ACC In4 SYS Key 1

Chapter 1: Introduction
True/False
1 Nowadays, an accountant's role is still to capture and record financial information about an organisation. F
2. Data is the same as information. F
3. Data are only useful when they are converted into information. T
4. An open system must have at least one input and one output. T
5. The inputs and outputs of a system can be the same. F
6. An accounting information system can be either manual or computerised. T
7. In modern organisations, accounting is considered as one of the functions that depend on the technologies of
information system. T
8. Behaviours of a system are unaffected by the external environment. F
9. A modern accounting information system can provide far more information than just traditional financial
statements. T
10. As accounting information systems are being computerised, data management will become less of an issue. T
Multiple choice
11. The role of the accountant has changed in recent times because:
b. Computer systems have emerged to handle the classification and recording tasks traditionally
associated with the accounting function.
12. Which of the following is NOT true?
a. Data are the raw facts relating to or describing an event.
13. What is information overload?
b. The amount of information exceeds the processing capacity of a human being when working
through a decision.
.
14. The following message box appears when entering a customer order into a sales system:
This is an example of:

d. Feedback
15. Which of the following statements is not true? .
d. None of the above.
16. Which of the following statements is not true?
c. A process should have at least one feedback.
17. A large company that provides supplies to the defence forces has just established a new accounting system. An
example of a factor in the external environment that would impact on the design of this system is: .
b. the directive from the finance director about the system's operation capacity.
18. Over time, the relationship between accounting and information systems has:
b. seen information systems gain an increased role as the emphasis shifted from accounting to information
systems.
c. The accounting function's reliance on information systems function has remained the same over years.
20. What is the accounting's role to an organisation? .
d. All of above.
Chap 2: Business Process
True/False
1. Business processes exemplify the interconnected nature of business function areas. T
2. Predetermined goals, usually driven by customer needs, are attributes of the functional perspective of a business.
F
3. The process perspective can introduce less bureaucracy and better efficiency than the functional perspective does.
T
4. Because ERP systems adopt best practices in their design, organisations seldom need to configure their ERP
systems or acquire additional software to support their needs. F
5. A well-designed ERP system should be able to drive all business processes of an organisati. F
Testbank to accompany Accounting Information Systems 3e
6. TQM is more suitable for drastic business changes. F

7. BPR is a top-down approach to process improvement, but it is less risky. F
8. A criticism of BPR is that it is frequently seen as a way of legitimising downsizing. T
9. Because BPR gives employees a greater sense of involvement and control over the process and it increases the
diversity of a job and make the job more interesting, employees will not reject BPR as a method of business change.
F
10. Organisations are always able to reap the full benefits of a new technology if that technology is implemented
properly. F
Multiple choice
11. Strategy can be seen to operate at:
a. the internal level.
b. the competitive level.
c. the business portfolio level.
d. all of above.
12. An example of a strategic level decision would be: .
d. Deciding whether or not to acquire the remaining shares of a partially owned subsidiary.
13. There are two perspectives of organisational design:
c. Functional and business process.
14. The logical consequence of Taylor's scientific management approach was that organisations:
a. Developed rigid hierarchies that sought to tightly control lower levels of the organisation.
15. Scientific management is concerned with:
c. Clearly defining individual employee's responsibilities and tasks.
16. An emphasis on business processes is different to a functional perspective of the organisation because a business
process emphasis:
c. Acknowledges cross-functional communication and action is essential to the customer's needs
17. Which of the following is NOT true?
b. The functional perspective is horizontally oriented whereas the process perspective is vertically oriented.
18. Which of the following statements is NOT true?
b. A business process consists of a series of discrete activities.

19. Which of the following is NOT a benefit of adopting a business process perspective within the organisation?
c. Tighter organisational control.
20. Although ERP systems are built around the idea of best practice, some organisations will choose not to adopt the
ERP best practice, seeking instead to modify the design of the system. The mostly likely reason for doing so is:
c. The ERP system is unable to drive some of the organisation's unique business processes that provide
distinct competitive advantage to the organisation.
21. Which of the following is NOT a result of moving to a business process-based environment?
c. The layer of middle management is thickened.
22. An organisation is undergoing a major change to the way it does business, redesigning business processes and
the use of IT within the processes. One of the suggested change approaches was TQM. In this case
d. TQM would not be ideal because its incremental approach is suited to gradual change rather than large
scale change
23. A process that has been reengineered will have less of a role for specialists because:
d. Jobs are combined and key workers are given decision making responsibility.
24. Which of the following statements is NOT true about a reengineered process?
c. Controls are increased to ensure smooth functioning.
25. Benefits of a reengineered process from a customer's perspective include:
a. better information availability.
b. a more convenient way of participating in a process.
c. a specific reference point.
d. all of above.
26. Organisations will benefit most from the application of IT when:
d. The use of IT is driven by business needs and opportunities.
© John Wiley & Sons Australia, Ltd 1.2

27. Evaluated receipts settlement involves:

a. The purchaser paying for goods without receiving an invoice
28. An organisation is looking for a way to improve their accounts payable process. Someone suggested that they
continue to send out paper invoices but allow customers to pay through their bank website and phone banking. This
is an example of:
c. Electronic bill payment
29. Which of the following statements regarding BPR is not true?
a. BPR means downsizing.
30. The central tenet of BPR is to:
a. Look for ways technology can potentially be applied to solve a business problem
b. Look for ways technology can potentially be applied to create a unique strategic position for an
organisation
c. Look for ways technology can potentially be applied to help organisation grasp emergent opportunities
d. All of the above.
31. From 2003 to 2008, the percentage of Australian businesses that have web presence:
a. Has remained unchanged

b. Has increased to more than 80%
c. Has decreased slightly
32. Which of the following statements is not true regarding Australian businesses?
c. More than 70% of businesses have incorporated internet into business processes .
33. Which of the following is not a factor that is attributed to the uptake of IT by many organisations?
a. Government support rt
d. Better socioeconomic environment
34. An aggregator:
a. operates by sourcing data from various sources and compiling or aggregating it in a way that adds value for the
end customer.
b. sells information products.
c. buys information products.
d. all of the above.
35. The information business:
a. cannot operate without modern information and communication technologies.
b. cannot operate on a manual basis.
c. is not popular because it adds middleman costs to final prices.
d. none of the above.
Chap 3: System Documentation

1. Modern accountants need to know how to interpret and understand systems documentation because they will be
involved in a system at some stage and because there are legal reasons. T
2. External entities are always external to the organisation. F
3. More than one bubble is allowed in a context diagram. F
4. A logical data flow diagram shows the people, places and things involved in a system. F
5. The structured narrative table, the physical data flow diagram, and the logical data flow diagram are legitimate
sources for developing the systems flowchart. T
6. If the external entities presented in a set of context, logical, and physical diagrams are the same, then this set of
data flow diagrams is balanced. F
7. One must draw the context diagram first before drawing the physical data flow diagram or the logical data flow
diagram. F
8. It is redundant to prepare a systems flowchart if a process map is in place. F
9. To improve efficiency, one can choose to develop a particular type of system documentation without losing too
many details. F
Multiple choice
11. Which of the following should not be included in a context diagram? d. Data store
12. A description for a flowchart is as follows:
"The sales order and invoice are manually matched by the sales assistant and entered into the computer. The

computer saves the data entered in the accounts receivable file."

The flowchart to best represent this would be:
a. A
b. B
c. C
d. D
13. The symbol for a computer disk data store in a flowchart is:
a. 1
b. 2
c. 3
d. 4

14. The symbol for a manually performed process in a flowchart is
a. 1
b. 2
c. 3
d. 4
15. The symbol for the manual keying of data in a systems flowchart is
a. 1
b. 2
c. 3
d. 4
16. The symbol for an internal entity in a physical data flow diagram is
a. 1
b. 2
c. 3

d. 4
17.
Refer the diagram above. How many copies of the purchase order are present in the system?
a. 1
b. 2
c. 3
d. 4
18. Where does the purchase order originate?
a. The sales assistant
b. The computer
c. The accounts receivable clerk
d. The customer
19. What order is used to file the invoice?
a. Alphabetical order
b. Chronological order
c. Numerical order
d. No order
20. How many manual processes are there in the diagram?

a. 0
b. 1
c. 2
d. 3
21. The best description for the flowchart would be:

a. The customer sends a purchase order to the sales assistant who keys the data into the computer,
which captures the data in the sales file. This data is used to prepare two invoices, one of which is
sent to the customer. The computer also updates the accounts receivable data. The second copy of the
invoice is sent to the accounts receivable clerk, who files the document. The sales assistant forwards
the purchase order to the accounts receivable clerk, who files the document away. 22.
Refer to the diagram above. Does the logical DFD balance with the physical DFD?
a. Yes, because they have the same external entities.

b. No, because the number of bubbles in each diagram is different.
c. Yes, because they have the same data stores.
d. No, because they have different flows to and from the external entities.
23. How many data stores are updated by the computer?

a. 5
b. 4
c. 3
d. 2
24. How many data stores are read by the sales person?
a. 0
b. 1

c. 2
d. 3
25. The number of process is can be determined by examining the ______ and the number is ______.
a. Logical DFD; 12
b. Physical DFD; 2
c. Logical DFD; 4
d. Physical DFD; 12
26. Which symbol represents a decision point in a process map?

a. 1
b. 2
c. 3
d. 4
a. The systems flowchart and the process map both tell us who is involved in a process.
b. The systems flowchart and the process map both tell us what is done in a process.
c. The systems flowchart and the process map both tell us how an activity is performed in a process.
d. The systems flowchart and process map both tell us the documents involved in a process.

28. Which of the following statements is true?

a. Process maps and systems flowcharts can be used to examine segregation of duties.
b. Logical DFD and context diagrams can be used to examine segregation of duties.
c. Physical DFD and context diagrams can be used to examine segregation of duties.
29. The first step of preparing a process map is to:
a. identify entities and divisions.
b. draw the lanes for each division.
c. indicate any sub-functions.
d. none of the above.
30. A typical structured narrative table contains descriptions for:
a. Entities, inputs, processes, and outputs
b. Entities, inputs, outputs, and feedbacks
c. Internal entities, external entities, systems, feedbacks
d. All of the above
31. A structured narrative table helps to:
a. classify entities into internal or external.
b. making it apparent which entity is only engaged in sending and receiving data.
c. making it apparent which entity is engaged in sending and receiving data as well as performing
information-processing activities.
32. From a structured narrative table, if an entity is identified as a mere receiver and sender of data, then the entity
can be classified as:
a. Internal entity
b. External entity
c. Process
d. Data store
33. Which of the following statements is incorrect?
a. A context diagram can be derived from the corresponding logical DFD
b. A context diagram can be derived from the corresponding physical DFD
c. Because of a and b, one does not have to draw a context diagram before drawing logical and physical
DFDs.
d. All of the above statements are incorrect.
34. Which of the following statement is incorrect?
a. Combining the process map in conjunction with the systems flowchart provides a very comprehensive
picture of a business process.
b. DFDs show less detail than the combination of process map and systems flowchart.
c. Because of a and b, the combination of process map and systems flowchart is always preferred to
DFDs.
d. None of the above
a. The process map presents an ungrouped view of the process
b. Preparing a logical DFD requires grouping the entities
c. Preparing a physical DFD requires grouping the processes
Chapter 9: Transaction cycle - the revenue cycle

True/False
1. Slling goods to customers is the sole objective of the revenue cycle. F
2. CRM technologies typically store data arranged by market segments or chronology. F
3. Inventory data and accounts receivable data are both created and updated by activities within the revenue cycle. F
4. In any DFD regarding the revenue cycle, the customer is always an external entity. T
5. A sale should not proceed if a customer's unrecorded accounts receivable amount is greater than the customer's
remaining credit availability. T

6. A sales order is created by the sales department and a sales order copy will be sent to the warehouse for picking
goods. T
7. As soon as the goods and the sales order copy are received from the warehouse department, the shipping
department can dispatch the goods. F
8. As soon as a sales order is created and sent to the warehouse, the sales department should bill the customer for the
goods. F
9. Credit check control will be invalidated if invoices are not posted regularly. T
10. Ideally, a cashier would be responsible for receiving payments from customers, issuing receipts for those
payments, depositing the payments into the company bank account, and conducting regular bank account
reconciliation. F
11. Revenue cycle performance can be affected by data entry errors. T
Multiple choice
12. The objective of the sales phase in the revenue cycle is to:
a. Effectively conduct sales and arrange the prompt supply of goods and services.
b. Effectively conduct sales.
c. Effectively conduct, record, and monitor sales and arrange the prompt supply of goods and
services.
d. Effectively conduct, record, and monitor sales.
13. The objective of the accounts receivable phase in the revenue cycle is to:
a. Ensure payments for goods and services are received on time and in correct amount.
b. Ensure payments for goods and services are correctly received, recorded and banked.
c. Ensure the accounts payable record is updated accordingly when payments for goods and services are
received.
14. Which of the following documents is not generated in the revenue cycle?
a. Sales order
b. Shipping notice
c. Bill of lading
d. Purchase requisition
15. Which of the following departments is not part of the revenue cycle?
a. Billing department
b. Sales department
c. Shipping department
d. Accounts payable department
16. Which document is prepared, usually in multiple copies, as part of the sales process and potentially used for
various purposes, including initiating shipping?
a. Customer order
b. Sales order
c. Shipping notice
d. Packing slip
a. The packing slip is generated by the shipping clerk.
b. The sales invoice is prepared by the billing clerk.
c. The remittance advice is generated by the customer.
d. The sales order is prepared by the salesperson.
a. The level of sales achieved drives all other activity levels within the organisation.
b. A sound, well-controlled revenue cycle can provide a competitive advantage.
c. A sound, well-controlled revenue cycle can lead to opportunities to sustain higher product pricing.
19. Online banking:
a. Improves security and cash flows
b. Improves transparency and reconciliation of transactions
c. Helps cut data entry costs and reduces error rates

d. All of the above

20. Which of the following technologies is not relevant to the revenue cycle?
a. CRM
b. ERP
c. SCM
d. EDI
21. Ideally, customer data should be produced by a dedicated customer management section of an organisation. This
customer management section is NOT responsible for:
a. Identifying and authorising new and existing customers
b. Assigning and reviewing customer credit limits
c. Secure preferential pricing from customers
22. Which of the following activities is not involved in processing the sales order?
a. Chck customer credit
b. Create sales order
c. Check inventory levels
d. Bill the customer
23. Which of the following activities is not involved in preparing and the sending the goods to customers?
a. Pick goods
b. Prepare goods for shipping
c. Deliver goods
d. Update inventory record
24. To bill a customer, the billing department must:

a. Check inventory levels
b. Perform a credit check
c. Check that the sale has been completed
d. All of the above
25. Which of the following information is needed to determine the creditworthiness of a customer?
a. Credit limit
b. Credit availability
c. Details of recent sales that are not yet recorded in the customer's accounts receivable account
d. All of above.
26. Requesting a signed purchase order form from the customer prior to accepting a sale can reduce the risk of:
a. Non-payment
b. Insufficient finished goods inventory available
c. Fictitious sales
d. Poor decision
a. The ability to add a new customer and change or assign a credit limit should be devolved to sales staff.
b. Credit limit should be established on the fiscal soundness of the customer.
c. The age of all receivables needs to be checked only occasionally.
d. All of the above
28. A customer buys a computer over the Internet; she is required to pay for the computer before the computer is
dispatched. This is an example of:
a. Electronic payment
b. Post-billing
c. Credit check
d. Pre-billing
29. A sales order is created by using ________ as the main source of information.
a. Inventory level
b. Credit information
c. Sales request
30. Which document triggers the picking of goods?

a. Sales order
b. Picking ticket
c. Either a or b
d. Neither a nor b
31. A status code is
a. A code used to show the credit level of a customer.
b. A code on transactions that are moving through an iteration of a process indicating which stage of
the process the transaction is at.
c. A code used to flag whether the goods are shipped.
d. Not accessible by the customer.
32. An invoice is created for each valid sale by basing on:

a. Price information and inventory information
b. Customer data and sales order
c. Sales request and price information
d. Customer data and inventory information
a. If invoices are not posted regularly, the credit check control may be invalidated.
b. Updating accounts receivable must happen in real-time; otherwise the accounts receivable accounts will
be understated.
c. Invoices must be dispatched with the goods to ensure timely payment.
34. An organisation separates the billing and shipping functions and imposes independent checks to ensure that
goods have been shipped prior to billing the customer. This is an example of:
a. Reducing the risk of over-billing
b. Reducing the risk of under-billing
c. Reducing the risk of failing to bill a customer for a valid sale
a. Cheques received should be stamped or endorsed immediately.
b. Cheques received should be receipted and deposited by the accounts receivable clerk.
c. Cheques need not be separated from the remittance advice.
36. Which of the following can be identified as a risk in receiving payment?
a. Late or slow payment
b. Non-payment
c. Theft of cash and/or cheques
d. All of the above
Chapter 10: Transaction cycle - the expenditure cycle
True/False
1. Paying for the goods received is the sole objective of the expenditure cycle. F

2. EDI is mainly used among different organisations. T
3. Inventory data and accounts payable data are both created and updated by activities within the
expenditure cycle. T
4. The supplier is always represented as an external entity in any logical expenditure cycle DFD.
T
5. Purchasing staff should order relevant goods as soon as purchase requests are received. F
6. Purchase requisitions can be created by the inventory control department. F
7. Purchase requisitions should be used as source documents for creating purchase orders. T
8. A blind copy of the purchase order should be sent to the warehouse with the name of the
shipping company obscured. F
9. Both quality and quantity of the goods received should be scrutinised regardless of the goods'
volume and value. F
10. Accounts payable staff should always take advantage of any payment discounts offered when
establishing the date for payment. F
11. The performance of the expenditure cycle is determined by the proportional amount of
discounts claimed. F
Multiple choice
12. The overall objective of the purchasing phase in the expenditure cycle is to:
a. Procure the right goods at the right amount and with the right price
b. Procure the right goods at the right amount and with the right supplier
c. Procure the right goods at the right amount, and to receive those goods at the right time
d. Procure the right goods at the right amount, and to update the accounts payable record
13. To achieve the overall objective of the purchasing phase in the expenditure cycle, an
organisation needs to
a. Approve and authorise initiated purchases properly

b. Obtain goods and services from authorised or pre-vetted suppliers
c. Record all purchase commitments and obligations accurately
d. Ensure that accepted goods and services must meet quality and delivery specifications.
e. All of the above
14. The overall objective of the accounts payable phase in the expenditure cycle is to:

a. Maintain the accounts payable record

b. Pay the right people the right amount at the right time
c. Determine whether an invoice should be paid
d. Ensure suppliers are neither overpaid nor underpaid
15. To decide whether a payment should be made to the supplier, an accounts payable clerk
should:
a. Examine the receiving report

b. Be involved in the interaction with suppliers of the goods during the purchasing phase
c. Ensure there are ongoing good relationships with suppliers
a. The accounts payable phase needs to ensure that payments are made by authorised
employees only.
b. The accounts payable phase needs to ensure that payments are accurate and timely
c. The accounts payable phase needs to ensure that the accounts are settled as soon as
possible.
d. The accounts payable phase needs to ensure that all accounts payable liabilities are
recorded accurately and promptly.
a. A sound, well-controlled expenditure cycle can provide a competitive advantage to the

organisation.
b. A sound, well-controlled expenditure cycle can provide the organisation with the
opportunities for higher product pricing.
c. An efficient and effective expenditure cycle can enable the organisation to provide
goods and services at a level that undercuts less efficient competitors.

18. Which of the following technologies is not involved in the expenditure cycle?
a. ERP
b. RFID
c. SCM
d. CRM
19. Which of the following technologies can provide accurate, timely and cost-effective data
sharing to the expenditure cycle?
a. RFID
b. SCM
c. EDI
d. CRM
20. What are the implications if an organisation is switching to an electronic payment system
from a manual payment system?
a. Access security
b. Timing
c. Cash flow
d. All of the above
21. Which of the following data is not required by the expenditure cycle?
a. Inventory data and supplier data
b. Goods received data
c. Purchase order data
22. When deciding which suppliers provide the best quality and service at the best price:
a. There is often a trade-off between price, quality and service

b. The overall business strategy of the organisation is not a concern.
c. The type of product being procured is not a concern.
a. Determining demand for goods involves collecting purchase requests

b. Ordering goods involves the creation of the purchase requisition
c. Receiving goods involves the preparation of a receiving report
d. Paying for goods involves the approval of the payment

a. Purchase requests are sometimes accumulated over a period of time before an order is
placed.
b. After purchase requests are collected and accumulated a purchase requisition can be
created
c. Purchase requisitions are sometimes accumulated over a period of time before
purchase orders are made.
d. Details of the purchase requisition are sent to the purchase clerk so that a purchase
order can be created
25. Normally, when the stock on hand drops down to the automatic reorder point:
a. A purchase request is generated automatically
b. A purchase requisition is generated automatically
c. A purchase order is generated automatically
26. Accumulation of purchase requests should be done when
a. There is a potential to achieve a better price outcome by buying in bulk

b. Transaction costs can be lower by a smaller number of larger orders
c. Time is not critical for the items being purchased
27. Which of the following statement is NOT true?
a. The trigger for accumulating purchase requests could be temporal

b. Purchase requests accumulation can be triggered by the receipt of a similar purchase
request
c. Accumulated purchase requests may be forgotten.
28. A blind copy of the purchase order, which is sent to the receiving department, cannot:
a. help deterring employee theft of high-value income goods
b. help forcing the receiving clerk to actually count and examine the incoming goods
c. expedite the preparation of receiving reports
d. be used for copying quantity and price information to the receiving report
29. Typical risks encountered in the ordering process do not include:
a. purchasing from unauthorised suppliers

b. overpayment
c. buying poor quality goods
d. kickbacks

e. None of the above
30. To prevent employees from receiving kickbacks in the ordering process, an organisation can
do the following except:
a. enforce job rotation

b. enforce annual leave
c. enforce corporate gift policies
d. enforce the use of pre-approved suppliers
31. To check that there was a purchase order placed for the goods, goods receiving staff should
check the following except:
a. the purchase number is valid
b. the goods and supplier listed on the purchase order approximate those on the delivery
document
c. the goods listed on that purchase order have not been received already
d. the price on the purchase order agrees with the price on the delivery document
32. The types of counts and checks conducted during receiving goods will vary depending on the
________.
a. availability of the receiving clerk

b. the corporate policy on how often incoming goods should be checked
c. volume and value of goods received
d. All of the above
33. A discount should only be taken where:
a. cash flow is sufficient to support the early payment

b. the discount offered is a reasonable inducement
c. corporate policy allows to do so
d. All of the above
a. All payments processed should be related to at least one purchase order.

b. Purchasing staff need to decide whether to take advantage of any payment discounts
offered.
c. A significant risk in the area of accounts payable is the potential to pay invoices twice.
35. When approving payments, and accounts payable clerk needs to examine:
a. purchased order information

b. receiving report
c. supplier information

d. All of the above
36. Which of the following KPIs is not suitable for measuring the timeliness and accuracy of
payments made to suppliers:
a. financial delegations compliance

b. discounts claimed/overlooked
c. number of supplier complaints
d. number of invalid requests received

Chapter 13: Transaction cycle - the general ledger and financial reporting cycle
True/False
1. The sole function of the general ledger and the financial reporting cycle is to prepare financial
statements to the shareholders of the company. F
2. XBRL is becoming the standard for corporate filing and reporting in Australia. T
3. Detailed budgeting, although more difficult than aggregate budgeting, provides better
monitoring of performance. T
4. The general ledger and financial reporting cycle starts with the updating of the general ledger.
F
5. The only output of the general ledger and financial reporting cycle is the set of financial
statements. F
6. Historical transactions and prior results must be used in the budgeting process to produce more
accurate estimates. F
7. The primary risk related to determining budget values are data entry errors. F
8. The primary risk when preparing adjusting journals are data entry errors. F
9. Management reports produced by the general ledger and financial reporting cycle should be
protected against unauthorised distribution. T
10. Separation of duties need not be specified for the general ledger and financial reporting cycle
because there is no physical asset involved. F

Multiple choice
11. The general ledger and financial reporting cycle ________.
a. Summarises, adjusts, and reports on data from all previous operational cycles
b. Summarises, adjusts, and reports on data from all current operational cycles
c. Creates, adjusts, and summarises on data from all previous operational cycles
d. Creates, adjusts, and summarises on data from all current operational cycles
12. During the general ledger and financial reporting cycle:
a. Budgets are created and agreed upon

b. Transactional level data is accumulated, summarised, adjusted and reported to internal
users
c. Transactional level data is accumulated, summarised, adjusted and reported to external
users
13. Financial reports generated in the general ledger and financial reporting cycle is not used by:
a. Managers within the organisation

b. Investors
c. External regulators
14. Which of the following statements is correct?
a. Budgets created for a particular financial year should not be altered until the next
financial year.
b. Assuring the timeliness, validity, accuracy and completeness of reported data has
nothing to do with the organisation success's.
c. Final budgets are used as a forecast rather than a control measure.
d. To motivate desirable behaviour by managers within the organisation, budgets should
be framed so that activity targets are achievable but challenging.
15. The purpose of budgeting is to:
a. Get a forecast of resource usage for the next financial year only
b. Facilitate organisational planning and control
c. Request more funding.

16. An unfavourable variance between budgeted and actual data does not indicate
a. Poor performance
b. Budget estimates were set at an unrealistic or unachievable level
c. The estimation of future activity levels and the associated potential costs and revenues
is incorrect and inaccurate.
17. In terms of the general ledger and financial reporting cycle, which of the following sequences
is in the correct order?
a. create trial balance, perform bank reconciliation, prepare adjusting journal entries,
conduct financial reporting
b. prepare adjusting journal entries, create trial balance, perform bank reconciliation,
c. perform bank reconciliation, create trial balance, prepare adjusting journal entries,
d. create trial balance, prepare adjusting journal entries, perform bank reconciliation,
a. Financial reports are more detailed than management reports.

b. Financial reports have an internal focus.
c. Management reports can be distributed externally.
d. Basic reports contain even more detailed information than financial reports and
management reports.
a. Decision making performance may be compromised due to poor quality outputs of the
general ledger and financial reporting cycle.
b. Decision making performance may be compromised due to poorly formatted and
designed reports.
c. Decision making performance may be compromised due to too many data being
presented in the reports.
20. Which of the following is not a problem that can be caused directly by errors in financial
statements?

a. Inability to improve business process efficiencies

b. Inability to access capital markets
c. Inequitable increases in the cost of capital
d. Incorrect market pricing of company shares
21. Which of the following technologies can be used in the general ledger and financial reporting
cycle?
a. ERP
b. XBRL
c. Both of a and b
22. An internet-based banking facility that allows organisations to manage and view their bank
accounts online and conduct transactions such as transfer from those accounts is called:
a. Online reconciliation
b. Online payment
c. Online banking
d. Online financial management
23. XBRL allows semantics to be embedded within strings of financial data. This does not mean:
a. It is easier to build a database for accounting information systems

b. More in-depth analysis can be conducted by users or recipients of the data
c. Embedded tags that identify where separate pieces of data start and end within strings
of data is inserted
d. It is easier to exchange financial data.
a. Access to financial data can occur by means of paper

b. External reporting must be paper based
c. Access to financial data can occur by means of electronic reports
d. External reporting can be done electronically
a. If an annual budget is set, month-by-month monitoring could be misleading when

variances are considered.
b. Not all revenue and expenses divide evenly into 12 over a fiscal year.

c. The degree of granularity at which the budget set determines how useful the budget
targets will be during performance monitoring.
26. Setting budget targets requires balance between:
a. the current financial situation of the organisation and the forecasted cash flow
b. what is desired in terms of performance and what is thought to be possible
c. the expenditure and the revenue of the organisation
27. Which of the following is not required during the process of updating the general ledger?
a. journal voucher
b. accounts receivable data
c. manufacturing overheads
d. direct labour costs
28. To minimise the risk of under or over estimating revenue and expenditure amounts, which of
the following controls can be applied?
a. Independent approval of budget estimates

b. Ask operational managers to prepare budget estimates
c. Link budget values to performance monitoring
a. The finalisation of budges is a nondiscretionary process involving senior management

only.
b. The finalisation of budgets is an interactive process involving both senior management
and operational staff.
c. The finalisation of budges is a nondiscretionary process involving both senior
management and operational staff.
d. The finalisation of budgets is an interactive process involving both senior management
and middle management.
30. A warning message is produced if budget estimate varies by more than a fixed percentage
from last year's budget is an example of controlling for:
a. fraud

b. data entry errors when recording budgets

c. underestimation of revenue and expenditure amounts
31. To reduce the risks of incomplete and inaccurate data during data extraction and validation in
the process of updating the general ledger, which of the following controls can be used?
a. Batch totals
b. Hash totals
c. Use ledger control accounts
d. All of the above
32. Which of the following is not helpful in reducing the risk of journal entries errors during the
preparation of adjusting journals?
a. Independent approval of journal entries by senior accounting staff

b. Attach full working papers to support journal entry calculations
c. Document assumptions and algorithms relied on when calculating journal amounts
d. Perform reasonableness check.
33. Unauthorised distribution of financial data cannot be controlled by:
a. using the XBRL technology

b. applying secure privacy settings on electronic reports
c. using a document management system for reports containing sensitive data
d. maintaining security profiles allowing read-only access to financial data at the
individual level
34. The main risk attached to producing financial reports is:
a. unauthorised distribution of financial reports

b. unauthorised access of financial reports
c. reporting incorrect data
d. All of the above
35. Which of the following KPIs is not suitable for measuring how accurate and complete the
budget estimates are determined and recorded?
a. Number of budget variances reported
b. Operational manager complaints received regarding budget errors
c. Cycle time to create budgets
d. Degree of compliance with accounting policy

Chapter 16: Ethics, fraud, and computer crime
True/False
1. Ethics are how a person approaches and responds to an issue. F
2. The first step of ethical decision making is to define the issue. F
3. Because the information resource is its asset, an organisation can use all information it holds
in whichever way it wants. F
4. Cookies are often used to gather a customer's online behaviour, but many organisations do so
without the informed consent of the customer. T
5. Customers have the right to view data that an organisation holds about them to make sure that
they are correct, and to demand that any errors be corrected. T
6. Because of the wide adoption of e-commerce, the assumption that the Internet can be accessed
by all people is valid. F
7. It is the systems designers and developers, not the managers working with an AIS, that are
required to ensure compliance to privacy laws and information usage laws. F
8. An organisation blocking employees from accessing certain external websites is definitely

unethical. F
9. An employee who is responsible for maintaining both accounts payable records and inventory
records can potentially commit a fraud. T
10. Fraud is most likely to be detected by notification from employees. F

Multiple choice
11. Which of the following statement is true?

i. Ethical conducts must be legal ii. Unethical conducts must be illegal
iii. Legal conducts must be ethical iv. Illegal conducts must be unethical
a. Both A and B
b. Both C and D
c. Both A and D
d. Both B and C
12. How a person approaches and responds to an ethical issues is termed:
a. Ethics
b. Morals
c. Critical thinking
d. Decision making
13. The implicit rules that guide us in our everyday behaviour,

thoughts and actions are collectively termed:
a. Ethics
b. Morals
c. Code of conduct
d. Legislation
14. The first step of ethical decision making is to:
a. Define the issue

b. Identify the principles that can be applied
c. Identify the facts
d. Any of the above

15. Which of the following statements regarding ethical decision

making is true?
a. The number of alternative courses of action should be restricted to a small amount to

avoid information overload.
b. When choosing from a set of alternative courses of action, the primary principle is to
look for the one that will minimise the chance of legal sanction.
c. Each alternative course of action needs to be evaluated from the perspective of the
different stakeholders.
d. All of the above
16. Information about users of an AIS can be gathered
a. Without the consent of the users

b. With the informed consent of the users
c. With the implied consent of the users
d. All of the above
17. ________ refers to the individual consenting to the information gathering through their
subsequent actions.
a. Informed consent
b. Implied consent
c. Forced consent
18. Ideally, a website should not store any data of the potential customer during the customer
registration process until:
a. The customer has agreed to relevant Terms and Conditions

b. The customer has elected to press the 'Submit' button on the electronic registration
form
c. The customer has reviewed all information entered in previous steps of registration.
d. All of the above
19. When submitting their online registration form, a pop-up dialogue box appears in the
customers' Internet browser asking them to confirm the submission of information. This is an
example of:
a. Informed consent
b. Implied consent
c. Forced consent

d. Conscious consent
20. Information privacy principles from the Privacy Act 1988 does not dictate that:
a. Information shall not be disclosed to a third party unless such disclosure was made
known to the subject at the time the information was solicited and the subject consented
to such disclosure.
b. Individuals have the right to view the information that is kept about them.
c. Individuals have the right to require that any inaccuracy regarding information that is
kept about them be corrected
d. The person gathering information should use whatever means to ensure that the
information is complete and up to date.
21. The principles of the Privacy Act 1988 do not explicitly cover:
a. Collection of information
b. Storage of information
c. Usage of information
d. Disposal of informations
22. Which of the following factors do not affect the usage of internet technology?
a. Age
b. Education
c. Geography
d. Gender
a. Young people are more likely to have internet access

b. Wealthier people are more likely to have internet access
c. Well educated people are more likely to have internet access
24. Which of the following factors is the most important one in addressing internet access issues
in Australia?
a. Social barriers
b. Economic barriers
c. Technical barriers
d. All of the above

a. Top management sets the tone and example for ethical practice.
b. Setting an example is an important part of promoting ethical behaviour in the
organisation
c. Managers working with an AIS have a duty to ensure that the system is being used
appropriately.
d. It is only the lawyer's responsibility to ensure that the organisation and its systems
comply with federal and state laws relating to privacy and the usage of information.
26. Which of the following controls can ensure that all software is properly licensed in an
organisation?
a. Users are restricted from installing programs or running unauthorised programs on

their work computer.
b. Administrator rights and power user rights are not assigned to any common user.
c. Centralised deployment of software.
d. All of the above
27. Which of the following is not a responsibility of the chief privacy officer?
a. Drafting organisational privacy policies

b. Lobby the government for tighter privacy control
c. Enforcing privacy policies and guidelines in the organisation
d. Create an organisational awareness of privacy issues
28. Managers are compelled to act in the best interest of the owners of the company. This is
implied by the:
a. Stakeholder theory
b. Stockholder theory
c. Social contract theory
d. Profit maximising theory
29. Some organisations restrict employee's access to external websites such as Facebook and
eBay that are not relevant to work. Such conduct is ________ from an employee's perspective:
a. Definitely unethical and illegal

b. Definitely unethical but legal
c. Potentially unethical and illegal
d. Potentially unethical but legal

30. Which of the following is not considered invasion of privacy?
a. Blocking employee access to external websites

b. Screening employee emails
c. Maintaining a log that tracks employee usage of the internet
31. The reporting, by an employee or member of an organisation, of the unethical behaviour of a

colleague is called:
a. Informing
b. Insider report
c. Whistle-blowing
d. Ethics-blowing
32. Whether it is ethical for the purchasing manager to accept a gift from a supplier may depend
on:
a. The social culture.

b. The value of the gift.
c. The company's gift policy.
33. Spam is a problem because
a. It can slow down email servers

b. It may spread computer viruses
c. It may affect the job efficiency of employees
d. All of the above
34. Gaining unauthorised access to a system is called:
a. Hacking
b. Identity theft
c. Phishing

35. Which of the following fraud can occur if an employee is responsible for both approving and
paying invoices?
a. Paying nonexistent suppliers

b. Inventory theft
c. Credit fraud
d. All of the above

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Chapter 1: Introduction

This is an example of:

6. TQM is more suitable for drastic business changes. F

18. Which of the following statements is NOT true?

b. A business process consists of a series of discrete activities.

© John Wiley & Sons Australia, Ltd 1.2

27. Evaluated receipts settlement involves:

a. Has remained unchanged

Chap 3: System Documentation

© John Wiley & Sons Australia, Ltd 1.3

computer saves the data entered in the accounts receivable file."

© John Wiley & Sons Australia, Ltd 1.4

14. The symbol for a manually performed process in a flowchart is

© John Wiley & Sons Australia, Ltd 1.5

20. How many manual processes are there in the diagram?

© John Wiley & Sons Australia, Ltd 1.6

a. Yes, because they have the same external entities.

23. How many data stores are updated by the computer?

© John Wiley & Sons Australia, Ltd 1.7

26. Which symbol represents a decision point in a process map?

© John Wiley & Sons Australia, Ltd 1.8

28. Which of the following statements is true?

Chapter 9: Transaction cycle - the revenue cycle

© John Wiley & Sons Australia, Ltd 1.9

© John Wiley & Sons Australia, Ltd 1.10

d. All of the above

24. To bill a customer, the billing department must:

© John Wiley & Sons Australia, Ltd 1.11

32. An invoice is created for each valid sale by basing on:

Chapter 10: Transaction cycle - the expenditure cycle

© John Wiley & Sons Australia, Ltd 1.12

2. EDI is mainly used among different organisations. T

6. Purchase requisitions can be created by the inventory control department. F

a. Approve and authorise initiated purchases properly

© John Wiley & Sons Australia, Ltd 1.13

a. Maintain the accounts payable record

a. Examine the receiving report

16. Which of the following statement is incorrect?

17. Which of the following statement is incorrect?

a. A sound, well-controlled expenditure cycle can provide a competitive advantage to the

© John Wiley & Sons Australia, Ltd 1.14

a. There is often a trade-off between price, quality and service

23. Which of the following statements is NOT true?

a. Determining demand for goods involves collecting purchase requests

24. Which of the following statements is NOT true?

© John Wiley & Sons Australia, Ltd 1.15

26. Accumulation of purchase requests should be done when

a. There is a potential to achieve a better price outcome by buying in bulk

27. Which of the following statement is NOT true?

a. The trigger for accumulating purchase requests could be temporal

29. Typical risks encountered in the ordering process do not include:

a. purchasing from unauthorised suppliers

© John Wiley & Sons Australia, Ltd 1.16

e. None of the above

a. enforce job rotation

a. availability of the receiving clerk

33. A discount should only be taken where:

a. cash flow is sufficient to support the early payment

34. Which of the following statements is true?

a. All payments processed should be related to at least one purchase order.

a. purchased order information

© John Wiley & Sons Australia, Ltd 1.17

d. All of the above