedures ANS: D Chapter 7—The Conversion Cycle MULTIPLE CHOICE 1. adjusting the asset records to reflect the cost of physical improvements c. ANS: B 31. allocates the cost of an asset over its useful life d.

determining raw material requirements c. continuous process d. authorizing work to be performed d. authorize release of raw materials c. specifies the materials and production required for each batch . a description of the type and quantity of raw materials and subassemblies used to produce a single unit of finished product d. monitoring the flow of cost information related to production ANS: D 3. raw material inventory levels c. is the formal plan and authority to begin production b. all of the above ANS: B 6. wedding invitations b. last year’s production level b. An example of a continuous process is the production of a. A move ticket a. jet aircraft d. All of the following are characteristics of batch processing except a. the sequence of operations during manufacturing ANS: B 9. setting up and retooling is required for different batches ANS: B 7. batches are produced in accordance with detailed customer specifications c. make-to-order process c. batch process b. none of the above ANS: C 5. direct the movement of work-in-process d. the standard cost of the item d. batches are produced to replenish depleted inventory levels d. the formal plan and authority to begin production c. When determining which items to produce. a firm must know a. Which process creates a homogeneous product through a continuous series of standard procedures? a. the expected demand for the firm’s finished goods for a given year b. milk products c. The production schedule is a. produce information for inventory valuation b. directing the movement of work through the process b. the sales forecast ANS: D 8. determine material requirements ANS: A 4. The purpose of the cost accounting system is to a. a. each item in the batch is similar b.

provides production planning and control with the inventory status report of finished goods b. What is the economic order quantity if the annual demand is 10. updates the raw material inventory records c. 480 units . 52 units b. 245 d. mathematical weaknesses of the Economic Order Quantity model b. work order d. c. lead time is known and is constant d. Firms hold safety stock to compensate for a. there are no quantity discounts ANS: B 14. 174 b. documents the return to raw materials inventory of unused production materials ANS: B 11. 48 units c. authorizes the storekeeper to release materials to work centers ANS: C 10. the reorder point is a. records the completed production as an increase to finished goods inventory ANS: C 12. If the daily demand is 40 units and the lead time is 12 days. 123 c. materials requisition c. total cost per year of placing orders is fixed c. Which of the following is not an assumption of the Economic Order Quantity model? a. fluctuations in carrying costs d. set up cost of placing each order is $3 and the holding cost per unit per year is $2? a. The internal control significance of the excess materials requisition is that it a. bill of materials ANS: B 13. demand for the product is known with certainty b. production schedule b. uncertainty in the estimation of ordering costs ANS: B 15. Inventory control performs all of the following tasks except it a. The storekeeper releases raw materials based on the a. prepares a materials requisition for each production batch d. indicates the amount of material released to work centers b.000 units. identifies materials used in production that exceed the standard amount allowed c. records the work done in each work center d. none of the above ANS: A 16. indicates the standard quantities required for production d. variations in lead time or daily demand c.

production planning and control is located apart from the work centers b. business process support c. human resources b. cost accounting updates the cost record with data gathered from the materials requisition c. Which situation violates the segregation of functions control procedure? a. using Computer Numerical Controlled machines which stand alone within a traditional setting b. revenue generation d. d. Which of the following is not a category of critical success factors in most manufacturing companies? a. completely automating the manufacturing environment . calculation and analysis of direct material and direct labor variances b. none of the above ANS: C 17. strategic d. materials requirements planning c. automated storage and retrieval systems d. cost accounting has custody of and makes entries on cost records d. Process simplification focuses on a. general ledger creates a new cost record upon receipt of a work order from production planning and control b. product quality b. customer service c. computer aided design ANS: B 20. Which statement is not correct? a. retention of excess materials by work centers c. All of the following are internal control procedures that should be in place in the conversion cycle except a. inventory control maintains custody of inventory items c. cost accounting computes variances and applies overhead to individual cost records ANS: A 18. Computer integrated manufacturing groups all of the following technologies except a. The SAP R/3 system provides pre-defined modules to support business processes in the all of the following categories except a. financial ANS: C 21. robotics b. limited access to raw material and finished goods inventories ANS: B 23. physical count of inventory items on hand d. work centers record direct labor on job tickets ANS: B 22. general ledger posts summary information about the manufacturing process based on a journal voucher prepared by cost accounting d. resource management ANS: C 19.

process simplification c. camouflage production problems d. The cost of poor quality includes all of the following except a. is organized along functional lines . robotics ANS: A 26. c. Computer Integrated Manufacturing d. A flexible manufacturing system a. Materials Requirements Planning d. proceeds from the sale of scrap ANS: D 30. shortens the physical distance between activities d. Computer Aided Engineering b. push manufacturing b. cost of rework b. reduced setup time and small lot sizes d. reliable vendors ANS: A 29. Characteristics of Just-In-Time manufacturing include all of the following except a. Computer Numerical Control ANS: C 27. zero defects c. leads to an “us” versus “them” attitude among workers c. determine the optimum inventory level using the EOQ model c. Automated Storage and Retrieval Systems c. ensure overproduction of inventory ANS: A 28. An example of automation of manufacturing design is a. A manufacturing process that is organized into group technology cells utilizing no human labor is called a. Computer Aided Engineering b. Firms implement a Just-In-Time inventory approach to a. creates bottlenecks in the process b. reduce investment in inventories b. reducing the complexity of the physical manufacturing layout of the shop floor d. An example of automation of manufacturing planning is a. warranty claims c. Automated Storage and Retrieval Systems c. scheduling delays d. organizing the process into functional departments ANS: C 24. traditional manufacturing ANS: C 25. Computer Numerical Control d. islands of technology b.

identification of cost drivers d. information reporting a. cost objects create a demand for activities ANS: B 33. an activity driver is a means to measure the activity used by the cost object b. inaccurate cost allocations c. an emphasis on financial performance b. it recognizes the importance of direct labor as a component of total manufacturing cost d. presents detailed information about activities c. production schedule b. ANS: C 31. materials requisition d. the dollar value of the direct material usage variance c. details of the components of the single overhead cost pool ANS: C 36. All of the following are documents in batch process production systems except a. in world-class manufacturing firms. it facilitates the analysis of variances b. an emphasis on standard costs d. Types of information provided by Activity Based Costing include a. shows the allocation of costs first to activities and then to cost objects d. Which statement is not correct? a. the benchmark approach compares key activities with similar activities in other firms b. identifies nonessential activities ANS: A 35. critical success factors include product and process quality c. the financial nature of the reports permits comparisons to be made among different types of products ANS: B 34. cost object describes the work performed in a firm c. the ABC model includes two perspectives: an allocation of cost perspective and a process perspective d. immediate feedback about deviations from the norm ANS: D 32. route sheet c. a description of the single activity driver used for overhead application b. In traditional firms. activities cause costs d. purchase order . Which statement is not correct? a. quality control activities at the end of the process are essential ANS: D 37. Deficiencies of the traditional cost accounting information system include all of the following except a. provides financially oriented information relating to operations b. it more accurately allocates costs to products c. Firms are adopting Activity Based Costing (ABC) because a.

high inventory levels c. process simplification. traditional. process simplification. computer-integrated manufacturing c. production planning and control initiates production with a work order b. islands of technology. and Management Reporting Systems MULTIPLE CHOICE 1. traditional. The most important advantage of sequential coding is that a. process simplification. identifying fixed assets ANS: C 3. creating the chart of accounts b. sequential code b. A common use for sequential coding is a. Manufacturing flexibility incorporates four characteristics. The coding scheme most appropriate for a chart of accounts is a. missing or unrecorded documents can be identified b. computer-integrated manufacturing. Financial Reporting. computer-integrated manufacturing. Transaction authorization occurs in a traditional manufacturing environment in all of the following ways except a. block code c. islands of technology. traditional. traditional. movement of the work through the production process follows the move ticket c. the sales department modifies work orders to match changes in demand d. process simplification b. items cannot be inserted d. identifying inventory items c. automation of manufacturing processes d. mnemonic code ANS: B 2. islands of technology ANS: C Chapter 8—General Ledger. the code itself lacks informational content c. deletions affect the sequence . the materials requisition authorizes the storekeeper to release materials to the work centers ANS: C 39. ANS: D 38. high product quality b. group code d. islands of technology. computer-integrated manufacturing d. These include all of the following except a. physical reorganization of production facilities ANS: B 40. The stages of the automation continuum are (in order) a. identifying documents d.

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

the unadjusted trial balance reports control account balances but omits subsidiary ledger detail ANS: C 12. the cash receipts journal vouchers are prenumbered and stored in a locked safe d. loss of physical assets d. financial statements are prepared based on the unadjusted trial balance d. general ledger account out of balance with the subsidiary account ANS: C 15. one purpose of preparing the unadjusted trial balance is to ensure that debits equal credits c. unauthorized access to the general ledger c. preparing the accounts payable journal voucher and recording it in the general ledger ANS: C 17. the employee who maintains the cash receipts journal records transactions in the accounts receivable subsidiary ledger ANS: D 16. What account appears on the postclosing trial balance? a. Which statement is not correct? a. recording the inventory journal voucher in the general ledger and maintaining custody of inventory c. maintaining the inventory ledger and recording the inventory journal voucher in the general ledger b. general ledger d. Financial statements are prepared from the a. interest income ANS: B 13. general journal ANS: B 14. which combination of duties performed by a single individual presents the least risk exposure? a. the cash receipts journal voucher is approved by the Treasurer c. rent expense d. With a limited work force and a desire to maintain strong internal control. ANS: D 11. the employee who maintains the cash journal computes depreciation expense b. Which situation indicates an internal control risk in the General Ledger/Financial Reporting Systems (GL/FRS)? a. Risk exposures in the General Ledger and Financial Reporting Systems include all of the following except a. the post-closing trial balance reports the ending balance of each account in the general ledger b. loss of the audit trail b. income summary b. adjusted trial balance c. The audit trail fulfills all of the following purposes except . trial balance b. machinery c. maintaining the cash disbursements journal and recording direct labor costs applied to specific jobs d.

a. the general ledger master file is recreated with each update c. paper documents are eliminated b. the MRS is developed by implementing SEC requirements d. separation between authorization and transaction processing is strictly enforced b. no direct access or querying of the General Ledger is possible ANS: C 19. setting goals and objectives of the firm b. it is a legal requirement that the MRS be installed and functioning properly c. 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. if an employee is given the responsibility for a task. detecting. provides the ability to answer inquiries b. and correcting errors ANS: B 18. offers a means for preventing. updates and reconciliation of transactions occur as a step within the transaction cycle d. fulfills governmental regulations d. that employee should be given authority to make decisions within the limits of that task c. is narrow for routine and repetitive tasks b. is related to the number of layers of management c. there is a time lag between transaction processing and posting to the general ledger d. Which best describes a batch process General Ledger System (GLS) a. deciding on the degree of diversification among the firm’s products ANS: B 24. the MRS operates in conformity with generally accepted accounting principles b. Short-range planning involves a. Which statement is not true? The manager’s span of control a. A characteristic of the Management Reporting System (MRS) is a. errors and out-of-balance conditions are identified at the end of the month ANS: C 20. ensures the accuracy of the application software c. Which statement is not true? a. authority refers to an individual’s obligation to achieve desired results b. all of the above are true ANS: A 22. affects the amount of detail provided to a manager d. Long-range planning involves a. planning the growth of the firm d. the general ledger master file is updated each night c. can affect employee morale and motivation ANS: A 23. the MRS focuses on internal decision-making information ANS: D 21. planning the marketing and promotion for a product . planning the production schedule for the next quarter c.

strategic planning decisions usually a. cash flow reports for Division B b. strategic planning b. The level of management that makes tactical planning decisions is a. preparing a work force utilization budget for the next quarter d. evaluating performance d. management control decisions. management control d. operational control ANS: A 27. procedures d. deciding the optimum size of the firm ANS: D 25. The decision to enter a new market is an example of a. span of control d. taking corrective action when necessary ANS: A 28. formalization of tasks b. authorization c. setting operating standards c. all of the above ANS: D 30. Which of the following management principles affects the management reporting system? a. determining the scope of the activity b. front-line management ANS: B 26. All of the following are elements of operational control decisions except a. top management b. year-to-date local income tax payments made by all employees living in City X and working in City Y . In contrast to tactical planning decisions. data c. All of the following are examples of programmed reports except a. have a high degree of certainty ANS: C 29. operations management d. are more focused b. middle management c. b. and operational control decisions. presenting department heads with budgetary goals for the next year c. are unstructured d. objectives ANS: A 31. have a shorter time frame c. certainty b. tactical planning c. All of the following are elements of problem structure except a.

d. structured reports should be prepared weekly d. the responsibility report b. Which statement is not true? Responsibility accounting a. Which of the following statements is NOT true? a. inventory exception reports for Division G d. formalization of tasks d. b. All of the following concepts encourage goal congruence except a. the scheduled report c. creates a budget d. managers are accountable only for items they control b. authority and responsibility c. analysis of consumer demand. involves both a top-down and bottom-up flow of information b. compares actual performance with budget ANS: B 34. a manager’s span of control should not exceed eight people c. budget master file c. c. d. c. the information flow is in one direction. equipment utilization reports for Plant M ANS: B 32. top-down ANS: A 33. . c. Mnemonic coding requires the user to memorize codes. review of the attributes and behavior of the organization’s competition. all of the above ANS: C 35. Sorting records that are coded alphabetically tends to be more difficult for users than sorting numeric sequences. responsibility file d. analysis of external economic factors. What mechanism is used to convey to managers the standards by which their performance will be measured? a. All of the following are characteristics of the strategic planning process except the a. acknowledges that some economic events cannot be traced to any manager c. b. A fundamental principle of responsibility accounting is that a. ANS: B 37. general ledger history file ANS: D 38. responsibility accounting ANS: A 36. emphasis on both the short and long run. the budget d. Mnemonic codes are limited in their ability to represent items within a class. detailed information reporting at all management levels b. journal voucher history file b. Which file has as its primary purpose to present comparative financial reports on a historic basis? a. Sequential codes carry no information content beyond their order in the sequence.

ANS: A

39. Which of the following performance measures can not result in dysfunctional behavior?
a. price variance
b. quotas
c. ROI
d. net income
e. all of the above can result in dysfunctional behavior
ANS: E

40. Which of the following best describes a profit center:
a. authority to make decisions affecting the major determinants of profit, including the
power to choose its markets and sources of supply.
b. authority to make decisions affecting the major determinants of profit, including the power
to choose its markets and sources of supply, and significant control over the amount of
invested capital.
c. authority to make decisions over the most significant costs of operations, including the
power to choose the sources of supply.
d. authority to provide specialized support to other units within the organization.
e. responsibility for combining the raw materials, direct labor, and other factors of
production into a final product.
ANS: A
Chapter 9—Database Management Systems

MULTIPLE CHOICE

1. All of the following are basic data management tasks except
a. data deletion
b. data storage
c. data attribution
d. data retrieval
ANS: C

2. The task of searching the database to locate a stored record for processing is called
a. data deletion
b. data storage
c. data attribution
d. data retrieval
ANS: D

3. Which of the following is not a problem usually associated with the flat-file approach to data management?
a. data redundancy
b. restricting access to data to the primary user
c. data storage
d. currency of information
ANS: B

4. Which characteristic is associated with the database approach to data management?
a. data sharing
b. multiple storage procedures
c. data redundancy

d. excessive storage costs
ANS: A

5. Which characteristic is not associated with the database approach to data management?
a. the ability to process data without the help of a programmer
b. the ability to control access to the data
c. constant production of backups
d. the inability to determine what data is available
ANS: D

6. The textbook refers to four interrelated components of the database concept. Which of the following is not one of the
components?
a. the Database Management System
b. the Database Administrator
c. the physical database
d. the conceptual database
ANS: D

7. Which of the following is not a responsibility of the Database Management System?
a. provide an interface between the users and the physical database
b. provide security against a natural disaster
c. ensure that the internal schema and external schema are consistent
d. authorize access to portions of the database
ANS: C

8. A description of the physical arrangement of records in the database is
a. the internal view
b. the conceptual view
c. the subschema
d. the external view
ANS: A

9. Which of the following may provide many distinct views of the database?
a. the schema
b. the internal view
c. the user view
d. the conceptual view
ANS: C

10. Users access the database
a. by direct query
b. by developing operating software
c. by constantly interacting with systems programmers
d. all of the above
ANS: A

11. The Data Definition Language
a. identifies, for the Database Management System, the names and relationships of all
data elements, records, and files that comprise the database
b. inserts database commands into application programs to enable standard programs to
interact with and manipulate the database
c. permits users to process data in the database without the need for conventional programs

d. describes every data element in the database
ANS: A

12. The Data Manipulation Language
a. defines the database to the Database Management System
b. transfers data to the buffer area for manipulation
c. enables application programs to interact with and manipulate the database
d. describes every data element in the database
ANS: C

13. Which statement is not correct? A query language like SQL
a. is written in a fourth-generation language
b. requires user familiarity with COBOL
c. allows users to retrieve and modify data
d. reduces reliance on programmers
ANS: B

14. Which duty is not the responsibility of the Database Administrator?
a. to develop and maintain the Data Dictionary
b. to implement security controls
c. to design application programs
d. to design the subschema
ANS: C

15. In a hierarchical model
a. links between related records are implicit
b. the way to access data is by following a predefined data path
c. an owner (parent) record may own just one member (child) record
d. a member (child) record may have more than one owner (parent)
ANS: B

16. Which term is not associated with the relational database model?
a. tuple
b. attribute
c. collision
d. relation
ANS: C

17. In the relational database model
a. relationships are explicit
b. the user perceives that files are linked using pointers
c. data is represented on two-dimensional tables
d. data is represented as a tree structure
ANS: C

18. In the relational database model all of the following are true except
a. data is presented to users as tables
b. data can be extracted from specified rows from specified tables
c. a new table can be built by joining two tables
d. only one-to-many relationships can be supported
ANS: D

19. In a relational database
a. the user’s view of the physical database is the same as the physical database
b. users perceive that they are manipulating a single table
c. a virtual table exists in the form of rows and columns of a table stored on the disk
d. a programming language (COBOL) is used to create a user’s view of the database
ANS: B

20. The update anomaly in unnormalized databases
a. occurs because of data redundancy
b. complicates adding records to the database
c. may result in the loss of important data
d. often results in excessive record insertions
ANS: A

21. The most serious problem with unnormalized databases is the
a. update anomaly
b. insertion anomaly
c. deletion anomaly
d. none of the above
ANS: C

22. The deletion anomaly in unnormalized databases
a. is easily detected by users
b. may result in the loss of important data
c. complicates adding records to the database
d. requires the user to perform excessive updates
ANS: B

23. Which statement is correct?
a. in a normalized database, data about vendors occur in several locations
b. the accountant is responsible for database normalization
c. in a normalized database, deletion of a key record could result in the destruction of the
audit trail
d. connections between M:M tables is provided by a link table
ANS: D

24. Which of the following is not a common form of conceptual database model?
a. hierarchical
b. network
c. sequential
d. relational
ANS: C

25. Which of the following is a relational algebra function?
a. restrict
b. project
c. join
d. all are relational algebra functions
ANS: D

26. Which statement is false?

replicating the database d. data access language c. the DBMS periodically makes backup copies of the physical database. A replicated database is appropriate when a. The DBMS does not control access to the database. none of the above ANS: C 32. query language b. there is minimal data sharing among information processing units b. partitioned database b. user view b. all are examples of distributed databases ANS: A 30. networked database d. Which of the following is a level of the database that is defined by the data definition language? a. d. implementing concurrency controls ANS: B 31. response time is improved d. All of the following are elements of the DBMS which facilitate user access to the database except a. c. Which procedure will prevent two end users from accessing the same data element at the same time? a. ANS: D 27. data redundancy b. schema c. data transmission volume is increased c. data lockout d. there exists a high degree of data sharing and no primary user . using a lockout procedure c. centralized database c. b. User programs send requests for data to the DBMS. risk of destruction of entire database is reduced ANS: B 33. The DBMS is special software that is programmed to know which data elements each user is authorized to access. The advantages of a partitioned database include all of the following except a. data replication c. user control is enhanced b. internal view d. data definition language ANS: B 28. partitioning the database b. data manipulation language d. Data currency is preserved in a centralized database by a. all are levels or views of the database ANS: D 29. An example of a distributed database is a. During processing. a.

concurrency control d. deadlock control b. presents the physical arrangement of records in a database for a particular user b. A user view a. occurs when a deadlock is triggered ANS: B 36. data that describe the characteristics of properties of resources c. nouns that are depicted by rectangles on an entity relationship diagram b. specifies the relationship of data elements in the database d. deadlocks are eliminated c. may result in data lockout d. there is no risk of the deadlock phenomenon d. Entities are a. All of the following are advantages of a partitioned database except a. c. Data concurrency a. most data sharing consists of read-write transactions ANS: B 34. project c. is a security issue in partitioned databases b. is the logical abstract structure of the database c. is implemented using timestamping c. What control maintains complete. increased user control by having the data stored locally b. current. link d. gateway control ANS: C 35. sets of data needed to make a decision ANS: A 37. and consistent data at all information processing units? a. partitioning can reduce losses in case of disaster ANS: B 39. Each of the following is a relational algebra function except a. join b. defines how a particular user sees the database ANS: D 38. replication control c. restrict ANS: C Chapter 10—The REA Approach to Business Process Modeling MULTIPLE CHOICE . transaction processing response time is improved d. associations among elements d.

measure expected future receipts c. The ‘R’ in REA stands for a. decision c. acts of updating c. scarce d. acts of recording b. acts of maintaining ANS: C 6. identifying non-value-added activities b. record keeping b.1. standardizing data forms for simplicity ANS: D 3. ratios b. relationships c. evaluation d. apportionment . management d. storage of detailed data to support a wider range of management decisions d. assets b. events b. assets b. The ‘A’ in REA stands for a. control ANS: A 5. The ‘E’ in REA stands for a. reserves ANS: C 7. Information events involve all of the following except a. under the organization’s control ANS: B 2. Decision/management events involve decisions relating to all of the following except a. economics d. resources d. operating b. Economic resources possess all of the following characteristics except a. planning c. entities ANS: A 8. storage of both financial and nonfinancial data in the same database c. Which type of events are included in an REA model? a. acts of evaluating d. The REA approach leads to more efficient operations in all of the following ways except a. estimates c. information ANS: A 4.

The REA model requires that phenomena be characterized in a manner consistent with the development of a multiple user view. identify links. Which of the following is not an advantage of using the REA model? a. paying for inventories received d. ANS: D 14. Which of the following statement is correct? a. assign cardinalities d. simpler database creation . identify operating events. preparing sales invoices d. b. identify links. decision events d. assign cardinalities. The REA model requires that phenomena be characterized in a manner consistent with the development of a single user view. All of the following are examples of operating events except a. preparing performance reports ANS: B 10. Which types of events are included in entity relationship diagrams? a. Which of the following is an example of a decision/management event? a. The REA model requires that phenomena be characterized in a manner consistent with the development of a unique user view. information events c. agents ANS: D 9. assign cardinalities ANS: C 13. organize events in order. preparing cost estimates for a new product b. identify links. organize events in order. identify resources and agents. requesting a report c. shipping product to a customer ANS: B 11. d. c. preparing a cash disbursement voucher for payment to the supplier c. The REA model requires that phenomena be characterized in a manner consistent with the development of a selected user view. c. identify operating events. receiving raw materials from a supplier b. greater efficiency b. assign cardinalities b. organize events in order c. identify resources and agents. all of the above ANS: D 12. operating events b. identify links. identify operating events. identify resources and agents. identify resources and agents. organize events in order. identify operating events. more relevant and timely information d. allocation d. increased productivity c. Which of the following represents the order of the steps in the preparation of an REA model? a.

the customer ANS: A 18. Which of the following is not correct? a. improvements of legacy systems c. improved customer service b. business planning c. Data warehousing processes does not include a. d. events need to be organized in sequence of a. b. the user d. ease of analysis d. When developing an REA model. events are described from the perspective of a. updating inventory records after a sale b. occurrence ANS: D 17. completion b. requesting a report c. shop floor control and logistics d. ANS: B 16. Information events trigger decision/management events. the organization b. In an REA model. Information events trigger operating events. c. all of the above ANS: D 3. increased production ANS: B 2. the designer c. sales and distribution b. Which of the following is not an example of an information event? a. Core applications are a. Goals of ERP include all of the following except a. Operating events trigger information events. ANS: D 15. preparing cost estimates for new products d. preparing sales invoices ANS: B Chapter 11—Enterprise Resource Planning Systems MULTIPLE CHOICE 1. Decision/management events trigger operating events. modeling data . length c. reduced production time d.

what-if analysis ANS: A 6. d. b. Drill-down is a data-mining tool available to users of OLAP. c. ANS: C 10. ANS: C 8. d. The phased-in approach is more suited to diversified businesses. OLAP applications ANS: D 5. The data warehouse should be separate from the operational system. condensing data c. It was an original part of all ERP systems. c. It contains data that are normally extracted periodically from the operating databases. In a typical two-tier client server system. b. Which statements about data warehousing is not correct? a. When a business is diversified. process reengineering must occur. one tier is for user presentations. one is for database and applications. Which of the following is usually not part of an ERP’s core applications? a. d. ERPs are infinitely scalable. Data cleansing is a process of transforming data into standard form. decision support systems c. Normalization is an requirement of databases included in a data warehouse. Which statement is true? a. Which of the following is usually not part of an ERP’s OLAP applications? a. sales and distribution applications c. . OLTP applications b. c. business planning applications d. In three-tier client server architecture. c. ANS: B 7. ERP fails because some important business process is not supported. b. Client computers are responsible for presenting data to the user and passing user input back to the server. For the ERP to be successful. transforming data ANS: B 4. d. Which statement about ERP installation is least accurate? a. The database and application functions are separate in the three-tier model. and the third is for Internet access. little is gained from ERP installation. ad hoc analysis d. logistics b. It may be deployed by organizations that have not implemented an ERP. It is constructed for quick searching and ad hoc queries. Which of the following statements is not true? a. b. the server handles both application and database duties. extracting data d. ANS: D 9. Which of the following statements is least likely to be true about a data warehouse? a. b.

third-party firms. cannot be integrated into an overall ERP. ERP systems can be modified using bolt-on software. is typically under the control of external partners in the chain. and information systems providers. b. including vendors. Legacy systems are a. ANS: D 11. b. d. handle large numbers of relatively simple transactions. On-line transaction processing programs a. c. ANS: B 13. a data warehouse created for a single function or department. ANS: B 12. are available in two models–two-tier and three-tier. ANS: C 16. ANS: D 14. Most ERPs are based on which network model? a. are bolt-on programs used with commercially available ERSs. c. Performance problems usually stem from technical problems. b. bus topology ANS: B 15. old manual systems that are still in place. b. a database that provides data to an organization’s customers. c. c. Auditors of ERP systems a. ring topology d. not business process reengineering. d. find independent verification easy. b. c. b. d. flat file mainframe systems developed before client-server computing became standard. c. need not worry about system access since the ERP determines it. stable database systems after debugging. A data mart is a. another name for a data warehouse. advanced systems without a data warehouse. links all of the partners in the chain. need not worry about segregation of duties. may feel that the data warehouse is too clean and free from errors. an enterprise resource planning system. The better ERP can handle any problems an organization can have. The setup of a data warehouse includes a. client-server c. none of the above ANS: B 17. modeling the data . d. allow users to analyze complex data relationships. d. carriers. Supply chain management software a. d. peer to peer b.

Extracting data for a data warehouse a. multiplexer d. to increase the efficiency of data mining processes c. the geographical area covered by the network b. summarizing data for ease of extraction c. should only involve active files. d. extracting data from operational databases c. Data cleansing involves all of the following except a. To physically connect a workstation to a LAN requires a a. the type of workstation used d. the size of the company ANS: A 2. ANS: C 19. The primary difference between a LAN and a WAN is a. bridge ANS: B 3. cannot be done from flat files. to integrate legacy system data into a form that permits entity-wide analysis d. formatting data from legacy systems ANS: B 20. to permit the integration of data from diverse sources ANS: A Chapter 12—Electronic Commerce Systems MULTIPLE CHOICE APPENDIX QUESTION 1. filtering out or repairing invalid data b. file servers permit software and data to be shared with other network users . requires that the files be out of service. b. Separating the data warehouse from the operations databases occurs for all of the following reasons except a. the transmission technology used c. all of the above ANS: D 18. transforming data into standard business terms d. bridges and gateways connect one workstation with another workstation b. cleansing the data d. file server b. c. b. One advantage of network technology is a. network interface card c. the network interface card permits different networks to share data c. follows the cleansing of data. to make the management of the databases more economical b.

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

has a host computer connected to several levels of subordinate computers c. carrier sensing d.10. one protocol is developed and applied to all the OSI layers c. facilitate physical connection between network devices b. eliminates the need for nodes to communicate with each other c. multiplexing b. All of the following are true about the Open System Interface (OSI) protocol except a. provide a basis for error checking and measuring network performance c. Which of the following statements is correct? TCP/IP a. result in inflexible standards ANS: D 15. b. when the central database does not have to be concurrent with the nodes ANS: A 12. within one node different layers communicate with other layers at that node b. polling c. In a ring topology a. functions only with a ring and bus topology ANS: C 11. . c. increases the amount of data that is transmitted between the central file and the network node b. for environments where network nodes routinely communicate with each other d. is the basic protocol that permits communication between Internet sites. The client/server technology a. responsibility for managing communications is distributed among the nodes d. the network consists of a central computer which manages all communications between nodes b. for a wide area network with a mainframe for a central computer b. information processing units rarely communicate with each other ANS: C 13. Which method does not manage or control data collisions that might occur on a network? a. controls Web browsers that access the WWW. for centralized databases only c. is a low-level encryption scheme used to secure transmissions in HTTP format. token passing ANS: A 14. Network protocols fulfill all of the following objectives except a. specific layers are dedicated to hardware tasks and other layers are dedicated to software tasks d. all nodes are of equal status. promote compatibility among network devices d. d. is the file format used to produce Web pages. A star topology is appropriate a. layers at each node communicate logically with their counterpart layers across nodes ANS: B 16. reduces the number of records that must be locked by having the file server perform record searches d.

is the basic protocol that permits communication between Internet sites. a denial of service attack b. Which one of the following statements is correct? a. and databases across the Internet. ANS: A 20. Web browsers cannot function without cookies. A digital signature is a. c. is used to connect to Usenet groups on the Internet. controls Web browsers that access the Web. ANS: A 17. is the document format used to produce Web pages. b. A message that is made to look as though it is coming from a trusted source but is not is called a. c. d. b. is used to connect to Usenet groups on the Internet d. d. Internet protocol spoofing d. digital signature forging c. Cookies contain the URLs of sites visited by the user. is used to transfer text files. is a low-level encryption scheme used to secure transmissions in higher-level () format. allows digital messages to be sent over analog telephone lines ANS: B 23. programs. c. is used to transfer text files. is a low-level encryption scheme used to secure transmissions in higher-level (HTTP) format. is the document format used to produce Web pages. c. HTML a. spreadsheets. e. derived from the digest of a document that has been encrypted with the sender’s private key c. ANS: D 18. Cookies always contain encrypted data. ANS: D 19. e. Cookies are text files and never contain encrypted data. d. and databases across the Internet. FTP a. is the document format used to produce Web pages. controls Web browsers that access the Web. was designed to provide the financial community with a standardized method for preparing e. the encrypted mathematical value of the message sender’s name b. XBRL a. URL masquerading ANS: C 22. the computed digest of the sender’s digital certificate d. spreadsheets. b. b. ANS: C 21. programs. controls Web browsers that access the Web. HTTP . is a low-level encryption scheme used to secure transmissions in higher-level () format.

a cost-benefit review will affect the schedule feasibility analysis ANS: B 2. is used to connect to Usenet groups on the Internet d. economic feasibility study ANS: C . b. spreadsheets. c. c. operational feasibility study b. It will resolve itself when the primary computer completes processing its transaction and releases the data needed by other users. b. ANS: C 25. controls Web browsers that access the Web. the packet is disassembled into the individual messages and distributed to the intended users. b. Packet switching combines the messages of multiple users into a “packet” for transmission. and databases across the Internet. a. NNTP a. and databases across the Internet. ANS: B 24. When studying the detailed feasibility of a new project a. prototyping does not affect the schedule feasibility analysis b. legal feasibility study d. controls Web browsers that access the Web. programs. spreadsheets. Protection from inadvertent disclosures of confidential information is part of the detailed a. The decision to partition a database assumes that no identifiable primary user exists in the organization. d. protection from fraud and errors will influence the schedule feasibility analysis d. schedule feasibility study c. is a low-level encryption scheme used to secure transmissions in higher-level (HTTP) format. the need for user training will influence the schedule feasibility analysis c. is the document format used to produce Web pages. ANS: C Chapter 13—Managing the Systems Development Life Cycle MULTIPLE CHOICE 1. is used to transfer text files. Message switching is used to establish temporary connections between network devices for the duration of a communication session. programs. is the document format used to produce Web pages. is used to connect to Usenet groups on the Internet d. A deadlock is a temporary phenomenon that disrupts transaction processing. is a low-level encryption scheme used to secure transmissions in higher-level () format. Which of the following statements is correct? a. c. At the receiving end. e. is used to transfer text files. e.

Site preparation costs include all of the following except a. insurance c. legal feasibility study d. An example of a tangible benefit is a. Examples of one-time costs include all of the following except a. reduced inventories d. a data conversion cost c. more current information c. systems design costs c. programming costs ANS: D 8. When implementing a new system. software acquisition b. a recurring cost b. supplies d. freight charges c. data conversion costs d. A cost-benefit analysis is a part of the detailed a. schedule feasibility study c. reinforcement of the building floor ANS: C 7. the costs associated with transferring data from one storage medium to another is an example of a. crane used to install equipment b. operational feasibility study b. a programming cost ANS: B 9. programming ANS: B 5. site preparation d. The testing of individual program modules is a part of a. economic feasibility study ANS: D 4. personnel costs d. software acquisition costs b. a systems design cost d. data conversion c. increased customer satisfaction b. An example of an intangible benefit is . hardware acquisition b. 3. faster response to competitor actions ANS: C 10. Examples of recurring costs include a. systems design ANS: C 6.

all of the above ANS: D 12. can be measured and expressed in financial terms b. Recurring costs include all of the following except a. might increase revenues c. expansion into other markets b. system requirements are not clearly specified c. supplies ANS: A 17. reduced equipment maintenance ANS: C 11. insurance d. review of accounting transaction data ANS: D 14. the detailed system design d. The formal product of the systems evaluation and selection phase of the Systems Development Life Cycle is a. All of the following are reasons why new systems fail except a. might decrease costs d. site preparation b. simulation models c. the user is not involved in the development of the system b. the systems plan ANS: B 15. insurance c. more efficient operations d. Intangible benefits a. software maintenance c. Which technique is least likely to be used to quantify intangible benefits? a. programming and testing d. the report of systems analysis b. data conversion ANS: B 16. professional judgment d. the systems selection report c. are easily measured b. reduction in supplies and overhead c. One time costs include all of the following except a. are of relatively little importance in making information system decisions c. opinion surveys b. data conversion b. systems analysts rely on prototyping models . do not lend themselves to manipulation ANS: C 13. A tangible benefit a. when measured. are sometimes estimated using customer satisfaction surveys d. a.

provides a static goal to be attained within a five-year period d. prioritizes the proposal in relation to other system proposals ANS: A 24. The degree of compatibility between the firm’s existing procedures and personnel skills and the requirements of the new system is called a. operational feasibility d. feasibility factors b. schedule feasibility ANS: B 21. technical feasibility b. The systems steering committee is responsible for all of the following except a. ability to eliminate nonessential activities and costs c. Strategic systems planning is important because the plan a. operational feasibility c. budgeting funds for systems development ANS: C 19. conceptual feasibility c. The ability of a system to protect individual privacy and confidentiality is an example of a. all of the above ANS: A 20. use of Computer Aided Software Engineering (CASE) tools in developing the system . legal feasibility d. operational feasibility c. system development techniques are ineffective ANS: C 18. determining whether and when to terminate systems projects c. d. schedule feasibility b. ability to provide a competitive advantage to the firm d. assigning priorities b. supplies an input to the project planning activity c. will eliminate any crisis component in systems development c. schedule feasibility d. The systems project proposal a. legal feasibility ANS: B 22. technical feasibility b. analyzing the technical feasibility of the project d. economic feasibility ANS: C 23. links the objectives of the proposed system to the system’s scheduling requirements d. Which step is not used to evaluate a systems proposal? An analysis of the project’s a. provides management with a basis for deciding whether or not to proceed with the project b. Project feasibility includes all of the following except a. provides authorization control for the Systems Development Life Cycle b.

reviewing key documents ANS: C 29. suggest inclusion of advanced audit features d. is performed by the internal auditor ANS: C 27. the company will have a formal systems analysis report on a. specify the system processing methods ANS: D 30. Reasons that a new systems implementation may be unsuccessful include all of the following except a. system development team members include representatives from end-user departments ANS: D 26. proposal ANS: D 25. gathering facts b. A disadvantage of surveying the current system is a. it constrains the generation of ideas about the new system b. formally state the goals and objectives of the system d. employees are not trained to use the system d. the conceptual design of the new system b. The systems analysis report does not a. specify requirements for the new system c. does not include a review of the current system c. After the systems analysis phase of the System Development Life Cycle (SDLC) is complete. it pinpoints the causes of the current problems d. identify user needs b. end users do not understand the strategic merits of the new system c. ensure mandated procedures are part of the design . results in a formal project schedule b. all of the above are advantages of surveying the current system ANS: A 28. a comparison of alternative implementation procedures for the new system ANS: C 31. organizational restructuring required by the new system results in displaced workers b. The accountant’s role in systems analysis includes all of the following except a. prepare data gathering questionnaires c. specify audit trail requirements b. identifies user needs and specifies system requirements d. an evaluation of the new system c. users’ needs and requirements for the new system d. it highlights elements of the current system that are worth preserving c. Typically a systems analysis a. Systems analysis involves all of the following except a. redesigning bottleneck activities d. surveying the current system c.

structure diagrams are commonly used c. Project planning includes all of the following except a. Aspects of project feasibility include all of the following except a. ANS: B 32. the accountant is responsible to ensure that audit trails are preserved c. producing a project schedule ANS: C 34. observation b. logistic feasibility d. technical feasibility b. 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. audit reports d. resolving conflicts that arise from a new system c. selecting hardware vendors d. When developing the conceptual design of a system. The role of the steering committee includes a. 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. preparing a formal project proposal c. processes. the accountant is responsible for designing the physical system b. specifying system objectives b. selecting the programming techniques to be used d. all similarities and differences between competing systems are highlighted b. Which of the following is not a tool of systems analysts? a. economic feasibility c. designing the system outputs b. schedule feasibility ANS: C 35. and Maintain Systems Projects . the internal auditor is responsible to confirm that embedded audit modules are included in the conceptual design d. a. personal interviews ANS: C 36. and outputs that distinguish one alternative from another are identified ANS: D 37. inputs. the format for input screens and source documents is decided d. Deliver. approving the accounting procedures to be implemented ANS: B 33. task participation c.

data flow diagrams d. is commercially available software b. MULTIPLE CHOICE 1. is a. context level c. context level b. conceptual level b. graphically depicts the iceberg effect c. is prepared by the systems analyst ANS: C 7. the program code b. presents an overview model of the primary transactions processed b. it forces all system changes to be made through the data flow diagrams d. which transforms the structure diagram into machine language. Which statement is not true? Computer Aided Software Engineering (CASE) technology a. prototypes do not include internal control features b. it ensures that firm will use a specific CASE tool and vendor c. reduces the productivity but increases the quality of the work of systems professionals c. elementary level ANS: A 5. a prototype is an inexpensive. a structure diagram a. An advantage of the Computer Aided Software Engineering (CASE) model tool. all of the above ANS: D 4. Which level of a data flow diagram is used to produce program code and database tables? a. it reduces the analysis required in designing the system . expedites the System Development Life Cycle d. In a Computer Aided Software Engineering (CASE) environment. Which statement is not true? a. systems designers always discard prototypes and do not develop them into finished systems ANS: D 2. elementary level c. it facilitates the auditors review of the system b. The central repository of the Computer Aided Software Engineering (CASE) system contains a. user prototype screens c. intermediate level d. simplified model of a system c. Which is not a level of a data flow diagram? a. prototype level ANS: B 6. intermediate level d. consists of upper and lower tools ANS: B 3. presents a model of the program code that constitutes the physical system d. a throwaway prototype is discarded after the requirements are established d.

the cost of software engineering programs d. ANS: C 8. the object class accounts receivable inherits all the attributes of Ms. is documented by data flow diagrams and structure diagrams c. assembles reusable modules rather than creating systems from scratch d. In the object-oriented systems design approach. system users are reluctant to become involved with the CASE approach d. an operation d. an object b. maintenance costs are increased ANS: A 11. the need for testing the modified application is eliminated ANS: C 9. user involvement is restricted to final stages of development ANS: A 10. Andrews . Andrews is an instance in the object class accounts receivable b. the ability to easily revise the model during the development stage b. In the object-oriented design approach a. development time is reduced c. Andrews owes the Edsell Company is an operation c. Ms. changes should be made directly to the structure diagram c. Ms. system maintenance activities are simplified ANS: A 13. determining the amount past due is an attribute d. the employee pay rate is an example of a. a standard module once tested does not have to be retested until changes are made d. Which of the following is an advantage of the Computer Aided Software Engineering (CASE) approach? a. a class ANS: B 14. a. When maintaining a system that was developed using Computer Aided Software Engineering (CASE) tools. the programmer must thoroughly review the program code b. an attribute c. the amount Ms. is a top-down approach b. The benefits of the object-oriented approach to systems design include all of the following except a. starts with an abstract description of the system and redefines it to produce a more detailed description of the system ANS: C 12. Which of the following is a disadvantage of the Computer Aided Software Engineering (CASE) approach? a. the requirement that all program code and documentation be regenerated for each module c. significantly less time is required compared to maintenance activities for a system developed without using Computer Aided Software Engineering (CASE) tools d. Which statement is not correct? The structured design approach a. source code produced by CASE tools is less efficient than code written by a skilled programmer b. alternative designs cannot be reviewed prior to implementation c. Andrews is a customer of the Edsell Company. this approach does not require input from accountants and auditors b.

and ready for implementation is called a a. ANS: A 15. detailed system design report d. is significantly less expensive than a system developed in-house d. Which step is least likely to occur when choosing a commercial software package? a. systems analysis report . turnkey system ANS: D 19. preparation of a request for proposal d. the system designer ANS: D 18. operations performed on objects always change attributes ANS: C 16. Evaluators of the detailed feasibility study should not include a. the project manager c. an instance is a logical grouping of individual objects c. the entity relationship diagram is used to create a program which can be used in other systems d. Which statement is not correct? In the object-oriented design approach a. benchmark system d. backbone system b. 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. inheritance means that each object instance inherits the attributes and operations of the class to which it belongs d. comparison of the results of a benchmark problem ANS: A 21. is less likely to have errors than an equivalent system developed in-house ANS: B 20. In the object-oriented systems design approach. a. can be easily modified to the user’s exact specifications c. contact with user groups c. systems selection report c. a user representative d. objects possess two characteristics–attributes and instances b. the control module must be recreated for each program ANS: D 17. The output of the detailed design phase of the Systems Development Life Cycle (SDLC) is a a. Which of the following is not an advantage of commercial software? Commercial software a. a detailed review of the source code b. the internal auditor b. can be installed faster than a custom system b. each module can inherit from other modules the attributes and operations it requires c. vendor-supported system c. fully documented system report b. tested. A commercial software system that is completely finished.

exception orientation ANS: D 26. a. conciseness d. calculations are automatically performed on intelligent forms c. relevance and summarization d. a point-of-sale terminal is required ANS: A 27. The most important design element for a hardcopy form that is used for electronic data input is that a. the form is a standard size b. There is often a conflict between the attributes of a. errors caused by transcription are reduced b. timeliness c. conciseness d. When each element of information supports the user’s decision or task. relevance ANS: D 24. summarization b. input errors are reduced d. alternative conceptual designs c. ANS: C 22. accuracy and timeliness c. the output is said to possess a. instructions use active voice d. A report of accounts that are past due has many information attributes. completeness b. workers who use direct data input forms must be highly trained and skilled ANS: D 29. report layouts d. The most important attribute is a. the source document and the input screen are identical c. Which is not true of direct data input forms? a. economies of scale in data collection are avoided c. The detailed design report contains all of the following except a. a paper audit trail is maintained b. Which statement is not true? . summarization c. completeness and exceptions orientation ANS: B 25. When hardcopy forms are used as the source for electronic data input. sufficient copies of the form are prepared ANS: B 28. timeliness and conciseness b. many data entry errors are detected and corrected immediately d. input screen formats b. process logic ANS: B 23.

Which statement is not true? A systems design walkthrough a. all of the above require systems documentation ANS: D 33. accountants d. a list of required hardware devices ANS: B 36. Which type of documentation shows the detailed relationship of input files. end users c. and output files? a. is conducted by a quality assurance group b. a program code listing c. Which task is not essential during a data conversion procedure? a. Typical contents of a run manual include all of the following except a. validating the database c. system flowchart d. structure diagrams b. programs. occurs just after system implementation c. explanation of error messages ANS: B 35. decomposing the system b. permits individuals with few technical skills to understand the logic of the module ANS: D 31. an error made in a tightly coupled module will affect other modules ANS: C 30. System documentation is designed for all of the following groups except a. Computer operators should have access to all of the following types of documentation except a. a. systems designers and programmers b. well-defined task c. run schedule b. overview diagram c. discourages end users from becoming actively involved in designing the system d. loosely coupled modules are independent of other modules b. cohesive modules perform a single. file requirements d. reconciliation of new and old databases . logic flowchart c. simulates the operation of the system in order to uncover errors and omissions d. program flowchart ANS: C 34. reduces costs by reducing the amount of reprogramming ANS: B 32. a list of all master files used in the system d. occurs in the implementation phase of the Systems Development Life Cycle b. Translating the system modules into pseudocode a. a list of users who receive output b. expresses the detailed logic of the module in programming language c. maintenance of a module with weak cohesion is simple d.

c. b. ANS: B 3. Which of the following is NOT a requirement in management’s report on the effectiveness of internal controls over financial reporting? a. Entities are resources. backing up the original files ANS: A 37. b. An explicit written conclusion as to the effectiveness of internal control over financial reporting. events. parallel operation cutover d. data coupling cutover ANS: C 38. materially affect internal control over financial reporting. ANS: D Chapter 15—IT Controls Part I: Sarbanes-Oxley and IT Governance MULTIPLE CHOICE 1. When converting to a new system. Corporate management (including the CEO) must certify monthly and annually their organization’s internal controls over financial reporting. A statement identifying the framework used by management to conduct their assessment of internal controls. phased cutover c. b. A statement of management’s responsibility for establishing and maintaining adequate internal control user satisfaction. Relationships are the degree of association between two entities. program coding from program operations . Auditors must determine. d. Attributes are data that describe the characteristics or properties of entities. d. cold turkey cutover b. d. In a computer-based information system. or agents involved in the business. c. ANS: C 2. c. whether changes in internal control has. d. Management must disclose any material changes in the company’s internal controls that have occurred during the most recent fiscal quarter. Auditors must interview management regarding significant changes in the design or operation of internal control that occurred since the last audit. What is not true about data modeling? a. A statement that the organizations internal auditors has issued an attestation report on management’s assessment of the companies internal controls. which cutover method is the most conservative? a. which of the following duties needs to be separated? a. Which of the following is NOT an implication of section 302 of the Sarbanes-Oxley Act? a. or is likely to. Modeling is the task of formalizing the data requirements of the business process as a physical model.

weakens database access security b. lack of documentation standards ANS: C 10. Which organizational structure is most likely to result in good documentation procedures? a. All of the following are control risks associated with the distributed data processing structure except a. allows programmers access to make unauthorized changes to applications during execution c. Which is the most critical segregation of duties in the centralized computer services function? a. system interdependency d. system crashes ANS: B 6. separate systems development from data processing d. many systems professionals have direct and unrestricted access to the organization's programs and data c. Adequate backups will protect against all of the following except a. separate systems analysis from application programming c. lack of separation of duties b. results in master files being inadvertently erased ANS: B 8. data operations from data librarian c. unauthorized access c. data control from data librarian ANS: A 7. separate systems development from systems maintenance b. results in inadequate documentation d. rapid changes in technology make staffing the systems environment challenging d. data corruption caused by program errors d. system incompatibilities c. rapid turnover of systems professionals complicates management's task of assessing the competence and honesty of prospective employees b. program operations from program maintenance c. Supervision in a computerized environment is more complex than in a manual environment for all of the following reasons except a. Which of the following is not an essential feature of a disaster recovery plan? . systems professionals and their supervisors work at the same physical location ANS: D 5. separate database administrator from data processing ANS: A 9. Systems development is separated from data processing activities because failure to do so a. natural disasters such as fires b. data preparation from data control d. systems development from data processing b. b. all of the above duties should be separated ANS: D 4. program maintenance from program coding d.

computer services function c. the initial recovery period is very quick c. inadequate systems documentation is prepared because this provides a sense of job security to the programmer . critical applications identified ANS: B 11. accounts receivable c. recovery operations center c. mutual aid pact ANS: D 12. backups of systems software b. systems documentation is inadequate because of pressures to begin coding a new program before documenting the current program b. backups of application software c. second site backup d. empty shell d. this is an inexpensive solution b. illegal lines of code are hidden among legitimate code and a fraud is covered up for a long period of time c. intense competition for shell resources during a widespread disaster c. which of the following is the least critical application for disaster recovery purposes? a. a new systems analyst has difficulty in understanding the logic of the program d. Some companies separate systems analysis from programming/program maintenance. documentation and blank forms d. the control of the shell site is an administrative drain on the company ANS: B 13. All of the following are control weaknesses that may occur with this organizational structure except a. month-end adjustments b. off-site storage of backups b. 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. An advantage of a recovery operations center is that a. accounts payable d. the host site may be unwilling to disrupt its processing needs to process the critical applications of the disaster stricken company b. For most companies. the company has sole control over the administration of the center d. internally provided backup b. The least important item to store off-site in case of an emergency is a. The major disadvantage of an empty shell solution as a second site backup is a. maintenance of excess hardware capacity d. results of the latest test of the disaster recovery program ANS: D 16. order entry/billing ANS: A 15. none of the above are advantages of the recovery operations center ANS: B 14. a.

c. ensure independence c. reduce audit fees b. external auditors assist internal auditors but internal auditors cannot assist external auditors ANS: A 22. IT auditing can be performed by both external and internal auditors. Auditors must maintain independence. an elaborate water sprinkler system c. internal auditors represent the interests of management and external auditors represent outsiders b. . c. The fundamental difference between internal and external auditing is that a. IT audits b. analyzing financial data ANS: B 19. manual fire extinguishers in strategic locations d. preparing financial statements c. Which concept is not an integral part of an audit? a. Typically. d. Auditors express an opinion in their audit report. evaluation of operational efficiency c. ANS: C 20. Internal auditors assist external auditors with financial audits to a. represent the interests of management d. automatic and manual alarms in strategic locations ANS: B 18. ANS: C 17. All of the following are recommended features of a fire protection system for a computer center except a. Which statement is not true? a. Which statement is not correct? a. IT auditors attest to the integrity of the computer system. Auditors gather evidence using tests of controls and substantive tests. review of compliance with legal obligations d. IT auditing is independent of the general financial audit. internal auditors perform IT audits and external auditors perform financial statement audits c. internal auditors perform all of the following tasks except a. internal auditors perform all of the above tasks ANS: D 21. internal auditors are not permitted to assist external auditors with financial audits ANS: A 23. evaluating internal controls b. internal auditors focus on financial statement audits and external auditors focus on operational audits and financial statement audits d. The most important element in determining the level of materiality is the mathematical formula. b. expressing an opinion d. b. the statement is not true. clearly marked exits b.

legal risk c. post-audit testing d. counting inventory c. All of the following are steps in an IT audit except a. reviewing systems documentation c. tests of controls c. counting cash ANS: C 28. Tests of controls include a. All of the following are components of audit risk except a. verification of the second site backup location . d. ANS: B 24. interviewing management c. associated with the unique characteristics of the business or industry of the client c. review of the test of the backup power supply c. substantive testing b. the likelihood that the control structure is flawed because controls are either absent or inadequate to prevent or detect errors in the accounts d. All of the following tests of controls will provide evidence about the physical security of the computer center except a. 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 30. review of fire marshal records b. observing activities d. the probability that the auditor will render an unqualified opinion on financial statements that are materially misstated b. control risk b. When planning the audit. information is gathered by all of the following methods except a. detection risk d. Auditors compare evidence to established criteria. completing questionnaires d. Substantive tests include a. audit planning ANS: C 25. Control risk is a. confirming accounts receivable ANS: D 26. confirming accounts receivable b. completing questionnaires b. inherent risk ANS: B 29. examining the safety deposit box for stock certificates b. completing questionnaires d. observation ANS: A 27.

In the CBIS environment. composition of the disaster recovery team ANS: B 32. that all allocated amounts such as depreciation are calculated on a systematic and rational basis ANS: B Chapter 16—IT Controls Part II: Security and Access MULTIPLE CHOICE 1. Substantive tests establish whether internal controls are functioning properly. c. All of the following tests of controls will provide evidence about the adequacy of the disaster recovery plan except a. d. d. is associated with the unique characteristics of the business or industry of the client. that all transactions on the income statement actually occurred d. d. Inherent risk a. review. review of the critical applications list d. The financial statement of an organization reflects a set of management assertions about the financial health of the business. that all of the assets and equities on the balance sheet exist b. the engagement is limited to examination. is the likelihood that the auditor will not find material misstatements. that all employees are properly trained to carry out their assigned duties c. Which of the following is true? a. Conducting an audit is a systematic and logical process that applies to all forms of information systems. exists because all control structures are flawed in some ways. IT auditors prepare the audit report if the system is computerized. and application of agreed-upon procedures ANS: B 35. translates third-generation languages into machine language . ANS: C 34. b. written assertions and a practitioner’s written report b. is the likelihood that material misstatements exist in the financial statements of the firm. The operating system performs all of the following tasks except a. the formal establishment of measurements criteria d. c. the engagement is designed to conduct risk assessment of the client’s systems to verify their degree of SOX compliance c. inspection of the second site backup b. b. All of the following described types of assertions except a. Attestation services require all of the following except a. auditors gather evidence relating only to the contents of databases. ANS: B 33. observation of procedures surrounding visitor access to the computer center ANS: C 31. analysis of the fire detection system at the primary site c. not the reliability of the computer system.

c. Which of the following is considered an unintentional threat to the integrity of the operating system? a. Trojan horse c. a hacker gaining access to the system because of a security flaw b. When creating and controlling backups for a sequential batch system. the number of backup versions retained depends on the amount of data in the file b. the greater the number of backup versions ANS: D 8. install antivirus software b. spooling. backup files can never be used for scratch files d. A software program that allows access to a system without going through the normal logon procedures is called a a. assigns memory to applications c. a virus that formats the hard drive d. dual-homed. back door ANS: D 5. All of the following will reduce the exposure to computer viruses except a. b. grandfather-father-son approach b. the systems programmer accessing individual user files ANS: B 3. worm c. staggered backup approach c. install public-domain software from reputable bulletin boards ANS: D 6. the more significant the data. schedules job processing ANS: C 2. worm d. spoofing. a. a hardware flaw that causes the system to crash c. install factory-sealed application software c. . off-site backups are not required c. b. Trojan horse b. logic bomb b. none of the above ANS: B 4. logic bomb d. direct backup d. authorizes user access d. Which backup technique is most appropriate for sequential batch systems? a. intermittent backup ANS: A 7. A software program that replicates itself in areas of idle memory until the system fails is called a a. remote site. assign and control user passwords d. 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.

Audit trails cannot be used to a. failure to change passwords on a regular basis b. if the master file is destroyed. Which of the following is not a basic database backup and recovery feature? a. Which is not a biometric device? a. Passwords are secret codes that users enter to gain access to systems. retina prints c. In a direct access file system a. checkpoint b. selecting passwords that can be easily detected by computer criminals ANS: B 15. passwords d. voice prints ANS: A 11. files are backed up immediately before an update run d. signature characteristics ANS: A 12. processing a transaction file against a maser file creates a backup file c. database authorization table c. protecting users from themselves d. recording passwords in obvious places d. backup database c. Which of the following is not an access control in a database system? a. it cannot be reconstructed ANS: C 10. voice prints d. d. protecting the environment from users ANS: D 14. using obscure passwords unknown to others c. ANS: A 9. protecting the OS from users b. facilitate reconstruction of events c. transaction log d. Security can be compromised by all of the following except a. protesting users from each other c. backups are created using the grandfather-father-son approach b. promote personal accountability . database authority table ANS: D 13. antivirus software b. screening. detect unauthorized access to systems b. All of the following are objectives of operating system control except a. password b. reduce the need for other forms of security d.

public key encryption d. the recipient's application software can validate the password prior to processing d. verifying that the security group monitors and reports on fault tolerance violations b. confirming that antivirus software is in use d. verifying that unauthorized users cannot access data files . parity bit c. none of the above ANS: A 21. ANS: C 16. the vendor's accounts payable file c. value added networks can compare passwords to a valid customer file before message transmission b. confirming that backup procedures are adequate c. 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. reviewing system maintenance records c. request-response technique ANS: A 19. Audit objectives for the database management include all of the following except a. Which method is most likely to detect unauthorized access to the system? a. encryption c. Which method will render useless data captured by unauthorized receivers? a. All of the following techniques are used to validate electronic data interchange transactions except a. data encryption standard c. customers routinely access a. verifying that only authorized software is used on company computers b. prior to converting the message. All of the following tests of controls will provide evidence that adequate computer virus control techniques are in place and functioning except a. vertical parity check d. echo check b. In an electronic data interchange environment. the vendor's open purchase order file d. message transaction log b. vertical parity bit d. the recipient's application software can validate the password after the transaction has been processed ANS: D 20. message sequencing ANS: C 18. horizontal parity bit ANS: B 17. Which control will not reduce the likelihood of data loss due to a line error? a. echo check b. the vendor's price list file b. ensuring that authorized users access only those files they need to perform their duties d.

In an Electronic Data Interchange (EDI) environment. Which of the following is not a test of access controls? a. unauthorized trading partners cannot gain access to database records c. All of the following tests of controls will provide evidence that access to the data files is limited except a. all EDI transactions are authorized b. the policy that all software upgrades are checked for viruses before they are implemented c. physical security measures are adequate to protect the organization from natural disaster d. all of the following policies are relevant except a. illegal access to the system is prevented and detected ANS: D 26. backup procedures are in place and functioning properly ANS: D 28. all EDI transactions are authorized b. encryption controls c. inference controls . the policy on the purchase of software only from reputable vendors b. Audit objectives in the Electronic Data Interchange (EDI) environment include all of the following except a. a complete audit trail of EDI transactions is maintained d. the policy that permits users to take files home to work on them ANS: D 29. procedures that render intercepted messages useless d. incompatible functions have been segregated b. they are testing which audit objective? a. attempting to retrieve unauthorized data via inference queries ANS: B 24. all of the above ANS: D 25. reconciling program version numbers c. detection and correction of message loss due to equipment failure b. when the auditor compares the terms of the trading partner agreement against the access privileges stated in the database authority table. backup controls d. When auditors examine and test the call-back feature. ANS: A 23. the auditor is testing which audit objective? a. In determining whether a system is adequately protected from attacks by computer viruses. application programs are protected from unauthorized access c. Audit objectives for communications controls include all of the following except a. a complete audit trail is maintained ANS: C 27. prevention and detection of illegal access to communication channels c. biometric controls b. the policy that current versions of antivirus software should be available to all users d. unauthorized trading partners cannot gain access to database records c. authorized trading partners have access only to approved data d. comparing job descriptions with access privileges stored in the authority table d. inspecting biometric controls b.

c. One of these is a. ANS: C 30. e. a system that enforces access control between two networks c. and processed by the system c. special materials used to insulate computer facilities b. antivirus software c. special software used to screen Internet access d. b. the audit trail a. translated. The database attributes that individual users have permission to access are defined in a. application listing. user manual. Firewalls are a. Many techniques exist to reduce the likelihood and effects of data communication hardware failure. An integrated group of programs that supports the applications and facilitates their access to specified resources is called a (an) a. none of the above 36. data encryption 33. is a printout of all incoming and outgoing transactions b. one-time passwords c. database management system. transaction authorization and validation b. All of the following are designed to control exposures from subversive threats except a. In an electronic data interchange environment. consists of pointers and indexes within the database 32. operating system. d. 37. In an electronic data interchange environment. access the vendor's price list file with read/write authority c. c. database schema. data encryption 34. all of the above 35. is an electronic log of all transactions received. access the vendor's accounts receivable file with read/write authority b. access the vendor's inventory file with read-only authority d. utility system . is a computer resource authority table d. EDI audit trail d. access controls c. operating system. b. hardware access procedures b. access the vendor's open purchase order file with read-only authority ANS: C 31. user view. field interrogation d. Which of the following deal with transaction legitimacy? a. firewalls b. parity checks d. customers routinely a.