CHAPTER 1 — THE INFORMATION SYSTEM: 22.

Under SOX legislation auditors are no longer

AN ACCOUNTANT’S PERSPECTIVE allowed to provide consulting services to their
clients.
TRUE/FALSE (True – Red)
MULTIPLE CHOICES
1. Information is a business resource.
2. An information system is an example of a natural 1. Which of the following is not a business resource?
system. a. raw material
3. Transaction processing systems convert non- b. labor
financial transactions into financial transactions. c. information
4. Information lacking reliability may still have value. d. all are business resources
5. A balance sheet prepared in conformity with GAAP 2. Which level of management is responsible for short-
is an example of discretionary reporting. term planning and coordination of activities
6. The Management Reporting System provides the necessary to accomplish organizational objectives?
internal financial information needed to manage a a. operations management
business. b. middle management
7. Most of the inputs to the General Ledger System c. top management
come from the Financial Reporting System. d. line management
8. When preparing discretionary reports, organizations 3. Which level of management is responsible for
can choose what information to report and how to controlling day-to-day operations?
present it. a. top management
9. Retrieval is the task of permanently removing b. middle management
obsolete or redundant records from the database. c. operations management
10. Systems development represents 80 to 90 percent of d. executive management
the total cost of a computer system. 4. The ability to achieve the goals of a system depends
11. The database administrator is responsible for the upon the effective functioning and harmonious
security and integrity of the database. interaction between its subsystems. This is called
12. A backbone system is completely finished, tested, a. system decomposition
and ready for implementation. b. system redundancy
13. The internal auditor represents the interests of third- c. backup system
party outsiders. d. subsystem interdependency
14. Information Technology (IT) audits can be 5. The value of information for users is determined by
performed by both internal and external auditors. all of the following but
15. The single largest user of computer services is the a. reliability
personnel function. b. relevance
16. Increased control is one of the key advantages of c. convenience
distributed data processing. d. completeness
17. The flat-file approach is most often associated with 6. An example of a nonfinancial transaction is
so-called legacy systems. a. sale of products
18. In a flat-file system, files are easily shared by users. b. cash disbursement
19. Legacy systems were eliminated in the effort to c. log of customer calls
make systems Y2K compliant. d. purchase of inventory
20. One of the greatest disadvantages of database 7. An example of a financial transaction is
systems is that all data is always available to all a. the purchase of computer
users. b. a supplier’s price list
21. Under SOX legislation auditors are no longer c. a delivery schedule
allowed to provide consulting services to audit d. an employee benefit brochure
clients.
8. Which subsystem is not part of the Accounting c. data that is redundant
Information System? d. data that is accurate
a. Transaction Processing System 14. The most basic element of useful data in the
b. Expert System database is
c. General Ledger/Financial Reporting System a. the record
d. Management Reporting System b. the key
9. The major difference between the Financial c. the file
Reporting System (FRS) and the Management d. the attribute
Reporting System (MRS) is the 15. In a database, a complete set of attributes for a single
a. FRS provides information to internal and occurrence of an entity class is called
external users; the MRS provides a. a key
information to internal users b. a file
b. FRS provides discretionary information; the c. a record
MRS provides nondiscretionary information d. a character
c. FRS reports are prepared using information 16. Effective information has all of the following
provided by the General Ledger System; the characteristics except:
MRS provides information to the General a. relevance
Ledger System b. completeness
d. FRS reports are prepared in flexible, non- c. summarization
standardized formats; the MRS reports are d. structure
prepared in standardized, formal formats 17. Database management tasks do not include
10. The purpose of the Transaction Processing System a. summarization
includes all of the following except b. storage
a. converting economic events into financial c. retrieval
transactions d. deletion
b. recording financial transactions in the 18. The author distinguishes between the Accounting
accounting records Information System and the management
c. distributing essential information to Information System based on
operations personnel to support their daily a. whether the transactions are financial or
operations nonfinancial
d. measuring and reporting the status of b. whether discretionary or nondiscretionary
financial resources and the changes in those reports are prepared
resources c. the end users of the reports
11. The Transaction Processing System includes all of d. the organizational structure of the business
the following cycles except 19. Which activity is not part of the finance function?
a. the revenue cycle a. cash receipts
b. the administrative cycle b. portfolio management
c. the expenditure cycle c. credit
d. the conversion cycle d. general ledger
12. The primary input to the Transaction Processing 20. Market research and advertising are part of which
System is business function?
a. a financial transaction a. materials management
b. an accounting record b. finance
c. an accounting report c. marketing
d. a nonfinancial transaction d. production
13. When designing the data collection activity, which
type of data should be avoided?
a. data that is relevant
b. data that is efficient
21. Which function manages the financial resources of b. internal accountants
the firm through portfolio management, banking, c. licensed auditors
credit evaluation, and cash receipts and d. third-party accountants
disbursements? 28. Which individual is least involved in new systems
a. accounting development?
b. finance a. systems analyst
c. materials management b. external auditor
d. distribution c. end user
22. Which of the following is not part of the accounting d. data librarian
function? 29. The objectives of all information systems include all
a. managing the financial information resource of the following except
of the firm a. support for the stewardship function of
b. capturing and recording transactions in the management
database b. evaluating transaction data
c. distributing transaction information to c. support for the day-to-day operations of the
operations personnel firm
d. managing the physical information system d. support for management decision making
of the firm 30. Which individuals may be involved in the Systems
23. The term “accounting independence” refers to Development Life Cycle?
a. data integrity a. accountants
b. separation of duties, such as record keeping b. systems professionals
and custody of physical resources c. end users
c. generation of accurate and timely d. all of the above
information 31. An appraisal function housed within the
d. business segmentation by function organization that performs a wide range of services
24. In the distributed data processing approach for management is
a. computer services are consolidated and a. internal auditing
managed as a shared organization resource b. data control group
b. the computer service function is a cost c. external auditing
center d. database administration
c. the end users are billed using a charge-back 32. Advantages of a database system include all of the
system following except
d. computer services are organized into small a. elimination of data redundancy
information processing units under the b. open access to all data by all users
control of end users c. single update for changes in data
25. The data control group is responsible for d. confidence that all data is current
a. performing the day-to-day processing of 33. Disadvantages of distributed data processing include
transactions all of the following except
b. security and integrity of the database a. mismanagement of organization-wide
c. liaison between the end user and data resources
processing b. hardware and software incompatibility
d. providing safe storage for off-line data files c. cost reductions
26. Data processing does not involve d. difficulty in hiring qualified IT professionals
a. data control 34. Advantages of distributed data processing include
b. computer operations each of the following except
c. system maintenance a. cost reductions
d. data conversion b. better management of organization resources
27. Independent auditing is performed by c. improved operational efficiency
a. external auditors d. increased user satisfaction
35. Disadvantages of the distributed data processing GROUP 1 QUIZ: THE INFORMATION SYSTEM: AN
approach include all of the following except ACCOUNTANT’S PERSPECTIVE
a. possible mismanagement of organization
resources PART I. MULTIPLE CHOICE
b. redundancy of tasks
c. software incompatibility 1. The information system supplies managers with the
d. system is not responsive to the user’s information they need to carry out their decision-
situation making responsibilities. This is under which of the
36. ERP packages include all of the following modules following Information System Objectives?
except a. To support the stewardship function of
a. human resources management
b. general ledger b. To support management decision making
c. inventory management c. To support the firm’s day-to-day operations
d. they include all of the above 2. If a vital subsystem fails or becomes
37. All of the following are external end users except defective and can no longer meet its
a. cost accountants specific objective, the overall system
b. creditors will fail to meet its objective.
c. stockholders a. Information System
d. tax authorities b. System Interdependency
38. Useful information must possess all of the following c. System Relation
characteristics except d. Transaction Processing System
a. relevance 3. Employment and payment of staff salaries is under
b. timelessness this cycle.
c. accuracy a. Human Resources Cycles
d. completeness b. Expenditure Cycles
39. The objectives of an information system include c. Financing Cycles
each of the following except d. Revenue Cycles
a. support for the stewardship responsibilities 4. Under this model, users have access to the
of management resource they need which is controlled by a
b. furthering the financial interests of database management system.
shareholders a. Flat-file limit data integration
c. support for management decision making b. Data-base model
d. support for the firm’s day-to-day operations c. REA model
40. Accountants play many roles relating to the d. ERP model
accounting information system, including all of the 5. Under this model business organizations
following except prepare financial statements directly from the
a. system users event database.
b. system designers a. Flat-file limit data integration
c. system auditors b. Data-base model
d. system converters c. REA model
d. ERP model
6. They are from inside and outside the
organization with discretionary power to
use or dispose of economic resources.
a. Manager
b. Accountant
c. Auditor
d. Agent
7. Which of the following is not a disadvantage of
distributed data processing?
a. Mismanagement of organization-wide
resources
b. By entering and editing data at the IPU data
conversion and control cost reduces.
c. Autonomous systems development
activities distributed throughout the firm
can result in each user area reinventing
the wheel.
1. The potential for hardware and
software incompatibility across
the organization is increased.
PART II. TRUE or FALSE
8. Management Reporting System communicates
information through non-discretionary type of
reporting.
a. True
b. False
9. Decomposition is the process of dividing the system
into smaller subsystem parts.
a. True
b. False
10. The design of the physical system involves
specifying the criteria for identifying delinquent
customers and the information that needs to be
reported while conceptual system is the medium and
method for capturing and presenting the information.
a. True
b. False
11. Logic of a business process is more
easily understood when it is not
shrouded by technology.
a. True
b. False
12. All firms use more than one method of
segmentation.
a. True
b. False
13. Information independence rests heavily on the
concept of accounting reliability.
a. True
b. False
14. The organizations that engage in in-house
development are smaller companies and larger
firms that have standardized information needs.
a. True
b. False
15. Under the distributed data processing model, all data
processing is performed by one or more large
computers housed at a central site that serve users
throughout the organization.
a. True
b. False
Group 1
1. What are the transaction cycles under
Transaction Processing System (TPS)?
a. Expenditure cycle, production cycle, human
resource cycle
b. Revenue cycle, human resource cycle,
financing cycle
c. Expenditure cycle, human resource cycle,
financing cycle
d. Revenue cycle, financing cycle, Expenditure
cycle
2. It exists due to the idea of distribution of work
across the large system hence allowing each
group to specialize in their work.
a. System Decomposition
b. Subsystem Interdependency
c. Modularity
d. Coupling
3. The set of formal procedures by which data are
collected, processed into information and
distributed to users.
a. Information
b. System
c. Information System
d. Accounting Information System
4. Which of the following is not a subsystem of
Accounting Information System?
a. Transaction Processing System
b. General Ledger Systems
c. Management Reporting System
d. Management Information System
5. These are completely finished and tested
systems that are ready for implementation
a. Turnkey System
b. Backbone System
c. Vendor supported System
 d. Personalized System a. System user
b. System auditor
6. Which of the following is not an information c. System designer
system objective? d. System programmer
a. To support the stewardship function of the
management 13. The following are models of information
b. To support customer’s decision making system, which one is NOT?
c. To support the firm’s day-to-day operations a. Manual process model
d. None of the above b. Database approach model
c. Flat table model
7. A characteristic of a useful information wherein d. ERP Model
information must be aggregated in accordance
with the user’s needs 14. Statement 1: Flat Table model is an accounting
a. Accuracy framework for modeling an organizations
b. Completeness critical resources, events and agents and the
c. Summarized relationship between them.
d. Relevance Statement 2: REA model is an information
system model that enables an organization to
8. The organization’s physical repository for automate and integrate its key business
financial and nonfinancial data processes
a. Data a. Statement 1 is true, Statement 2 is false
b. Information b. statement 1 is false, statement 2 is true
c. Database c. Both are true
d. Files d. Both are false

9. It monitors the manufacturing process at various 15. This system determines the nature of the
points to ensure that the finished products meet information required, its sources, its destination,
the firm’s quality standards. and the accounting rules that must be applied.
a. REA model system
a. Production Planning
b. Manual model system
b. Maintenance
c. Quality Control c. Database approach system
d. Materials Management d. Conceptual system

10. Accounting function manages the financial

information resource. The value of information
to a user is determined by its
a. Relevance
b. Reliability
c. Accuracy
d. Timeliness

11. It manages the computer resources used to

perform the day-to-day processing of
transactions. It may consist of the following
functions: data control, data conversion,
computer operations, and the data library.
a. Data Processing
b. Centralized Data Processing
c. Distributed Data Processing
d. Systems Development

12. Which is NOT an accountant’s primary role in

information systems?
CHAPTER 2 — INTRODUCTION TO 21. Real-time processing in systems that handle large
TRANSACTION PROCESSING volumes of transactions each day can create
operational inefficiencies.
TRUE/FALSE (True – Red) 22. Operational inefficiencies occur because accounts
unique to many concurrent transactions need to be
1. Processing more transactions at a lower unit cost updated in real time.
makes batch processing more efficient than real-time 23. Operational inefficiencies occur because accounts
systems. common to many concurrent transactions need to be
2. The process of acquiring raw materials is part of the updated in real time.
conversion cycle. 24. Batch processing of noncritical accounts improves
3. Directing work-in-process through its various stages operational efficiency.
of manufacturing is part of the conversion cycle. 25. Batch processing of accounts common to many
4. The top portion of the monthly bill from a credit concurrent transactions reduces operational
card company is an example of a turn-around efficiency.
document.
5. The general journal is used to record recurring MULTIPLE CHOICES
transactions that are similar in nature.
6. Document flowcharts are used to represent systems 1. Which system is not part of the expenditure cycle?
at different levels of detail. a. cash disbursements
7. Data flow diagrams represent the physical system. b. payroll
8. Document flowcharts are often used to depict c. production planning/control
processes that are handled in batches. d. purchases/accounts payable
9. Program flowcharts depict the type of media being 2. Which system produces information used for
used (paper, magnetic tape, or disks) and terminals. inventory valuation, budgeting, cost control,
10. System flowcharts represent the input sources, performance reporting, and make-buy decisions?
programs, and output products of a computer a. sales order processing
system. b. purchases/accounts payable
11. Program flowcharts are used to describe the logic c. cash disbursements
represented in system flowcharts. d. cost accounting
12. Batch processing systems can store data on direct 3. Which of the following is a turn-around document?
access storage devices. a. remittance advice
13. Backups are automatically produced in a direct b. sales order
access file environment. c. purchase order
14. The box symbol represents a temporary file. d. payroll check
15. Auditors may prepare program flowcharts to verify 4. The order of the entries made in the ledger is by
the correctness of program logic. a. transaction number
16. A control account is a general ledger account which b. account number
is supported by a subsidiary ledger. c. date
17. The most significant characteristic of direct access d. user
files is access speed. 5. The order of the entries made in the general journal
18. Real time processing is used for routine transactions is by
in large numbers. a. date
19. Batch processing is best used when timely b. account number
information is needed because this method processes c. user
data efficiently. d. customer number
20. An inverted triangle with the letter “N” represents a
file in “name” order.
6. In general a special journal would not be used to d. inform the bank of electronic funds deposits
record 14. Which type of graphical documentation represents
a. sales systems at different levels of detail?
b. cash disbursements a. data flow diagram
c. depreciation b. document flowchart
d. purchases c. system flowchart
7. Which account is least likely to have a subsidiary d. program flowchart
ledger? 15. Data flow diagrams
a. sales a. depict logical tasks that are being
b. accounts receivable performed, but not who is performing them
c. fixed assets b. illustrate the relationship between processes,
d. inventory and the documents that flow between them
8. Subsidiary ledgers are used in manual accounting and trigger activities
environments. What file is comparable to a c. represent relationships between key
subsidiary ledger in a computerized environment? elements of the computer system
a. archive file d. describe in detail the logic of the process
b. reference file 16. Document flowcharts
c. transaction file a. depict logical tasks that are being
d. master file performed, but not who is performing them
9. A journal is used in manual accounting b. illustrate the relationship between processes,
environments. What file is comparable to a journal and the documents that flow between them
in a computerized environment? and trigger activities
a. archive file c. represent relationships between key
b. reference file elements of the computer system
c. transaction file d. describe the logic of the process
d. master file 17. When determining the batch size, which
10. In a computerized environment, a list of authorized consideration is the least important?
suppliers would be found in the a. achieving economies by grouping together
a. master file large numbers of transactions
b. transaction file b. complying with legal mandates
c. reference file c. providing control over the transaction
d. archive file process
11. Which of the following is an archive file? d. balancing the tradeoff between batch size
a. an accounts payable subsidiary ledger and error detection
b. a cash receipts file 18. In contrast to a real-time system, in a batch
c. a sales journal processing system
d. a file of accounts receivable that have been a. there is a lag between the time when the
written off economic event occurs and the financial
12. Which document is not a type of source document? records are updated
a. a sales order b. relatively more resources are required
b. an employee time card c. a greater resource commitment per unit of
c. a paycheck output is required
d. a sales return receipt d. processing takes place when the economic
13. The most important purpose of a turn-around event occurs
document is to
a. serve as a source document
b. inform a customer of the outstanding
amount payable
c. provide an audit trail for the external auditor
19. In contrast to a batch processing system, in a real- 26. The characteristics that distinguish between batch
time system and real-time systems include all of the following
a. a lag occurs between the time of the except
economic event and when the transaction is a. time frame
recorded b. resources used
b. relatively fewer hardware, programming, c. file format
and training resources are required d. efficiency of processing
c. a lesser resource commitment per unit of 27. A file that stores data used as a standard when
output is required processing transactions is
d. processing takes place when the economic a. a reference file
event occurs b. a master file
20. The type of transaction most suitable for batch c. a transaction file
processing is d. an archive file
a. airline reservations 28. Sequential storage means
b. credit authorization a. data is stored on tape
c. payroll processing b. access is achieved through an index
d. adjustments to perpetual inventory c. access is direct
21. The type of transaction most suitable for real-time d. reading record 100 requires first reading
processing is records 1 to 99
a. recording fixed asset purchases 29. Real-time processing would be most beneficial in
b. recording interest earned on long-term handling a firm’s
bonds a. fixed asset records
c. adjusting prepaid insurance b. retained earnings information
d. recording a sale on account c. merchandise inventory
22. Which step is not found in batch processing using d. depreciation records
sequential files? 30. Which accounting application is least suited for
a. control totals batch processing?
b. sort runs a. general ledger
c. edit runs b. vendor payments
d. immediate feedback of data entry errors c. sales order processing
23. Both the revenue and the expenditure cycle can be d. payroll
viewed as having two key parts. These are 31. Which accounting application is best suited for batch
a. manual and computerized processing?
b. physical and financial a. general ledger
c. input and output b. vendor payments
d. batch and real-time c. sales order processing
24. All of the following can provide evidence of an d. payroll
economic event except 32. Operational inefficiencies occur because
a. source document a. Accounts both common and unique to many
b. turn-around document concurrent transactions need to be updated
c. master document in real time.
d. product document b. Accounts common to many concurrent
25. Which method of processing does not use the transactions need to be updated in real time.
destructive update approach? c. Accounts unique to many concurrent
a. batch processing using direct access files transactions need to be updated in real time.
b. real-time processing d. None of the above are true statements
c. batch processing using sequential files
d. all of the above use the destructive update
approach
33. Operational efficiencies can be improved by d. It allows for the insertion of the new codes
a. Updating accounts both common and unique within the group without having to
to many concurrent transactions in real time. reorganize the entire coding structure
b. Updating accounts both common and unique 10. Batch processing offers general advantage/s which
to many concurrent transactions in batch is/are:
mode. a. Organizations improve operational
c. Updating accounts unique to many efficiency by grouping together large
concurrent transactions in real time and numbers of transactions into batches and
updating common accounts in batch mode. processing them as a unit of work
d. None of the above are true statements b. Batch processing provides control over the
transaction process
NOTE: FIGURE QUESTIONS NOT INCLUDED c. Both A & B
d. None of the above
GROUP 2 QUIZ: INTRODUCTION TO 11. Transaction processing must be aligned with this
TRANSACTION PROCESSING kind of file. What file it is which also acts as
standard file?
1. What activities/tasks are involved in the sales order a. Master File
processing subsystem? b. Archive File
a. Sales order, granting of credit, billing, c. Reference File
deposit of cash in the bank d. Transaction File
b. Granting of credit, shipping of goods, billing 12. Which set contains the advantages of real-time data
c. Cash receipt, deposit of cash in the bank, processing?
billing a. Improved productivity, decreased lags in
d. Recording of cost of inventory, shipping customer billing, poor customer satisfaction
products, recording cash receipt, deposit of b. Increased inventory, decreased lags in
cash in the bank customer billing, reduced physical source
2. What are the two common techniques used by documents
auditors? c. Improved productivity, reduced inventory,
a. Checking and Verification increased inventory turnover
b. Sampling and Verification d. Increased inventory turnover, enhanced
c. Checking and Confirmation customer satisfaction, greater physical
d. Sampling and Confirmation source documents
8. Which is incorrect? 13. Few of its distinguishing features are they are
a. Entities: Noun mainframe-based applications, they tend to be batch
b. Processes: Transitive Verb oriented and its early systems use flat files for data
c. Data Flow: Arrows storage.
d. Data Store: Accounting Records a. Legacy Systems
9. All of the following are the advantages of using b. Modern Systems
group code as data coding scheme except: c. Batch Systems
a. It facilitates the representation of large d. Real-time Systems
amounts of diverse data 2. This coding scheme does not require the user to
b. It allows complex data structures to be memorize meaning; the code itself conveys a high
represented in a hierarchical form that is degree of information about the item that is being
logical and more easily remembered by represented.
humans a. Block Codes
c. It permits detailed analysis and reporting b. Sequential Codes
both within an item class and across c. Mnemonic Codes
d. Group Codes
3. What is a product document that becomes a source Group 2
document for another system?
1. Which system is not part of the expenditure
a. Product Document
cycle?
b. Source Document
a. Cash Disbursements
c. Turnaround Document
b. Payroll
d. Secondary Document c. Production Planning
4. All of the following are the basic documentation d. Accounts Payable
techniques, except: 2. An economic event that affects the assets and
a. Data flow diagrams equities of the firm, is reflected in its
b. Systematic flowcharts accounts, and is measured in monetary terms.
c. Record layout diagrams a. Accounting transaction
d. Entity relationship diagrams b. Business transaction
5. Which of the following correctly illustrates the steps c. Financial transaction
on batch processing using sequential file? d. General Transaction
a. Keystroke, Sort Run, Edit Run, Update Run, 3. All of the following are transaction cycles,
except:
Backup Procedure
a. Revenue Cycle
b. Keystroke, Backup Procedure, Edit Run,
b. Conversion Cycle
Sort Run, Update Run
c. Expenditure Cycle
c. Keystroke, Edit Run, Sort Run, Update Run, d. Accounting Cycle
Backup Procedure 4. Are product documents of one
d. Keystroke, Edit Run, Sort Run, Backup system that become source
Procedure, Update Run documents for another system.
6. What is the step-by-step record that is useful in the a. Product document
process of tracing the source of certain financial b. Source document
information presented in the financial statements to c. Turnaround Document
verify the information’s accuracy and reliability? d. Accounting document
a. Audit Trek 5. Accounting records in computer-based
b. Audit Trail systems are represented by four different
types of magnetic files, except:
c. Verification
a. Master file
d. Audit Tracing
b. Reference File
7. Statement 1: All symbols on the flowchart should be
c. Archive File
labeled.
d. None of the above
Statement 2: The correct symbols should be used to
6. Is a temporary file of transaction records
represent the various entities in the system.
used to change or update data in a
Statement 3: Lines should have two arrowheads to
master file.
clearly show the process flow and sequence of
a. Master File
events.
b. Transaction file
a. All statements are true
c. Reference file
b. All statements are false d. Archive file
c. Two statements are false 7. The most important purpose of a turn-around
d. Two statements are true document is to
15. Relationship can be the following, except: a. serve as a source document
a. 1:1 b. inform a customer of the outstanding
b. 1:M amount payable
c. M:1 c. provide an audit trail for the external
d. M:M auditor
d. inform the bank of electronic funds
deposits
8. Data flow diagrams
a. depict logical tasks that are being
 performed, but not who is 13. Which symbol represents a decision? D
performing them
b. illustrate the relationship between a.
processes, and the documents that
flow between them and trigger
activities b.
c. represent relationships between key
elements of the computer system
d. describe in detail the logic of the
process c.
9. Real-time processing would be most beneficial
in handling a firm’s .
a. fixed asset records d.
b. merchandise inventory
c. retained earning information
d. depreciation records.
10. Which accounting application is best suited to 14. Which symbol represents a terminal start or
batch processing? end of an operation? B
a. General ledger
b. Updating inventory reductions to the a.
subsidiary ledger
c. Sales order processing
d. Credit checking
11. Which symbol represents a magnetic tape? C b.
a.

c.
b.

d.
c.

15. Which symbol represents an input or output

operation? C
d.
a.

12. Which symbol represents a document? A b.

a.
c.

b.
d.

c.

d.
CHAPTER 3 — ETHICS, FRAUD, AND
INTERNAL CONTROL
TRUE/FALSE (True – Red)
1. The ethical principle of justice asserts that the
benefits of the decision should be distributed fairly
to those who share the risks.
2. The ethical principle of informed consent suggests
that the decision should be implemented so as to
minimize all of the risks and to avoid any
unnecessary risks.
3. Employees should be made aware of the firm’s
commitment to ethics.
4. Business ethics is the analysis of the nature and
social impact of computer technology, and the
corresponding formulation and justification of
policies for the ethical use of such technology.
5. Para computer ethics is the exposure to stories and
reports found in the popular media regarding the
good or bad ramifications of computer technology.
6. Source code is an example of intellectual property.
7. Copyright laws and computer industry standards
have been developed jointly and rarely conflict.
8. Business bankruptcy cases always involve
fraudulent behavior.
9. Defalcation is another word for financial fraud.
10. The trend toward distributed data processing
increases the exposure to fraud from remote
locations.
11. The external auditor is responsible for establishing
and maintaining the internal control system.
12. Segregation of duties is an example of an internal
control procedure.
13. Controls in a computer-based information system
are identical to controls in a manual system.
14. Preventive controls are passive techniques designed
to reduce fraud.
15. Ethical issues and legal issues are essentially the
same.
16. Internal control systems are recommended but not
required of firms subject to the Foreign Corrupt
Practices Act.
17. Operations fraud is the misuse or theft of the firm’s
computer resources.
18. The Foreign Corrupt Practices Act requires only that
a firm keep good records.
19. A key modifying assumption in internal control is
that the internal control system is the responsibility
of management.
20. Database management fraud includes altering,
updating, and deleting an organization’s data.
21. While the Sarbanes-Oxley Act prohibits auditors
from providing non-accounting services to their
audit clients, they are not prohibited from
performing such services for non-audit clients or
privately held companies
22. The Sarbanes-Oxley Act requires the audit
committee to hire and oversee the external auditors.
23. Section 404 requires that corporate management
(including the CEO) certify their organization’s
internal controls on a quarterly and annual basis.
24. Section 302 requires the management of public
companies to assess and formally report on the
effectiveness of their organization’s internal
controls.
25. The objective of SAS 99 is to seamlessly blend the
auditor’s consideration of fraud into all phases of the
audit process.
MULTIPLE CHOICES
1. Which ethical principle states that the benefit from a
decision must outweigh the risks, and that there is no
alternative decision that provides the same or greater
benefit with less risk?
a. minimize risk
b. justice
c. informed consent
d. proportionality
2. Individuals who acquire some level of skill and
knowledge in the field of computer ethics are
involved in which level of computer ethics?
a. para computer ethics
b. pop computer ethics
c. theoretical computer ethics
d. practical computer ethics
3. All of the following are issues of computer security
except
a. releasing incorrect data to authorized
individuals
b. permitting computer operators unlimited
access to the computer room
c. permitting access to data by unauthorized
individuals
 d. providing correct data to unauthorized 10. Who is responsible for establishing and maintaining
individuals the internal control system?
4. Which characteristic is not associated with software a. the internal auditor
as intellectual property? b. the accountant
a. uniqueness of the product c. management
b. possibility of exact replication d. the external auditor
c. automated monitoring to detect intruders 11. The concept of reasonable assurance suggests that
d. ease of dissemination a. the cost of an internal control should be less
5. For an action to be called fraudulent, all of the than the benefit it provides
following conditions are required except b. a well-designed system of internal controls
a. poor judgment will detect all fraudulent activity
b. false representation c. the objectives achieved by an internal
c. intent to deceive control system vary depending on the data
d. injury or loss processing method
6. One characteristic of employee fraud is that the d. the effectiveness of internal controls is a
fraud function of the industry environment
a. is perpetrated at a level to which internal 12. Which of the following is not a limitation of the
controls do not apply internal control system?
b. involves misstating financial statements a. errors are made due to employee fatigue
c. involves the direct conversion of cash or b. fraud occurs because of collusion between
other assets to the employee’s personal two employees
benefit c. the industry is inherently risky
d. involves misappropriating assets in a series d. management instructs the bookkeeper to
of complex transactions involving third make fraudulent journal entries
parties 13. The most cost-effective type of internal control is
7. Forces which may permit fraud to occur do not a. preventive control
include b. accounting control
a. a gambling addiction c. detective control
b. lack of segregation of duties d. corrective control
c. centralized decision making environment 14. Which of the following is a preventive control?
d. questionable integrity of employees a. credit check before approving a sale on
8. Which of the following best describes lapping? account
a. applying cash receipts to a different b. bank reconciliation
customer’s account in an attempt to conceal c. physical inventory count
previous thefts of funds d. comparing the accounts receivable
b. inflating bank balances by transferring subsidiary ledger to the control account
money among different bank accounts 15. A well-designed purchase order is an example of a
c. expensing an asset that has been stolen a. preventive control
d. creating a false transaction b. detective control
9. Operations fraud includes c. corrective control
a. altering program logic to cause the d. none of the above
application to process data incorrectly 16. A physical inventory count is an example of a
b. misusing the firm’s computer resources a. preventive control
c. destroying or corrupting a program’s logic b. detective control
using a computer virus c. corrective control
d. creating illegal programs that can access d. feedforward control
data files to alter, delete, or insert values
17. The bank reconciliation uncovered a transposition
error in the books. This is an example of a
a. preventive control
b. detective control
c. corrective control
d. risk minimization
e. proportionality
18. In balancing the risks and benefits that are part of
every ethical decision, managers receive guidance
from each of the following except
a. justice
b. self interest
c. risk minimization
d. proportionality
19. Which of the following is not an element of the
internal control environment?
a. management philosophy and operating style
b. organizational structure of the firm
c. well-designed documents and records
d. the functioning of the board of directors and
the audit committee
20. Which of the following suggests a weakness in the
internal control environment?
a. the firm has an up-to-date organizational
chart
b. monthly reports comparing actual
performance to budget are distributed to
managers
c. performance evaluations are prepared every
three years
d. the audit committee meets quarterly with the
external auditors
21. Which of the following indicates a strong internal
control environment?
a. the internal audit group reports to the audit
committee of the board of directors
b. there is no segregation of duties between
organization functions
c. there are questions about the integrity of
management
d. adverse business conditions exist in the
industry
22. According to SAS 78, an effective accounting
system performs all of the following except
a. identifies and records all valid financial
transactions
b. records financial transactions in the
appropriate accounting period
c. separates the duties of data entry and report
generation
d. records all financial transactions promptly
23. Which of the following is the best reason to separate
duties in a manual system?
a. to avoid collusion between the programmer
and the computer operator
b. to ensure that supervision is not required
c. to prevent the record keeper from
authorizing transactions
d. to enable the firm to function more
efficiently
24. Segregation of duties in the computer-based
information system includes
a. separating the programmer from the
computer operator
b. preventing management override
c. separating the inventory process from the
billing process
d. performing independent verifications by the
computer operator
25. Which of the following is not an internal control
procedure?
a. authorization
b. management’s operating style
c. independent verification
d. accounting records
26. The decision to extend credit beyond the normal
credit limit is an example of
a. independent verification
b. authorization
c. segregation of functions
d. supervision
27. When duties cannot be segregated, the most
important internal control procedure is
a. supervision
b. independent verification
c. access controls
d. accounting records
28. An accounting system that maintains an adequate
audit trail is implementing which internal control
procedure?
a. access controls
b. segregation of functions
c. independent verification
d. accounting records
29. Employee fraud involves three steps. Of the d. access controls
following, which is not involved? 35. The office manager forgot to record in the
a. concealing the crime to avoid detection accounting records the daily bank deposit. Which
b. stealing something of value control procedure would most likely prevent or
c. misstating financial statements detect this error?
d. converting the asset to a usable form a. segregation of duties
30. Which of the following is not an example of b. independent verification
independent verification? c. accounting records
a. comparing fixed assets on hand to the d. supervision
accounting records 36. Business ethics involves
b. performing a bank reconciliation a. how managers decide on what is right in
c. comparing the accounts payable subsidiary conducting business
ledger to the control account b. how managers achieve what they decide is
d. permitting authorized users only to access right for the business
the accounting system c. both a and b
31. The importance to the accounting profession of the d. none of the above
Foreign Corrupt Practices Act of 1977 is that 37. All of the following are conditions for fraud except
a. bribery will be eliminated a. false representation
b. management will not override the b. injury or loss
company’s internal controls c. intent
c. firms are required to have an effective d. material reliance
internal control system 38. The four principal types of fraud include all of the
d. firms will not be exposed to lawsuits following except
32. The board of directors consists entirely of personal a. bribery
friends of the chief executive officer. This indicates b. gratuities
a weakness in c. conflict of interest
a. the accounting system d. economic extortion
b. the control environment 39. The characteristics of useful information include
c. control procedures a. summarization, relevance, timeliness,
d. this is not a weakness accuracy, and completeness
33. Computer fraud can take on many forms, including b. relevance, summarization, accuracy,
each of the following except timelessness, and completeness
a. theft or illegal use of computer-readable c. timeliness, relevance, summarization,
information accuracy, and conciseness
b. theft, misuse, or misappropriation of d. disaggregation, relevance, timeliness,
computer equipment accuracy, and completeness
c. theft, misuse, or misappropriation of assets 40. Internal control system has limitations. These
by altering computer-readable records and include
files a. possibility of honest error
d. theft, misuse, or misappropriation of printer b. circumvention
supplies c. management override
34. When certain customers made cash payments to d. stability of systems
reduce their accounts receivable, the bookkeeper
embezzled the cash and wrote off the accounts as
uncollectible. Which control procedure would most
likely prevent this irregularity?
a. segregation of duties
b. accounting records
c. accounting system
41. Management can expect various benefits to follow GROUP 3 QUIZ: ETHICS, FRAUD, AND INTERNAL
from implementing a system of strong internal CONTROL
control. Which of the following benefits is least
likely to occur? 16. It pertains to taking appropriate action when
a. Reduced cost of an external audit. code violations occur. What is it?
b. Prevents employee collusion to commit a. Accountability
fraud. b. Legal Compliance
c. Availability of reliable data for decision- c. Computer Security
making purposes. d. Misuse of Computers
d. Some assurance of compliance with the 17. What is the federal law that established
Foreign Corrupt Practices Act of 1977. sweeping auditing and financial regulations for
e. Some assurance that important documents public companies?
and records are protected. a. Saines-Oxley Act
42. Which of the following situations is not a b. Sarbanes-Oxley Act
segregation of duties violation? c. Sarbanes-Oakley Act
a. The treasurer has the authority to sign d. Saines-Oakley Act
checks but gives the signature block to the 18. This level of fraud does not involve the direct
assistant treasurer to run the check-signing theft of assets. What is it?
machine. a. Management Fraud
b. The warehouse clerk, who has the custodial b. Employee Fraud
responsibility over inventory in the c. Vendor Fraud
warehouse, selects the vendor and authorizes d. Shell Company Fraud
purchases when inventories are low. 19. It ensures that all material transactions processed
c. The sales manager has the responsibility to by the information system are in line with
approve credit and the authority to write off management’s objectives.
accounts. a. Independent Verification
d. The department time clerk is given the b. Accounting Records
undistributed payroll checks to mail to c. Transaction Authorization
absent employees. d. IT Controls
e. The accounting clerk who shares the record 20. The following are the three levels of computer
keeping responsibility for the accounts ethics, except:
receivable subsidiary ledger performs the a. Pop
monthly reconciliation of the subsidiary b. Hypothetical
ledger and the control account. c. Para
43. Which of the following is not an issue to be d. Theoretical
addressed in a business code of ethics required by 21. Which is not an element of the fraud triangle?
the SEC? a. Opportunity
a. Conflicts of interest b. Ethics
b. Full and Fair Disclosures c. Pressure
c. Legal Compliance d. Risk
d. Internal Reporting of Code Violations 22. What is the scheme in which an employee
e. All of the above are issues to be addressed makes a claim for reimbursement of fictitious or
inflated business expenses?
a. Non-cash Fraud
b. Computer Fraud
c. Expense Reimbursements Fraud
d. Payroll Fraud
1. It is when an employee causes the employer to 7. It is a guide of principles designed to help
issue a payment to a false supplier or vendor. professionals conduct business honestly and
a. Cash Larceny with integrity. What is it?
b. Skimming a. Ethical Standards
c. Billing Schemes b. Ethical Responsibility
d. Check Tampering c. Ethics
2. Which of the following are the five conditions d. Code of Ethics
to be met for an act to be fraudulent? 15. Materially misstating financial data and internal
a. Fabrication, Material Fact, Intent, reports is usually a fraudulent act of which level
Justifiable Reliance, Injury of management?
b. False Representation, Material Fact, a. Top Management
Intent, Justifiable Reliance, Injury b. Middle Management
c. False Representation, Material Fact, c. Lower-level Management
Intent, Unjustifiable Reliance, Injury d. Intermediate Management
d. False Representation, Substance, Intent, Group 3
Justifiable Reliance, Injury 1. Even if judged acceptable by principles, the decision
3. It involves giving, or soliciting something of should be implemented so as to __________ all of the
value because of an official act that has been risks.
taken.
a. Bribery a. Maximize
b. Conflicts of Interest b. Minimize
c. Economic Extortion c. neutralize
d. Illegal Gratuities d. ignore
4. Which of the following are the four areas of 2. Which refers to the analysis of the nature and social
ethical issues? impact of computer technology and the corresponding
a. Equity, Rights, Honesty, Exercise of formulation and justification of policies for its ethical
Company Power use?
b. Equality, Rights, Honesty, Exercise of
Corporate Power a. Technology Ethics
c. Equity, Rights, Honesty, Exercise of b. Business Ethics
Corporate Power c. Computer Ethics
d. Equity, Rights, Integrity, Exercise of d. Social Ethics
Corporate Power
5. These are passive techniques designed to reduce 3. The desire to be in full control of what and how much
the frequency of occurrence of undesirable information about themselves is available to others and
events. What are these? to whom it is available is an issue of __________.
a. Detective Controls
a. Privacy
b. Preventive Controls
b. Ownership
c. Physical Controls
c. equity access
d. Corrective Controls
d. insecurity
6. Which of the following is a benefit for misstate
of financial statements? 4. The following are the areas of ethical issues in
a. Diminished chances of promotion, or business, except:
endeavor firing or demotion.
b. Reduced stock price. a. rights
c. Delayed cash flow problems or b. equity
bankruptcy. c. exercise of corporate power
d. Declined incentive-based compensation. d. privilege
5. It is the theory and development of computer systems 11. Below are the broad objectives of internal control,
able to perform tasks that normally require human except:
intelligence, such as visual perception, speech
recognition, decision-making, and translation between a. To ensure accuracy and reliability of accounting
languages. records
b. To safeguard the assets
a. Technology c. To give the management full authority without
b. Computer Science complying with the prescribed policies
c. Artificial Intelligence d. To promote efficiency
d. Computer Ethics
12. It is the absence or weakness of a control.
6. Which of the following is not a principal type of
corruption? a. Defense
b. Exposure
a. Bribery c. Shield
b. Illegal Gratuities d. Risks
c. Conflicts of Interest
d. Asset Misappropriation 13. One of the three levels of internal control shield that
screens out aberrant events through forcing compliance
7. Which of the following is a reason why financial with prescribed or desired actions. This is the first line of
losses from fraud are difficult to quantify? defense in the control structure.

a. all fraud cases are detectable a. Preventive control

b. of that detected, not all is reported b. Detective control
c. complete information is gathered among such c. Corrective control
fraud cases d. Internal control
d. companies usually take civil or criminal action
against the perpetrators of fraud 14. It is a legislation that requires the management of
public companies to pursue and implement an adequate
8. It is a situation in which an individual has competing system of internal control over their financial reporting
interests or loyalties because of their duties to more than process.
one person or organization.
a. Universal Accounting Protocols
a. Bribery b. Conceptual Framework
b. Illegal Gratuities c. Sarbanes-Oxley
c. Conflict of Interest d. SAS 78/ COSO
d. Asset Misappropriation
15. It is the process by which the quality of internal
9. Which is not a special characteristic of management control design and operation can be assessed.
fraud?
a. Control Activities
a. perpetrated at levels of management b. Monitoring
b. uses financial statements c. Segregation of Duties
c. concealment of fraud d. Risk Assessment
d. misappropriation of assets

10. Which is not a form of asset misappropriation?

a. Payroll Fraud
b. Expense Reimbursements
c. Bribery
d. Non-Cash Misappropriations
CHAPTER 4 — THE REVENUE CYCLE
1. The revenue cycle consists of
TRUE/FALSE (True – Red) a. one subsystem–order entry
b. two subsystems–sales order processing and
1. The packing slip is also known as the shipping cash receipts
notice. c. two subsystems–order entry and inventory
2. The bill of lading is a legal contract between the control
buyer and the seller. d. three subsystems–sales order processing,
3. Another name for the stock release form is the credit authorization, and cash receipts
picking ticket. 2. The reconciliation that occurs in the shipping
4. Warehouse stock records are the formal accounting department is intended to ensure that
records for inventory. a. credit has been approved
5. The purpose of the invoice is to bill the customer. b. the customer is billed for the exact quantity
6. In most large organizations, the journal voucher file shipped
has replaced the formal general journal. c. the goods shipped match the goods ordered
7. The cash receipts journal is a special journal. d. inventory records are reduced for the goods
8. In the revenue cycle, the internal control “limit shipped
access” applies to physical assets only. 3. The adjustment to accounting records to reflect the
9. In real-time processing systems, routine credit decrease in inventory due to a sale occurs in the
authorizations are automated. a. warehouse
10. In a computerized accounting system, segregation of b. shipping department
functions refers to inventory control, accounts c. billing department
receivable, billing, and general ledger tasks. d. inventory control department
11. A written customer purchase order is required to 4. Which document triggers the revenue cycle?
trigger the sales order system. a. the sales order
12. Inventory control has physical custody of inventory. b. the customer purchase order
13. The principal source document in the sales order c. the sales invoice
system is the sales order. d. the journal voucher
14. Sales orders should be pre-numbered documents. 5. Copies of the sales order can be used for all of the
15. Integrated accounting systems automatically transfer following except
data between modules. a. purchase order
16. If a customer submits a written purchase order, there b. credit authorization
is no need to prepare a sales order. c. shipping notice
17. Sales return involves receiving, sales, credit, and d. packing slip
billing departments, but not accounts receivable. 6. The purpose of the sales invoice is to
18. A remittance advice is a form of turn-around a. record reduction of inventory
document. b. transfer goods from seller to shipper
19. A bill of lading is a request for payment for shipping c. bill the customer
charges. d. select items from inventory for shipment
20. In point of sale systems, authorization takes the form 7. The customer open order file is used to
of validation of credit card charges. a. respond to customer queries
b. fill the customer order
c. ship the customer order
d. authorize customer credit

8. The stock release copy of the sales order is not used

to
MULTIPLE CHOICES
 a. locate and pick the items from the
warehouse shelves
b. record any out-of-stock items
c. authorize the warehouse clerk to release
custody of the inventory to shipping
d. record the reduction of inventory
9. The shipping notice
a. is mailed to the customer
b. is a formal contract between the seller and
the shipping company
c. is always prepared by the shipping clerk
d. informs the billing department of the
quantities shipped
10. The billing department is not responsible for
a. updating the inventory subsidiary records
b. recording the sale in the sales journal
c. notifying accounts receivable of the sale
d. sending the invoice to the customer
11. Customers should be billed for backorders when
a. the customer purchase order is received
b. the backordered goods are shipped
c. the original goods are shipped
d. customers are not billed for backorders
because a backorder is a lost sale
12. Usually specific authorization is required for all of
the following except
a. sales on account which exceed the credit
limit
b. sales of goods at the list price
c. a cash refund for goods returned without a
receipt
d. write off of an uncollectible account
receivable
13. Which of following functions should be segregated?
a. opening the mail and making the journal
entry to record cash receipts
b. authorizing credit and determining reorder
quantities
c. maintaining the subsidiary ledgers and
handling customer queries
d. providing information on inventory levels
and reconciling the bank statement
14. Which situation indicates a weak internal control
structure?
a. the mailroom clerk authorizes credit memos
b. the record keeping clerk maintains both
accounts receivable and accounts payable
subsidiary ledgers
c. the warehouse clerk obtains a signature
before releasing goods for shipment
d. the accounts receivable clerk prepares
customer statements every month
15. The most effective internal control procedure to
prevent or detect the creation of fictitious credit
memoranda for sales returns is to
a. supervise the accounts receivable
department
b. limit access to credit memoranda
c. pre-number and sequence check all credit
memoranda
d. require management approval for all credit
memoranda
16. The accounts receivable clerk destroys all invoices
for sales made to members of her family and does
not record the sale in the accounts receivable
subsidiary ledger. Which procedure will not detect
this fraud?
a. pre-number and sequence check all invoices
b. reconcile the accounts receivable control to
the accounts receivable subsidiary ledger
c. prepare monthly customer statements
d. reconcile total sales on account to the debits
in the accounts receivable subsidiary ledger
17. Which department is least likely to be involved in
the revenue cycle?
a. credit
b. accounts payable
c. billing
d. shipping
18. Which document is included with a shipment sent to
a customer?
a. sales invoice
b. stock release form
c. packing slip
d. shipping notice
19. Good internal controls in the revenue cycle should
ensure all of the following except
a. all sales are profitable
b. all sales are recorded
c. credit is authorized
d. inventory to be shipped is not stolen
20. Which control does not help to ensure that accurate
records are kept of customer accounts and
inventory?
 a. reconcile accounts receivable control to
accounts receivable subsidiary
b. authorize credit
c. segregate custody of inventory from record
keeping
d. segregate record keeping duties of general
ledger from accounts receivable
21. Internal controls for handling sales returns and
allowances do not include
a. computing bad debt expense using the
percentage of credit sales
b. verifying that the goods have been returned
c. authorizing the credit memo by management
d. using the original sales invoice to prepare
the sales returns slip
22. The printer ran out of preprinted sales invoice forms
and several sales invoices were not printed. The best
internal control to detect this error is
a. a batch total of sales invoices to be prepared
compared to the actual number of sales
invoices prepared
b. sequentially numbered sales invoices
c. visual verification that all sales invoices
were prepared
d. none of the above will detect this error
23. Which department prepares the bill of lading?
a. Sales
b. Warehouse
c. Shipping
d. Credit
24. A remittance advice is
a. used to increase (debit) an account
receivable by the cash received
b. is a turn-around document
c. is retained by the customer to show proof of
payment
d. none of the above
25. A weekly reconciliation of cash receipts would
include comparing
a. the cash prelist with bank deposit slips
b. the cash prelist with remittance advices
c. bank deposit slips with remittance advices
d. journal vouchers from accounts receivable
and general ledger
26. At which point is supervision most critical in the
cash receipts system?
a. accounts receivable
b. general ledger
c. mail room
d. cash receipts
27. EDI trading partner agreements specify all of the
following except
a. selling price
b. quantities to be sold
c. payment terms
d. person to authorize transactions
28. A cash prelist is
a. a document that records sales returns and
allowances
b. a document returned by customers with their
payments
c. the source of information used to prepare
monthly statements
d. none of the above
29. An advantage of real-time processing of sales is
a. the cash cycle is lengthened
b. current inventory information is available
c. hard copy documents provide a permanent
record of the transaction
d. data entry errors are corrected at the end of
each batch
30. Commercial accounting systems have fully
integrated modules. The word “integrated” means
that
a. segregation of duties is not possible
b. transfer of information among modules
occurs automatically
c. batch processing is not an option
d. separate entries are made in the general
ledger accounts and the subsidiary ledgers
31. The data processing method that can shorten the
cash cycle is
a. batch, sequential file processing
b. batch, direct access file processing
c. real-time file processing
d. none of the above
32. Which of the following is not a risk exposure in a
microcomputer accounting system?
a. reliance on paper documentation is
increased
 b. functions that are segregated in a manual a. Sales order procedures
environment may be combined in a b. Sales return procedures
microcomputer accounting system c. Cash receipts procedures
c. backup procedures require human d. Cash disbursement procedure
intervention 9. The three purposes of Bill of Lading according to
d. data are easily accessible Spelic (2016) are the following except:
33. Which journal is not used in the revenue cycle? a. It acts as evidence of contract between the
a. cash receipts journal shipper and the seller
b. sales journal b. It acts as evidence of a contract between the
c. purchases journal shipper and the carrier
d. general journal c. It serves as a receipt of freight services and
34. Periodically, the general ledger department receives goods
all of the following except d. It is a document of title, ownership, of goods
a. total increases to accounts receivable 10. Which one is not an advantage of real-time
b. total of all sales backorders processing?
c. total of all sales a. Less administrative errors.
d. total decreases in inventory b. Better inventory management.
35. The credit department c. Shortens Cash cycle.
a. prepares credit memos when goods are d. Reduces amount of expensive paper.
returned e. All are advantages.
b. approves credits to accounts receivable 11. This software is suitable for large organizations
when payments are received having various divisions.
c. authorizes the granting of credit to a. Ready-to-use software
customers b. Customized software
d. none of the above c. Tailored Software
36. Adjustments to accounts receivable for payments d. Large software
received from customers is based upon 12. PC systems generally provide inadequate control
a. the customer’s check over access to data files. This is a PC control issue
b. the cash prelist of ________.
c. the remittance advice that accompanies a. Segregation of Duties
payment b. Access Control
d. a memo prepared in the mailroom c. Accounting Records
37. The revenue cycle utilizes all of the following files d. File Backup
except 13. Essential documents in in reconciliation for cash
a. credit memo file receipts procedure are the following, EXCEPT:
b. sales history file a. Remittance advice
c. shipping report file b. Copy of prelist
d. cost data reference file c. Deposit slips
38. All of the following are advantages of real-time d. Journal vouchers
processing of sales except
a. The cash cycle is shortened
b. Paper work is reduced
c. Incorrect data entry is difficult to detect
d. Up-to-date information can provide a
competitive advantage in the marketplace 14. Shipping function: Stock release document &
GROUP 4 QUIZ: THE REVENUE CYCLE Packing Slip :
a. Reconciliation function: Journal vouchers &
8. Which of the following is not a process in the Return Slip
conceptual revenue cycle?
 b. General ledger: Accounts Receivable & b. False
Inventory Control
c. Billing function: Sales order & Shipping Group 4
notice 1. It is a form of turnaround document which contains
d. Billing function: Sales order & Stock release information needed to service individual customers’
15. This section of the sales order procedure is accounts.
important as it is the last opportunity to detect errors a. Check
before actually shipping the goods to the customer. b. Remittance Advice
a. Ship Goods c. Cash Prelist
b. Bill Customer d. Deposit Slip
c. Verify Order 2. Remittance advice shows the following information,
d. Check Credit except:
2 Purchase Returns Slip: Receiving department: a. Payment Date
a. Credit Memo: Billing Department b. Name of Customer
b. Sales order: Sales Department c. Amount Paid
c. Credit Memo: Sales Department d. Customer Check Number
d. Sales Order: Billing Department 3. It is a list that provides a means for verifying that
customer checks and remittance advices match in
PART II: TRUE OR FALSE amount.
a. Master List
8. Electronic Data Intersection (EDI) is the electronic b. Remittance List
interchange of business information using a c. Cash Prelims
standardized format; a process which allows one d. Billing Statement
company to send information to another company 4. The controller reconciles cash receipts of the
electronically rather than with paper. company using the following documents, except:
a. True a. Checks from the customer
b. False b. Copy of the prelist from the mail room
9. Asset custody must be separated from asset keeping. c. Deposit slips from the bank
a. True d. Related journal vouchers from the GL
b. False function
10. Reengineering involves using technology to improve 5. Within the revenue cycle, the assets to most likely to
efficiency and effectiveness of a task. protect are:
a. True a. Cash and Accounts Receivable
b. False b. Cash and Inventories
11. Automation involves radically rethinking the c. Prepaid Assets
business process and the workflow. d. Fixed Assets
a. True 6. It is the beginning of sales process.
b. False a. Pick goods
12. Reengineering involves replacing traditional b. Receive order
procedures with procedures that are innovative and c. Check credit
often very different from those that previously d. Ship goods
existed. 7. A customer’s order should be in a standard format.
a. True a. True
b. False b. False
8. Under what kind of investigation should new
13. At the end of the day, the cash receipts clerk customers undergo?
prepares a four-part deposit slip for the total amount a. Financial investigation
of the cash received. b. Comparative investigation
a. True c. Descriptive investigation
 d. Experimental investigation CHAPTER 5 — THE EXPENDITURE CYCLE
9. This should travel with the goods to describe its PART I
contents.
a. Shipping log TRUE/FALSE (True – Red)
b. Bill of lading
c. Shipping notice 1. Purchasing decisions are authorized by inventory
d. Packing slip control.
10. Which is not a step on sales return procedures 2. The blind copy of the purchase order that goes to the
a. Update sales journal receiving department contains no item descriptions.
b. Approve credit memo 3. Firms that wish to improve control over cash
c. Receive order disbursements use a voucher system.
d. Prepare return slip 4. In a voucher system, the sum of all unpaid vouchers
11. Which of the following are PC Control issues? in the voucher register equals the firm’s total
a. Access control voucher payable balance.
b. Segregation of duties 5. The accounts payable department reconciles the
c. Accounting records accounts payable subsidiary ledger to the control
d. All of the above account.
12. It refers to use technology to improve efficiency and 6. The use of inventory reorder points suggests the
effectiveness. need to obtain specific authorization.
a. Automation 7. Proper segregation of duties requires that the
b. Reengineering responsibility approving a payment be separated
c. Independent verification from posting to the cash disbursements journal.
d. Supervision 8. A major risk exposure in the expenditure cycle is
13. It is use technology to restructure business processes that accounts payable may be overstated at the end
and firm organization. of the accounting year.
a. Supervision 9. When a trading partner agreement is in place, the
b. Automation traditional three way match may be eliminated.
c. Reengineering 10. Authorization of purchases in a merchandising firm
d. Independent verification occurs in the inventory control department.
14. To counter the problem with regards to independent 11. A three way match involves a purchase order, a
verification, which could be done? purchase requisition, and an invoice.
a. Perform batch control balancing after each 12. Authorization for a cash disbursement occurs in the
run. cash disbursement department upon receipt of the
b. Produce management reports and summaries supplier’s invoice.
for end users to review. 13. An automated cash disbursements system can yield
c. Both a and b better cash management since payments are made on
d. None of these time.
15. Which is not an advantage of Real Time Processing? 14. Permitting warehouse staff to maintain the only
a. Shortens the cash cycle of the firm by inventory records violates separation of duties.
reducing the time between the order date 15. A purchasing system that employs electronic data
and billing date. interchange does not use a purchase order.
b. Better inventory management which can 16. Inventory control should be located in the
lead to a competitive advantage. warehouse.
c. More clerical errors, reducing incorrect 17. Inspection of shipments in the receiving department
items being shipped and bill discrepancies. would be improved if the documentation showed the
d. Reduces the amount of expensive paper value of the inventory.
documents and their storage costs. 18. One reason for authorizing purchases is to enable
efficient inventory management.
19. If accounts payable receives an invoice directly from 7. The reason that a blind copy of the purchase order is
the supplier it needs to be reconciled with the sent to receiving is to
purchase order and receiving report. a. inform receiving when a shipment is due
20. Supervision in receiving is intended to reduce the b. force a count of the items delivered
theft of assets. c. inform receiving of the type, quantity, and price
of items to be delivered
MULTIPLE CHOICES d. require that the goods delivered are inspected
8. The receiving report is used to
1. The purpose of the purchase requisition is to a. accompany physical inventories to the storeroom
a. order goods from vendors or warehouse
b. record receipt of goods from vendors b. advise the purchasing department of the dollar
c. authorize the purchasing department to order value of the goods delivered
goods c. advise general ledger of the accounting entry to
d. bill for goods delivered be made
2. The purpose of the receiving report is to d. advise the vendor that the goods arrived safely
a. order goods from vendors 9. When a copy of the receiving report arrives in the
b. record receipt of goods from vendors purchasing department, it is used to
c. authorize the purchasing department to order a. adjust perpetual inventory records
goods b. record the physical transfer of inventory from
d. bill for goods delivered receiving to the warehouse
3. All of the following departments have a copy of the c. analyze the receiving department’s process
purchase order except d. recognize the purchase order as closed
a. the purchasing department 10. The financial value of a purchase is determined by
b. the receiving department reviewing the
c. accounts payable a. packing slip
d. general ledger b. purchase requisition
4. The purpose of the purchase order is to c. receiving report
a. order goods from vendors d. supplier’s invoice
b. record receipt of goods from vendors 11. Which document is least important in determining
c. authorize the purchasing department to order the financial value of a purchase?
goods a. purchase requisition
d. approve payment for goods received b. purchase order
5. The open purchase order file in the purchasing c. receiving report
department is used to determine d. supplier’s invoice
a. the quality of items a vendor ships 12. In a merchandising firm, authorization for the
b. the best vendor for a specific item payment of inventory is the responsibility of
c. the orders that have not been received a. inventory control
d. the quantity of items received b. purchasing
6. The purchase order c. accounts payable
a. is the source document to make an entry into the d. cash disbursements
accounting records 13. In a merchandising firm, authorization for the
b. indicates item description, quantity, and price purchase of inventory is the responsibility of
c. is prepared by the inventory control department a. inventory control
d. is approved by the end-user department b. purchasing
c. accounts payable
d. cash disbursements
14. When purchasing inventory, which document usually
triggers the recording of a liability?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
15. Because of time delays between receiving inventory
and making the journal entry
a. liabilities are usually understated
b. liabilities are usually overstated
c. liabilities are usually correctly stated
d. none of the above
16. Usually the open voucher payable file is organized
by
a. vendor
b. payment due date
c. purchase order number
d. transaction date
17. Which of the following statements is not correct?
a. the voucher system is used to improve control
over cash disbursements
b. the sum of the paid vouchers represents the
voucher payable liability of the firm
c. the voucher system permits the firm to
consolidate payments of several invoices on one
voucher
d. many firms replace accounts payable with a
voucher payable system
18. In the expenditure cycle, general ledger does not
a. post the journal voucher from the accounts
payable department
b. post the account summary from inventory
control
c. post the journal voucher from the purchasing
department
d. reconcile the inventory control account with the
inventory subsidiary summary
19. The documents in a voucher packet include all of the
following except
a. a check
b. a purchase order
c. a receiving report
d. a supplier’s invoice
20. To maintain a good credit rating and to optimize
cash management, cash disbursements should arrive at
the vendor’s place of business
a. as soon as possible
b. on the due date
c. on the discount date
d. by the end of the month
21. The cash disbursement clerk performs all of the
following tasks except
a. reviews the supporting documents for
completeness and accuracy
b. prepares checks
c. signs checks
d. marks the supporting documents paid
22. When a cash disbursement in payment of an
accounts payable is recorded
a. the liability account is increased
b. the income statement is changed
c. the cash account is unchanged
d. the liability account is decreased
23. Authorization for payment of an accounts payable
liability is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements
24. Of the following duties, it is most important to
separate
a. warehouse from stores
b. warehouse from inventory control
c. accounts payable and accounts receivable
d. purchasing and accounts receivable
25. In a firm with proper segregation of duties, adequate
supervision is most critical in
a. purchasing
b. receiving
c. accounts payable
d. general ledger
26. The receiving department is not responsible to
a. inspect shipments received
b. count items received from vendors
c. order goods from vendors
d. safeguard goods until they are transferred to the
warehouse
27. The major risk exposures associated with the
receiving department include all of the following except
a. goods are accepted without a physical count
b. there is no inspection for goods damaged in
shipment
c. inventories are not secured on the receiving
dock
d. the audit trail is destroyed
28. When searching for unrecorded liabilities at the end
of an accounting period, the accountant would search all
of the files except
a. the purchase requisition file
b. the cash receipts file
c. the purchase order file
d. the receiving report file
29. In regards to the accounts payable department, which
statement is not true?
a. the purchase requisition shows that the
transaction was authorized
b. the purchase order proves that the purchase
was required
c. the receiving report provides evidence of the
physical receipt of the goods
d. the supplier’s invoice indicates the financial
value of the transaction
30. In a computerized system that uses an economic
order quantity (EOQ) model and the perpetual inventory
method, who determines when to reorder inventory?
a. the inventory control clerk
b. the purchasing department
c. the vendor
d. the computer system
31. Firms can expect that proper use of a valid vendor
file will result in all of the following benefits except
a. purchasing agents will be discouraged from
improperly ordering inventory from related
parties
b. purchases from fictitious vendors will be
detected
c. the most competitive price will be obtained
d. the risk of purchasing agents receiving
kickbacks and bribes will be reduced
32. In a real-time processing system with a high number
of transactions, the best and most practical control over
cash disbursements is to have
a. all checks manually signed by the treasurer
b. all checks signed by check-signing equipment
c. checks over a certain dollar amount manually
signed by the treasurer
d. checks over a certain dollar amount manually
signed by the cash disbursements clerk
33. The document which will close the open purchase
requisition file is the
a. purchase order
b. vendor invoice
c. receiving report
d. one of the above
34. Goods received are inspected and counted to
a. determine that the goods are in good condition
b. determine the quantity of goods received
c. preclude payment for goods not received or
received in poor condition
d. all of the above
35. If a company uses a standard cost system, inventory
records can be updated from the
a. vendor invoice
b. purchase order
c. receiving report
d. purchase requisition
36. If a company uses an actual cost system, inventory
records can first be updated from the
a. vendor invoice
b. purchase order
c. receiving report
d. purchase requisition
37. Copies of a purchase order are sent to all of the
following except
a. inventory control
b. receiving
c. general ledger
d. accounts payable
38. The receiving report
a. is used to update the actual cost inventory ledger
b. accompanies the goods to the storeroom
c. is sent to general ledger
d. is returned to the vendor to acknowledge receipt
of the goods
39. A supplier invoice 18. In this department a multipart purchase order is
a. is included with the goods prepared to be sent to the vendor, AP, receiving,
b. shows what was ordered even if all was not data processing, and purchasing department file.
shipped a. Data Processing Department
c. is sent by vendor to accounts payable b. Receiving Department
d. none of the above c. Purchasing Departmen
40. The cash disbursement function is d. Accounts Payable Department
a. part of accounts payable 19. After receiving the purchase order in data processing
b. an independent accounting function department, an open purchase order file will be
c. a treasury function created and the open purchase requisition file will be
d. part of the general ledger department transferred to close purchase requisition file.
a. True
GROUP 5 QUIZ: THE EXPENDITURE CYCLE PART b. False
I 16. This file contains purchase requisition number,
inventory number, quantity on order, vendor
13. It contributes to both control and efficiency by number, and the unit standard cost.
listing only those vendors approved to do business a. Open and Close Requisition File
with the organization. b. Inventory Master Fil
a. Voucher System c. Vendor File
b. Valid Vendor File d. Open and Purchase Order File
c. Blind Copy of the Purchase Order 17. It processes the payment of obligations created in
d. Receiving Report the purchases system.
14. These procedures include the tasks involved in a. Cash Disbursement System
identifying inventory needs, placing the order, b. Cash Receipt System
receiving the inventory and recognizing the liability. c. Purchases Procedure
a. Cash Disbursement System d. Sales Reporting
b. Sales Forecasting 18. This function continually monitors inventory levels.
c. Financial Reporting As inventory levels drop to their predetermined
d. Purchases Processing Procedures reorder points, it formally authorizes replenishment
15. Which document helps to ensure that the receiving with a purchase requisition.
clerks actually count the number of goods received? a. Inventory Control
a. Packing List b. Purchase Orders
b. Blind Copy of Purchase Order c. Purchases Subsystem
c. Shipping Notice d. Supervision
d. Invoice 19. The reengineered system addresses many of the
16. The reconciliation of this document with the PO operational weaknesses associated with the
signifies that the organization has a legitimate automated system except:
obligation. a. It uses real-time procedures and direct access
a. Invoices files to shorten the lag time in record keeping
b. Purchase Orders b. It eliminates routine clerical procedures by
c. Purchase Requisitions distributing terminals to user areas
d. Receiving Reports c. This system removes the physical separation
17. This document should reconcile with the purchase between authorization and transaction
requisition. processing
a. Invoices d. It achieves a significant reduction in paper
b. Purchase Orders documents by using digital communications
c. Checks between departments and by digitally storing
d. Receiving Reports records.
20. The automated system of expenditure cycle
promotes effective cash management by scanning
the voucher file daily for items due, thus avoiding
early payments and missed due dates.
a. True
b. False
21. The blind copy contains no __________________
information about the products being received.
a. Quantity or Price
b. Quantity and Price
c. Price or PO Number
d. Price and Terms
22. Upon recording the liability, the AP clerk transfers
all source documents to the open AP file. These
source documents include the following except:
a. Purchase Order
b. Receiving Report
c. Disbursement Voucher
d. Invoice
23. This states that there must be a control of access to
physical assets. Controls might include locks,
alarms, and restricted access to areas that contain
inventories and cash.
a. Theft of Assets
b. Indirect Access
c. Direct Access
d. Supervision
Group 5
1. This should travel with the goods to describe its
contents.
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order
goods
d. bill for goods delivered
2. The purpose of the receiving report is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order
goods
d. bill for goods delivered
3. All of the following departments have a copy of the
purchase order except
a. order goods from vendors
b. the receiving department
c. accounts payable
d. general ledger
4. The purpose of the purchase order is to
a.order goods from vendors
b.record receipt of goods from vendors
c.authorize the purchasing department to order
goods
d. approve payment for goods received
5. The open purchase order file in the purchasing
department is used to determine
a. the quality of items a vendor ships
b. the best vendor for a specific item
c. the orders that have not been received
d. the quantity of items received
6. The purchase order
a. is the source document to make an entry into
the accounting records
b. indicates item description, quantity, and
price
c. is prepared by the inventory control
department
d. is approved by the end-user department
7. The reason that a blind copy of the purchase order is
sent to receiving is to
a. inform receiving when a shipment is due
b. force a count of the items delivered
c. inform receiving of the type, quantity, and
price of items to be delivered
d. require that the goods delivered are
inspected
8. The receiving report is used to
a. accompany physical inventories to the
storeroom or warehouse
b. advise the purchasing department of the
dollar value of the goods delivered
c. advise general ledger of the accounting entry
to be made
d. advise the vendor that the goods arrived
safely
9. When a copy of the receiving report arrives in the
purchasing department, it is used to
a. accompany physical inventories to the
storeroom or warehouse
b. advise the purchasing department of the
dollar value of the goods delivered
c. advise general ledger of the accounting entry
to be made
d. recognize the purchase order as closed
10. The financial value of a purchase is determined by
reviewing the
a. Packing slip
 b. purchase requisition
c. receiving report
d. supplier’s invoice
11. Which document is least important in determining
the financial value of a purchase?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
12. In a merchandising firm, authorization for the
payment of inventory is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements
13. Because of time delays between receiving inventory
and making the journal entry
a. liabilities are usually understated
b. liabilities are usually overstated
c. liabilities are usually correctly stated
d. none of the above
14. Which of the following statements is not correct?
a. the voucher system is used to improve
control over cash disbursements
b. the sum of the paid vouchers represents the
voucher payable liability of the firm
c. the voucher system permits the firm to
consolidate payments of several invoices on
one voucher
d. many firms replace accounts payable with a
voucher payable systems
15. When a cash disbursement in payment of an
accounts payable is recorded
a. the liability account is increased
b. the income statement is changed
c. the cash account is unchanged
d. the liability account is decreased
CHAPTER 6 — THE EXPENDITURE CYCLE
PART II
TRUE/FALSE (True – Red)
1. Time cards are used by cost accounting to allocate
direct labor charges to work in process.
2. The personnel department authorizes changes in
employee pay rates.
3. Most payroll systems for mid-size firms use real-
time data processing.
4. To improve internal control, paychecks should be
distributed by the employee's supervisor.
5. Employee paychecks should be drawn against a
special checking account.
6. Because a time clock is used, no supervision is
required when employees enter and leave the work
place.
7. Inventory control performs the formal record
keeping function for fixed assets.
8. The depreciation schedule shows when assets are
fully depreciated.
9. Authorization to dispose of fixed assets should be
issued by the user of the asset.
10. Work-in-process records are updated by payroll
personnel.
11. Ideally, payroll checks are written on a special bank
account used only for payroll.
12. The supervisor is the best person to determine the
existence of a “phantom employee” and should
distribute paychecks.
13. Payroll processing can be automated easily because
accounting for payroll is very simple.
14. Timekeeping is part of the personnel function.
15. Fixed asset accounting systems include cost
allocation and matching procedures that are not part
of routine expenditure systems.
16. Asset maintenance involves only the recording of
depreciation charges. Physical improvements are
always expensed.
17. Fixed Asset Systems must keep track of the physical
location of each asset to promote accountability.
18. Time cards capture the total time an individual
worker spends on each production job.
19. Accounting conventions and IRS rules sometime
specify the depreciation parameters to be used.
20. The fixed asset disposal report authorizes the user
department to dispose of a fixed asset.
MULTIPLE CHOICES
1. The document that captures the total amount of time
that individual workers spend on each production
job is called a
a. time card
b. job ticket
c. personnel action form
d. labor distribution form
2. An important reconciliation in the payroll system is
a. general ledger compares the labor distribution
summary from cost accounting to the
disbursement voucher from accounts payable
b. personnel compares the number of employees
authorized to receive a paycheck to the
number of paychecks prepared
c. production compares the number of hours reported
on job tickets to the number of hours
reported on time cards
d. payroll compares the labor distribution summary to
the hours reported on time cards
3. Which internal control is not an important part of the
payroll system?
a. Supervisors verify the accuracy of employee time
cards.
b. Paychecks are distributed by an independent
paymaster.
c. Accounts payable verifies the accuracy of the
payroll register before transferring payroll
funds to the general checking accounting.
d. General ledger reconciles the labor distribution
summary and the payroll disbursement
voucher.
4. Which transaction is not processed in the Fixed Asset
System?
a. purchase of building
b. improvement of equipment
c. purchase of raw materials
d. sale of company van
5. Depreciation
a. is calculated by the department that uses the fixed
asset
b. allocates the cost of the asset over its useful life
c. is recorded weekly
d. results in book value approximating fair market
value
6. Depreciation records include all of the following
information about fixed assets except
a. the economic benefit of purchasing the asset
b. the cost of the asset
c. the depreciation method being used
d. the location of the asset
7. Which control is not a part of the Fixed Asset System?
a. formal analysis of the purchase request
b. review of the assumptions used in the capital
budgeting model
c. development of an economic order quantity
model
d. estimates of anticipated cost savings
8. Objectives of the Fixed Asset System do not include
a. authorizing the acquisition of fixed assets
b. recording depreciation expense
c. computing gain and/or loss on disposal of fixed
assets
d. maintaining a record of the fair market value of
all fixed assets
9. Which of the following is not a characteristic of the
Fixed Asset System?
a. Acquisitions are routine transactions requiring
general authorization.
b. Retirements are reported on an authorized
disposal report form.
c. Acquisition cost is allocated over the expected
life of the asset.
d. Transfer of fixed assets among departments is
recorded in the fixed asset subsidiary ledger.
10. In the payroll subsystem, which function should
distribute paychecks?
a. personnel
b. timekeeping
c. paymaster
d. payroll
11. Where does the responsibility lie for reconciling the
labor distribution summary and the payroll
disbursement voucher?
a. cash disbursements
b. cost accounting
c. personnel
d. general ledger
12. Which of the following statements is not true?
a. Routine payroll processing begins with the
submission of time cards.
b. Payroll clerks must verify the hours reported on
the time cards.
c. Payroll reconciles personnel action forms with
time cards and prepares paychecks.
d. Cash disbursements signs paychecks and
forwards them to the paymaster for distribution.
13. In a manufacturing firm, employees use time cards
and job tickets. Which of the following statements
is not correct?
a. Job tickets are prepared by employees for each
job worked on, so an employee may have
more that one job ticket on a given day.
b. An individual employee will have only one
time card.
c. The time reported on job tickets should
reconcile with the time reported on time cards.
d. Paychecks should be prepared from the job
tickets.
14. Which department is responsible for approving
changes in pay rates for employees?
a. payroll
b. treasurer
c. personnel
d. cash disbursements
15. Which of the following situations represents a
serious control weakness?
a. Timekeeping is independent of the payroll
department.
b. Paychecks are distributed by the employees
immediate supervisor.
c. Time cards are reconciled with job tickets.
d. Personnel is responsible for updating employee
records, including creation of records for
new hires.
16. Why would an organization require the paymaster to
deliver all unclaimed paychecks to the internal
audit department?
a. to detect a “phantom employee” for whom a
check was produced
b. to prevent an absent employee’s check from
being lost
c. to avoid paying absent employees for payday
d. to prevent the paymaster from cashing
unclaimed checks
17. Which of the following is not a reasonable control
for fixed assets?
a. Proper authorization is required for acquisition
and disposal of fixed assets.
b. Fixed asset records show the location of each
asset.
c. Fully depreciated assets are immediately
disposed of.
d. Depreciation policies are in writing.
18. Cost accounting updates work-in-process accounts
from
a. time cards
b. the labor distribution summary
c. job tickets
d. personnel action forms
19. Payroll uses time card data to do all of the following
except
a. prepare the payroll register
b. update employee payroll records
c. prepare the labor distribution summary
d. prepare paychecks
20. Payroll checks are typically drawn on
a. the regular checking account
b. a payroll imprest account
c. a wages payable account
d. petty cash
21. The personnel action form provides authorization
control by
a. preventing paychecks for terminated employees
b. verifying pay rates for employees
c. informing payroll of new hires
d. all of the above
22. Accounting records that provide the audit trail for
payroll include all of the following except
a. time cards
b. job tickets
c. payroll register
d. accounts payable register
23. Personnel actions forms are used to do all of the
following except
a. activate new employees
b. terminate employees
c. record hours worked
d. change pay rates
24. The payroll department performs all of the following
except
a. prepares the payroll register
b. distributes paychecks
c. updates employee payroll records
d. prepares paychecks
25. The document that records the total amount of time
spent on a production job is the
a. time card
b. job ticket
c. labor distribution summary
d. personnel action form
26. A control technique that can reduce the risk of a a. the recording of periodic depreciation
terminated employee being paid is b. adjusting the asset records to reflect the cost of
a. a security camera viewing the time clock physical improvements
b. the supervisor taking role during the shift c. keeping track of the physical location of the
c. paychecks being distributed by an independent assets
paymaster d. all of the above
d. reconciliation of time cards and job tickets 34. The Fixed Asset Systems does all of the following
27. Accounts payable except
a. signs paychecks a. records acquisition of assets
b. prepares the payroll voucher b. records improvements to assets
c. reconciles time cards and employee records c. estimates the fair market value of assets in
d. distributes paychecks to employees service
28. All of the following are processed by the Fixed Asset d. records the disposal of assets
System except 35. Asset disposal
a. sale of unneeded equipment a. occurs as soon as an asset is fully depreciated
b. purchase of raw materials b. requires no special authorization
c. repair of production equipment c. automatically initiates the purchase of a
d. purchase of a new plant replacement asset
29. The Fixed Asset System performs all of the d. must follow formal authorization procedures
following except
a. determines the need for new assets GROUP 6 QUIZ: THE EXPENDITURE CYCLE PART
b. maintains depreciation records II
c. records retirement and disposal of assets
d. tracks the physical location of fixed assets PART I: MULTIPLE CHOICE
30. The payroll department performs all of the following
except 1. It captures the time that individual workers spend on
a. prepares paychecks each production job.
b. transfers adequate funds to the payroll imprest a. Personnel Action Form
account b. Job Tickets
c. updates employee payroll records c. Time Cards
d. prepares the payroll register d. Payroll Record
31. Depreciation 2. It captures the time the employee is at work.
a. assures that assets are reported at fair market a. Personnel Action Form
value b. Job Tickets
b. is discretionary for many firms c. Time Cards
c. allocates the cost of an asset over its useful life d. Payroll Record
d. is the responsibility of the department using the 3. Its function is to prepare a single check for the entire
asset amount of the payroll and deposits it in the payroll
imprest account.
a. Cash Disbursement Department
b. Cost Accounting Department
c. Accounts Payable Department
32. The Fixed Asset System is similar to the expenditure
cycle except
d. Production Department
a. fixed asset transactions are non-routine and
require special authorization and controls
4. The department that prepares copies of cash
b. fixed assets are capitalized, not expensed
disbursement voucher is.
c. both a and b
a. Cash Disbursement Department
d. none of the above
b. Cost Accounting Department
33. Asset maintenance involves
c. Accounts Payable Department
d. Production Department c. Authorizes the fixed asset department to
5. The following are examples of payroll control remove from the ledger an asset disposed of
except: by the user department
a. Access Control d. Reviewing and verifying the accuracy and
b. Segregation of Duty completeness of the depreciation charges
c. Dependent Verification calculated by the fixed asset system
d. Supervision
6. The following are the objectives of fixed asset PART II: TRUE OR FALSE
system except:
a. Maintain adequate accounting records of 9. Unlike any other transactions, the asset disposal does
asset acquisition, cost, description, and not require an approval.
physical location in the organization a. True
b. Maintain accurate depreciation records for b. False
depreciable assets in accordance with 10. The fixed asset disposal procedure begins when the
acceptable methods fixed asset accounting clerk receives a receiving report
c. It is involved in the process of asset and a cash disbursement voucher.
acquisition, asset maintenance a. True
d. Provide management with information to b. False
help plan for future fixed asset investments 11. Gusto is standalone payroll software built for the
7. Which of the following statements is true? small business owner.
a. In the task of acquiring the asset, the a. True
receiving department delivers the acquired b. False
asset to the central store or to the warehouse. 12. Manual payroll system is less costly than the
b. Conceptual-based fixed asset system automated one.
demonstrates real time processing a. True
c. In fixed asset acquisition, the fixed asset b. False
department performs the record keeping 13. Dedicated payroll management covers core tasks like
function payroll processing, income tax calculations, and pay
d. Fixed asset system processes routine check printing.
transactions a. True
b. False
14. Integrated payroll management are standalone apps
that go beyond core features with specialized functions
as time-tracking and attendance, customized reporting,
benefits administration, and even a tax planner.
a. True
b. False

15. BambooHR could be an alternative for Xero.

8. This file contains purchase requisition number, a. True
inventory number, quantity on order, vendor b. False
number, and the unit standard cost.
a. Review the asset acquisition and approval Group 6
procedures to determine the reasonableness 1. It is a record prepared by the production
of factors used in the analysis employees to account for the time that
b. Verify the location, condition, and fair value individual workers spend on each production
of the organization’s fixed assets against the job.
fixed asset records in the subsidiary ledger a. Time record
 b. Job ticket
c. Time card
d. Job record
2. Which of the following is not a use of personnel
action forms?
a. To eliminate employees
b. To change the pay rate of employees
c. To account for the total time worked
each pay period for payroll calculation
d. To activate new employees
3. Which department prepares a cash
disbursements voucher for the total amount of
the payroll?
a. Payroll department
b. Accounts payable department
c. Cash disbursements department
d. Production department
4. The audit trail for payroll includes the following
documents, except:
a. Personnel action forms
b. General ledger accounts
c. Time cards, job tickets, and
disbursement vouchers
d. Subsidiary ledger accounts
5. The _____________ department makes changes
to the employee file in real time via terminals.
These changes include additions of new
employees, deletions of terminated employees,
changes in dependents, changes in withholding,
and changes in job status (pay rate)
a. Human Resource Management (HRM)
system
b. Personnel
c. Cost Accounting
d. Time-Keeping
6. The ______________ department enters job cost
data (real time or daily) to create the labor usage
file.
a. Human Resource Management (HRM)
system
b. Personnel
c. Cost Accounting
d. Time-Keeping
7. Upon receipt of the approved time cards from
the supervisor at the end of the week, the
_____________ department creates the current
attendance file
a. Human Resource Management (HRM)
system
b. Personnel
c. Cost Accounting
d. Time-Keeping
8. For moderate-sized and large organizations,
payroll processing is often integrated within the
_________________________. It captures and
processes a wide range of personnel related data,
including employee benefits, labor resource
planning, employee relations, employee skills,
and personnel actions (pay rates, deductions, and
so on), as well as payroll.
a. Human Resource Management (HRM)
system
b. Personnel
c. Cost Accounting
d. Time-Keeping
9. The fixed asset system uses the depreciation
schedules to record end-of-period depreciation
transactions automatically. The specific tasks
includes which of the following
a. Calculating the current period’s
depreciation,
b. Updating the accumulated depreciation
and book value fields in the subsidiary
records,
c. Posting the total amount of depreciation
to the affected general ledger accounts
(depreciation expense and accumulated
depreciation), and
d. Recording the depreciation transaction
by adding a record to the journal
voucher file
e. All of the above
10. The _________ formally authorizes the fixed
asset department to remove from the ledger an
asset disposed of by the user department.
a. Disposal report
b. Assessment Report
c. Information Report
d. Acquisition Report
11. Controlling the fixed asset system includes
which of the following
a. Authorization Controls
b. Supervision Controls
c. Independent Verification Controls
d. All of the above
12. These are relatively permanent items that often
collectively represent the largest financial
investment by the organization.
a. Intangible assets
b. Fixed assets
c. Current assets
d. Biological assets
13. This usually begins with the departmental
manager (user) recognizing the need to obtain a
new asset or replace an existing one.
a. Asset requisition
b. Asset disposal
c. Asset management
d. Asset acquisition
14. This process involves adjusting the fixed asset
subsidiary balances as the assets (excluding
land) depreciate over time or with usage.
 a. Asset maintenance 3. The cost accounting system authorizes the release of
b. Asset acquisition raw materials into production.
c. Asset management 4. Batch processing creates a homogeneous product
d. Asset disposal
through a continuous series of standard procedures.
15. It begins when the responsible manager issues a
request to dispose of the asset 5. The bill of materials specifies the types and
a. Asset acquisition quantities of the raw materials and subassemblies
b. Asset inventory used in producing a single unit of finished product.
c. Asset disposal 6. A purchase requisition authorizes the storekeeper to
d. Asset maintenance release materials to individuals or work centers in
the production process.
7. The SAP R/3 system organizes business processes
into four categories: financial, logistics, human
resources, and business process support.
8. The objective of the Economic Order Quantity
model is to reduce total inventory costs by
minimizing carrying costs and ordering costs.
9. The work-in-process file is the subsidiary ledger for
the work-in-process control account.
10. Move tickets authorize the storekeeper to release
materials to work centers.
11. An operating characteristic of modern
manufacturing firms is that labor is replaced with
capital so that the firm can be more efficient and
therefore more competitive.
12. Computer Integrated Manufacturing focuses on
reducing the complexity of the physical
manufacturing layout of the shop floor.
13. The only objective of the Just-In-Time philosophy is
to reduce inventory levels.
14. Accounting in a world-class manufacturing
environment emphasizes standard cost and variance
analysis.
15. Identifying cost drivers is an essential step in
implementing the Just-In-Time philosophy.
16. A world class information system produces very
little paper.
17. Internal control procedures are virtually identical in
a world-class manufacturing environment and in a
traditional manufacturing environment.
18. In a world-class company, all activities, from
acquisition of raw materials to selling the final
CHAPTER 7 — THE CONVERSION CYCLE
product, form a “chain of customers.”
19. The two subsystems of a traditional conversion cycle
are the production system and the delivery system.
TRUE/FALSE (True – Red) 20. Manufacturing resources planning (MRP II) has
evolved into electronic resource planning (ERP).
1. The philosophy of customer satisfaction permeates
the world-class firm. MULTIPLE CHOICES
2. Reports generated by the cost accounting system
include performance reports and budget reports.
1. Which item does not describe a world-class company?
a. the goal of a world-class company is to delight its
customers
b. customers in a world-class company are external
departments only
c. world-class companies work in cross-functional
teams
d. a world-class company has a flat organizational
structure
2. Which subsystem is not a part of the production
system?
a. directing the movement of work through the
process
b. determining raw material requirements
c. authorizing work to be performed
d. monitoring the flow of cost information related to
production
3. The purpose of the cost accounting system is to
a. produce information for inventory valuation
b. authorize release of raw materials
c. direct the movement of work-in-process
d. determine material requirements
4. Which process creates a homogeneous product
through a continuous series of standard procedures?
a. batch process
b. make-to-order process
c. continuous process
d. none of the above
5. An example of a continuous process is the production
of
a. wedding invitations
b. milk products
c. jet aircraft
d. all of the above
6. All of the following are characteristics of batch
processing except
a. each item in the batch is similar
b. batches are produced in accordance with detailed
customer specifications
c. batches are produced to replenish depleted
inventory levels
d. setting up and retooling is required for different
batches
7. When determining which items to produce, a firm
must know
a. last year’s production level
b. raw material inventory levels
c. the standard cost of the item
d. the sales forecast
8. The production schedule is
a. the expected demand for the firm’s finished
goods for a given year
b. the formal plan and authority to begin production
c. a description of the type and quantity of raw
materials and subassemblies used to produce a
single unit of finished product
d. the sequence of operations during manufacturing
9. A move ticket
a. is the formal plan and authority to begin
production
b. specifies the materials and production required
for each batch
c. records the work done in each work center
d. authorizes the storekeeper to release materials to
work centers
10. The internal control significance of the excess
materials requisition is that it
a. indicates the amount of material released to work
centers
b. identifies materials used in production that
exceed the standard amount allowed
c. indicates the standard quantities required for
production
d. documents the return to raw materials inventory
of unused production materials
11. Inventory control performs all of the following tasks
except it
a. provides production planning and control with
the inventory status report of finished goods
b. updates the raw material inventory records
c. prepares a materials requisition for each
production batch
d. records the completed production as an increase
to finished goods inventory
12. The storekeeper releases raw materials based on the
a. production schedule
b. materials requisition
c. work order
d. bill of materials
13. Which of the following is not an assumption of the
Economic Order Quantity model?
a. demand for the product is known with certainty
b. total cost per year of placing orders is fixed
c. lead time is known and is constant
d. there are no quantity discounts
14. Firms hold safety stock to compensate for
 a. mathematical weaknesses of the Economic Order
Quantity model
b. variations in lead time or daily demand
c. fluctuations in carrying costs
d. uncertainty in the estimation of ordering costs
15. What is the economic order quantity if the annual
demand is 10,000 units, set up cost of placing each
order is $3 and the holding cost per unit per year is $2?
a. 174
b. 123
c. 245
d. none of the above
16. If the daily demand is 40 units and the lead time is
12 days, the reorder point is
a. 52 units
b. 48 units
c. 480 units
d. none of the above
17. Which statement is not correct?
a. general ledger creates a new cost record upon
receipt of a work order from production
planning and control
b. cost accounting updates the cost record with data
gathered from the materials requisition
c. general ledger posts summary information about
the manufacturing process based on a
journal voucher prepared by cost accounting
d. cost accounting computes variances and applies
overhead to individual cost records
18. Which of the following is not a category of critical
success factors in most manufacturing companies?
a. product quality
b. customer service
c. revenue generation
d. resource management
19. Computer integrated manufacturing groups all of the
following technologies except
a. robotics
b. materials requirements planning
c. automated storage and retrieval systems
d. computer aided design
20. The SAP R/3 system provides pre-defined modules
to support business processes in the all of the
following categories except
a. human resources
b. business process support
c. strategic
d. financial
21. Which situation violates the segregation of functions
control procedure?
a. production planning and control is located apart
from the work centers
b. inventory control maintains custody of
inventory items
c. cost accounting has custody of and makes
entries on cost records
d. work centers record direct labor on job tickets
22. All of the following are internal control procedures
that should be in place in the conversion cycle
except
a. calculation and analysis of direct material and
direct labor variances
b. retention of excess materials by work centers
c. physical count of inventory items on hand
d. limited access to raw material and finished
goods inventories
23. Process simplification focuses on
a. using Computer Numerical Controlled
machines which stand alone within a
traditional
setting
b. completely automating the manufacturing
environment
c. reducing the complexity of the physical
manufacturing layout of the shop floor
d. organizing the process into functional
departments
24. A manufacturing process that is organized into group
technology cells utilizing no human labor is
called
a. islands of technology
b. process simplification
c. Computer Integrated Manufacturing
d. traditional manufacturing
25. An example of automation of manufacturing design
is
a. Computer Aided Engineering
b. Automated Storage and Retrieval Systems
c. Computer Numerical Control
d. robotics
26. An example of automation of manufacturing
planning is
a. Computer Aided Engineering
b. Automated Storage and Retrieval Systems
c. Materials Requirements Planning
 d. Computer Numerical Control
27. Firms implement a Just-In-Time inventory approach
to
a. reduce investment in inventories
b. determine the optimum inventory level using
the EOQ model
c. camouflage production problems
d. ensure overproduction of inventory
28. Characteristics of Just-In-Time manufacturing
include all of the following except
a. push manufacturing
b. zero defects
c. reduced setup time and small lot sizes
d. reliable vendors
29. The cost of poor quality includes all of the following
except
a. cost of rework
b. warranty claims
c. scheduling delays
d. proceeds from the sale of scrap
30. A flexible manufacturing system
a. creates bottlenecks in the process
b. leads to an “us” versus “them” attitude among
workers
c. shortens the physical distance between activities
d. is organized along functional lines
31. Deficiencies of the traditional cost accounting
information system include all of the following except
a. an emphasis on financial performance
b. inaccurate cost allocations
c. an emphasis on standard costs
d. immediate feedback about deviations from the
norm
32. Which statement is not correct?
a. an activity driver is a means to measure the
activity used by the cost object
b. cost object describes the work performed in a
firm
c. activities cause costs
d. cost objects create a demand for activities
33. Firms are adopting Activity Based Costing (ABC)
because
a. it facilitates the analysis of variances
b. it more accurately allocates costs to products
c. it recognizes the importance of direct labor as
a component of total manufacturing cost
d. the financial nature of the reports permits
comparisons to be made among different
types of products
34. In traditional firms, information reporting
a. provides financially oriented information
relating to operations
b. presents detailed information about activities
c. shows the allocation of costs first to activities
and then to cost objects
d. identifies nonessential activities
35. Types of information provided by Activity Based
Costing include
a. a description of the single activity driver used
for overhead application
b. the dollar value of the direct material usage
variance
c. identification of cost drivers
d. details of the components of the single
overhead cost pool
36. Which statement is not correct?
a. the benchmark approach compares key
activities with similar activities in other firms
b. critical success factors include product and
process quality
c. the ABC model includes two perspectives: an
allocation of cost perspective and a process
perspective
d. in world-class manufacturing firms, quality
control activities at the end of the process are
essential
37. All of the following are documents in batch process
production systems except
a. production schedule
b. route sheet
c. materials requisition
d. purchase order
38. Transaction authorization occurs in a traditional
manufacturing environment in all of the following
ways except
a. production planning and control initiates
production with a work order
b. movement of the work through the production
process follows the move ticket
c. the sales department modifies work orders to
match changes in demand
d. the materials requisition authorizes the
storekeeper to release materials to the work
centers
39. Manufacturing flexibility incorporates four
characteristics. These include all of the following except
 a. high product quality
b. high inventory levels
c. automation of manufacturing processes
d. physical reorganization of production facilities
40. The stages of the automation continuum are (in
order)
a. traditional, computer-integrated manufacturing,
islands of technology, process
simplification
b. process simplification, traditional, islands of
technology, computer-integrated
manufacturing
c. traditional, islands of technology, process
simplification, computer-integrated
manufacturing
d. traditional, process simplification, computer-
integrated manufacturing, islands of
technology
GROUP 7 QUIZ: THE CONVERSION CYCLE
1. Which of the following is not a deficiency of the
Standard Accounting System?
a. Inaccurate Cost Allocation
b. Promotes Lean Behavior
c. Time Lag
d. Financial Orientation
2. It records the financial effects of the physical events
that are occurring in the production process.
a. General Ledger
b. Cost Accounting Services
c. Work Orders
d. Management Services
3. Pledis Industrial uses 64,000 kilos of one material in
producing ceramic products. The cost associated with
placing each order is ₱40. The carrying cost of one kilo
of the material is ₱2. Compute for Pledis Industrial’s
EOQ.
a. 1,400 kilos
b. 1,500 kilos
c. 1,600 kilos
d. 1,700 kilos
4. The first step in applying Activity-Based Costing is …
a. Identifying the cost drivers
b. Computing a cost rate per cost driver
c. Identifying the activities that consume resources
d. Assigning the cost to products
5. A type of security which protects the physical records
and assets from damage or theft.
a. Administrative Security
b. Physical Security
c. Technical Security
d. Corporate Security
6. Wonwoo Company has an annual demand of 183,750
units, a per-unit order cost of ₱240, and a carrying cost
per unit of ₱5. Using these values, calculate the EOQ.
a. 4,100 units
b. 4,200 units
c. 4,300 units
d. 4,400 units
7. Which of the following define/s or is/are related to
Product Family.
a. A group of related goods produced by the same
company under the same brand.
b. It leverages the customer trust and your loyalty
earned for the original brand.
c. Both A and B
d. Neither A nor B
8. In the model of lean manufacturing implementation
process, the implementation and measuring the progress
stage includes the following, except:
a. Waste Elimination
b. Multifunctional Teams
c. Environment for Change
d. Information Systems
9. A Computer-Aided Manufacturing (CAM) facility
makes use of group technology cells composed of
various types of CNC machines to produce an entire part
from start to finish in one location.
a. True
b. Computer-Aided Design (CAD)
c. Computer Integrated Manufacturing (CIM)
d. Island of Technology
10. Which of the following is an automated production
planning and control system used to support inventory
management?
a. Materials Requirements Planning
b. Manufacturing Requirements Planning
c. Material Resources Planning
d. Manufacturing Resources Planning
11. Which of the following is an extension of MRP that
has evolved beyond the confines of inventory
management and is both a system and a philosophy for
coordinating a wide range of manufacturing activities?
a. Materials Requirements Planning
b. Manufacturing Requirements Planning
c. Material Resources Planning
d. Manufacturing Resources Planning
12. A document in the batch processing system that
shows the production path that a particular batch of
product follows during manufacturing.
a. Route sheet
b. Bill of materials
c. Work order
d. Production schedule
13. Value Stream Map works best in highly focused,
low-volume processes in which real benefit is derived
from reducing repetitive processes by even small
amounts of time.
a. True
b. False
14. Production scheduling is the first activity of the
planning and control function.
a. True
b. False
15. In the relationship of total inventory cost and order
quantity, as the quantity ordered increases, the number
of ordering events decreases, causing the total annual
cost of ordering to decrease.
a. True
b. False
Group 7
1. Is a method of allocating costs to products and
services to facilitate better planning and control.
It accomplishes this by assigning cost to
activities based on their use of resources and
assigning cost to cost objects based on their use
of activities.
a. Traditional Costing
b. Activity-based Costing
c. Standard Costing
d. Value Stream Accounting
2. This type of valuation method includes all the
costs associated with the product family, but
makes no distinction between direct costs and
indirect costs.
a. Traditional Costing
b. Activity-based Costing
c. Standard Costing
d. Value Stream Accounting
3. It is an automated production planning and
control system used to support inventory
management.
a. Enterprise Resource Planning (ERP)
b. Material Requirement Planning (MRP)
c. Manufacturing Requirement Planning
(MRP II)
d. None of the Above
4. Which of the following is not an objective of
Material Requirement Planning (MRP)?
a. Ensure that adequate raw materials are
available to the production
b. Maintain the lowest possible level of
inventory on hand
c. Produce production and purchasing
schedules and other information needed
to control production
d. All are objectives of MRP
5. Which of the following statements is true?
a. MRP integrates product manufacturing,
product engineering, sales order
processing, customer billing, human
resources, and related accounting
functions
b. MRP II is an automated production
planning and control system used to
support inventory management
c. ERP integrates departments and
functions across a company into one
system of integrated applications that is
connected to a single common database
d. None of the statements is true.
6. What best describes the philosophy of lean
manufacturing?
a. giving ample time to workers to do their
job
b. doing more with less, eliminating waste,
and reducing production cycle time
c. reduction of workers in the
manufacturing environment
d. elimination of improper work etiquette
in the manufacturing process
7. All are principles characterizing lean
manufacturing, except:
a. waste minimization
b. inventory reduction
c. perfect quality
d. Push Processing
8. The progression of automation toward world-
class status includes the following, except:
a. Traditional
b. Computer Integrated Manufacturing
c. Islands of Technology
d. New Era
9. Which of the following best describes Value
Stream Mapping?
 a. It can evaluate the technical feasibility a. Move Ticket
of the product and determine its b. Production schedule
‘‘manufacturability.’ c. Work order
b. monitors and controls the production d. Route sheet
process and routing of products through
the cell
c. it graphically represents business
processes to identify aspects of it that
are wasteful and should be removed
d. programmed to perform specific actions
over and over with a high degree of
precision and are widely used in
factories to perform jobs such as
welding and riveting
10. Which of the following is the heart of the lean
manufacturing philosophy?
a. Robotics
b. physical reorganization of the
production facilities
c. automation of the manufacturing
process
d. islands of technology
11. Which of the following is not a basic process of
traditional batch production model?
a. Plan and control production
b. Perform production operation
c. Bill of materials
d. Perform cost accounting
12. It specifies the types and quantities of the raw
materials and subassemblies used in producing a
single unit of finished product.
a. Bill of materials
b. Production schedule
c. Route sheet
d. Work order
13. Document that authorizes the storekeeper to
release materials (and subassemblies) to
individuals or work centers in the production
process.
a. Bill of materials
b. Move Ticket
c. Materials Acquisition
d. Route Sheet
14. It is an additional inventories that must be added
to the reorder point to avoid unanticipated stock-
out events.
a. Lead time
b. Safety Stock
c. Back-order
d. Raw materials
15. It shows the production path that a particular
batch of product follows during manufacturing.

CHAPTER 8 — FINANCIAL REPORTING AND
MANAGEMENT REPORTING SYSTEMS
TRUE/FALSE (True – Red)
1. The most common means of making entries in the
general ledger is via the journal voucher.
2. Individuals with access authority to general ledger
accounts should not prepare journal vouchers.
3. The journal voucher is the document that authorizes
entries to be made to the general ledger.
4. Each account in the chart of accounts has a separate
record in the general ledger master file.
5. The responsibility center file is primarily used by the
Financial Reporting System.
6. Management reporting is often called discretionary
reporting because it is not mandated as is financial
reporting.
7. Primary recipients of financial statement information
are internal management.
8. The Management Reporting System is a
nondiscretionary system.
9. When evaluating decision alternatives, one option is
to take no action.
10. In most cases intangible decision criteria can be
quantified.
11. One benefit of the Management Reporting System is
that it can alert management to delays in project
implementation.
12. Responsibility refers to an individual’s obligation to
achieve desired results.
13. A firm with a wide span of control tends to have
relatively more layers of management.
14. The control function entails evaluating a process
against a standard and, if necessary, taking
corrective action.
15. Standards are the basis for evaluating actual
performance.
16. A report is said to have information content if it
eliminates uncertainty associated with a problem
facing the decision maker.
17. An inventory out-of-stock report is an example of a
programmed, on-demand report.
18. A principle of responsibility accounting is that
managers are responsible for controllable and
uncontrollable costs.
19. The manager of a cost center is responsible for cost
control and revenue generation.
20. Designing an effective management reporting
system does not require an understanding of the
information managers need to deal with the
problems they face.
21. The formalization of tasks principle suggests that
management should structure the firm around the
unique skills sets of key individuals.
22. If a manager delegates responsibility to a
subordinate, he or she must also grant the
subordinate authority to make decisions.
23. Operational control involves motivating managers at
all levels to use resources, including materials,
personnel, and financial assets, as productively as
possible.
24. The block code is the coding scheme most
appropriate for a chart of accounts.
MULTIPLE CHOICES
1. The coding scheme most appropriate for a chart of
accounts is
a. sequential code
b. block code
 c. group code
d. mnemonic code
2. A common use for sequential coding is
a. creating the chart of accounts
b. identifying inventory items
c. identifying documents
d. identifying fixed assets
3. The most important advantage of sequential coding is
that
a. missing or unrecorded documents can be
identified
b. the code itself lacks informational content
c. items cannot be inserted
d. deletions affect the sequence
4. When a firm wants its coding system to convey
meaning without reference to any other document, it
would choose
a. an alphabetic code
b. a mnemonic code
c. a group code
d. a block code
5. The most important advantage of an alphabetic code is
that
a. meaning is readily conveyed to users
b. sorting is simplified
c. the capacity to represent items is increased
d. missing documents can be identified
6. Entries into the General Ledger System (GLS) can be
made using information from
a. the general journal
b. a journal voucher which represents a summary
of similar transactions
c. a journal voucher which represents a single,
unusual transaction
d. all of the above
7. Which statement is not correct? The general ledger
master file
a. is based on the firm’s chart of account
b. contains a record for control accounts
c. is an output of the Financial Reporting System
(FRS)
d. supplies information for management decision
making
8. What type of data is found in the general ledger
master file?
a. a chronological record of all transactions
b. the balance of each account in the chart of
accounts
c. budget records for each account in the chart of
accounts
d. subsidiary details supporting a control account
9. Which report is not an output of the Financial
Reporting System (FRS)?
a. variance analysis report
b. statement of cash flows
c. tax return
d. comparative balance sheet
10. Which steps in the Financial Accounting Process are
in the correct sequence?
a. record the transaction, post to the ledger, prepare
the adjusted trial balance, enter adjusting entries,
prepare financial statements
b. record the transaction, prepare the unadjusted
trial balance, record adjusting journal entries,
record closing entries, prepare financial statements
c. record the transaction, post to the ledger, record
adjusting entries, prepare the unadjusted trial
balance, prepare financial statements
d. record the transaction, post to the ledger, prepare
the adjusted trial balance, prepare financial
statements, record closing entries
11. Which statement is not correct?
a. the post-closing trial balance reports the ending
balance of each account in the general ledger
b. one purpose of preparing the unadjusted trial
balance is to ensure that debits equal credits
c. financial statements are prepared based on the
unadjusted trial balance
d. the unadjusted trial balance reports control
account balances but omits subsidiary ledger
detail
12. What account appears on the postclosing trial
balance?
a. income summary
b. machinery
c. rent expense
d. interest income
13. Financial statements are prepared from the
a. trial balance
b. adjusted trial balance
c. general ledger
d. general journal
14. Risk exposures in the General Ledger and Financial
Reporting Systems include all of the following except
 a. loss of the audit trail
b. unauthorized access to the general ledger
c. loss of physical assets
d. general ledger account out of balance with the
subsidiary account
15. Which situation indicates an internal control risk in
the General Ledger/Financial Reporting Systems
(GL/FRS)?
a. the employee who maintains the cash journal
computes depreciation expense
b. the cash receipts journal voucher is approved by
the Treasurer
c. the cash receipts journal vouchers are
prenumbered and stored in a locked safe
d. the employee who maintains the cash receipts
journal records transactions in the accounts
receivable subsidiary ledger
16. With a limited work force and a desire to maintain
strong internal control, which combination of duties
performed by a single individual presents the least risk
exposure?
a. maintaining the inventory ledger and recording
the inventory journal voucher in the general ledger
b. recording the inventory journal voucher in the
general ledger and maintaining custody of
inventory
c. maintaining the cash disbursements journal and
recording direct labor costs applied to specific
jobs
d. preparing the accounts payable journal voucher
and recording it in the general ledger
17. The audit trail fulfills all of the following purposes
except
a. provides the ability to answer inquiries
b. ensures the accuracy of the application software
c. fulfills governmental regulations
d. offers a means for preventing, detecting, and
correcting errors
18. Which best describes a batch process General Ledger
System (GLS)
a. paper documents are eliminated
b. the general ledger master file is updated each
night
c. there is a time lag between transaction
processing and posting to the general ledger
d. no direct access or querying of the General
Ledger is possible
19. An advantage of a batch General Ledger System
(GLS) is that
a. separation between authorization and transaction
processing is strictly enforced
b. the general ledger master file is recreated with
each update
c. updates and reconciliation of transactions occur
as a step within the transaction cycle
d. errors and out-of-balance conditions are
identified at the end of the month
20. A characteristic of the Management Reporting
System (MRS) is
a. the MRS operates in conformity with generally
accepted accounting principles
b. it is a legal requirement that the MRS be
installed and functioning properly
c. the MRS is developed by implementing SEC
requirements
d. the MRS focuses on internal decision-making
information
21. Which statement is not true?
a. authority refers to an individual’s obligation to
achieve desired results
b. if an employee is given the responsibility for a
task, that employee should be given authority to
make decisions within the limits of that task
c. the level of detail provided to an employee is a
function of the employee’s position with the firm
d. all of the above are true
22. Which statement is not true? The manager’s span of
control
a. is narrow for routine and repetitive tasks
b. is related to the number of layers of management
c. affects the amount of detail provided to a
manager
d. can affect employee morale and motivation
23. Short-range planning involves
a. setting goals and objectives of the firm
b. planning the production schedule for the next
quarter
c. planning the growth of the firm
d. deciding on the degree of diversification among
the firm’s products
24. Long-range planning involves
 a. planning the marketing and promotion for a c. inventory exception reports for Division G
product d. equipment utilization reports for Plant M
b. presenting department heads with budgetary 32. A fundamental principle of responsibility accounting
goals for the next year is that
c. preparing a work force utilization budget for the a. managers are accountable only for items they
next quarter control
d. deciding the optimum size of the firm b. a manager’s span of control should not exceed
25. The level of management that makes tactical eight people
planning decisions is c. structured reports should be prepared weekly
a. top management d. the information flow is in one direction, top-
b. middle management down
c. operations management 33. Which statement is not true? Responsibility
d. front-line management accounting
26. The decision to enter a new market is an example of a. involves both a top-down and bottom-up flow of
a. strategic planning information
b. tactical planning b. acknowledges that some economic events cannot
c. management control be traced to any manager
d. operational control c. creates a budget
27. All of the following are elements of operational d. compares actual performance with budget
control decisions except 34. What mechanism is used to convey to managers the
a. determining the scope of the activity standards by which their performance will be measured?
b. setting operating standards a. the responsibility report
c. evaluating performance b. the scheduled report
d. taking corrective action when necessary c. the budget
28. In contrast to tactical planning decisions, d. all of the above
management control decisions, and operational control 35. All of the following concepts encourage goal
decisions, strategic planning decisions usually congruence except
a. are more focused a. detailed information reporting at all
b. have a shorter time frame management levels
c. are unstructured b. authority and responsibility
d. have a high degree of certainty c. formalization of tasks
29. Which of the following management principles d. responsibility accounting
affects the management reporting system? 36. Which of the following statements is NOT true?
a. formalization of tasks a. Sorting records that are coded alphabetically
b. authorization tends to be more difficult for users than sorting
c. span of control numeric sequences.
d. all of the above b. Mnemonic coding requires the user to memorize
30. All of the following are elements of problem codes.
structure except c. Sequential codes carry no information content
a. certainty beyond their order in the sequence.
b. data d. Mnemonic codes are limited in their ability to
c. procedures represent items within a class.
d. objectives 37. Which file has as its primary purpose to present
31. All of the following are examples of programmed comparative financial reports on a historic basis?
reports except a. journal voucher history file
a. cash flow reports for Division B b. budget master file
b. year-to-date local income tax payments made by c. responsibility file
all employees living in City X and working in d. general ledger history file
City Y
38. All of the following are characteristics of the 3. The decision to enter a new market is an example of
strategic planning process except the ___________.
a. emphasis on both the short and long run. a. Strategic planning
b. review of the attributes and behavior of the b. Tactical planning
organization’s competition. c. Management control
c. analysis of external economic factors. d. Operational control
d. analysis of consumer demand. 4. Which of the following management principles affects
39. Which of the following performance measures can the management reporting system?
not result in dysfunctional behavior? a. Formalization of tasks
a. price variance b. Authorization
b. quotas c. Span of control
c. ROI d. All of the above
d. net income 5. It uses tags to identify each piece of financial data,
e. all of the above can result in dysfunctional which then allows it to be used programmatically by a
behavior compatible program. It also allows an easy transmission
40. Which of the following best describes a profit center: of data between businesses.
a. authority to make decisions affecting the major a. XBL
determinants of profit, including the power to b. XBRL
choose its markets and sources of supply. c. Either XBL or XBRL
b. authority to make decisions affecting the major d. Neither XBL or XBRL
determinants of profit, including the power to 6. Responsibility center file contains the following
choose its markets and sources of supply, and except:
significant control over the amount of invested a. Revenues
capital. b. Expenditures
c. authority to make decisions over the most c. Budgeted Revenues
significant costs of operations, including the d. Other Resource Utilization Data
power to choose the sources of supply. 7. Which is not part of the report attributes?
d. authority to provide specialized support to other a. Accuracy
units within the organization. b. Completeness
e. responsibility for combining the raw materials, c. Catchy
direct labor, and other factors of production into a d. Exception Orientation
final product. 8. Programmed reporting has two subclasses which are:
I. Adhoc Report
GROUP 8 QUIZ: FINANCIAL REPORTING AND II. Scheduled Report
MANAGEMENT REPORTING SYSTEMS III. On-demand Report
IV. Management Report
1. This file provides a record of all general ledger a. I & III
transactions and replaces the traditional general journal. b. II & IV
a. Journal voucher file c. II & III
b. Journal voucher history file d. I & IV
c. General ledger master file 9. It involves sophisticated techniques such as database
d. General ledger history file queries and artificial intelligence.
2. The level of management that makes tactical planning a. Data warehousing
decisions is _________. b. Adhoc reporting
a. Top management c. Data mining
b. Middle management d. Management report
c. Operations management 10. It is known to be as the formal vehicle to convey
d. Front-line management information.
a. Accounting
 b. Financial statements transaction can be accurately traced through the
c. Report system from initiation to final disposition.
d. File a. Master File
11. Operational control involves motivating managers at b. XBRL Instant Documents
all levels to use resources, including materials, c. Audit Trail
personnel, and financial assets, as productively as d. None of the above
possible.
a. True 4. Individuals with access authority to GL accounts
b. False should not, except:
12. The formalization of tasks principle suggests that a. Have record-keeping responsibility for
special journals or subsidiary ledgers
management should structure the firm around the unique
b. Prepare journal vouchers
skills sets of key individuals.
c. Have custody of physical assets
a. True
d. All of the above are correct.
b. False
13. According to MDN web docs, XML (Extensible 5. For a report to be useful, it must have:
Markup Language) is a markup language similar to a. report attribute
HTML, with predefined tags to use. b. information overload
a. True c. complete information
b. False d. information content
14. The MRS uses general ledger master file to support
internal information reporting.
6. It is the process of selecting, exploring, and
a. True
b. False modeling large amounts of data to uncover
15. On demand reports are not triggered by events. relationships and global patterns that exist in
a. True large databases but are hidden among the vast
b. False amount of facts.
Group 8 a. data discovering
1. If risks are not controlled it may result in b. data processing
misstated financial statements and other reports,
c. data finding
thus misleading users of this information. The
d. data mining
potential consequences are the following,
except:
a. Significant financial loss 7. This approach uses a drill-down technique to
b. Suctions specified by SEC legislation either verify or reject a user’s hypothesis.
c. Litigation a. data mining
d. All of the above are correct b. ad hoc reporting
c. verification model
2. Which of the following is not correct? d. discovery model
a. End-user computer cannot process XML
and can only display the format. 8. What do you call a report that aims at informing
b. End-user computer can recognize XML managers of different aspects of the business, to
and process help them make better-informed decisions?
c. XBRL is typically used for reporting
a. financial reports
aggregated financial data.
b. ad hoc reports
d. Unauthorized access to the GL accounts
can result in errors, fraud and c. sales report
misrepresentations in financial d. management reports
statements.
9. This management principle suggests that
3. This involves a network of documents, journals, management should structure the firm around
and ledgers designated to ensure that a the tasks it performs rather than around
individuals with unique skills.
 a. Formalization of tasks b. Journal Voucher History File
b. Responsibility and authority c. General Ledger History File
c. Span of control d. General Ledger Master File
d. Management by exception
15. Statement 1: Financial Reporting is the final step
10. This principle suggests that managers should in the overall accounting process.
Statement 2: Journal vouchers for the adjusting
limit their attention to potential problem areas
entries are prepared and posted to the
rather than being involved with every activity or
appropriate accounts in the GL.
decision.
a. Only statement 1 is true.
a. Formalization of tasks
b. Only statement 2 is true.
b. Responsibility and authority
c. Both are true.
c. Span of control
d. Both are false.
d. Management by exception

11. These decisions are shorter term, more specific,

recurring, have more certain outcomes, and have
a lesser impact on the firm than strategic
decisions.
a. Management control decision
b. Tactical planning decision
c. Operational control decision
d. Strategic planning decision

12. It involves motivating managers in all functional

areas to use resources, including materials,
personnel, and financial assets, as productively
as possible.
a. Management control decision
b. Tactical planning decision
c. Operational control decision
d. Strategic planning decision

13. Statement 1: It is assumed that the users of

financial reports do not understand the
conventions and accounting principles that are
applied.
Statement 2: The primary recipients of financial
statement information are internal users, such as
stockholders, creditors and government
agencies.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both are false.
d. Both are true.

14. Its primary purpose is to provide historical

financial data for comparative financial reports.
a. Journal Voucher File

CHAPTER 9 — DATABASE MANAGEMENT
SYSTEMS
TRUE/FALSE (True – Red)
1. The database approach to data management is
sometimes called the flat file approach.
2. The Database Management System provides a
controlled environment for accessing the database.
3. To the user, data processing procedures for routine
transactions, such as entering sales orders, appear to
be identical in the database environment and in the
traditional environment.
4. An important feature associated with the traditional
approach to data management is the ability to
produce ad hoc reports.
5. The Data Definition Language is used to insert
special database commands into application
programs.
6. There is more than one conceptual view of the
database.
7. In the database method of data management, access
authority is maintained by systems programming.
8. The physical database is an abstract representation
of the database.
9. A customer name and an unpaid balance is an
example of a one-to-many relationship.
10. In the relational model, a data element is called a
relation.
11. Data normalization group data attributes into tables
in accordance with specific design objectives.
12. Under the database approach, data is viewed as
proprietary or “owned” by users.
13. The data dictionary describes all of the data
elements in the database.
14. A join builds a new table by creating links.
15. The deletion anomaly is the least important of the
problems affecting un-normalized databases.
16. A deadlock is a phenomenon that prevents the
processing of transactions.
17. Time stamping is a control that is used to ensure
database partitioning.
18. A lockout is a software control that prevents
multiple users from simultaneous access to data.
19. Logical database design is the foundation of the
conceptual design.
20. An entity is any physical thing about which the
organization wishes to capture data.
21. An ER diagram is a graphical representation of a
data model.
22. The term occurrence is used to describe the number
of attributes or fields pertaining to a specific entity.
23. Cardinality describes the number of possible
occurrences in one table that are associated with a
single occurrence in a related table.
24. A table in third normal form is free of partial
dependencies, multiple dependencies, and transitive
dependencies.
25. Improperly normalized databases are associated with
three types of anomalies: the update anomaly, the
insertion anomaly, and the deletion anomaly.
MULTIPLE CHOICES
1. All of the following are basic data management tasks
except
a. data deletion
b. data storage
c. data attribution
d. data retrieval
2. The task of searching the database to locate a stored
record for processing is called
a. data deletion
b. data storage
c. data attribution
d. data retrieval
3. Which of the following is not a problem usually
associated with the flat-file approach to data
management?
a. data redundancy
b. restricting access to data to the primary user
c. data storage
d. currency of information
4. Which characteristic is associated with the database
approach to data management?
a. data sharing
b. multiple storage procedures
c. data redundancy
d. excessive storage costs
5. Which characteristic is not associated with the
database approach to data management?
a. the ability to process data without the help of a
programmer
b. the ability to control access to the data
c. constant production of backups
d. the inability to determine what data is available
6. The textbook refers to four interrelated components of
the database concept. Which of the following is not one
of the components?
a. the Database Management System
b. the Database Administrator
c. the physical database
d. the conceptual database
7. Which of the following is not a responsibility of the
Database Management System?
a. provide an interface between the users and the
physical database
b. provide security against a natural disaster
c. ensure that the internal schema and external
schema are consistent
d. authorize access to portions of the database
8. A description of the physical arrangement of records
in the database is
a. the internal view
b. the conceptual view
c. the subschema
d. the external view
9. Which of the following may provide many distinct
views of the database?
a. the schema
b. the internal view
c. the user view
d. the conceptual view
10. Users access the database
a. by direct query
b. by developing operating software
c. by constantly interacting with systems
programmers
d. all of the above
11. The Data Definition Language
a. identifies, for the Database Management
System, the names and relationships of all data
elements, records, and files that comprise the
database
b. inserts database commands into application
programs to enable standard programs to interact
with and manipulate the database
c. permits users to process data in the database
without the need for conventional programs
d. describes every data element in the database
12. The Data Manipulation Language
a. defines the database to the Database
Management System
b. transfers data to the buffer area for manipulation
c. enables application programs to interact with
and manipulate the database
d. describes every data element in the database
13. Which statement is not correct? A query language
like SQL
a. is written in a fourth-generation language
b. requires user familiarity with COBOL
c. allows users to retrieve and modify data
d. reduces reliance on programmers
14. Which duty is not the responsibility of the Database
Administrator?
a. to develop and maintain the Data Dictionary
b. to implement security controls
c. to design application programs
d. to design the subschema
15. In a hierarchical model
a. links between related records are implicit
b. the way to access data is by following a
predefined data path
c. an owner (parent) record may own just one
member (child) record
d. a member (child) record may have more than
one owner (parent)
16. Which term is not associated with the relational
database model?
a. tuple
b. attribute
c. collision
d. relation
17. In the relational database model
a. relationships are explicit
b. the user perceives that files are linked using
pointers
c. data is represented on two-dimensional tables
d. data is represented as a tree structure
18. In the relational database model all of the following
are true except
a. data is presented to users as tables
b. data can be extracted from specified rows from
specified tables
c. a new table can be built by joining two tables
d. only one-to-many relationships can be supported
19. In a relational database
a. the user’s view of the physical database is the
same as the physical database
b. users perceive that they are manipulating a
single table
c. a virtual table exists in the form of rows and
columns of a table stored on the disk
d. a programming language (COBOL) is used to
create a user’s view of the database
20. The update anomaly in unnormalized databases
a. occurs because of data redundancy
b. complicates adding records to the database
c. may result in the loss of important data
d. often results in excessive record insertions
21. The most serious problem with unnormalized
databases is the
a. update anomaly
b. insertion anomaly
c. deletion anomaly
d. none of the above
22. The deletion anomaly in unnormalized databases
a. is easily detected by users
b. may result in the loss of important data
c. complicates adding records to the database
d. requires the user to perform excessive updates
23. Which statement is correct?
a. in a normalized database, data about vendors
occur in several locations
b. the accountant is responsible for database
normalization
c. in a normalized database, deletion of a key
record could result in the destruction of the audit
trail
d. connections between M:M tables is provided by
a link table
24. Which of the following is not a common form of
conceptual database model?
a. hierarchical
b. network
c. sequential
d. relational
25. Which of the following is a relational algebra
function?
a. restrict
b. project
c. join
d. all are relational algebra functions
26. Which statement is false?
a. The DBMS is special software that is
programmed to know which data elements each
user is authorized to access.
b. User programs send requests for data to the
DBMS.
c. During processing, the DBMS periodically
makes backup copies of the physical database.
d. The DBMS does not control access to the
database.
27. All of the following are elements of the DBMS
which facilitate user access to the database except
a. query language
b. data access language
c. data manipulation language
d. data definition language
28. Which of the following is a level of the database that
is defined by the data definition language?
a. user view
b. schema
c. internal view
d. all are levels or views of the database
29. An example of a distributed database is
a. partitioned database
b. centralized database
c. networked database
d. all are examples of distributed databases
30. Data currency is preserved in a centralized database
by
a. partitioning the database
b. using a lockout procedure
c. replicating the database
d. implementing concurrency controls
31. Which procedure will prevent two end users from
accessing the same data element at the same time?
a. data redundancy
b. data replication
 c. data lockout c. transaction processing response time is
d. none of the above improved
32. The advantages of a partitioned database include all d. partitioning can reduce losses in case of disaster
of the following except 39. Each of the following is a relational algebra function
a. user control is enhanced except
b. data transmission volume is increased a. join
c. response time is improved b. project
d. risk of destruction of entire database is reduced c. link
33. A replicated database is appropriate when d. restrict
a. there is minimal data sharing among information
processing units
b. there exists a high degree of data sharing and no
primary user
c. there is no risk of the deadlock phenomenon
d. most data sharing consists of read-write
transactions

34. What control maintains complete, current, and GROUP 9 QUIZ: DATABASE MANAGEMENT
consistent data at all information processing units? SYSTEMS
a. deadlock control
b. replication control 1. At the physical level, the database is a collection of
c. concurrency control records and files. Relational databases are based on the
d. gateway control _____ structure. This structure uses an index in
35. Data concurrency conjunction with a sequential file organization.
a. is a security issue in partitioned databases a. Inverted sequential list
b. is implemented using timestamping b. Indexed symmetrical file
c. may result in data lockout c. Indexed sequential file
d. occurs when a deadlock is triggered d. Indexed conjunctional file
36. Entities are 2. Which of the following is not a feature of database
a. nouns that are depicted by rectangles on an management system?
entity relationship diagram a. Database usage reporting
b. data that describe the characteristics of b. Database access
properties of resources c. Both a and b
c. associations among elements d. Neither a nor b
d. sets of data needed to make a decision 3. It is a programming language used to define the
37. A user view physical database to the Database Management System.
a. presents the physical arrangement of records in a a. Data Definition Language (DDL)
database for a particular user b. Data Definition Speech (DDS)
b. is the logical abstract structure of the database c. Data Description Language (DDL)
c. specifies the relationship of data elements in the d. None of the Above
database 4. Which of the following statements are correct?
d. defines how a particular user sees the database I. The conceptual view or schema represents the
38. All of the following are advantages of a partitioned database logically and abstractly, rather
database except than the way it is physically stored.
a. increased user control by having the data stored II. The user view presents the physical arrangement
locally of records in the database. This is the lowest level of
b. deadlocks are eliminated
 representation, which is one step removed from the b. (1) an entity must consist of two or more
physical database. occurrences and (2) an entity must
III. The internal view defines how a particular user contribute more than one attribute that is not
sees the portion of the database that he or she is provided through other entities
authorized to access. To the user, the internal view is the
database. c. (1) an entity must consist of two or more
a. Only statement I is correct. occurrences and (2) an entity must
b. Statements I and II are correct. contribute at least one attribute that is not
c. Statements I, II, II are correct. provided through other entities
d. No statement is correct. d. (1) an entity must consist of one or more
5. This position is responsible for managing the occurrences and (2) an entity must
database resource and this does not exist in the flat-file contribute at least two attributes that are not
environment. provided through other entities
a. Database assessor
b. Database administrator
c. Database personnel
d. None of the above

6. This anomaly results from data redundancy in a

table that is not normalized. 10. A transitive dependency
a. Update anomaly a. Occurs when one or more non-key attributes
b. Repetitive anomaly are dependent on (defined by) only part of
c. Insertion anomaly the primary key, rather than the whole key
d. Deletion anomaly b. Is one of the three anomalies that result from
7. To be free of anomalies, tables must be normalized not normalized database tables
to the _______. c. Occurs in a table where non-key attributes
a. 1NF are dependent on another non-key attribute
b. 2NF and independent of the table’s primary key
c. 3NF d. None of the above
d. 4NF 11. What are the two basic options in addressing the
8. What is the correct order of steps involved in issue regarding the location of the organization's
creating relational database? database?
I. Normalize the data model and add foreign keys a. Centralized and decentralized
II. Prepare the user views b. Distributed and undistributed
III. Construct a data model showing entity c. Centralized and Distributed
associations d. Decentralized and Undistributed
IV. Identify entities 12. Statement I: Storing data at local sites increases
V. Add primary keys and attributes to the users’ control.
model VI. Construct the physical database Statement II: Permitting local access to data and
a. IV, VI, III, I, V, II reducing the volume of data that must be transmitted
b. IV, III, V, I, VI, II between sites improves transaction processing
c. III, V, IV, I, VI, II response time.
d. III, IV, V, II, I, VI Statement III: Partitioned databases can reduce the
9. To pass as valid entities, what are the two potential for disaster. By having data located at
conditions that needs to be met? several sites, the loss of a single site cannot
a. (1) an entity must consist of one or more terminate all data processing by the organization.
occurrences and (2) an entity must Which of the following statement(s) is (are) the
contribute at least one attribute that is not advantages of partitioned database approach?
provided through other entities a. Statement I and II
 b. Statement I and III 2. Is a programming language used to define the
c. Statement II and III database per se.
d. Statement I, II and III a. Data Definition Language
13. What type of model was an efficient data processing b. Data Manipulation Language
tool for highly structured problems and also called a c. Query Language
navigational database because traversing it requires d. Sign Language
following a predefined path? 3. The following are DBMS features, except:
a. Hierarchical Database Model a. Data Manipulation
b. Network Database Model b. Backup and Recovery
c. Hierarchical Indexed Direct Access Model c. Database Usage Reporting
d. Relational Database Model d. Database Access
14. Statement I: In Hierarchical Database Model, no 4. The functions of Database Administrator are:
child record can have more than one parent. a. Database Planning
Statement II: In Network Database Model, allows a b. Design Implementation
child record to have multiple parents. c. Operation and Maintenance
a. Statement I is false while Statement II is d. All of the above
true. 5. Which of the following is not an advantage of the
Database Approach?
b. Statement I is true while Statement II is a. No data redundancy.
false. b. Single update
c. Both Statement I and II are false. c. Current values:
d. Both Statement I and II are true. d. All are advantages of Database Approach
15. Give the correct order in correcting structural 6. It is used to describe the number of instances or
dependencies. records that pertain to a specific entity
I. The conceptual view or schema represents the a. Entities
database logically and abstractly, rather than the b. Attributes
way it is physically stored. c. Cardinality
II. The user view presents the physical arrangement d. Occurrence
of records in the database. This is the lowest 7. The six phases of database design includes the
level of representation, which is one step following except:
removed from the physical database. a. Construct a data model showing entity
III. The internal view defines how a particular user associations
sees the portion of the database that he or she is b. Add foreign keys and attributes to the model.
authorized to access. To the user, the internal view is the c. Construct the physical database.
database. d. Add primary keys and attributes to the model
a. 2,3,1 8. The three types of anomalies are the following
b. 3,2,1 a. Upgrade, Deletion and Addition
c. 1,2,3 b. Update, Deletion and Improved
d. 2,1,3 c. Update, Deletion and Insertion
d. Upgrade, Deletion and Improved
Group 9 9. The four basic forms of cardinality that are possible
1. It is a method for designing interface between are the following except:
program instructions and data on which a specific data a. many or many
file was created for each application. b. zero or many
a. File-oriented Processing c. one or many
b. Data oriented Processing d. one and only one
c. Conceptual Mapping 10. Which of the following statements is false?
d. Programming
 a. Improperly normalized tables can cause
DBMS processing problems that restrict, or even
deny, users’ access to the information they need.
b. Association is represented with a verb, such
as ships, requests, or receives while cardinality
is the degree of association between two entities.
c. Database normalization is a technical matter
that is usually the responsibility of accounting
professionals.
d. When unnormalized tables are split into
multiple 3NF tables, they need to be linked
together via foreign keys so the data in them can
be related and made accessible to users
11. Second step in view modelling
a. Construct a data model showing entity
associations.
b. Add primary keys and attributes to the model.
c. Normalize the data model and add foreign
keys.
d. Construct the physical database.
12. Every _________ in an entity should appear directly
or indirectly (a calculated value) in one or more user
views
a. Primary Key
b. Foreign Key
c. Attribute
d. Analyst
13. Combining the data needs of all users into a single
schema or enterprise-wide view is called
a. View integration.
b. Internal integration
c. Report Integration
d. None of the above
14. Under the _____________ approach, remote users
send requests via terminals for data to the central site,
which processes the requests and transmits the data back
to the user.
a. Decentralized Database
b. Distributed Database
c. Centralized Database
d. Partitioned Database

15. A ________ occurs here because there is mutual

exclusion to data, and the transactions are in a wait state
until the locks are removed.
a. Deadlock
b. Concurrency Control
c. Database Lockout
d. Temporary Inconsistency

CHAPTER 10 — THE REA APPROACH
TRUE/FALSE (True – Red)
1. According to the REA philosophy, information
systems should support only the needs of accounting
professionals.
2. Many believe that the accounting profession should
shift away from debits and credits toward providing
information that assists decision-making.
3. Modern managers need both financial and
nonfinancial information that traditional GAAP-
based accounting systems are incapable of
providing.
4. The REA model is an alternative accounting
framework for modeling an organization’s critical
resources, events, and accounts.
5. In REA, resources are assets of the organization as
shown on a traditional balance sheet.
6. In REA, events can be operating, information, or
decision/management events.
7. REA agents are individuals and departments that
participate in an economic event.
8. In a relational database environment, the focus is on
transaction events, not the accounting artifacts.
9. Under the REA approach to database design, an
entity relationship diagram is used to model the
relationships between an organization’s critical
resources, events, and agents.
10. Operating events are activities that produce goods
and services.
11. Decision/management events are activities
associated with recording, maintaining, and
reporting information.
12. Information events are activities that lead to
decisions being made.
13. Entity relationship diagrams include operating,
information, and decision events. Only operating
events are included in an REA model.
14. A data flow diagram is a data modeling tool that
enables organizations to view each business process
in detail.
15. The primary purpose of an ER diagram is to identify
data attributes that represent the conceptual user
views that must be supported by the base tables.
16. The REA approach generates an information system
with only one user view.
17. Organizations that use REA produce financial
statements and reports directly from the event-driven
data, not from traditional ledgers and journals.
18. The REA model may enhance efficiency and
competitive advantage though often productivity
may decline.
19. User views are set by REA modeling.
20. REA focuses on business activities within business
processes. It is event-oriented.
MULTIPLE CHOICES
1. Economic resources possess all of the following
characteristics except
a. assets
b. measure expected future receipts
c. scarce
d. under the organization’s control
2. The REA approach leads to more efficient
operations in all of the following ways except
a. identifying non-value-added activities
b. storage of both financial and nonfinancial
data in the same database
c. storage of detailed data to support a wider
range of management decisions
d. standardizing data forms for simplicity
3. Which types of events are included in an REA
model?
a. operating
b. decision
c. management
 d. information a. organize events in order, identify resources
4. Decision/management events involve decisions and agents, identify links, identify operating
relating to all of the following except events, assign cardinalities
a. record keeping b. identify operating events, identify resources
b. planning and agents, identify links, assign
c. evaluation cardinalities, organize events in order
d. control c. identify operating events, organize events in
5. Information events involve all of the following order, identify resources and agents, identify
except links, assign cardinalities
a. acts of recording d. identify resources and agents, identify
b. acts of updating operating events, organize events in order,
c. acts of evaluating identify links, assign cardinalities
d. acts of maintaining
6. The “R” in REA stands for
a. ratios
b. relationships
c. resources
d. reserves
7. The “E” in REA stands for 13. Which of the following statement is correct?
a. events a. The REA model requires that phenomena be
b. estimates characterized in a manner consistent with
c. economics the development of a single user view.
d. entities b. The REA model requires that phenomena be
8. The “A” in REA stands for characterized in a manner consistent with
a. assets the development of a selected user view.
b. apportionment c. The REA model requires that phenomena be
c. allocation characterized in a manner consistent with
d. agents the development of a unique user view.
9. Which of the following is an example of a d. The REA model requires that phenomena be
decision/management event? characterized in a manner consistent with
a. preparing cost estimates for a new product the development of a multiple user view.
b. requesting a report 14. Which of the following is not an advantage of using
c. preparing sales invoices the REA model?
d. preparing performance reports a. greater efficiency
10. All of the following are examples of operating b. increased productivity
events except c. more relevant and timely information
a. receiving raw materials from a supplier d. simpler database creation
b. preparing a cash disbursement voucher for 15. Which of the following is not correct?
payment to the supplier a. Operating events trigger information events.
c. paying for inventories received b. Information events trigger operating events.
d. shipping product to a customer c. Decision/management events trigger
11. Which types of events are included in entity operating events.
relationship diagrams? d. Information events trigger
a. operating events decision/management events.
b. information events 16. When developing an REA model, events need to be
c. decision events organized in sequence of
d. all of the above a. completion
12. Which of the following represents the order of the b. length
steps in the preparation of an REA model? c. ease of analysis
 d. occurrence IV. Linking one table to another
17. In an REA model, events are described from the a. , II, III and IV
perspective of b. I,III and IV
a. the organization c. I, II and III
b. the designer d. II, III and IV
c. the user e. None of these
d. the customer 4. Each occurrence of the Verify Availability entity is
18. Which of the following is not an example of an the result of
information event? a. Customer Order
a. updating inventory records after a sale b. Customer Feedback
b. requesting a report c. Customer Inquiry
c. preparing cost estimates for new products d. Customer Service
d. preparing sales invoices

5. It is either an economic or support event which

GROUP 10 QUIZ: THE REA APPROACH involves commitment on the part of the seller to sell
goods to the customer. It may even involve adjusting
1. The following are the anomalies that might exists in (decreasing) the inventory available for sale to
tables that are not normalized except one: prevent it from being sold or promised to other
a. Deletion customers.
b. Update a. Verify Availability
c. Insertion b. Take Order
d. Storage c. Ship Product
2. Which of the following represents the order of the d. Receive Cash
steps in the preparation of a REA model? 6. Which of the following is not an example of Support
a. Identify the resource entities, identify the Event?
agent entities, identify the event entities, a. Checking customer credit
determine associations and cardinalities b. Determining inventory availability
between entities c. Verifying supporting information
b. Identify the event entities, identify the agent d. Purchasing of raw materials from vendors
entities, determine associations and 7. This act does constitute a support event and a
cardinalities between entities, identify the commitment to buy.
resource entities a. Order Product
c. Identify the event entities, identify the b. Receive Product
resource entities, identify the agent entities, c. Disburse Cash
determine associations and cardinalities d. Take Order Entity
between entities 8. Many researchers believe that the accounting
d. Identify the agent entities, identify the event profession should shift away from debits and credits
entities, identify the resource entities, toward providing information that assists decision-
determine associations and cardinalities making.
between entities a. True
3. Designing a relational database involves what b. False
activities? 9. Under the REA approach to database design, an
I. Determining primary keys entity relationship diagram is used to model the
II. Defining attributes relationships between an organization’s critical
III. Assigning foreign keys resources, events, and agents.
 a. False
b. True
10. Statement 1: Tables in every association can accept
an embedded foreign key from its related table.
Statement 2: All non-key attributes are independent
from each other and but is dependent from the
primary key.
a. True, True
b. False, False
c. False, True
d. True, False
11. Statement 1: Get Time event includes a worker
(external agent) giving up his or her time, which is
characterized by the Employee Services resource
and the supervisor (internal agent) shoulders control
of the resource.
Statement 2: The Disburse Cash event is the give
half of the economic exchange. This comprises
distributing cash to an employee (now the external
agent) for services rendered and the payroll clerk
(internal agent) joins in this event, which reduces the
cash resource.
a. True, False
b. False, True
c. False, False
d. True, True
12. What are the four basic forms of cardinality?
a. one and many (1,M), zero or many (0,M),
one and only one (1,1), and zero and one
(0,1)
b. zero and many (0,M), zero and one (0,1),
one or many (1,M), and one or only one
(1,1)
c. zero or one (0,1), one and only one (1,1),
zero or many (0,M), and one or many (1,M)
d. one or only one (1,1), one and many (1,M),
zero or one (0,1), and zero and many (0,M)
13. Statement 1: Customer is the only external agent
associated with all four economic event entities.
Statement 2: The sales representative is an internal
agent who partakes in the first economic event entity
while shipping clerk is an external agent who takes
part in the third economic event entity.
a. True, False
b. False, False
c. True, True
d. False, True
14. Statement 1: Resource and agent tables start out
empty and will be populated through actual
transaction processing activities.
Statement 2: Event tables must be initialized with
data values such as inventory quantities on hand,
customer names and addresses, and employee data.
a. True, True
b. False, False
c. False, True
d. True, False
15. Statement 1: Traditional accounting mechanisms
such as journals are entities of the REA model.
Statement 2: In a 1:1 association, when the foreign
key that is embedded in the 1,1 cardinality is the
primary key of the side of the association with 0,1
cardinality, the link will not work.
a. True, True
b. False, False
c. False, True
d. True, False
Group 10
1. They are the individuals within and outside the
organization who participate in an economic
event and has the discretionary power to use or
dispose economic resources.
a. Share holders
b. Agents
c. User
d. Clerk
2. REA modeling embraces two events which are;
a. Ecological events and system events
b. Ecological events and sampling events
c. Economic events and system events
d. Economic events and support events
3. Which of the following are characteristics of
economic agents?
a. They participate in economic events, but
do not assume control of the resources.
b. They participate in economic events, but
not in support events.
c. Internal agents are employees of the
company whose system is being
modeled.
d. All of the above describe agents
4. This purports the rationale behind an economic
transaction is that two agents each give the other
a resource in exchange for another resource.
a. Duality
b. Bilateral
c. Financial transaction
d. Exchange
5. Which of the following describes the differences
of an ER Diagram to a REA Diagram?
I. ER Diagrams are of one class and their
proximity is determined by their cardinality.
While, REA Diagram are divided into three
classes and organized into constellations by
class on the diagram
II. REA Diagrams are typically organized from
top to bottom within the constellation to focus
on the sequence of event. While, ER Diagrams
present a static picture of the underlying
business phenomena
III. In ER Diagrams, entity names are always
represented in the singular noun form. REA
modeling applies this rule when assigning names 10.
to resource and agent activities. However, in
REA Diagrams, event entities represent and
describes data tables that will store data about
processes, but they are not representing or
describing the processes themselves.
a. I only
b. III only 11.
c. I and II
d. All are correct
6. Which of the following is true?
a. REA diagram entities are arranged in
constellations by entity class.
b. ER diagrams present a static picture of
the underlying business phenomena.
c. Entity names in ER diagrams are always 12.
in the noun form.
d. Events entity names in REA diagrams
are in the verb form.
e. All of the above are true statements.
7. A model that captures the operational meaning
of the user’s data and provides a concise
description of it. 13.
a. Systemic
b. Semantic Model
c. REAL Model
d. REA Model
8. The following are the differences between ER
and REA Diagrams, except:
a. visually in a significant way
b. sequencing of events
c. naming conventions for entities 14.
d. determined by their cardinality
9. Statement 1: Association describes the number
of possible occurrences in one entity that are
associated with a single occurrence in a related
entity.
Statement 2: Cardinality is the nature of the
relationship between two entities, as the labeled
line connecting them represents.
a. Statement 1 is FALSE but Statement 2
is CORRECT
b. Statement 2 is CORRECT and
Statement 1 is CORRECT
c. Statement 1 is CORRECT but Statement
2 is FALSE
d. Statement 2 is FALSE and Statement 1
is FALSE
A fundamental precept of REA is the ________
of accounting artifacts, including journals,
ledgers, and double-entry bookkeeping.
a. Outsourcing
b. Analysis
c. Rejection
d. Classification
It is the Second Step in the View Integration
Process in REA.
a. Define the primary keys, foreign keys,
and attributes
b. Construct the physical database and
produce user views.
c. Consolidate the individual models.
d. There is no second step in such process.
These advantages have drawn great attention to
REA as a theoretical model for system and
database design, except:
a. Detailed Specificity
b. Value chain analysis
c. Systems integration
d. Operational efficiency
The concept of duality means that an REA
diagram must consist of
a. two events—one of them economic and
the other support.
b. two agents—one of them internal and
the other external.
c. two resources—one increased and the
other decreased by the same event.
d. all of the above.
Which of the following about support activites
is/are false?
 a. It includes control, planning, and
management activities that are related to
economic events.
b. It involves information not resources
c. It has direct effect on change of
resources.
d. All of the above are correct.
15. Which of the following does not describe
difference between ER Diagram and REA
Diagram?
a. ER: describes relationship thru
cardinality, REA: divided in three
classes organized in constellations by
class on the diagrams.
b. ER: presents logical flow of process and
relationship among entities, REA: it
deals more on physical relationship
among key elements.
c. ER: present a static picture of the
underlying business phenomena., REA:
typically organized from top to bottom
within the constellations to focus on the
sequence of events.
d. ER: entity names are always represented
in the singular noun form, REA: applies
this rule when assigning names to
resource and agent entities while Event
entities, however, are given verb.

CHAPTER 11 — ENTERPRISE RESOURCE
PLANNING SYSTEMS
TRUE/FALSE (True – Red)
1. The primary goal of installing an ERP system is
reducing system maintenance costs.
2. The recommended data architecture for an ERP
includes separate operational and data warehouse
databases.
3. Closed database architecture shares data easily.
4. ERP systems support a smooth and seamless flow of
information across organizations.
5. OLAP stands for on-line application processing.
6. The primary goal of installing an ERP system is
achieving business process reengineering to improve
customer service, reduce production time, increase
productivity, and improve decision-making.
7. Day-to-day transactions are stored in the operational
database.
8. Data mining typically focuses on the operational
databases.
9. Companies are more likely to modify an ERP to
accommodate the company than to modify company
processes to accommodate the ERP.
10. If a chosen ERP cannot handle a specific company
process bolt-on software may be available.
11. Core applications are also called OLAP.
12. The client/server model is a form of network
technology in which user computers, called clients,
access ERP programs and data via a host computer
called a server.
13. A data warehouse is a relational or multi-
dimensional database that may require hundreds of
gigabytes of storage.
14. Drill-down capability is an OLAP feature of data
mining tools.
15. Supply-chain management software is a type of
program that supports efforts relative to moving
goods from the raw material stage to the customer.
16. In two-tier architecture, the database and application
functions are separated.
17. Slicing and dicing permits the disaggregation of data
to reveal underlying details.
18. Data entered into the data warehouse must be
normalized.
19. OLAP includes decision support, modeling,
information retrieval, and what-if analysis.
20. Efficient supply-chain management provides firms
with a competitive advantage.
21. The big-bang approach involves converting from old
legacy systems to the new ERP in one
implementation step.
22. In two-tier architecture approach is used primarily
for wide area network (WAN) applications.
23. Data cleansing is a step performed by external
auditors to identify and repairing invalid data prior
to the audit.
MULTIPLE CHOICES
1. Goals of ERP include all of the following except
a. improved customer service
b. improvements of legacy systems
c. reduced production time
d. increased production
2. Core applications are
a. sales and distribution
b. business planning
c. shop floor control and logistics
d. all of the above
3. Data warehousing processes does not include
a. modeling data
b. condensing data
c. extracting data
d. transforming data
4. Which of the following is usually not part of an b. ERP fails because some important business
ERP’s core applications? process is not supported.
a. OLTP applications c. When a business is diversified, little is
b. sales and distribution applications gained from ERP installation.
c. business planning applications d. The phased-in approach is more suited to
d. OLAP applications diversified businesses.
5. Which of the following is usually not part of an 10. Which statement is true?
ERP’s OLAP applications? a. ERPs are infinitely scalable.
a. logistics b. Performance problems usually stem from
b. decision support systems technical problems, not business process
c. ad hoc analysis reengineering.
d. what-if analysis c. The better ERP can handle any problems an
6. Which of the following statements is least likely to organization can have.
be true about a data warehouse? d. ERP systems can be modified using bolt-on
a. It is constructed for quick searching and ad software.
hoc queries. 11. Auditors of ERP systems
b. It was an original part of all ERP systems. a. need not worry about segregation of duties
c. It contains data that are normally extracted b. may feel that the data warehouse is too clean
periodically from the operating databases. and free from errors
d. It may be deployed by organizations that c. find independent verification easy
have not implemented an ERP. d. need not worry about system access since
7. Which of the following statements is not true? the ERP determines it
a. In a typical two-tier client server system, the 12. Legacy systems are
server handles both application and database a. old manual systems that are still in place
duties. b. flat file mainframe systems developed
b. Client computers are responsible for before client-server computing became
presenting data to the user and passing user standard
input back to the server. c. stable database systems after debugging
c. In three-tier client server architecture, one d. advanced systems without a data warehouse
tier is for user presentations, one is for 13. A data mart is
database and applications, and the third is a. another name for a data warehouse
for Internet access. b. a database that provides data to an
d. The database and application functions are organization’s customers
separate in the three-tier model. c. an enterprise resource planning system
8. Which statements about data warehousing is not d. a data warehouse created for a single
correct? function or department
a. The data warehouse should be separate from 14. Most ERPs are based on which network model?
the operational system. a. peer to peer
b. Data cleansing is a process of transforming b. client-server
data into standard form. c. ring topology
c. Drill-down is a data-mining tool available to d. bus topology
users of OLAP. 15. On-line transaction processing programs
d. Normalization is a requirement of databases a. are bolt-on programs used with
included in a data warehouse. commercially available ERSs
9. Which statement about ERP installation is least b. are available in two models–two-tier and
accurate? three-tier
a. For the ERP to be successful, process c. handle large numbers of relatively simple
reengineering must occur. transactions
 d. allow users to analyze complex data
relationships
16. Supply chain management software
a. is typically under the control of external
partners in the chain
b. links all of the partners in the chain,
including vendors, carriers, third-party
firms, and information systems providers
c. cannot be integrated into an overall ERP
d. none of the above
17. The setup of a data warehouse includes
a. modeling the data
b. extracting data from operational databases
c. cleansing the data
d. all of the above
18. 18. Extracting data for a data warehouse
a. cannot be done from flat files
b. should only involve active files
c. requires that the files be out of service
d. follows the cleansing of data
19. Data cleansing involves all of the following except
a. filtering out or repairing invalid data
b. summarizing data for ease of extraction
c. transforming data into standard business
terms
d. formatting data from legacy systems
20. Separating the data warehouse from the operations
databases occurs for all of the following reasons
except
a. to make the management of the databases
more economical
b. to increase the efficiency of data mining
processes
c. to integrate legacy system data into a form
that permits entity-wide analysis
d. to permit the integration of data from
diverse sources
GROUP 11 QUIZ: ENTERPRISE RESOURCE
PLANNING SYSTEMS
16. Enterprise Research Planning integrates key
processes of the organization such as order entry,
manufacturing, procurement and accounts payable,
payroll, and human resources.
a. True
b. False
17. ERP Business Analysis Application operationally
supports the day-to-day activities of the business
a. True
b. False
18. An ERP system could exist without having a data
warehouse.
a. True
b. False
19. Online Analytical Processing (OLAP) events is
consist of large numbers of relatively simple
transactions, such as updating accounting records
that are stored in several related tables.
a. True
b. False
20. In ERP systems configuration, “two-tier model” is
typically used for local area network (LAN)
applications for which the demand on the server is
restricted to a relatively small population to users.
a. True
b. False
21. It is a relational or multidimensional database that
may consume hundreds of gigabytes or even
terabytes of disk storage.
a. Data Mart
b. Data Extraction
c. Data Warehousing
d. Data Mining
22. Administrators and line managers may create new
roles, modify existing roles, and delete roles that are
no longer needed in RBAC. Creating a role involves
defining the following role attributes except:
a. A stated set of business responsibilities to be
performed within the role.
b. The ethical behaviors taken into account in
performing the duties of the role
c. The technical competencies needed to
perform the role.
d. The specific transactions (permissions)
required to carry out the stated
responsibilities.
23. The following are the reasons data warehouses must
be created and maintained separately from the
operational databases, except:
a. Consolidation of Global Data
b. Smooth and Economic Growth
c. Internal Efficiency
d. Integration of Legacy Systems
24. What is the difference between the traditional access
control list approach and the role-based access
control (RBAC)?
 a. RBAC assigns access permissions to the
role an individual play in the organization
rather than directly to the individual, which
is portrayed in the traditional approach
b. The traditional approach allows multiple
access to a single user while RBAC only
allows one access per user.
c. The traditional approach conveniently
handles many-to-many relationships
between users and permissions and
facilitates dealing efficiently with vast
numbers of employees better than the
RBAC.
d. The traditional approach model is very
flexible when allowing for the assignment of
specific access privileges to individuals
while the RBAC is quite inflexible.
25. Which of the following is false regarding data
warehousing process?
a. Data contained in a data warehouse are in
volatile, unstable status
b. Normalizing data in an operational database
is necessary to reflect accurately the
dynamic interactions among entities.
c. To improve efficiency, data can be
transformed into summary views before they
are loaded into the warehouse.
d. Relational theory does not apply to a data
warehousing system because the Sales
Order/Product relation is stable.
26. The following should be done by the management
before engaging an outside consultant, except:
a. Conduct reference checks of the proposed
staff members.
b. Align the consultants’ interests with those of
the organization by negotiating a pay-for-
performance scheme based on achieving
certain milestones in the project.
c. Set a firm termination date for the consultant
to avoid consulting arrangements becoming
interminable, resulting in dependency and an
endless stream of fees.
d. Interview the staffs proposed for the project
and draft a provisional contract with the
names of the members of the consulting
team and their respective tasks
27. Data mining involves:
a. Extracting, converting, and standardizing an
organization’s operational data from ERP
and legacy systems and loading it into
b. Collecting data from operational databases,
flat files, archives, and external data sources.
c. Sophisticate techniques that use database
queries and artificial intelligence
d. Transforming data into standard business
terms with standard data values.
28. Which of the following is not true regarding the risk
of experiencing high cost and cost overruns?
a. Integration and testing are done on a case-by
case basis; thus, the cost is extremely
difficult to estimate in advance.
b. Training costs are invariably higher than
estimated because management focuses
primarily on the cost of teaching employees
the new software.
c. An increase in hardware capacity by a factor
of x will decrease query response time by no
less than a factor of x in a scalable system
d. More often, the data in the legacy system are
not reliable (sometimes called dirty).
29. This approach is particularly suited to diversified
organizations whose units do not share common
processes and data.
a. Scalability
b. Phased-in
c. Big Bang
d. Traditional
30. Role-based governance systems allow managers to
do the following, EXCEPT:
a. View the current and historical inventory of
roles, permissions granted, and the
individuals assigned to roles.
b. Identify unnecessary or inappropriate access
entitlements and segregation-of-duties
violations.
c. Verify that changes to roles and entitlements
have been successfully implemented.
d. Monitor for risk periodically upon notice of
the top management.
Group 11
1. This system supports a smooth and seamless flow of
information across the organization by providing a
standardized environment for a firm’s business
 processes and a common operational database that a. Modeling data for the warehouse
supports communications. b. Extracting data from operational database
a. Enterprise Resource Planning (ERP) c. Cleansing extracted data
b. Supply Chain Management (SCM) d. All are data warehousing processes
c. Online Analytical Processing (OLAP) 8. It is a technique where it can dramatically reduce the
d. Online Transaction Processing (OLTP) extraction time by capturing only new modified
2. This is a form of network topology in which a user’s data.
computer or terminal (the client) accesses the ERP
programs and data via a host computer called the a. Extracting snapshots
server. b. Changed data capture
a. Web-based Model c. Cleansing extracted data
b. Client-server Model d. Integration of Legacy System
c. Peer-to-peer Model
d. Cloud Computing 9. What is the primary reason for data warehousing?
3. This is the set of activities associated with moving a. to optimize business performance
goods from the raw materials stage to the consumer. b. to secure data properly
This includes procurement, production scheduling,
c. to provide proper collection of data
order processing, inventory management, d. to accommodate industry-specific software
transportation, warehousing, customer service, and 10. A data warehouse is composed of
forecasting the demand for goods. _________________________.
a. Enterprise Resource Planning (ERP)
b. Supply Chain Management (SCM) a. multiple summary views
c. Online Analytical Processing (OLAP) b. system software
d. Online Transaction Processing (OLTP) c. both detail and summary data
d. structural and operational requirements
4. This architecture is typical of large ERP systems that 11. It is the system’s ability to grow smoothly and
use wide area networks (WANs) for connectivity economically as user requirements increase.
among the users. a. Scalability
a. One-tier model b. Internal efficiency
b. Two-tier Model c. System efficiency
c. Three-tier Model d. None of the above
d. Four-tier Model 12. Which of the following is not a dimension of
5. This includes decision support, modeling, scalability?
information retrieval, ad hoc reporting/analysis, and a. Size
what-if analysis. b. Workload
c. Accuracy
a. Enterprise Resource Planning (ERP) d. Transaction cost
b. Supply Chain Management (SCM) 13. Statement I: The two general approaches in ERP
c. Online Analytical Processing (OLAP) implementation are big bang and phase-in approach.
d. Online Transaction Processing (OLTP) Statement II: Phase-in approach is switching
6. It is a set of activities associated with moving goods operations from old legacy system to the new system
from the raw material stage to the customer. in a single event.
a. Data Warehousing a. Statement I is true and statement II is false
b. Bolt-on Software b. Statement I is false and statement II is true
c. Supply Chain Management c. Both statements are true
d. ERP Systems d. Both statements are false
7. Data warehousing has several processes, which of 14. Statement I: The goal of ERP access control is to
the following is not a data warehousing process? maintain data confidentiality, integrity, and
availability.
 Statement II: The fundamental objective of RBAC is
to provide access in accordance with an
organization’s needs, which derive from defined
tasks rather than an individual’s wants.
a. Statement I is true and statement II is false
b. Statement I is false and statement II is true
c. Both statements are true
d. Both statements are false
15. It is a system that allow managers to view current
and historical inventory of roles, permissions
granted, and individuals assigned to roles.
a. Enterprise resource planning system
b. Role-based governance system
c. Legacy system
d. None of the above
CHAPTER 12 — ELECTRONIC COMMERCE
SYSTEMS
TRUE/FALSE (True – Red)
1. Because of network protocols, users of networks
built by different manufacturers are able to
communicate and share data.
2. Electronic commerce refers only to direct consumer
marketing on the Internet.
3. Business to consumer is the largest segment of
Internet commerce.
4. The phrase “.com” has become an Internet buzz
word. It refers to a top-level domain name for
communications organizations.
5. The standard format for an e-mail address is
DOMAIN NAME@USER NAME.
6. The network paradox is that networks exist to
provide user access to shared resources while one of
its most important objectives is to control access.
7. Business risk is the possibility of loss or injury that
can reduce or eliminate an organization’s ability to
achieve its objectives.
8. IP spoofing is a form of masquerading to gain
unauthorized access to a Web server.
9. The rules that make it possible for users of networks
to communicate are called protocols.
10. A factor that contributes to computer crime is the
reluctance of many organizations to prosecute
criminals for fear of negative publicity.
11. Cookies are files created by user computers and
stored on Web servers.
12. Sniffing is the unauthorized transmitting of
information across an Intranet.
13. The client-server model can only be applied to ring
and star topologies.
14. The most popular topology for local area networks is
the bus topology.
15. A network topology is the physical arrangement of
the components of the network.
16. A bus topology is less costly to install than a ring
topology.
17. In a hierarchical topology, network nodes
communicate with each other via a central host
computer.
18. Polling is one technique used to control data
collisions.
19. The most frequent use of EDI is in making vendor
payments.
20. EDI is the inter-company exchange of computer
processible business information in standard format.
MULTIPLE CHOICES
1. The primary difference between a LAN and a WAN
is
a. the geographical area covered by the
network
b. the transmission technology used
c. the type of workstation used
d. the size of the company
2. To physically connect a workstation to a LAN
requires a
a. file server
b. network interface card
c. multiplexer
d. bridge
3. One advantage of network technology is
a. bridges and gateways connect one
workstation with another workstation
b. the network interface card permits different
networks to share data
c. file servers permit software and data to be
shared with other network users
 d. a universal topology facilitates the transfer
of data among networks
4. Which topology has a large central computer with
direct connections to a periphery of smaller
computers? Also in this topology, the central
computer manages and controls data
communications among the network nodes.
a. star topology
b. bus topology
c. ring topology
d. client/server topology
5. In a star topology, when the central site fails
a. individual workstations can communicate
with each other
b. individual workstations can function locally
but cannot communicate with other
workstations
c. individual workstations cannot function
locally and cannot communicate with other
workstations
d. the functions of the central site are taken
over by a designated workstation
6. Which of the following statements is correct? The
client-server model
a. is best suited to the token-ring topology
because the random-access method used by
this model detects data collisions
b. distributes both data and processing tasks to
the server’s node
c. is most effective used with a bus topology
d. is more efficient than the bus or ring
topologies
7. What do you call a system of computers that
connects the internal users of an organization that is
distributed over a wide geographic area?
a. LAN
b. decentralized network
c. multi-drop network
d. Intranet
8. Sniffer software is
a. software used by malicious Web sites to
sniff data from cookies stored on the user’s
hard drive
b. used by network administrators to analyze
network traffic
c. used by bus topology Intranets to sniff for a
carrier before transmitting a message to
avoid data collisions
d. illegal programs downloaded from the Net
to sniff passwords from the encrypted data
of Internet customers
9. In a ring topology
a. all nodes are of equal status
b. nodes manage private programs and
databases locally
c. shared resources are managed by a file
server which is a node on the ring
d. all of the above
10. The client/server technology
a. increases the amount of data that is
transmitted between the central file and the
network node
b. eliminates the need for nodes to
communicate with each other
c. reduces the number of records that must be
locked by having the file server perform
record searches
d. functions only with a ring and bus topology
11. A star topology is appropriate
a. for a wide area network with a mainframe
for a central computer
b. for centralized databases only
c. for environments where network nodes
routinely communicate with each other
d. when the central database does not have to
be concurrent with the nodes
12. In a ring topology
a. the network consists of a central computer
which manages all communications between
nodes
b. has a host computer connected to several
levels of subordinate computers
c. all nodes are of equal status; responsibility
for managing communications is distributed
among the nodes
d. information processing units rarely
communicate with each other
13. Which method does not manage or control data
collisions that might occur on a network?
a. multiplexing
b. polling
c. carrier sensing
d. token passing
14. Network protocols fulfill all of the following
objectives except
a. facilitate physical connection between
network devices
 b. provide a basis for error checking and
measuring network performance
c. promote compatibility among network
devices
d. result in inflexible standards
15. All of the following are true about the Open System
Interface (OSI) protocol except
a. within one node different layers
communicate with other layers at that node
b. one protocol is developed and applied to all
the OSI layers
c. specific layers are dedicated to hardware
tasks and other layers are dedicated to
software tasks
d. layers at each node communicate logically
with their counterpart layers across nodes
16. Which of the following statements is correct?
a. TCP/IP is the basic protocol that permits
communication between Internet sites
b. controls Web browsers that access the
WWW
c. is the file format used to produce Web pages
d. is a low-level encryption scheme used to
secure transmissions in HTTP format
17. XBRL
a. is the basic protocol that permits
communication between Internet sites
b. controls Web browsers that access the Web
c. is the document format used to produce Web
pages
d. was designed to provide the financial
community with a standardized method for
preparing
e. is a low-level encryption scheme used to
secure transmissions in higher-level (HTTP)
format
18. FTP
a. is the document format used to produce Web
pages
b. controls Web browsers that access the Web
c. is used to connect to Usenet groups on the
Internet
d. is used to transfer text files, programs,
spreadsheets, and databases across the
Internet
e. is a low-level encryption scheme used to
secure transmissions in higher-level format
19. HTML
a. is the document format used to produce Web
pages
b. controls Web browsers that access the Web
c. is used to connect to Usenet groups on the
Internet
d. is used to transfer text files, programs,
spreadsheets, and databases across the
Internet
e. is a low-level encryption scheme used to
secure transmissions in higher-level format
20. Which one of the following statements is correct?
a. Cookies always contain encrypted data.
b. Cookies are text files and never contain
encrypted data.
c. Cookies contain the URLs of sites visited by
the user.
d. Web browsers cannot function without
cookies.
21. A message that is made to look as though it is
coming from a trusted source but is not is called
a. a denial of service attack
b. digital signature forging
c. Internet protocol spoofing
d. URL masquerading
22. A digital signature is
a. the encrypted mathematical value of the
message sender’s name
b. derived from the digest of a document that
has been encrypted with the sender’s private
key
c. the computed digest of the sender’s digital
certificate
d. allows digital messages to be sent over
analog telephone lines
23. HTTP
a. is the document format used to produce Web
pages
b. controls Web browsers that access the Web
c. is used to connect to Usenet groups on the
Internet
d. is used to transfer text files, programs,
spreadsheets, and databases across the
Internet
e. is a low-level encryption scheme used to
secure transmissions in higher-level format
24. Which of the following statements is correct?
a. Packet switching combines the messages of
multiple users into a “packet” for
transmission. At the receiving end, the
 packet is disassembled into the individual b. Business to Consumer
messages and distributed to the intended c. Consumer to Consumer
users. d. Consumer to Business
b. The decision to partition a database assumes 5. Hyper Text Transport Protocol (HTTP) has the
that no identifiable primary user exists in the control to Web browser that can access in the Web. The
organization. Hyper Text Transport Protocol–New Generation (HTTP-
c. Message switching is used to establish NG) is the more advanced version of the HTTP protocol
temporary connections between network that keeps the simplicity of the HTTP highlighting
devices for the duration of a communication various features like security & authentication.
session. a. True
d. A deadlock is a temporary phenomenon that b. False
disrupts transaction processing. It will 6. A type of attack wherein a hacker sends ping
resolve itself when the primary computer which consequently triggers an echo request message to
completes processing its transaction and the host computer that listens for a response message
releases the data needed by other users. called echo reply.
25. NNTP a. SYN Flood Attack
a. is the document format used to produce Web b. Smurf Attack
pages c. Caesar cipher
b. controls Web browsers that access the Web d. Distributed DDoS
c. is used to connect to Usenet groups on the 7. It is a network security device that tracks incoming
Internet and outgoing network traffic and allows or blocks data
d. is used to transfer text files, programs, packets based on a set of security rules.
spreadsheets, and databases across the a. Firewall
Internet b. Antivirus
e. is a low-level encryption scheme used to c. Advanced encryption standard
secure transmissions in higher-level (HTTP) d. Digital envelope
format 8. The use of e-mail for a firewall system is under
application-level firewall.
GROUP 12 QUIZ: ENTERPRISE RESOURCE a. True
PLANNING SYSTEMS b. False
c. Maybe
1. One of the functions that protocols perform is the d. I don’t know
promotion of compatibility among network devices 9. Which of the following are not used by businesses and
a. True organizations in improving their security, assurance, and
b. False trust?
2. Theft of passwords is an example of Intranet risks I. Digital Authentication
under “risks to consumers”. II. Encryption
a. True III. Firewalls
b. False IV. Seals of Assurance
3. This is a kind of security protocol that gives security V. Network Topologies
of transactions in the Web. VI. Value-added Network
a. Private Enhanced Mail a. I, II, III, and IV
b. Privacy Enhanced Messaging b. I, II, III, IV, and V
c. Private Communications Technology c. V and VI
d. Privacy Communications Technology d. None of the above
4. An electronic commerce model where online 10. Electronic audit trails need to be developed that
transactions only involve the manufacturers, will enable the auditor to review transactions at frequent
wholesalers, retailers etc. intervals or as they occur.
a. Business to Business a. False
 b. Maybe 2. The Internet uses three types of addresses for
c. True communication. One of them is _______ that is used
d. I have no idea as the address that defines the path to a facility or
11. This can be applied to any topology. file on the Web.
a. Hierarchy Topology a. URL Address
b. E-mail Address
b. Ring Topology
c. IP Address
c. Bus Topology
d. Home Address
d. Client-Server Topology
3. It is the document format used to produce Web
12. The structure is applicable to firms with many pages. It defines the page layout, fonts, and graphic
organizational levels and must be controlled from a elements as well as hypertext link to other
central location. documents or the web.
a. Hierarchy Topology a. HMTL
b. Ring Topology b. HTTPS
c. Bus Topology c. HTML
d. Client-Server Topology d. HTTP
4. Which of the following are the fundamental
components of Ceasar cipher:
a. key and algorithm
13. It is simple, reliable, and generally less costly to b. field and key
install than the ring topology. c. field and algorithm
a. Hierarchy Topology d. none of the above
b. Ring Topology 5. It is a nonprofit organization that has been
promoting ethical business practices through self-
c. Bus Topology
regulation since 1912.
d. Client-Server Topology
a. TRUSTe
14. This is a peer-to-peer arrangement in which all nodes
b. BBB
are of equal status.
c. VeriSign, Inc.
a. Hierarchy Topology
d. ICSA
b. Ring Topology
6. Which of the following are the implications for the
c. Bus Topology accounting profession:
d. Client-Server Topology a. data integrity
15. Which of the following is not a feature of Electronic b. access controls
Data Interchange (EDI)? c. confidentiality of data
a. EDI is an interorganization endeavor. d. all of the above
b. the information systems of the trading partners 7. It is implemented to reasserts the importance of
automatically process the transaction. privacy.
c. transaction information is transmitted in a a. Safe Harbor Agreement
standardized format. b. European Union
d. EDI reduces or even eliminates the need for data c. AICPA/CICA SysTrust
entry. d. Public key infrastructure
8. It is a form of masquerading to gain unauthorized
Group 12 access to a Web server and/or perpetrate an unlawful
1. The benefits attained from electronic commerce will act without revealing one’s identity.
depend on the degree of organizational commitment a. IP Spoofing
to it as a business strategy. This can occur on three b. SVN Flood attack
levels, except: c. Denial service attack
a. Information Level d. Distributed denial of service
b. Management Level 9. It is the procedure of shifting each letter in the
c. Transaction Level cleartext message the number of positions that the
d. Distribution Level key value indicates
a. Algebra
 b. Arithmetic
c. Algorithm
d. Calculus
10. These are files containing user information that are
created by the Web server of the site being visited.
a. Cache
b. Cookies
c. Candies
d. Data
11. It is a popular interactive service on the Internet that
lets thousands of people from around the world
engage in real-time communications via their
computers
a. Internet Relationship Chat
b. Internet Recess Chat
c. Internet Rising Chat
d. Internet Relay Chat
12. The most popular technique for establishing a
communication session in WANs.
a. Token Passing
b. Poling
c. Carrier Sensing
d. Data Collision
13. Describes a network of computers with a large
central computer (the host) at the hub that has direct
connections to a periphery of smaller computers.
a. Star Topology
b. Hierarchical Topology
c. Ring Topology
d. Bus Topology
14. The most popular LAN topology. It is so named
because the nodes are all connected to a common
cable – the bus.
a. Star Topology
b. Hierarchical Topology
c. Ring Topology
d. Bus Topology
15. All are benefits of EDI, except:
a. Data keying
b. Error Reduction
c. Carrier Sensing
d. Postage