The internal auditor represents the interests of third-party outsiders.

 True

 False .
Operational inefficiencies occur when accounts common to many concurrent
transactions are updated in real time.
 True .

 False

After selecting a sample of subsidiary ledger accounts and tracing them to sales journal,
the next step is for the auditor to compare the financial statement accounts receivable
balance with the general ledger control account.
 True .

 False
A potential risk of cloud computing is that the client firm does not need to know where
its data are being processed.
 True

 False .
In a flat-file system, files are not easily shared by users.
 True .

 False
The computer operator is responsible for the security and integrity of the database.
 True

 False .
Cloud computing is a practice in which the organization sells its IT resources to a third-
party outsourcing vendor then leases back IT services from the vendor for a contract
period.
 True

 False .
In general, the actual disbursement of cash may occur at a different point after the
receipt of the goods or services, based on a credit relationship.
 True .

 False

System flowcharts are often used to depict processes that are handled in batches.
 True .

 False

Commercial software is completely finished, tested, and ready for implementation.

  True .

 False
The sequential code is the coding scheme most appropriate for a chart of accounts.
 True

 False .
Real-time processing in systems that handle large volumes of transactions each day
can create operational efficiencies.
 True

 False .
Management information system (MIS) processes financial transactions not processed
by the AIS.
 True .

 False

Operational inefficiencies occur when accounts unique to many concurrent transactions

are updated in real time.
 True

 False .
Product documents are the results of transaction processing.
 True .

 False
By tracing forward beginning from source documents, auditors can verify the
completeness of the recording of assets, and by vouching back from the recorded entry
to the source documents, auditors can better verify the accuracy of assets claimed to be
owned.
 True

 False .
Selecting a specific record from a master file containing millions of records requires a
direct access file environment.
 True .

 False
It is in the general journal where nonrecurring, infrequent, and dissimilar transactions
are recorded.
 True

 False .
The flat-file approach is most often associated with so-called legacy systems.
 True .

 False
Under SOX legislation public accounting firms are no longer allowed to provide
consulting services to audit clients which are specifically public companies.
 True .

 False
One member of a company’s audit committee must be a financial expert.
 True

 False .
A parallelogram represents accounting records in a systems flowchart and input/output
operation in a program flowchart.
 True .

 False
In principle, the sum of the amounts owed to each creditor listed in the accounts
payable ledger should equal the corresponding control total in the general ledger.
 True .

 False
Information Technology (IT) audits can only be performed by external auditors.
 True

 False .
The least significant characteristic of direct access files is access speed.
 True

 False .
Real-time processing in systems that handle large volumes of transactions each day
can create operational efficiencies.
 True .

 False
Summarization pertains to aggregation for the user’s needs.
 True .

 False
A potential disadvantage of cloud computing is that the client firm does not need to
know where its data are being processed.
 True .

 False

The special journal is used to record recurring transactions that are similar in nature.
 True

 False .
New systems development consumes the majority of a system’s total costs.
  True .

 False
Auditors may prepare program flowcharts to verify the correctness of program logic
 True .

 False
In a systems flowchart, a cylinder represents digital storage specifically direct access
storage device.
 True .

 False
The monthly bill from a credit card company is an example of a product document.
 True

 False .
Data flow diagrams represent the logical system.
 True .

 False
In a flowchart, the rectangle represents a computerized process while an inverted
pyramid represents a manual process.
 True

 False .
There may be a time lag between when the source document is prepared and when the
journal entry is made.
 True .

 False
For a given field size, a system that uses numeric codes can represent far more
situations than a system with that uses alphabetic codes.
 True .

 False
Transaction processing systems records financial transactions in the accounting
records.
 True .

 False
An inverted triangle with the letter “N” represents a file in “name” order.
 True

 False .
Information lacking reliability generally have no value.
 True .
  False
Financial transactions are common, repetitive events that involve external parties
(customers or suppliers) or internal events (depreciation, use of materials, etc.).
 True .

 False
Inverted triangle file storage
False
A control account is a subsidiary ledger account which is supported by a general ledger.
 True .

 False
Batch processing systems cannot store data on direct access storage devices.
 True

 False .
The network administrator is responsible for the security and integrity of the database.
 True

 False .
Manual systems utilize documents to provide evidence of an economic event.
 True .

 False
The Management Reporting System provides the external financial information needed
by outside stakeholders.
 True

 False .
Under SOX legislation public accounting firms are generally allowed to provide
consulting services to audit clients.
 True

 False .
Program flowcharts are used to describe the logic represented in system flowcharts.
 True .

 False
Systems maintenance represents 80 to 90 percent of the total cost of a computer
system.
 True .

 False
The Management Reporting System provides the external financial information needed
to manage a business.
 True
  False .
A disadvantage of mnemonic codes is the limited ability to represent items within a
class.
 True .

 False
Commercial software is completely finished, tested, and ready for implementation.
 True .

 False
The revenue cycle involves tracing the cost flows in the transformation of raw materials
into finished goods, a primary concern of cost accounting courses.
 True

 False .
Sequential codes are appropriate for items in either an ascending or descending
sequence, such as the numbering of checks or source documents.
 True .

 False
Batch processing is used for routine transactions in large numbers.
 True .

 False
DFDs represent systems data and ERDs represent system processes.
 True

 False .
A network is a collection of interconnected computers and communications devices that
allows users to communicate, access data and applications, and share information and
resources.
 True .

 False
The external auditor represents the interests of third-party outsiders.
 True .

 False
The process of acquiring raw materials is part of the expenditure cycle.
 True .

 False
In a systems flowchart, oblong represents
hard copy.
computer process.
terminal input/output.
 direct access storage.
What do you call a complete set of attributes for a single occurrence within an entity
class?
attribute
record
file
byte
Useful information must possess all of the following characteristics EXCEPT
relevance.
timelessness.
accuracy.
completeness.
All of the following are typical reports by the MRS EXCEPT
annual reports
budgets
variance reports
CVP analyses

Database management tasks do not include

storage
retrieval
summarization
deletion

Which symbol represents a document?

square
folder
triangle
heart
Which subsystem is part of the Accounting Information System?
Finance System
Expert System
General Ledger/Financial Reporting System
Management Information System
In general, a special journal would not be used to record
Sales
Depreciation
Both a and b
None. Both would use special journals
Sequential storage means
data is stored on tape
access is achieved through an index
access is direct
reading record 20 requires first reading records 1 to 19

The sales department clerk receives a customer orders from customers and prepares a
three-part sales order. The three copies are sent to the credit department for approval,
where the clerk reviews the Customer Credit Records. After approval, the credit
department clerk returns one copy of the sales order to the Sales Department, where it
is reviewed and filed. The remaining two copes are sent to the warehouse. The
Warehouse clerk picks the goods from the shelves and sends them along with one copy
of the sales order to the shipping department. The third copy of the sales order is filed in
the warehouse. Upon receipts of the goods, the shipping clerk prepares a shipping
notice and sends the goods and one copy of the sales order to the customer. The clerk
then sends the shipping notice to the Billing Department. Upon receipt of the shipping
notice, the billing clerk updates the customer’s account receivable and files the shipping
notice in the department. Which of the following accounting documents is used for credit
checking by the credit department clerk?
Sales order
Customer credit records
Shipping notice
AR subsidiary ledger

The major difference between the Financial Reporting System (FRS) and the
Management Reporting System (MRS) is the
FRS provides information to internal users; the MRS provides information to
external users
FRS provides nondiscretionary information; the MRS provides discretionary
information
FRS reports are prepared using information provided by the General Ledger
System; the MRS provides information to the General Ledger System
FRS reports are prepared in flexible, non-standardized formats; the MRS reports
are prepared in standardized, formal formats

In a database model,
all data are stored in one location or database.
 all data can be seen by all users.
it is more efficient and effective if there is no database management and control
software utilized
data sharing is limited.

In a computerized environment, price lists used for preparing customer invoices would
be found in the
reference file.
master file.
transaction file.
archive file.

The most important purpose of a turnaround document is to

serve as a source document
inform a customer of the outstanding amount payable
provide an audit trail for the external auditor
inform the bank of electronic funds deposits

The sales department clerk receives a customer orders from customers and prepares a
three-part sales order. The three copies are sent to the credit department for approval,
where the clerk reviews the Customer Credit Records. After approval, the credit
department clerk returns one copy of the sales order to the Sales Department, where it
is reviewed and filed. The remaining two copes are sent to the warehouse. The
Warehouse clerk picks the goods from the shelves and sends them along with one copy
of the sales order to the shipping department. The third copy of the sales order is filed in
the warehouse. Upon receipts of the goods, the shipping clerk prepares a shipping
notice and sends the goods and one copy of the sales order to the customer. The clerk
then sends the shipping notice to the Billing Department. Upon receipt of the shipping
notice, the billing clerk updates the customer’s account receivable and files the shipping
notice in the department. In preparing for the flowchart of the process, the symbol to be
used in the preparation of the sales order should be
rectangle.
inverted trapezoid.
square.
parallelogram.

Which accounting application is most suited to batch processing?

General ledger
Inventory system
Sales order processing
 Purchase and Accounts Payable System
Real-time processing would be most beneficial in handling a firm’s
fixed asset records
retained earnings information
merchandise inventory
depreciation records

Which activity is not part of the finance function?

general ledger
cash receipts In a computerized environment, a file of open sales order
portfolio management awaiting processing would be found in the
master file
credit
transaction file
reference file
archive file
Which activity is part of the finance function?
payroll
billing
credit
general ledger

The value of information for users is determined by all of the following but
reliability
relevance
summarization
Accountability
The most important advantage of mnemonic code is that
meaning is readily conveyed to users
sorting is simplified
the capacity to represent items is increased
missing documents can be identified
The financial components of transaction processing systems include
purchase and payable system.
sales order processing system.
cash receipts system.
all of the above.
Which system is part of the expenditure cycle?
Cash disbursements
Payroll
Both a and b
None of the above
According to the digital accounting records in a computer-based system, in auditing the
records, the beginning of the audit trail is the
balance sheet
general ledger
subsidiary ledger
journal.

The most important disadvantage of sequential coding is that

missing or unrecorded documents can be identified
the code itself lacks informational content
items can be inserted
deletions do not affect the sequence

Both the revenue and the expenditure cycles can be viewed as having two key parts.
These are
physical and financial.
input and output.
batch and real-time.
manual and computerized.

The characteristics that distinguish between batch and real-time systems include
time frame
resources used
efficiency of processing
all of the above

A circle represents
off-page connector.
on-page connector.
file.
terminal input/output.

The type of code generally used for chart of accounts is

 sequential code.
block code.
group code.
mnemonic code.

The sales department clerk receives a customer orders from customers and prepares a
three-part sales order. The three copies are sent to the credit department for approval,
where the clerk reviews the Customer Credit Records. After approval, the credit
department clerk returns one copy of the sales order to the Sales Department, where it
is reviewed and filed. The remaining two copes are sent to the warehouse. The
Warehouse clerk picks the goods from the shelves and sends them along with one copy
of the sales order to the shipping department. The third copy of the sales order is filed in
the warehouse. Upon receipts of the goods, the shipping clerk prepares a shipping
notice and sends the goods and one copy of the sales order to the customer. The clerk
then sends the shipping notice to the Billing Department. Upon receipt of the shipping
notice, the billing clerk updates the customer’s account receivable and files the shipping
notice in the department. Who picks the goods from the shelves?
Sales clerk
Credit department clerk
Warehouse clerk
Shipping clerk

All of the following can provide evidence of an economic event except

source document
turn-around document
master document
product document

When designing the data collection activity, which type of data should be avoided?
data that is redundant
data that is efficient
data that is relevant
data that is accurate

Each customer sale affects the following accounting records:

inventory control
accounts receivable control
cost of goods sold
all of the above
Which level of management is responsible for short-term planning and coordination of
activities necessary to accomplish organizational objectives?
operations management
middle management
top management
line management

Data collection
is a financial transaction that enters the information system from both internal and
external sources.
is the first operational stage in the information.
is the physical repository for financial and nonfinancial data.
involves storage, retrieval and deletion.

An example of a non-financial transaction is

purchase of computer
sale of inventory
collect cash
schedule delivery

The type of transaction most suitable for batch processing is

adjustments to perpetual inventory.
airline reservations.
credit authorization.
payroll processing.

Which system produces information used for inventory valuation, budgeting, cost
control, performance reporting, and make-buy decisions?
management information system
purchases/accounts payable
system
cash disbursements system
none of the above
Which of the following is a turn-around document?
sales order
remittance advice
purchase order
payroll check