Chapter 1: Introduction True/False

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
Testbank to accompany Accounting Information Systems 3e
Multiple choice
11. The role of the accountant has changed in recent times because:
a. Professional bodies have sought to redefine and reposition the accounting function.
b. Computer systems have emerged to handle the classification and recording tasks
traditionally associated with the accounting function.
c. The accounting cycle is too complex and involved to be performed solely by the
accountant.
d. Knowledge workers have increasingly replaced accountants in the performance of
recording and classification tasks.
12. Which of the following is NOT true?
a. Data are the raw facts relating to or describing an event.

b. Data are useful even if they are not subject to the application of rules or knowledge,
which enables the transformation of data into information.
c. Information is used in decision making and can prompt action, as well as be a guiding
tool for decision making.
d. Excess amount of irrelevant information may cause information overload.
13. What is information overload?
a. The amount of information exceeds the storage capacity of a computer system when
data storage is taking place.
b. The amount of information exceeds the processing capacity of a human being when
working through a decision.
c. Both a and b.
d. None of the above.
© John Wiley & Sons Australia, Ltd 1.2

14. The following message box appears when entering a customer order into a sales system:
This is an example of:
a. Input
b. Processing
c. Output
d. Feedback
15. Which of the following statements is not true?
a. A system should have at least one input.

b. A system should have at least one output.
c. A system should have at least one feedback.
a. A process should have at least one input.

b. A process should have at least one output.
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:
a. the specification details gained from users.

b. the directive from the finance director about the system's operation capacity.
c. the defence force requirement regarding e-commerce.
d. the accounting standards governing large companies.

18. Over time, the relationship between accounting and information systems has:
a. seen accounting gain an increased role as the emphasis shifted from information
systems to accounting.
b. seen information systems gain an increased role as the emphasis shifted from
accounting to information systems.
c. seen information systems and accounting share the emphasis.
d. seen both accounting and information systems become part of a wider organisational
IT function.
a. Information systems were first seen as a support tool for the accounting function
b. Because of technological advancements, organisations began to see that technology of
the computer could be applied beyond the domain of the accounting function.
c. The accounting function's reliance on information systems function has remained the
same over years.
d. All of the above
20. What is the accounting's role to an organisation?
a. Gather data about the organisation's activities.

b. Provide a means for business data storage and processing.
c. Convert business data into useful information.
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 organisation.
F
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:
a. Determining the quantity of raw materials to purchase.

b. Appointing a new line manager responsible for running the delivery department.
c. Reconfiguring the production line design to eliminate wasted time due to bottlenecks.
d. Deciding whether or not to acquire the remaining shares of a partially owned
subsidiary.
13. There are two perspectives of organisational design:
a. Logical and physical.

b. Internal and external.
c. Functional and business process.
d. Scientific and practical.
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.
b. Developed highly interactive and flexible structures that could easily adapt to changing
environments.
c. Had employees who questioned procedures and sought to continually redefine their
role.
d. Streamlined the information flows across the organisation.
15. Scientific management is concerned with:
a. Streamlined work flows across the organisation.

b. Hierarchical control of the organisation through three levels of management.
c. Clearly defining individual employee's responsibilities and tasks.
d. Dividing the business structure into the optimal number of functional divisions.

16. An emphasis on business processes is different to a functional perspective of the organisation

because a business process emphasis:
a. Offers highly defined tasks and responsibilities

b. Gives employees the freedom to do what they want in order to please the customer
c. Acknowledges cross-functional communication and action is essential to the
customer's needs
d. Views the customer needs as secondary to those of the functional divisions
17. Which of the following is NOT true?
a. The functional perspective focuses on what should be done while the process
perspective focuses on how tasks are done.
b. The functional perspective is horizontally oriented whereas the process perspective is
vertically oriented.
c. The functional perspective is task driven while the process perspective is customer
driven.
d. The functional perspective emphasises on specialists whereas the process perspective
emphasise on generalists.
18. Which of the following statements is NOT true?
a. A business process is based on a horizontal perspective of the organisation.

b. A business process consists of a series of discrete activities.
c. A business process is customer driven.
d. A business process is designed to achieve a predetermined organisational goal.
19. Which of the following is NOT a benefit of adopting a business process perspective within
the organisation?
a. Better customer service and customer relations.

b. Greater efficiency and effectiveness in using resources.
c. Tighter organisational control.
d. Less non-value-adding activities.

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:
a. Modifying the ERP system will lower the cost of implementation because redundant
features are removed.
b. The 'fit' between the system and the business processes needs to exist. It is easier to
change the system than to change the organisational design.
c. The ERP system is unable to drive some of the organisation's unique business
processes that provide distinct competitive advantage to the organisation.
d. Adopting an ERP system off the shelf erodes competitive advantage because everyone
else has the same software at their disposal.
21. Which of the following is NOT a result of moving to a business process-based environment?
a. The way that the organisation is managed is changed.

b. Functional barriers are broken down.
c. The layer of middle management is thickened.
d. Employee resistance.
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
a. TQM would be ideal because it allows for all employees to offer suggestions and be
involved in the changing of the organisation
b. TQM would be ideal because its incremental approach to organisational change means
that the change process would be well managed.
c. TQM would not be ideal because its incremental approach would mean that change
would take a large amount of time
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:
a. Specialists are made redundant through the cost-cutting emphasis of BPR.

b. Decisions that require specialists are removed from a process.
c. Generalists are trained and act as specialists through the assistance of decision aids.
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?
a. Jobs change and people are empowered.

b. Work units change from a functional to a process perspective.
c. Controls are increased to ensure smooth functioning.
d. Workers' jobs are combined and workers are given decision rights.
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:
a. They use the most advanced and latest IT.

b. All business processes are computerised.
c. IT costs are brought to the minimum.
d. The use of IT is driven by business needs and opportunities.
27. Evaluated receipts settlement involves:
a. The purchaser paying for goods without receiving an invoice

b. The supplier issuing an invoice before goods have been delivered
c. Speeding up the accounts receivable process for a vendor
d. The electronic sending and payment of invoices
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:
a. Electronic bill presentment

b. Electronic bill presentment and payment
c. Electronic bill payment
d. None of above

29. Which of the following statements regarding BPR is not true?
a. BPR means downsizing.

b. Ethical issues are involved in BPR.
c. Social issues are involved in BPR.
d. All of the above
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?
a. More than 90% of businesses are using the internet.

b. More than 80% of websites have some form of customer contact facility
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
b. Customer pressure
c. Ability to access technological support
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?
a. External entities
b. System inputs
c. System outputs
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.
b. The sales assistant prepares a purchase order and 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. After this the computer updates the sales data. The second
copy of the invoice is electronically 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.
c. The sales assistant prepares a purchase order and scans the data into the computer,
which is sent to the customer. The computer updates the accounts receivable data. The
second copy of the invoice is electronically 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.
d. The sales assistant receives a purchase order and keys the data into the computer,
which is sent to the customer. 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 7: Internal controls I
True/False
1. Corporate governance is concerned with management and has nothing to do with internal
control. F
2. Corporate governance does not cover shareholders because the latter is external to a company.
F
3. IT governance is evidenced by top management's concern that the IT in place within the
organisation is being used appropriately and is consistent with the overall organisational strategy.
T
4. In terms of IT governance, monitoring and evaluating IT mean that an organisation should

ensure that all systems and software are running smoothly and various hardware are energy
efficient. F
5. Internal controls only protect the physical assets of an organisation. F
6. Both COSO and ASA 315 state that internal control should guarantee attainment of
organisational objectives, reporting reliability, and legal compliance. F
7. Senior management can, consciously or unconsciously, limit the effectiveness of internal

controls. T
8. To ensure its efficiency and effectiveness, the internal control system should be monitored by
both internal and external parties. T
9. Effective internal controls can eliminate the risk of financial reporting errors and guarantee
that the assertions are met. F
10. COSO provides an IT-specific control framework whereas COBIT is a control framework for
general internal controls. F
Multiple choice
11. Which of the following relates to corporate governance?

a. Goal setting
b. Risk management
c. Performance measurement and management

d. All of the above
12. Which of the following is the objective of a corporate governance system?

a. To ensure that minority shareholders receive reliable information about the value of
firms and that a company's managers and large shareholders do not cheat them out of the
value of their investments
b. To motivate managers to maximise firm value instead of pursuing personal objectives
c. To encourage companies to create value, through entrepreneurialism, innovation,
development and exploration, and provide accountability and control systems
commensurate with the risks involved.
d. All of the above
a. Corporate governance is only relevant at the level of the individual organisation.

b. Corporate governance mechanisms can extend to the wider economy.
c. Corporate governance mechanisms do not relate to how an organisation achieves its
goals.
d. Corporate governance mechanisms do not relate to how an organisation monitors and
rewards organisational performance.
14. Which of the following principles is not part of the principles for corporate governance
identified by the ASX Corporate Governance Council?
a. Respect the rights of shareholders
b. Keep disclosure of business information to a minimum
c. Safeguard integrity in financial reporting
d. Structure the board to add value
15. In corporate governance principles, remunerate fairly and responsibly means:
a. All board members should be paid the same amount of remuneration.

b. All employees of an organisation should be paid fairly.
c. The organisation should be able to demonstrate a clear link between company
performance and executive remuneration.
16. Which of the following is not part of the four main objectives of IT governance?
a. Ensuring the organisation has appropriate management strategies and techniques in

place for dealing with IT related risks.

b. Ensuring that the IT being used or adopted within an organisation is consistent with the
organisation's goals and meets expectations.
c. Ensuring the organisation's IT resources are used responsibly.
d. Using IT to make the most of future business opportunities and benefits.
a. IT managers need to ensure that IT within the organisation is performing as expected

and adding value to the organisation.
b. IT managers do not have to ensure that resources associated with IT are used
appropriately.
c. IT managers need to ensure that the organisation's IT resources are protected and able
to provide reliable and continuous operation.
d. IT managers need to measure the performance of IT within the organisation.
18. The COBIT framework
a. is only recognised in Australia and New Zealand

b. can only be adopted by large organisations
c. is a framework for corporate governance
d. is a framework for IT governance
19. Major IT stages outlined by the COBIT framework do not include
a. Plan and organise

b. Deliver and support
c. Monitor and evaluate
d. Recycle and disposal
20. Based on the COSO definition of internal controls, which of the following is NOT an aim of
internal controls?
a. Effective and efficient operations

b. Reliable financial reporting
c. Compliance with laws and regulations
d. Safe workplace
a. Only the COSO definition states that internal controls can provide reasonable
assurance.

b. Only the ASA definition states that internal controls can provide reasonable assurance.
c. Both COSO and ASA definitions state that internal controls can provide reasonable
assurance.
d. Neither COSO nor ASA definition states that internal controls can provide reasonable
assurance.
22. Control environment is
a. The attitude, emphasis and awareness of an organisation's management towards

internal control and its operation within the organisation.
b. The attitude, emphasis and awareness of the government towards internal control and
operations within organisations.
c. The attitude, emphasis and awareness of the legislative entities towards internal control
and operations within organisations.
23. Risk assessment is:
a. the process of scanning the organisation for risks that could inhibit the attainment of
the organisation's goals.
b. the process of scanning the organisation and its environment for risks that could inhibit
the attainment of the organisation's goals.
c. the process of scanning the organisation for risks that could inhibit the attainment of
the organisation's goals and devising appropriate corrections.
d. the process of scanning the organisation and its environment for risks that could inhibit
the attainment of the organisation's goals and devising appropriate corrections.
24. Control activities:
a. are the responses by management to the risks identified in the risk assessment stage.
b. are policies and procedures that help ensure that management directives are carried
out.
c. are also called control procedures.
a. Top management and internal auditors, rather than ordinary employees, are involved in
monitoring activities.
b. External auditors and regulatory bodies, rather than internal auditors, should be
involved in monitoring activities due to concerns of conflict of interests.

c. Monitoring a control system means checking the system occasionally to ensure that the
risks it addresses are still relevant and the controls are operating effectively.
a. Non-executive directors are more effective for monitoring and responding to

management performance.
b. An audit committee is made up of a selection of internal and external auditors.
c. Senior management's involvement in the design and effectiveness of the organisation's
control system is not essential.
d. Having a board structure that consists of only internal directors signal the senior
management's commitment to a rigorous control system.
27. Who is responsible for setting the tone in which control policies within an organisation will
function?
a. Internal auditors
b. External auditors
c. Top management
d. Shareholder committees
a. Looking at the organisation's financial statements is a useful way to identify risks.

b. Financial statements assert that the facts were the case at balance date.
c. In the case of preparing financial statements, managers are asserting that the statement
of financial position represents the organisation's actual financial position.
29. All account balances should demonstrate the following assertions:
a. completeness, accuracy, classification, and valuation and allocation

b. valuation and allocation, rights and obligations, completeness, and existence
c. rights and obligations, completeness, accuracy, classification
d. classification, value and allocation, existence, and rights and obligations
30. Different transactions and events are impacted by the following assertions:
a. Completeness and accuracy

b. Occurrence and cut-off
c. Classification

d. All of the above
a. Control issues that are present at each stage of the COBIT framework can be mapped
against the COSO framework.
b. IT-related issues that are part of the COBIT framework are able to fit within and
support COSO.
c. COBIT is a widely applied framework for internal control and it is a substitution of
COSO.
32. COBIT offers control objectives and guidance that relate to the stages of:
i. planning for IT acquisition
ii. acquiring IT resources
iii. operating IT resources
iv. monitoring and assessing IT resources
a. i, ii and iii
b. ii, iii and iv
c. iii and iv
d. i, ii, iii and iv
33. ERM stands for:
a. Enterprise Resource Management

b. Enterprise Risk Management
c. Enterprise Resource Model
d. Enterprise Risk Model
a. There is considerable overlap between the ERM perspective and that of COSO.
b. ERM extends COSO by breaking out of the control environment and risk assessment
of COSCO into finer elements that emphasise the link between organisational strategy,
risk preferences and risk management.
c. The COSO and the ERM have the same number of objectives.
d. There are eight components in ERM and five in COSO.
35. Under the ERM, the objectives of the organisation are:

a. operations, performance, reporting, and compliance

b. strategic, reporting, compliance, and operations
c. environmentally friendly, reporting, profitable and compliance
d. socially responsible, profitable, compliance, and environmentally friendly

Chapter 8: Internal controls II
True/False
1. Detective controls have built-in correction mechanisms to reverse the effects of an error or
irregularity. F
2. An organisation should choose either COBIT or COSO as the framework for organisation-
wide internal control. F
3. If timeliness is a critical factor in its business processes, an organisation should choose online
real-time data processing over batch processing. T
4. Physical controls do not apply to computers because computers are normally password-
protected. F
5. A password is considered strong if it contains a mix of alphanumeric characters, upper and

lower case characters and symbols even if its length is very short. F
6. As long as the documents are pre-numbered, it doesn't matter whether the numbers are
consecutive. F
7. Range checks can replace limit checks. T
8. Validity and reasonableness checks ensure that data within the system is correctly and
accurately processed.
9. Whereas a hot site should be located away from an organisation, a cold site can be located
nearby. F
10. Computer-based internal controls mainly depend on the design of relevant programs rather
than the control environment and general controls. F
11. Regulatory environment is not a threat to internal controls. F
12. The smaller the number of employees, the less the less adequate the segregation of duties. T
Multiple choice
13. The comparison of actual and budgeted figures and the conduct of variance analysis to
determine the source of the variance is a type of:
a. General control
b. Information processing control

c. Performance review
d. Application control
14. Information processing controls are those that are put in place within the organisation to
work towards the _______ of transactions.
a. efficiency, effectiveness, and accuracy

b. timeliness, efficiency, and completeness
c. accuracy, completeness, and authorisation
d. authorisation, processing, accuracy
a. General controls operate across the organisation.

b. General controls relate to the overall environment in which different information
systems are located.
c. General controls relate to specific applications and processes.
d. General controls affect the operation of various information systems within an
organisation indirectly.
a. Application controls are designed around the control objectives of a specific business
process or system.
b. Application controls operate within the scope of general controls.
c. Application controls only provides reasonable assurance that all transactions have
occurred, are authorised, and are completely and accurately recorded and processed.
17. An antivirus program scans and monitors files in a computer continuously for viruses. This is
an example of:
a. Preventive control
b. Detective control
c. Corrective control
d. Application control
a. Good preventative controls should always be able to stop all risks from occurring.
b. Sometimes corrective control is the only option available.

c. Detective and corrective controls, when used together, can substitute preventive
control.
d. A mixture of preventive, detective and corrective controls should always be used.
19. A computer virus is found in a file in the computer system. Because a solution for recovering
the file is not yet available, the infected file is quarantined by the antivirus software.
Quarantining the infected file is an example of:
a. Preventive control
b. Detective control
c. Corrective control
20. Which of the following is NOT a major aim of a computerised accounting information
system?
a. Proper authorisation.
b. Timeliness.
c. Proper recording.
d. User friendly
a. Proper recording of transactions is essentially about completeness.

b. Proper recording of transactions is essentially about accuracy.
c. Proper recording of transactions is essentially about storing data in only one place.
a. Organisations with inadequate computing power should consider batch processing.

b. Organisations with sufficient computing power should always use online real-time data
processing.
c. Online data gathering and batch processing is a compromise between online real-time
processing and batch processing.
23. Which of the following is NOT a form of physical control?
a. Servers are placed in a locked room.

b. A username and a password are needed to log into a computer.
c. Security cameras are put in place.

24. Which of the following is an example of poor segregation of duties?
a. The inventory control department is allowed to receive incoming goods.

b. Warehouse personnel are allowed to ship goods to customers.
c. The purchasing department is allowed to generate purchase requisitions.
25. Which of the following is an example of good segregation of duties?
a. The sales department is allowed to bill customers.

b. The accounts receivable department is allowed to prepare bills.
c. The warehouse personnel are allowed to maintain the inventory record.
a. Transaction authorisation should be separated from transaction processing.

b. Asset record-keeping must be separated from asset custody.
c. An organisation should be structured in such a way that any successful fraud would
require the collusion of two or more employees with incompatible duties.
27. A cash disbursement clerk issues a cheque that has been approved by the treasurer. This is an
example of:
a. Separating record-keeping from asset custody

b. Separating transaction processing to transaction authorisation
c. Separating asset custody from transaction processing.
d. Separating transaction authorisation from record-keeping.
28. Which of the following is the strongest password?
a. ah@123re$d
b. Nik890102336757099924PoT
c. A_d33erZb#4G
d. Qwertyuiopasdfghjklzxcvbnm1234567890

a. Strong passwords are not required to be changed periodically.

b. As long as a strong password is devised, it can be as the password to multiple accounts
of a single user.
c. A good control system should force the users to change their password periodically.
30. When developing a backup policy, one should consider:
a. Keeping multiple backups and multiple versions of backups

b. Storing backups offsite
c. Deciding what and how frequently to backup
31. The prenumbering of cheques helps to achieve completeness because it:
a. provides control over cheques

b. prevents the issue of false cheques
c. allows us to account for all cheques through a sequence check
d. allows us to ensure all cheque payments are properly authorised
32. A purchase order is entered into a computer purchasing system. The purchase is for $25,000
and has been entered by the purchase clerk. Company policy dictates that purchases over $2000
must be entered by the purchasing manager. This is an example of a breach of controls relating
to:
a. Timeliness
b. Input accuracy
c. Input validity
d. Authorisation
a. Standardised forms help ensure completeness.

b. Standardised forms help ensure accuracy.
c. Standardised forms can be seen as a preventive control.
34. A reasonableness check that is used when processing fortnightly employee wage payments
would best be used to:
a. avoid the entry of false employee names

b. detect any employees who have their payments entered twice

c. detect any potentially incorrect employee numbers
d. detect potentially high values for hours worked
35. Which of the following controls will best help detect inventory input accuracy concerns
when entering credit sales into a system?
a. A batch total of the number of sales invoices in the batch

b. A hash total of the number of inventory items ordered across all invoices
c. A hash total of customer numbers from all sales invoices
d. A sequence check on sales invoice numbers
36. Which control would best help achieve the aim of correct valuation for purchase transactions
entered into a system?
a. Range checks - checking the quantity ordered against acceptable ranges

b. Validity checks - checking the supplier is listed in our supplier master file
c. Sequence check - ensuring the purchase order number is the next number in the
sequence
d. Authorisation - getting a manager to approve all purchases
37. An example of an output control in a payroll system may be that:
a. Only the HR manager can change an employee's rate of pay

b. Only an employee with a valid employee number and password can request a summary
of wages received over the past month
c. Only the Payroll Clerk can enter payroll details each month
d. Employees have read only access to payroll details
38. Disaster recovery plans include all of the following except:
a. Temporary sites
b. Staffing
c. Employee evacuation procedures
d. Business relationships restoration
39. Disadvantages of manual controls include all of the following except:
a. Manual controls are prone to human errors

b. Manual controls are prone to inconsistent application
c. Manual controls used up too many human resources

d. Manual controls are easier to avoid and work around.
40. Advantages of computer-based controls include all of the following except:
a. Consistent application
b. Independent on control environment and general controls
c. Timely execution
d. Greater degree of difficulty in working around or avoiding the control

Chapter 9: Transaction cycle - the revenue cycle
True/False
1. Selling 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. Check 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

2. Data is the same as information. F

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

8. Behaviours of a system are unaffected by the external environment. F

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?

© John Wiley & Sons Australia, Ltd 1.2

This is an example of:

15. Which of the following statements is not true?

a. A system should have at least one input.

16. Which of the following statements is not true?

a. A process should have at least one input.

a. the specification details gained from users.

© John Wiley & Sons Australia, Ltd 1.3

19. Which of the following statements is not true?

20. What is the accounting's role to an organisation?

a. Gather data about the organisation's activities.

© John Wiley & Sons Australia, Ltd 1.4

Chap 2: Business Process

1. Business processes exemplify the interconnected nature of business function areas. T

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

© John Wiley & Sons Australia, Ltd 1.5

11. Strategy can be seen to operate at:

a. the internal level.

12. An example of a strategic level decision would be:

a. Determining the quantity of raw materials to purchase.

13. There are two perspectives of organisational design:

a. Logical and physical.

15. Scientific management is concerned with:

a. Streamlined work flows across the organisation.

© John Wiley & Sons Australia, Ltd 1.6

16. An emphasis on business processes is different to a functional perspective of the organisation

a. Offers highly defined tasks and responsibilities

17. Which of the following is NOT true?

18. Which of the following statements is NOT true?

a. A business process is based on a horizontal perspective of the organisation.

a. Better customer service and customer relations.

© John Wiley & Sons Australia, Ltd 1.7

a. The way that the organisation is managed is changed.

a. Specialists are made redundant through the cost-cutting emphasis of BPR.

© John Wiley & Sons Australia, Ltd 1.8

a. Jobs change and people are empowered.

25. Benefits of a reengineered process from a customer's perspective include:

a. better information availability.

26. Organisations will benefit most from the application of IT when:

a. They use the most advanced and latest IT.

27. Evaluated receipts settlement involves:

a. The purchaser paying for goods without receiving an invoice

a. Electronic bill presentment

© John Wiley & Sons Australia, Ltd 1.9

29. Which of the following statements regarding BPR is not true?

a. BPR means downsizing.

30. The central tenet of BPR is to:

a. Has remained unchanged

a. More than 90% of businesses are using the internet.

© John Wiley & Sons Australia, Ltd 1.10

a. operates by sourcing data from various sources and compiling or aggregating it in a

35. The information business:

a. cannot operate without modern information and communication technologies.