OLIVAREZ COLLEGE

Dr. A Santos Avenue San Dionisio, Parañaque City

COLLEGE OF ACCOUNTANCY
AUD302B AUDITING IN CIS ENVIRONMENT
NAME: JOAN D. BONGATO

MODS 5 & 6 QUIZ APR 5 – 30 POINTS

PART I. ESSAY (18 POINTS). Just go direct to the point. No long story, unless you can explain the answer
better with the use of an example

1. Why are accountants involved with SDLC? (3 points)

Accountants are involved with SDLC for two reasons: 1) the creation of an information system represents a
significant financial transaction that consumes both financial and human resources. Systems development is like any
manufacturing process that produces a complex product through a series of stages, and, 2) the quality of the
information system rests directly on the SLDC activities that produce them. The accountant’s responsibility is to
ensure that the systems apply proper accounting conventions and rules, and possess adequate controls.

2. What is the role of internal audit in systems development activities? (3 points)

The internal auditor plays an important role in the control of systems development activities, particularly in
organizations whose users lack technical expertise. The internal auditor can serve as liaison between users and the
systems professionals to ensure an effective transfer of knowledge. An internal audit group, astute in computer
technology and with a solid grasp of the business problems of users, is thus invaluable to the organization during all
phases of SLDC. The auditor should become involved at the inception of the SLDC process to make conceptual
suggestions regarding system requirements and controls. Auditor involvement should continue throughout all phases
of the development process and into the maintenance phase

3. Differentiate source documents from product documents and conversion documents. (3 points)

Source documents are those documents being created at the beginning (the source) of the transaction due to
some economic events. Some documents are used to capture and formalize transaction data needed for processing by
the transaction cycle. A sale (an economic event) causes the sales clerk to prepare a multipart sales order, which is
formal evidence that a sale has occurred. Copies of this sales document enter the sales system and are used to
convey information to various functions, such as billing, shipping, and accounts receivable. The information in the
sales order triggers specific activities in each of these departments.

While product documents are the result of transaction processing rather than the triggering mechanism for
the process. For example, a payroll check to an employee is a product document of the payroll system. Customer’s
bill is a product document of the sales system.

4. Explain the meaning of “re-engineering financial reporting”. (2 points)

 Re-engineering involves radically rethinking the business process and the flow of work. The objective of
re-engineering is to greatly reduce the cost of business by identifying and eliminating non value-added task. This
involves replacing traditional procedures with procedures that are innovative and sometimes very different from
those that previously existed. A re-engineered GL/FRS enables users to update the general ledger after each batch of
transactions is processes. This also integrates the GL/FRS with MRS.

5. What happens in the three business transaction cycles? (3 points)

Three transaction cycles process most of the firm’s economic activity: the expenditure cycle, the
conversion cycle, and the revenue cycle. These cycles exist in all types of businesses – both profit-seeking and not-
for-profit. For instance, every business (1) incurs expenditures in exchange for resources (expenditure cycle), (2)
provides value -added through its products or services (conversion cycle), and (3) receives revenue from outside
sources (revenue cycle).

6. Give two types of transactions that need special journals.(2 points)

Two types of transactions that need the use of special journals are sales and purchases. The sales journal
and purchase journal provides a specialized format for recording only sales and purchase transactions.

7. Give two ledger accounts that have to be supported by subsidiary ledgers as a means of control.(2 points)

Two ledger accounts that have to be supported by subsidiary ledgers are accounts receivable and accounts
payable. This separation provides better control and support of the operations. The totals of account balances in
subsidiary ledgers should equal the balance in the corresponding general ledger control account.

PART II. TRUE OR FALSE (write your answer st the sight side) (5 POINTS)

1. A general journal is no longer used by organizations using the journal voucher system TRUE

2. Since a general journal is no longer needed, special journals are also done away with under the journal voucher
system FALSE

3. Auditor involvement should continue throughout all phases of the development process and into the maintenance
phase. TRUE

4. Service and retail establishments do not go through a conversion cycle. TRUE

5. The Chart of Accounts uses the block coding system. TRUE

PART III. MULTIPLE CHOICE –Highlight your choice in red ink (7 POINTS)

1. Who should become involved at the very start of the development of the SDLC, to make conceptual suggestions
regarding system requirements and controls?

a. internal auditor b. accountants c. external auditor d. none of them

2. This type of coding allows for the insertion of new codes within a block without having to reorganize the entire
coding structure.

a. sequential coding b. block coding c. numeric coding d. alphabetical coding

3. CD-ROM and WORM are types of

a. optical disks b. magnetic tapes c. magnetic disks d. viruses

4. The first step in batch processing when clerk transcribes source documents (sales orders) to magnetic tape for
processing later.

a. edit run b. sort run c. keystroke d. update run

5. This does not refer to financial transactions.

a. an economic activity that affects the assets and equities of the firm b. common business events that occur with

regularity c.is measured in monetary terms d. adding a new supplier to the list

6. Under this type of storage, its surface must be formatted first to get the disks ready to receive data.

a. magnetic disks b. magnetic tapes d. optical disks e. viruses

7. These consist of alphabetic characters in the forms of acronyms and other combinations that convey meaning

a. mnemonic codes b. alphabetic codes c. group codes d. block codes