Chapter 1—The Information System: An
Accountant’s Perspective
TRUE/FALSE
1.
Information is a business resource.
ANS: T
2.
3.
4.
PTS: 1
Information lacking reliability may still have value.
ANS: F
5.
PTS: 1
Transaction processing systems convert nonfinancial transactions into financial transactions.
ANS: F
PTS: 1
6. The Management Reporting System provides the
internal financial information needed to manage a
business.
ANS: T
7.
Most of the inputs to the General Ledger System
come from the Financial Reporting System.
ANS: F
8.
PTS: 1
When preparing discretionary reports,
organizations can choose what information to
report and how to present it.
ANS: T
9.
PTS: 1
PTS: 1
Retrieval is the task of permanently removing
obsolete or redundant records from the database.
ANS: F
PTS: 1
10. Systems development represents 80 to 90 percent
of the total cost of a computer system.
ANS: F
ANS: T
PTS: 1
13. The internal auditor represents the interests of
third-party outsiders.
ANS: F
PTS: 1
16. A database is a collection of interconnected
computers and communications devices that
allows users to communicate, access data and
applications, and share information and resources.
ANS: F
PTS: 1
17. Systems maintenance consumes the majority of a
system’s total costs.
ANS: T
PTS: 1
18. Cloud computing is a practice in which the
organization sells its IT resources to a third-party
outsourcing vendor then leases back IT services
from the vendor for a contract period.
ANS: F
PTS: 1
19. A potential benefit of cloud computing is that the
client firm does not need to know where its data
are being processed.
ANS: F
PTS: 1
20. One of the greatest disadvantages of database
systems is that all data is always available to all
users.
ANS: F
PTS: 1
21. Under SOX legislation public accounting firms are
no longer allowed to provide consulting services to
audit clients.
ANS: T
PTS: 1
22. Under SOX legislation public accounting firms are
no longer allowed to provide consulting services to
their clients.
ANS: F
Chapter 2—Introduction to Transaction Processing
PTS: 1
12. Custom software is completely finished, tested,
and ready for implementation.
ANS: F
ANS: F
PTS: 1
11. The database administrator is responsible for the
security and integrity of the database.
PTS: 1
15. Custom software is the most affordable systems
development option.
PTS: 1
A balance sheet prepared in conformity with GAAP
is an example of discretionary reporting.
ANS: F
ANS: T
PTS: 1
IT outsourcing is location-independent computing.
ANS: F
14. Information Technology (IT) audits can be
performed by both internal and external auditors.
PTS: 1
TRUE/FALSE
1.
Processing more transactions at a lower unit cost
makes batch processing more efficient than realtime systems.
ANS: T
PTS: 1
2.
The process of acquiring raw materials is part of the
conversion cycle.
ANS: F
3.
4.
5.
6.
7.
PTS:
1
16.
Directing work-in-process through its various stages
of manufacturing is part of the conversion cycle.
ANS: T
PTS: 1
A control account is a general ledger account which
is supported by a subsidiary ledger.
ANS: T
PTS: 1
17.
The portion of the monthly bill from a credit card
company is an example of a turn-around document.
ANS: T
PTS: 1
The most significant characteristic of direct access
files is access speed.
ANS: T
PTS: 1
18.
Real time processing is used for routine
transactions in large numbers.
ANS: F
PTS: 1
Batch processing is best used when timely
information is needed because this method
processes data efficiently.
ANS: F
PTS: 1
The general journal is used to record recurring
transactions that are similar in nature.
ANS: F
PTS: 1
Document flowcharts are used to represent
systems at different levels of detail.
ANS: F
PTS: 1
20.
An inverted triangle with the letter “N”
represents a file in “name” order.
ANS: F
PTS: 1
21.
Real-time processing in systems that handle large
volumes of transactions each day can create
operational inefficiencies.
ANS: T
PTS: 1
22.
Operational inefficiencies occur because accounts
unique to many concurrent transactions need to be
updated in real time.
ANS: F
PTS: 1
23.
Operational inefficiencies occur because accounts
common to many concurrent transactions need to
be updated in real time.
ANS: T
PTS: 1
Program flowcharts are used to describe the logic
represented in system flowcharts.
ANS: T
PTS: 1
24.
Batch processing of non-critical accounts improves
operational efficiency.
ANS: T
PTS: 1
Batch processing systems can store data on direct
access storage devices.
ANS: T
PTS: 1
25.
Batch processing of accounts common to many
concurrent transactions reduces operational
efficiency.
ANS: F
PTS: 1
26.
The block code is the coding scheme most
appropriate for a chart of accounts.
ANS: T
PTS: 1
27.
Sequential codes may be used to represent
complex items or events involving two or more
pieces of related data.
ANS: F
PTS: 1
Data flow diagrams represent the physical system.
ANS: F
PTS: 1
8.
System flowcharts are often used to depict
processes that are handled in batches.
ANS: T
PTS: 1
9.
Program flowcharts depict the type of media being
used (paper, magnetic tape, or disks) and terminals.
ANS: F
PTS: 1
10.
System flowcharts represent the input sources,
programs, and output products of a computer
system.
ANS: T
PTS: 1
11.
12.
13.
14.
15.
19.
Backups are automatically produced in a direct
access file environment.
ANS: F
PTS: 1
The box symbol represents a temporary file.
ANS: F
PTS: 1
Auditors may prepare program flowcharts to verify
the correctness of program logic.
ANS: T
PTS: 1
28.
Block codes restrict each class to a pre-specified
range.
ANS: T
PTS: 1
29.
For a given field size, a system that uses alphabetic
codes can represent far more situations than a
system with that uses numeric codes.
ANS: T
PTS: 1
30.
Mnemonic codes are appropriate for items in either
an ascending or descending sequence, such as the
numbering of checks or source documents.
ANS: F
PTS: 1
31.
The flat-file approach is most often associated with
so-called legacy systems.
ANS: T
PTS: 1
32.
In a flat-file system, files are easily shared by users.
ANS: F
PTS: 1
5.
The value of information for users is determined
by all of the following but
a. reliability
b. relevance
c. convenience
d. completeness
6.
An example of a nonfinancial transaction is
a. sale of products
b. cash disbursement
c. log of customer calls
d. purchase of inventory
7.
An example of a financial transaction is
a. the purchase of computer
b. a supplier’s price list
c. a delivery schedule
d. an employee benefit brochure
8.
Which subsystem is not part of the Accounting
Information System?
a. Transaction Processing System
b. Expert System
c. General Ledger/Financial Reporting System
d. Management Reporting System
9.
The major difference between the Financial
Reporting System (FRS) and the Management
Reporting System (MRS) is the
a. FRS provides information to internal and
external users; the MRS provides information
to internal users
b. FRS provides discretionary information; the
MRS provides nondiscretionary information
c. FRS reports are prepared using information
provided by the General Ledger System; the
MRS provides information to the General
Ledger System
d. FRS reports are prepared in flexible,
nonstandardized formats; the MRS reports are
prepared in standardized, formal formats
CHAP 1-MULTIPLE CHOICE
1.
Which of the following is not a business
resource?
a. raw material
b. labor
c. information
d. all are business resources
2.
Which level of management is responsible for
short-term planning and coordination of activities
necessary to accomplish organizational
objectives? a. operations management
b. middle management
c. top management
d. line management
3.
Which level of management is responsible for
controlling day-to-day operations?
a. top management
b. middle management
c. operations management
d. executive management
4.
Location-independent computing in which shared
data centers deliver hosted IT services over the
Internet.
a. IT outsourcing
b. Network administration
c. Cloud computing
d. Custom software
10. The purpose of the Transaction Processing
System includes all of the following except
a. converting economic events into financial
transactions
b. recording financial transactions in the
accounting records
c. distributing essential information to
operations personnel to support their daily
operations
d. measuring and reporting the status of financial
resources and the changes in those resources
11. The Transaction Processing System includes all of
the following cycles except
a. the revenue cycle
b. the administrative cycle
c. the expenditure cycle
d. the conversion cycle
12. The primary input to the Transaction Processing
System is
a. a financial transaction
b. an accounting record
c. an accounting report
d. a nonfinancial transaction
13. When designing the data collection activity,
which type of data should be avoided?
a. data that is relevant
b. data that is efficient
c. data that is redundant
d. data that is accurate
14. The most basic element of useful data in the
database is
a. the record
b. the key
c. the file
d. the attribute
15. In a database, a complete set of attributes for a
single occurrence of an entity class is called
a. a key
b. a file
c. a record
d. a character
16. Effective information has all of the following
characteristics except
a. relevance
b. completeness
c. summarization
d. structure
17. Database management tasks do not include
a. summarization
b. storage
c. retrieval
d. deletion
18. The author distinguishes between the Accounting
Information System and the management
Information System based on
a. whether the transactions are financial or
nonfinancial
b. whether discretionary or nondiscretionary
reports are prepared
c. the end users of the reports
d. the organizational structure of the business
19. Which activity is not part of the finance function?
a. cash receipts
b. portfolio management
c. credit
d. general ledger
20. Market research and advertising are part of
which business function?
a. materials management
b. finance
c. marketing
d. production
21. Which function manages the financial resources
of the firm through portfolio management,
banking, credit evaluation, and cash receipts and
disbursements?
a. accounting
b. finance
c. materials management
d. distribution
22. Which of the following is not part of the
accounting function?
a. managing the financial information resource of
the firm
b. capturing and recording transactions in the
database
c. distributing transaction information to
operations personnel
d. managing the physical information system of
the firm
23. The term “accounting independence” refers to
a. data integrity
b. separation of duties, such as record keeping
and custody of physical resources
c. generation of accurate and timely information
d. business segmentation by function
24. In the distributed data processing approach
a. computer services are consolidated and
managed as a shared organization resource
b. the computer service function is a cost center
c. the end users are billed using a charge-back
system
d. computer services are organized into small
information processing units under the control
of end users
25. Which of the following is not a cloud computing
service?
a. Software as a service
b. Infrastructure as a service
c. Network as a service
d. Platform as a service
26. Data processing does not involve
a. data control
b. computer operations
c. system maintenance
d. data conversion
27. Attestation services are performed by
a. external auditors
b. internal accountants
c. internal auditors
d. third-party accountants
28. Which individual is least involved in new systems
development?
a. systems analyst
b. external auditor
c. end user
d. data librarian
29. The objectives of all information systems include
all of the following except
a. support for the stewardship function of
management
b. evaluating transaction data
c. support for the day-to-day operations of the
firm
d. support for management decision making
30. Which individuals may be involved in the Systems
Development Life Cycle?
a. accountants
b. systems professionals
c. end users
d. all of the above
31. An appraisal function housed within the
organization that performs a wide range of
services for management is
a. internal auditing
b. data control group
c. external auditing
d. database administration
32. Which of the following is not a production
support activity?
a. Maintenance
b. Marketing
c. Production planning
d. Quality control
33. Advantages of cloud computing include all of the
following except
a. Access to whatever computing power is
needed
b. Paying only for what is used
c. Unknown data processing location
d. Flexible, short term contracts
34. Motivations for IT outsourcing include each of the
following except
a. IT’s highly technical nature
b. Long term contracts in IT outsourcing
c. Expense of IT
d. Dynamically changing nature of IT
35. These are focuses on the system itself.
a. Cloud computing
b. Fraud audits
c. Substantive tests
d. Tests of controls
36. What factor conceptually distinguishes external
auditing and internal auditing?
a. Tests of controls
b. Substantive tests
c. Education
d. Constituencies
37. All of the following are external end users except
a. Cost accountants
b. Creditors
c. Stockholders
d. Tax authorities
38. Useful information must possess all of the
following characteristics except
a. relevance
b. precision
c. accuracy
d. completeness
39. The objectives of an information system include
each of the following except
a. support for the stewardship responsibilities of
management
b. furthering the financial interests of
shareholders
c. support for management decision making
d. support for the firm’s day-to-day operations
8.
40. Accountants play many roles relating to the
accounting information system, including all of
the following except
a. system users
b. system designers
c. system auditors
d. system converters
9.
CHAP 2-MULTIPLE CHOICE
1. Which system is not part of the expenditure
cycle?
a. cash disbursements
b. payroll
c. production planning/control
d. purchases/accounts payable
2. Which system produces information used for
inventory valuation, budgeting, cost control,
performance reporting, and make-buy decisions?
a. sales order processing
b. purchases/accounts payable
c. cash disbursements
d. cost accounting
3. Which of the following is a turn-around
document?
a. remittance advice
b. sales order
c. purchase order
d. payroll check
4. The order of the entries made in the ledger is by
a. transaction number
b. account number
c. date
d. user
5. The order of the entries made in the general
journal is by
a. date
b. account number
c. user
d. customer number
6. In general, a special journal would not be used to
record
a. sales
b. cash disbursements
c. depreciation
d. purchases
7. Which account is least likely to have a subsidiary
ledger?
a. sales
b. accounts receivable
c. fixed assets
10.
11.
12.
13.
14.
15.
d. inventory
Subsidiary ledgers are used in manual accounting
environments. What file is comparable to a
subsidiary ledger in a computerized
environment?
a. archive file
b. reference file
c. transaction file
d. master file
A journal is used in manual accounting
environments. What file is comparable to a
journal in a computerized environment?
a. archive file
b. reference file
c. transaction file
d. master file
In a computerized environment, a list of
authorized suppliers would be found in the
a. master file
b. transaction file
c. reference file
d. archive file
Which of the following is an archive file?
a. an accounts payable subsidiary ledger
b. a cash receipts file
c. a sales journal
d. a file of accounts receivable that have been
written off
Which document is not a type of source
document?
a. a sales order
b. an employee time card
c. a paycheck
d. a sales return receipt
The most important purpose of a turnaround
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
d. inform the bank of electronic funds deposits
Which type of graphical documentation
represents systems at different levels of detail?
a. data flow diagram
b. document flowchart
c. system flowchart
d. program flowchart
Data flow diagrams
a. depict logical tasks that are being performed,
but not who is performing them
b. illustrate the relationship between processes,
and the documents that flow between them
and trigger activities
16.
17.
18.
19.
20.
21.
22.
c. represent relationships between key elements
of the computer system
d. describe in detail the logic of the process
System flowcharts
a. depict logical tasks that are being performed,
but not who is performing them
b. illustrate the relationship between database
entities in systems.
c. represent relationships between key elements
of both manual and computer systems.
d. describe the internal logic of computer
applications in systems. .
When determining the batch size, which
consideration is the least important?
a. achieving economies by grouping together
large numbers of transactions
b. complying with legal mandates
c. providing control over the transaction process
d. balancing the trade off between batch size and
error detection
In contrast to a real-time system, in a batch
processing system
a. there is a lag between the time when the
economic event occurs and the financial
records are updated
b. relatively more resources are required
c. a greater resource commitment per unit of
output is required
d. processing takes place when the economic
event occurs
In contrast to a batch processing system, in a realtime system
a. a lag occurs between the time of the economic
event and when the transaction is recorded
b. relatively fewer hardware, programming, and
training resources are required
c. a lesser resource commitment per unit of
output is required
d. processing takes place when the economic
event occurs
The type of transaction most suitable for batch
processing is
a. airline reservations
b. credit authorization
c. payroll processing
d. adjustments to perpetual inventory
The type of transaction most suitable for realtime processing is
a. recording fixed asset purchases
b. recording interest earned on long-term bonds
c. adjusting prepaid insurance
d. recording a sale on account
Which step is not found in batch processing using
sequential files?
a. control totals
b. sort runs
c. edit runs
d. immediate feedback of data entry errors
23. Both the revenue and the expenditure cycle can
be viewed as having two key parts. These are
a. manual and computerized
b. physical and financial
c. input and output
d. batch and real-time
24. All of the following can provide evidence of an
economic event except
a. source document
b. turn-around document
c. master document
d. product document
25. Which method of processing does not use the
destructive update approach?
a. batch processing using direct access files
b. real-time processing
c. batch processing using sequential files
d. all of the above use the destructive update
approach
26. The characteristics that distinguish between
batch and real-time systems include all of the
following except
a. time frame
b. resources used
c. file format
d. efficiency of processing
27. A file that stores data used as a standard when
processing transactions is
a. a reference file
b. a master file
c. a transaction file
d. an archive file
28. Sequential storage means
a. data is stored on tape
b. access is achieved through an index
c. access is direct
d. reading record 100 requires first reading
records 1 to 99
29. Real-time processing would be most beneficial in
handling a firm’s
a. fixed asset records
b. retained earning information
c. merchandise inventory
d. depreciation records
ANS: C
PTS: 1
30. Which accounting application is least suited to
batch processing?
a. general ledger
b. vendor payments
c. sales order processing
d. payroll
31. Which accounting application is best suited to
batch processing?
a. general ledger
b. updating inventory reductions to the
subsidiary ledger
c. sales order processing
d. credit checking
32. Operational inefficiencies occur because
a. accounts both common and unique to many
concurrent transactions need to be updated in
real time.
b. accounts common to many concurrent
transactions need to be updated in real time.
c. accounts unique to many concurrent
transactions need to be updated in real time.
d. None of the above are true statements
33. Operational efficiencies can be improved by
a. updating accounts both common and unique
to many concurrent transactions in real time.
b. updating accounts both common and unique
to many concurrent transactions in batch
mode.
34.
42.
42.
43.
44.
c. updating accounts unique to many concurrent
transactions in real time and updating
common accounts in batch mode.
d. None of the above are true statements
The coding scheme most appropriate for a chart
of accounts is
a. sequential code
b. block code
c. group code
d. mnemonic code
A common use for sequential coding is
a. creating the chart of accounts
b. identifying inventory items
c. identifying documents
d. identifying fixed assets
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
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
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
CHAPTER 2 - Overview of Transaction Processing
and Enterprise Resource Planning Systems Test
Bank Accounting Information Systems 14 Edition
Test Bank
D) The total of the subsidiary ledgers must equal the control
account.
Which of the following is not usually a consideration when
designing a coding system?
A) government coding regulations
B) standardization
C) future expansion needs
D) ease of reporting
Which of the following is an example of source data
automation?
A) a utility bill
B) POS (point-of-sale) scanners in retail stores
C) a bill of lading
D) a subsidiary ledger
Pre-numbering of source documents helps to verify that
A) documents have been used in order.
B) company policies were followed.
C) all transactions have been recorded.
D) source data automation was used to capture data.
Identify the statement below that is false with regards to
effective coding practices.
A) Codes should allow for growth.
B) Codes should be consistent with intended use.
C) Codes should be customized for each division of an
organization.
D) Codes should be as simple as possible.
Identify the statement below that is not true with regards to
the accounts receivable subsidiary ledger.
A) Every credit sale is entered individually into the subsidiary
ledger.
B) Debits and credits in the subsidiary ledger must always
equal.
C) The subsidiary ledgers play an important role in maintaining
the accuracy of the data stored in the AIS.
The coding technique most likely used for sales orders is
A) block code.
B) group code.
C) sequence code.
D) data code.
Data processing includes all of the following except
A) verifying subsidiary ledger balances.
B) changing customer addresses.
The collection of employee time sheets is part of which
transaction cycle?
C) removing inventory items no longer offered.
A) the revenue cycle
D) adding the name of a new vendor.
B) the production cycle
A general journal
C) the human resources cycle
A) would be used to record monthly depreciation entries.
D) the expenditure cycle
B) simplifies the process of recording large numbers of
repetitive transactions.
Which of the following information would most likely be
reviewed by management on an exception report?
C) records all detailed data for any general ledger account that
has individual sub-accounts.
A) monthly cash budget
B) quality control system failures
D) contains summary-level data for every account of the
organization.
C) unit sales by territory and salesperson
A specialized journal would be most likely to be used to enter
D) income statement
A) sales transactions.
The general ledger
B) monthly depreciation adjustments.
A) is the initial place to record general expenses.
C) annual closing entries.
B) is posted in total to the general journal.
D) stock issuance transactions.
C) only includes balance sheet accounts.
John Pablo works in the accounting department of a
multinational manufacturing company. His job includes
updating accounts receivable based on sales orders and
remittance advices. His responsibilities are part of the
company's
D) summarizes the transactions in journals.
A purchase requisition is a common source document used to
facilitate which business activity?
A) customer sale
A) revenue cycle.
B) receipt of goods
B) expenditure cycle.
C) inventory purchase
C) financing cycle.
D) purchase request
D) production cycle.
Catarina Boards is a skateboard retailer located in Pueblo,
New Mexico. Catarina Boards is a sole proprietorship that
stocks an inventory of between 30 and 50 different
skateboards. Inventory is updated in real time by the AIS. If
Catarina wishes to keep detailed information about the
purchase price of each skateboard in a place outside of the
general ledger, it might use a
All of the following situations would likely be communicated
in an exception report except
A) production stoppages.
B) weekly credit and cash sales comparison.
C) low inventory level.
A) relational ledger.
D) expense variances outside acceptable range.
B) transaction file.
Which of the following statements is true?
C) master file.
A) Batch processing ensures that stored information is always
current.
D) specific ledger.
B) Batch input is more accurate than on-line data entry.
D) None of these
C) On-line batch processing is a combination of real-time and
batch processing.
Identify the output below that an accounting information
system can provide.
D) Batch processing is not frequently used.
A) income statement
What is the most frequent revenue cycle transaction?
B) list of sales returns
A) purchase of inventory
C) exception reports
B) receipt of cash
D) All of these
C) sale to customer
All of the following are ERP vendors except
D) billing
A) Dell.
A subsidiary ledger
B) SAP.
A) is used to record infrequent or non-routine transactions.
C) Oracle.
B) simplifies the process of recording large numbers of
repetitive transactions.
D) Microsoft.
C) records all detailed data for any general ledger account that
has individual sub-accounts.
Source documents generally help to improve accuracy in
transaction processing because
D) contains summary-level data for every account of the
organization.
A) they specify which information to collect.
In transaction processing, generally which activity comes first?
B) logically related data can be grouped in the same area of the
document.
A) recording data in a journal
C) they provide directions and steps for completing the form.
B) posting items to special journals
D) All of these are correct.
C) capturing data on source documents
Which of the following statements is not correct?
D) recording data in a general ledger
A) The audit trail is intended to verify the validity and accuracy
of transaction recording.
A specialized journal
A) is used to record infrequent or non-routine transactions.
B) The audit trail consists of records stored sequentially in an
audit file.
B) simplifies the process of recording large numbers of
repetitive transactions.
C) The audit trail provides the means for locating and examining
source documents.
C) records all detailed data for any general ledger account that
has individual sub-accounts.
D) The audit trail is created with document numbers and
posting references.
D) contains summary-level data for every account of the
organization.
Documents that are sent to customers or suppliers and then
sent back to the company in the course of a business
transaction are known as
ERP stands for
A) turnaround documents.
A) enterprise resource planning.
B) source documents.
B) enterprise resource program.
C) input documents.
C) enterprise reporting program.
D) transaction documents.
For a retail business, a delivery of inventory, from a vendor
(with whom there is an established credit relationship) would
be initially recorded in which type of accounting record as part
of which transaction cycle?
In an ERP system, the module used to record data about
transactions in the production cycle is called
A) purchases journal; expenditure cycle
B) purchase to pay.
B) general journal; expenditure cycle
C) manufacturing.
C) general ledger; expenditure cycle
D) logistics.
D) cash disbursements journal; production cycle
Which of the following documents would be found in the
expenditure cycle?
A) order to cash.
A chart of accounts is an example of (select all that apply)
A) delivery ticket
sequence codes.
B) time card
block codes.
C) credit memo
group codes.
D) purchase order
mnemonic codes.
Identify the four parts of the transaction processing cycle.
All of the following are advantages of an ERP system except
A) in an ERP, data input is captured or keyed once.
B) ERPs permit management to gain greater visibility into every
area of the enterprise.
A) data input, data storage, data processing, information
output
B) data input, data recall, data processing, information output
C) data input, data recall, data transmission, information output
C) it takes considerable experience and training to use an ERP
system effectively.
D) ERPs permit manufacturing plants to receive new orders in
real time.
In Petaluma, California, electric power is provided to
consumers by Pacific Power. Each month Pacific Power mails
bills to 86,000 households and then processes payments as
they are received. What is the best way for this business to
ensure that payment data entry is efficient and accurate?
A) well-designed paper forms
B) source data automation
D) data input, data recall, data transmission, data storage
Source data automation refers to
A) using devices to capture transaction data in machinereadable form at the time the transaction is initiated.
B) using the internet as the operating platform of an accounting
information system.
C) using an accounting information system to electronically bill
customers.
D) using an accounting information system to automate a
previously manual transaction process.
C) turnaround documents
D) sequentially numbered bills
Pre-numbered invoices and pre-numbered purchase orders
are examples of
What is the first step in the data processing cycle?
A) sequence codes.
A) input
B) block codes.
B) output
C) group codes.
C) storage
D) mnemonic codes.
D) purchasing
The quality assurance department at a large manufacturing
business enters data into the AIS that is used to produce a
weekly report that summarizes the proportion of defective
units in each product line. This is an example of
A) segregation of duties between custody, authorization, and
recording
B) data entry controls on validity and accuracy
A) internal financial information.
C) controls over access to data
B) internal nonfinancial information.
D) appropriate disposal of hard copy reports
C) external financial information.
D) external nonfinancial information.
Which of the following statements about a master file is false?
A) A master file is conceptually similar to a ledger in a manual
AIS.
Antia Carmie is the largest collector and retailer of Japanese
fans in the St. Louis area. Antia uses computer technology to
provide superior customer service. The store's database
system was designed to make detailed information about
each Japanese fan easily accessible to her customers.
Accordingly, the fan price and condition are provided for each
fan, along with many pictures of each fan. In Antia's database,
the data about each Japanese fan's price is stored in a(n)
B) A master file's individual records are rarely, if ever, changed.
A) entity.
C) A master file exists across fiscal periods.
B) attribute.
D) A master file stores cumulative information.
C) field.
Which statement below is true with regards to an audit trail?
D) record.
A) An audit trail begins with the general journal.
B) An audit trail provides the means to check the accuracy and
validity of ledger postings.
Changing an employee's hourly wage rate would be recorded
where?
A) employee master file
C) An audit trail is a summary of recorded transactions.
B) employee transaction file
D) An audit trail is automatically created in every computerbased information system.
The existence of multiple systems which provide information
can result in all of the following except
C) special journal
D) employee update file
Product items are often coded with (select all that apply)
A) redundancies.
sequence codes.
B) discrepancies.
block codes.
C) integration issues.
group codes.
D) efficiency.
mnemonic codes.
The general ledger account that corresponds to a subsidiary
ledger account is known as a(n)
What is the final step in the data processing cycle?
A) dependent account.
A) output
B) control account.
B) storage
C) credit account.
C) processing
D) attribute account.
D) input
Implementation of an ERP system requires increased focus on
all except which of the following controls?
An ERP system might facilitate the purchase of direct
materials by all of the following except
D) data processing
A) selecting the best supplier by comparing bids.
Which statement below regarding the AIS is false?
B) preparing a purchase order when inventory falls to reorder
point.
A) The AIS must be able to provide managers with detailed and
operational information about the organization's performance.
C) routing a purchase order to a purchasing agent for approval.
D) communicating a purchase order to a supplier.
Antia Carmie is the largest collector and retailer of Japanese
fans in the St. Louis area. Antia uses computer technology to
provide superior customer service. The store's database
system was designed to make detailed information about
each Japanese fan easily accessible to her customers.
Accordingly, the fan price and condition are provided for each
fan, along with many pictures of each fan. In Antia's database,
the Japanese fans (as a whole) represent a(n)
B) Both traditional financial measures and operational data are
required for proper and complete evaluation of performance.
C) The AIS was often just one of the information systems used
by an organization to collect and process financial and
nonfinancial data.
D) Traditionally, most AIS have been designed so that both
financial and operational data are stored in a manner that
facilitates their integration in reports.
A) entity.
All of the following are reasons that implementing a new ERP
may fail except
B) attribute.
A) employees may resist using the ERP system.
C) field.
B) ERPs can take years to fully implement.
D) record.
C) employees may refuse to share sensitive information with
different departments.
In an ERP system, the module used to record data about
transactions in the revenue cycle is called
D) ERPs may require procedures and reports to be standardized
across business units.
A) order to cash.
B) purchase to pay.
Data about which of the following facets of a business activity
is most likely to be recorded in a transaction file?
C) financial.
A) business activity
D) customer relationship management.
B) resources affected by the business activity
The general ledger
C) people who participate in the business activity
A) is used to record infrequent or non-routine transactions.
D) place the business activity occurs
B) simplifies the process of recording large numbers of
repetitive transactions.
Common source documents for the revenue cycle include all
of the following except
C) records all detailed data for any general ledger account that
has individual sub-accounts.
A) sales order.
B) receiving report.
D) contains summary-level data for every account of the
organization.
Which step below is not considered to be part of the data
processing cycle?
A) data input
B) feedback from external sources
C) data storage
C) delivery ticket.
D) credit memo.
Which statement below regarding the AIS and managerial
reports is false?
A) The AIS is best utilized for financial data while the
management information system is best utilized for operational
data.
B) The AIS must be able to provide managers with detailed
operational information about the organization's performance.
C) Both financial and nonfinancial data are required for proper
and complete evaluation of organizational performance.
D) Most source documents capture both financial and
nonfinancial data about business transactions.
Which of the following is an example of an ERP system?
A) Alexis uses a computerized information system to keep track
of all the financial data generated by her bakery. She is
considering opening a new bakery on the east side of town.
B) Betty has a system that keeps track of the accounts payable
and receivable for her plumbing business. At the end of the
year, the system helps her to prepare her taxes in just two
hours.
C) Charlie keeps records of all his business records in a shoe
box. Each week he enters all of the data into spreadsheets that
automatically generate purchase orders, based on
predetermined inventory reorder points. Production quotas for
the coming week are also automatically generated based on
customer orders.
D) Doug is a freelance photographer. He keeps records of all
expenses and revenues on his cell phone and then e-mails them
to himself every month. The files are stored on his personal
computer and backed up to CD quarterly.
In an ERP system, the module used to record data about
transactions in the disbursement cycle is called
A) order to cash.
B) purchase to pay.
C) financial.
D) customer relationship management.
Which of the following statements about data processing
methods is true?
A) Online real-time processing does not store data in a
temporary file.
B) Batch processing cannot be used to update a master file.
C) Control totals are used to verify accurate processing in both
batch and online batch processing.
D) Online real-time processing is only possible with source data
automation.
CHAPTER 1 (NEW VERSION)
MULTIPLE CHOICE
1. A set of two or more interrelated components that
interact to achieve a goal is:
a)
A system
b)
An accounting information system
c)
Data
d)
Mandatory information
2. This results when a subsystem achieves its goals while
contributing to the organization's overall goal. a) Goal
conflict
b)
Goal congruence
c)
Value of information
d)
Systems congruence
3. Goal conflict may result when
a)
A decision or action of a subsystem is inconsistent
with the system as a whole.
b)
A subsystem achieves its goals while contributing
to the organization's overall
goal.
c)
Duplicate recording, storage and processes are
eliminated.
d)
The data exceeds the amount the human mind
can absorb and process.
4. Facts that are collected, recorded, stored and
processed by an information system
a)
Information
b)
Data
c)
Systems
d)
Mandatory information
5. Information is
a)
What happens when the data exceeds the
amount the human mind can absorb.
b)
The benefit produced by the information minus
the cost of producing it.
c)
Facts that are collected, recorded, stored, and
processed by an information system.
d)
Data that have been organized and processed to
provide meaning to a user.
6. Data are
a)
facts entered, stored, and processed by an
information system.
b)
processed output that is useful to decision
makers.
c)
another word for information.
d)
quantitative facts that are not qualitative by
nature.
7. Which of the following statements below shows the
contrast between data and
information?
a)
Data is the output of an AIS.
b)
Information is the primary output of an AIS.
c)
Data is more useful in decision-making than
information.
d)
Data and information are the same.
8. Information is
a)
basically the same as data.
b)
raw facts about transactions.
c)
potentially useful facts when processed in a
timely manner.
d)
data that has been organized and processed so
that it's meaningful.
9. Humans can absorb and process only so much
information. Information __________ occurs when
those limits are passed.
a)
overload
b)
excess
c)
anxiety
d)
discretion
10. The value of information can best be defined as
a)
how useful it is to decision makers.
b)
the benefits produced by possessing and using
the information minus the cost of producing it.
c)
how relevant it is.
d)
the extent to which it maximizes the value chain.
11. The benefit produced by the information minus the
cost of producing it.
a)
Goal congruence
b)
Information
c)
Information overload
d)
Value of information
12. An accounting information system (AIS) processes
__________ to provide users with __________.
a)
data; information
b)
data; transactions
c)
information; data
d)
data; benefits
13.
a)
b)
c)
d)
How many components are found in an AIS?
three
four
five
six
14. An accounting information system in part consists of
a)
People, hardware and programs.
b)
Information, programs and computers.
c)
People, procedures, data, software and
information technology infrastructure.
d)
Internal controls and accounting records.
15. Information that reduces uncertainty, improves
decision makers' ability to make predictions, or confirms
or corrects their prior expectations, is said to be
a)
Complete
b)
Relevant
c)
Reliable
d)
Timely
16. Information that is free from error or bias and
accurately represents the events or activities of the
organization is
a)
Relevant
b)
Reliable
c)
Verifiable
d)
Timely
17. Information that does not omit important aspects of
the underlying events or activities that it measures is
a) Complete
b)
Accessible
c)
Relevant
d)
Timely
18. When two knowledgeable people acting
independently each produce the same information; this
information is said to be
a)
Complete
b)
Relevant
c)
Reliable
d)
Verifiable
19. Data must be converted into information to be
considered useful and meaningful for decision-making.
There are six characteristics that make information both
useful and meaningful. If information is free from error
or bias and accurately represents the events or activities
of the organization, it is representative of the
characteristic of
a)
Relevancy
b)
Timeliness.
c)
Understandability
d)
Reliability
20. The primary consideration when producing this type
of information is that its benefits exceeds its costs.
a)
Discretionary information
b)
Essential information
c)
Mandatory information
d)
Value of information
21. An AIS is a system of six interrelated components
that interact to achieve a goal. One of these
components, which includes both manual and
automated activities that involve collecting, processing,
and storing data, is known as
a)
Information or data
b)
Procedures and instructions
c)
Software
d)
Information technology infrastructure
22. An accounting information system must be able to
perform which of the following tasks?
a)
collect transaction data
b)
process transaction data
c)
provide adequate controls
d)
all of the above
23. Which of the following is not an example of a
common activity in an AIS?
a)
buy and pay for goods and services
b)
sell goods and services and collect cash
c)
summarize and report results to interested
parties
d)
recording of sales calls for marketing purposes
24. Which of the following is not one of the components
of an AIS?
a)
Internal controls and security measures
b)
People
c)
Procedures and instructions
d)
Software and hardware
25. An AIS must be able to fulfill three important
functions in any organization. One such function is the
collecting and storing of data about activities performed
by the organization. One group that relies on both the
adequate collection and transformation of data for
decision-making purposes for an organization is
a)
management.
b)
interested outsiders.
c)
competitors.
d)
the government.
b) a way to provide adequate controls to safeguard an
organization's assets.
c) being an information system.
d) a way to collect and transform data into useful
information.
28. Which activity below would not be considered to be
a "top" accountant work activity?
a)
process improvement
b)
input into future product marketing initiatives
c)
long-term strategic planning
d)
computer systems and operations
29. The American Institute of Certified Public
Accountants (AICPA) has recognized the importance of
AIS and the major impact information technology has on
the area of accounting. To recognize individual CPAs
who have met educational and experiential
requirements in this area, the group formally created
the designation known as
a)
the Certified Management Accountant.
b)
the Certified Information Technology
Professional.
c)
the Certified Internal Auditor.
d)
the Certified Data Processing Professional.
30. An analysis conducted by the Institute of
Management Accountants shows that the most
important activities performed by corporate
accountants relate to
a)
customer and product profitability.
b)
internal consulting.
c)
process improvement.
d)
accounting systems and financial reporting.
31. The primary focus of an AIS course, as opposed to
other IS courses, is on
a)
application of information technology.
b)
use of accounting software.
c)
understanding how information technology can
be used to improve AIS processes.
d)
preparation of financial statements.
26. The primary objective of accounting is to
a)
implement strong internal controls.
b)
provide useful information to decision makers.
c)
prepare financial statements.
d)
ensure the profitability of an organization.
32. The AIS must include controls to ensure
a)
safety and availability of data.
b)
marketing initiatives match corporate goals.
c)
information produced from data is accurate.
d)
both A and C
27. The Financial Accounting Standards Board (FASB), in
its Statement of Financial Accounting Concepts No. 2,
has defined accounting as
a) an information identification, development,
measurement, and communication process.
33. A change in the AIS that makes information more
easily accessible and widely available within an
organization is most likely to first influence the
a)
organizational culture.
b)
customer base.
c)
d)
external financial statement users.
production activity.
34. The process of creating value for customers is the
result of nine activities (five primary and four support)
that taken together form a
a)
value chain.
b)
profitable operation.
c)
successful business.
d)
support system.
35. The value chain concept is composed of two types of
activities known as
a)
primary and support.
b)
primary and secondary.
c)
support and value.
d)
technology and support.
36. Which of the following is a primary activity in the
value chain?
a)
infrastructure
b)
technology
c)
purchasing
d)
marketing and sales
37. In value chain analysis, what is the activity of
arranging the delivery of products to customers called?
a)
outbound logistics
b)
inbound logistics
c)
shipping
d)
delivery
38. An AIS provides value by
a)
improving products or services through
information that increases quality and reduces costs.
b)
providing timely and reliable information to
decision makers.
c)
creating new products.
d)
both A and B
39. In Chapter 1, Figure 1-2 shows the factors that
influence the design of AIS. The diagram shows a bidirectional arrow between the organizational culture
and the AIS. The reason for this two-way interchange
between organizational culture and AIS is
a) that the AIS should not influence the values of the
organizational culture.
b) because the organization's culture influences the AIS,
and likewise the AIS influences the organization's culture
by controlling the flow of information within the
organization.
c) due to the transfer of managers between the two
corporate elements.
d) the AIS impacts the organization's key strategies.
40. The objective of the majority of organizations is to
provide value to their customers. The activities that
support such an objective can be conceptualized as
forming a value chain. Within this value chain, logistics
plays an important role. Logistics is both inbound and
outbound in nature. An example of inbound logistics
would consist of
a) the activities that transform inputs into final products
or services.
b) the activities that help customers to buy the
organization's products or services.
c) the activities that provide post-sale support to
customers.
d) the activities that consist of receiving, storing, and
distributing the materials used as inputs by the
organization to create goods and/or services it sells.
41. A good example of how an AIS is used to share
knowledge within an organization is
a) the use of an expert system to help staff identify the
relevant experts who can help with a particular client.
b) the use of laptop computers to access a network for
messaging worldwide.
c) the monitoring of production equipment to watch for
defects.
d) the use of point-of-sale data to determine hot-selling
items.
42. Within the value chain conceptual framework,
organizations also perform a number of other support
activities that enable the five primary value chain
activities to be performed efficiently and effectively.
One such support activity is research and development.
This activity can be identified as a
a)
firm infrastructure activity.
b)
human resources activity.
c)
technology activity.
d)
purchasing activity.
43. Within the value chain conceptual framework, AIS is
shown as a support activity. The AIS is of value to an
organization when it provides accurate and timely
information to help support the five primary value chain
activities. When the AIS provides information in a
timely and accurate manner, it stands as an example of
a)
improved decision making.
b)
improving the quality and reducing the costs of
products or services.
c)
improving efficiency.
d)
All of the above
44. A decision situation that is non-routine and for
which no established framework exists for making the
decision is called a(n) __________ decision.
a)
structured
b)
semistructured
c)
unstructured
d)
strategic
45. A decision that is repetitive, routine and well
understood is
a)
structured
b)
semistructured
c)
unstructured
d)
strategic
46. Which of the following is an example of a strategic
planning decision?
a)
setting financial and accounting policies
b)
conducting a performance evaluation
c)
budgeting
d)
developing human resource practices
47. Decisions about the effective and efficient execution
of specific tasks are concerned with
a)
operational control.
b)
management control.
c)
strategic planning.
d)
tactical planning.
48.Budgeting and human resource practices are
examples of
a)
operational control
b)
management control
c)
strategic planning
d)
tactical planning
49. Accounting information plays major roles in
managerial decision making by
a) identifying situations requiring management action.
b) reducing uncertainty.
c) providing a basis for choosing among alternative
actions.
d) all of the above
50. Business activities that pertain to product pricing,
discount and credit terms, and identifying the most and
least profitable items are part of the __________ activity
in the organization's value chain.
a) service
b) marketing and sales
c) operations
d) inbound logistics
51. A principal focus of AIS is to assist with the decisionmaking function of an organization. The degree of
support AIS can provide depends on the type of decision
being made. Decisions are categorized in terms of the
degree of existing structure or the effect of their scope.
From the items below, select the description that is an
example of a semi-structured decision.
a) selecting basic research projects to undertake
b) setting a marketing budget for a new product
c) extending credit to an established customer
d) hiring a senior manager
52. Regarding decision scope, which statement below is
true?
a) Operational control is concerned with the effective and
efficient use of resources for accomplishing
organizational objectives.
b) Management control is concerned with the effective
and efficient performance of specific tasks.
c) Strategic planning is concerned with establishing
organizational objectives and policies for accomplishing
those
objectives.
d) There is no real correlation between a manager's level
in an organization and his or her decision-making
responsibilities.
53. A well-designed AIS can improve the decisionmaking function within the organization. Which
statement below would describe a limitation, rather
than a benefit, of an efficient AIS?
a) An AIS reduces uncertainty, and therefore accounting
information can provide a basis for choosing among
alternative courses of action.
b) An AIS identifies situations requiring management
action.
c) An AIS provides to its users an abundance of
information without any filtering or condensing of such
information.
d) An AIS provides information about the results of
previous decisions which provides decision makers with
feedback that can be used in future decision making.
54. A strategic position is important to the success and
growth of any organization. Harvard professor Michael
Porter has identified three basic strategic positions.
Which statement below is false regarding these basic
strategic positions?
a) The three basic strategic positions are mutually
exclusive of each other.
b) Part of a needs-based strategic position is to identify a
target market.
c) An access-based strategic position involves serving a
subset of customers who differ from other customers in
terms of geographic location or size.
d) A variety-based strategic position involves producing or
providing a subset of the industry's products or services.
55. A strategic position is important to the success and
growth of any organization. Harvard professor Michael
Porter has identified two basic business strategies.
Which statement below is false regarding these basic
strategies?
a) A product differentiation strategy entails adding
features or services not provided by competitors to a
product so customers can be charged a premium price.
b) A low-cost strategy entails striving to be the most
efficient producer of a product or service.
c) Sometimes a company can succeed in both producing a
better product and achieving low costs.
d) The two basic strategic positions are mutually
exclusive.
56. According to Michael Porter, to be successful in the
long run, a company must
a) deliver greater value to customers and/or create
comparable value at a lower cost.
b) maximize profits.
c) maximize shareholder value.
d) both B and C
57. A variety-based strategic position involves
a) trying to serve most or all of the needs of a particular
group of customers.
b) serving a subset of customers who differ from other
customers.
c) providing a subset of the industry's products or
services.
d) serving all needs of all customers.
58. A needs-based strategic position involves
a) trying to serve most or all of the needs of a particular
group of customers.
b) serving a subset of customers who differ from other
customers.
c) providing a subset of the industry's products or
services.
d) serving all needs of all customers.
59. An access-based strategic position involves
a) trying to serve most or all of the needs of a particular
group of customers.
b) serving a subset of customers who differ from other
customers.
c) providing a subset of the industry's products or
services.
d) serving all needs of all customers.
60. The Internet has changed the way many processes
are performed in business today. The Internet has had a
material effect on the five primary characteristics in the
value chain and on the strategy adopted by businesses
that incorporate use of the Web into their business
systems. Which statement below is true regarding the
Internet relative to a strategic position that a business
may adopt?
a) Use of the Internet has reduced the power of buyers.
b) The Internet has increased the barriers to entry in
many industries.
c) Use of the Internet reduces pressure to compete on
price.
d) The most important effect of the development of the
Internet in business is the increased importance of
adopting a viable business strategy.
Chapter 2 (new version)
MULTIPLE CHOICE
1. An agreement between two entities to exchange
goods or services or any other event that can be
measured in economic terms by an organization is
a)
give-get exchange
b)
transaction
c)
revenue
d)
processing cycle
2. Groups of related business activities such as the
acquisition of merchandise and payment of vendors are
called
a)
transaction cycles.
b)
economic cycles.
c)
business events.
d)
transactions.
3. The transaction cycles approach leads to efficient
processing of large number of transactions because
a) transaction cycles are easier to computerize.
b) a large number of transactions within a given cycle can
be categorized into a relatively small number of distinct
types.
c) the transaction cycle approach represents the natural
order of business.
d) transaction cycles are easy to understand.
4. The basic "give and take" functions of a business have
been grouped into transaction cycles. The cycle that
includes the events of hiring employees and paying
them is known as the
a)
revenue cycle.
b)
c)
d)
expenditure cycle.
human resources cycle.
financing cycle.
5. What is the major difference between the revenue
and the expenditure cycle?
a)
The revenue cycle includes marketing activities;
the expenditure cycle does not.
b)
In the revenue cycle, cash is received; in the
expenditure cycle cash is paid out.
c)
The expenditure cycle includes paying employees.
d)
The revenue cycle includes the activity of
obtaining funds from investors.
6. The business owners obtain financing from outside
investors, which results in an inflow of cash into the
company. This transaction is considered to be part of
which
cycle?
a)
the revenue cycle
b)
the payroll cycle
c)
the production cycle
d)
the financing cycle
7. Which of the following is not a transaction cycle?
a)
revenue
b)
expenditure
c)
human resources
d)
general ledger and reporting
8. All transaction cycles feed information directly into
the
a)
financial statements.
b)
governmental reports.
c)
general ledger and reporting system.
d)
financing operations.
9. Transaction cycles can be summarized on a high level
as "give-get" transactions. An example of "give-get" in
the expenditure cycle would be
a)
give cash, get cash.
b)
give cash, get goods.
c)
give cash, get labor.
d)
give goods, get cash.
10. Transaction cycles can be summarized on a high level
as "give-get" transactions. An example of "give-get" in
the revenue cycle would be
a)
give cash, get goods.
b)
give goods, get cash.
c)
give cash, get labor.
d)
give cash, get cash.
11. The transaction cycles relate to one another and
interface with this to generate information for both
management and external parties.
a)
general ledger and reporting system
b)
accounting information systems
c)
computer processor
d)
human resources cycle
12. Many modern accounting software packages offer
separate transaction cycle modules. What is the reason
for this?
a)
Every organization does not need to implement
all of the available transaction cycle modules.
b)
Most businesses do not need the revenue cycle
module as part of their AIS.
c)
The nature of a given transaction cycle is the
same irrespective of the type of organization.
d)
A properly designed AIS does not use the concept
of separate business transaction cycles to process
transactions.
13. Which of the following statements is false?
a)
Retail stores do not have a production cycle.
b)
Financial institutions have installment-loan cycles.
c)
A service company does not have an inventory
system.
d)
Every organization should implement every
transaction cycle module.
14. The operations performed on data to generate
meaningful and relevant information are referred to as
a)
general ledger and reporting system
b)
accounting information system
c)
financial reporting
d)
data processing cycle
15. One of the steps in the data processing cycle is data
input. What is the catalyst for data input into a system?
a)
The production transaction system automatically
checks each hour to see if any new data is available for
input and processing.
b)
The performance of some business activity
generally serves as the trigger for data input.
c)
A general ledger program is queried to produce a
trial balance at the end of an accounting period.
d)
Data is only input when an authorized party
permits the input to occur.
16. A typical source document could be
a)
in some paper form.
b)
a computer data entry screen.
c)
a notepad entry.
d)
both A and B
17. Which step below is not considered to be part of the
data processing cycle?
a)
data input
b)
feedback from external sources
c)
data storage
d)
data processing
18. Data must be collected about three facets of each
business activity. What are they?
a)
the business activity, the resources it affects, the
people who participate
b)
the business activity, the transactions it creates,
the impact on the financial statements
c)
the inputs, outputs and processes used
d)
who is involved, what was sold, how much was
paid
19. Certain documents or forms are generated and/or
processed with each transaction cycle. The issuing of a
purchase order is part of which transaction cycle?
a)
the revenue cycle
b)
the production cycle
c)
the human resources cycle
d)
the expenditure cycle
20. Certain documents or forms are generated and/or
processed with each transaction cycle. The collection of
job time tickets or time sheets is part of which
transaction cycle?
a)
the revenue cycle
b)
the production cycle
c)
the human resources cycle
d)
the expenditure cycle
21.
Common source documents for the revenue
cycle include all of the following except
a)
sales order.
b)
receiving report.
c)
delivery ticket.
d)
credit memo.
22. Which of the following documents would be found in
the expenditure cycle?
a)
delivery ticket
b)
time card
c)
journal voucher
d)
purchase order
23. Businesses usually use some type of documents in
the data input step of the data processing cycle.
Documents that are sent to customers or suppliers and
then sent back to the organization in the course of a
business transaction are known as
a)
turnaround documents.
b)
c)
d)
source documents.
source data automation.
rubber or bounce-back documents.
24. What is a primary example of source data
automation?
a)
a utility bill
b)
POS (point-of-sale) scanners in retail stores
c)
a bill of lading
d)
a subsidiary ledger
25. Pre-numbering of source documents helps to verify
that
a)
all transactions have been recorded since the
numerical sequence serves as a control.
b)
no inventory has been misplaced.
c)
documents have been used in order.
d)
all cash has been collected.
26. Source documents generally help to improve
accuracy in transaction processing because
a)
they specify which information to collect due to
their structure.
b)
standard information is preprinted on the
document.
c)
they provide directions and steps for completing
the form.
d)
All of the above are correct.
27. When the sum of all entries in the subsidiary ledger
equals the amount in the corresponding general ledger
account, it is assumed that (select all that apply)
a)
the recording and posting processes are accurate.
b)
all of the transaction cycles have been completed.
c)
since the ledgers are in balance, adjusting entries
are not required.
d)
no errors exist in the subsidiary ledger and
corresponding general ledger account.
28. The general ledger account that corresponds to a
subsidiary ledger account is known as a
a)
dependent account.
b)
attribute account.
c)
entity account.
d)
control account.
29. The systematic assignment of numbers or letters to
items to classify and organize them is known as
a)
coding
b)
chart of accounts
c)
data input
d)
pre-numbered documents
30. Pre-numbered checks, invoices and purchase orders
are examples of
a)
sequence codes
b)
block codes
c)
group codes
d)
hierarchical codes
31. A chart of accounts is an example of (select all that
apply)
a)
sequence codes
b)
block codes
c)
group codes
d)
hierarchical codes
32. Inventory items are often codes with these
a)
sequence codes
b)
block codes
c)
group codes
d)
hierarchical codes
33. A listing of general ledger accounts by account
number is called the
a)
chart of accounts.
b)
listing of accounts.
c)
trial balance.
d)
subsidiary accounts.
34. Regarding codes, which of the following is false?
a)
The code should be consistent with its intended
use.
b)
Codes should allow for growth in the number of
items to be coded.
c)
Coding systems should be as simple as possible.
d)
Coding systems need not be consistent across
divisions of an organization.
35. To be effective, the chart of accounts must
a)
be as concise as possible.
b)
contain only five account categories.
c)
limit account codes to 10 digits or less.
d)
contain sufficient detail to meet the information
needs of the specific organization's AIS.
36. The chart of accounts for a manufacturing
corporation would include
a)
retained earnings.
b)
common stock.
c)
raw materials inventory.
d)
all of the above
37. The chart of accounts of a corporate retail bookstore
would probably include
a)
work-in-process inventory.
b)
a drawing account.
c)
d)
retained earnings.
both A and C
38. In a chart of accounts using three digits for each
account, each numeric digit has meaning to users of the
AIS. For example, a numeric digit may represent either a
major category of accounts, a primary financial
subaccount within each category, or a specific account
into which transaction data will be posted. Using this
example, which digit position would best represent a
primary financial subaccount within an account
category?
a)
first
b)
second
c)
third
d)
fourth
39. In transaction processing, generally which activity
comes first?
a)
recording data in a journal
b)
posting items to special journals
c)
capturing data on source documents
d)
posting data to a ledger
40. The efficiency of recording numerous business
transactions can be best improved by the use of
a)
prenumbered source documents.
b)
specialized journals.
c)
posting references.
d)
segregation of duties.
41. A general journal
a)
is used to record infrequent or non-routine
transactions.
b)
simplifies the process of recording large numbers
of repetitive transactions.
c)
records all detailed data for any general ledger
account that has individual subaccounts.
d)
contains summary-level data for every account of
the organization.
42. The general ledger
a)
is used to record infrequent or non-routine
transactions.
b)
simplifies the process of recoding large numbers
of repetitive transactions.
c)
records all detailed data for any general ledger
account that has individual subaccounts.
d)
contains summary-level data for every account of
the organization.
43. A subsidiary ledger
a)
is used to record infrequent or non-routine
transactions.
b)
simplifies the process of recoding large numbers
of repetitive transactions.
c)
records all detailed data for any general ledger
account that has individual subaccounts.
d)
contains summary-level data for every account of
the organization.
44. A specialized journal
a)
is used to record infrequent or non-routine
transactions.
b)
simplifies the process of recording large numbers
of repetitive transactions.
c)
records all detailed data for any general ledger
account that has individual subaccounts.
d)
contains summary-level data for every account of
the organization.
45. An audit trail
a)
provides the means to check the accuracy and
validity of ledger postings.
b)
is provided by the ledger and the general journal.
c)
is automatically created in every computer-based
information system.
d)
is a characteristic of interest.
46. Something about which information is stored is
a)
attribute
b)
database
c)
entity
d)
record
47. Characteristics of interest that need to be stored are
a)
attribute
b)
database
c)
entity
d)
record
48. Computers store data by organizing smaller units of
data into larger units, which have meaning to users.
Data values that are stored in a physical space are called
a
a)
field.
b)
record.
c)
file.
d)
database.
49. Related records grouped together form a(n)
a)
field.
b)
entity.
c)
file.
d)
database.
50. The set of fields that contain data about various
attributes of the same entity forms a
a)
b)
c)
d)
entity
record.
file.
database.
51. Concerning a master file, which of the following
statements is false?
a)
It is conceptually similar to a ledger in a manual
AIS.
b)
It stores cumulative information about an
organization's resources.
c)
It exists across fiscal periods.
d)
Its individual records are not changed.
52. Basic data storage concepts define both entities and
attributes. An entity is something about which
information is stored. Which item below would not be
considered an entity?
a)
a customer address
b)
a customer
c)
an employee
d)
an inventory item
53. Which of the following is conceptually similar to a
journal in a manual AIS?
a)
database
b)
master file
c)
record
d)
transaction file
54. Which of the following is not one of the four types of
file processing?
a)
changing
b)
updating
c)
deleting
d)
altering
55. Periodic updating of the data stored about resources
and agents is
a)
On-line processing
b)
real-time processing
c)
batch processing
d)
data processing
56. Concerning processing, which of the following
statements is true?
a)
Batch processing ensures that stored information
is always current.
b)
Batch input is more accurate than on-line data
entry.
c)
On-line batch processing is a combination of realtime and batch processing.
d)
Batch processing is almost never used.
57. Federal Express stated in one of its mission
statements that "positive control of each package will
be maintained by utilizing . . . electronic tracking and
tracing systems." This is an example of which type of
data processing?
a)
real-time processing which features immediate
updating as to the location of packages
b)
batch processing which features updating at fixed
time periods
c)
real-time processing which features updating at
fixed time periods such as at the end of an accounting
period
d)
batch processing which features immediate
updating as to the location of packages
58. Documents generated at the end of transaction
processing activities are called
a)
financial statements
b)
operational documents
c)
reports
d)
source documents
59. Which of the following is not a type of report
provided to decision makers by the typical AIS?
a)
financial statements
b)
customer satisfaction surveys conducted by third
parties
c)
managerial reports
d)
All of the above reports are important to decision
makers.
60. Which statement below regarding the AIS and
managerial reports is false
a)
The AIS must be able to provide managers with
detailed and operational information about the
organization's performance.
b)
Both traditional financial measures and
operational data are required for proper and complete
evaluation of performance.
c)
Most source documents capture both financial
and operational data about business transactions.
d)
Traditionally, most AIS systems have been
designed so that both financial and operational data are
stored in a manner that facilitates their integration in
reports.
61. A formal expression of goals and objectives in
financial terms is called a(n)
a)
mission statement.
b)
strategic plan.
c)
budget.
d)
operational plan.
62. A projection of an organization's cash inflows and
outflows is known as a(n)
a)
performance budget.
b)
operating budget.
c)
management budget.
d)
cash budget.
63. Identify an example of external source data that is
important to an organization.
a)
customer satisfaction as gauged by surveys
b)
staff salaries as a percentage of sales
c)
satisfaction of employees with their work
environment
d)
sales revenue divided by the number of hours
worked by the sales staff
64. Some information will have to be collected from
__________ sources to determine, for example,
customer satisfaction.
a)
external
b)
internal
c)
regulatory
d)
competitive
65. Performance reports are primarily used for
a)
financial control.
b)
cash planning.
c)
forecasting.
d)
financial planning.
66. A report which shows actual results, budgets, and
variances is called a
a)
financial plan.
b)
cash budget.
c)
performance report.
d)
managerial report.
67. Variances to the budget should be interpreted by
using the principle of
a)
management by exception.
b)
management by objectives.
c)
management by exemption.
d)
exceptions to variances.
68. One of the most important assumptions about how
managers will act in a budget controlled environment is
that:
a)
managers will largely ignore budgets.
b)
budgets must be too tight to encourage high
aspirations.
c)
budget slack will exist in almost every budget and
is negotiated by all managers.
d)
measurement affects behavior.
69. Which managerial tool below is used to provide the
organization with financial control?
a)
a cash budget
b)
a performance report
c)
a sales budget
d)
a customer satisfaction survey
Chapter 3 – ETHICS, FRAUD, AND INTERNAL CONTROL
TRUE/FALSE
1. The ethical principle of justice asserts that the
benefits of the decision should be distributed fairly
to those who share the risks.
ANS: F
9.
Defalcation is another word for financial fraud.
ANS: T
10. The trend toward distributed data processing
increases the exposure to fraud from remote
locations.
ANS: T
11. The external auditor is responsible for establishing
and maintaining the internal control system.
ANS: F
ANS: T
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.
ANS: F
3.
Employees should be made aware of the firm’s
commitment to ethics.
ANS: T
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.
ANS: F
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.
ANS: F
6.
Source code is an example of intellectual property.
ANS: T
7.
Copyright laws and computer industry standards
have been developed jointly and rarely conflict.
ANS: F
8.
Business bankruptcy cases always involve
fraudulent behavior.
12. Segregation of duties is an example of an internal
control procedure.
ANS: T
13. Controls in a computer-based information system
are identical to controls in a manual system.
ANS: F
14. Preventive controls are passive techniques
designed to reduce fraud.
ANS: T
15. Ethical issues and legal issues are essentially the
same.
ANS: F
16. Internal control systems are recommended but
not required of firms subject to the Foreign
Corrupt Practices Act.
ANS: F
17. Operations fraud is the misuse or theft of the
firm’s computer resources.
ANS: T
18. The Foreign Corrupt Practices Act requires only
that a firm keep good records.
ANS: F
19. A key modifying assumption in internal control is
that the internal control system is the
responsibility of management.
ANS: T
20. Database management fraud includes altering,
updating, and deleting an organization’s data.
ANS: F
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.
ANS: T
22. The Sarbanes-Oxley Act requires the audit
committee to hire and oversee the external
auditors.
ANS: T
23. Section 404 requires that corporate management
(including the CEO) certify their organization’s
internal controls on a quarterly and annual basis.
ANS: F
24. Section 302 requires the management of public
companies to assess and formally report on the
effectiveness of their organization’s internal
controls.
ANS: F
25. The objective of SAS 99 is to seamlessly blend the
auditor’s consideration of fraud into all phases of
the audit process.
ANS: T
CHAPTER 3 - MULTIPLE CHOICE
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
individuals
4. Which characteristic is not associated with
software as intellectual property?
a. uniqueness of the product
b. possibility of exact replication
c. automated monitoring to detect intruders
d. ease of dissemination
5. For an action to be called fraudulent, all of the
following conditions are required except
a. poor judgment
b. false representation
c. intent to deceive
d. injury or loss
6. One characteristic of employee fraud is that the
fraud
a. is perpetrated at a level to which internal
controls do not apply
b. involves misstating financial statements
c. involves the direct conversion of cash or other
assets to the employee’s personal benefit
d. involves misappropriating assets in a series of
complex transactions involving third parties
7.
Forces which may permit fraud to occur do not
include
a. a gambling addiction
b. lack of segregation of duties
c. centralized decision making environment
d. questionable integrity of employees
8.
Which of the following best describes lapping?
a. applying cash receipts to a different
customer’s account in an attempt to conceal
previous thefts of funds
b. inflating bank balances by transferring money
among different bank accounts
c. expensing an asset that has been stolen
d. creating a false transaction
9.
Operations fraud includes
a. altering program logic to cause the application
to process data incorrectly
b. misusing the firm’s computer resources
c. destroying or corrupting a program’s logic
using a computer virus
d. creating illegal programs that can access data
files to alter, delete, or insert values
10. Who is responsible for establishing and
maintaining the internal control system?
a. the internal auditor
b. the accountant
c. management
d. the external auditor
ANS: C
11. The concept of reasonable assurance suggests
that
a. the cost of an internal control should be less
than the benefit it provides
b. a well-designed system of internal controls will
detect all fraudulent activity
c. the objectives achieved by an internal control
system vary depending on the data processing
method
d. the effectiveness of internal controls is a
function of the industry environment
12. Which of the following is not a limitation of the
internal control system?
a. errors are made due to employee fatigue
b. fraud occurs because of collusion between two
employees
c. the industry is inherently risky
d. management instructs the bookkeeper to
make fraudulent journal entries
13. The most cost-effective type of internal control is
a. preventive control
b. accounting control
c. detective control
d. corrective control
14. Which of the following is a preventive control?
a. credit check before approving a sale on
account
b. bank reconciliation
c. physical inventory count
d. comparing the accounts receivable subsidiary
ledger to the control account
15. A well-designed purchase order is an example of
a
a. preventive control
b. detective control
c. corrective control
d. none of the above
16. A physical inventory count is an example of a
a. preventive control
b. detective control
c. corrective control
d. feedforward control
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. none of the above
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
following, which is not involved?
a. concealing the crime to avoid detection
b. stealing something of value
c. misstating financial statements
d. converting the asset to a usable form
30. Which of the following is not an example of
independent verification?
a. comparing fixed assets on hand to the
accounting records
b. performing a bank reconciliation
c. comparing the accounts payable subsidiary
ledger to the control account
d. permitting authorized users only to access the
accounting system
31. The importance to the accounting profession of
the Foreign Corrupt Practices Act of 1977 is that
a.bribery will be eliminated
b. management will not override the company’s
internal controls
c. firms are required to have an effective internal
control system
d. firms will not be exposed to lawsuits
32. The board of directors consists entirely of
personal friends of the chief executive officer.
This indicates a weakness in
a. the accounting system
b. the control environment
c. control procedures
d. this is not a weakness
33. Computer fraud can take on many forms,
including each of the following except
a. theft or illegal use of computer-readable
information
b. theft, misuse, or misappropriation of computer
equipment
c. theft, misuse, or misappropriation of assets by
altering computer-readable records and files
d. theft, misuse, or misappropriation of printer
supplies
34. When certain customers made cash payments to
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
d. access controls
35. The office manager forgot to record in the
accounting records the daily bank deposit. Which
control procedure would most likely prevent or
detect this error?
a. segregation of duties
b. independent verification
c. accounting records
d. supervision
36. Business ethics involves
a. how managers decide on what is right in
conducting business
b. how managers achieve what they decide is
right for the business
c. both a and b
d. none of the above
37. All of the following are conditions for fraud
except
a. false representation
b. injury or loss
c. intent
d. material reliance
38. The four principal types of fraud include all of the
following except
a. bribery
b. gratuities
c. conflict of interest
d. economic extortion
39. The characteristics of useful information include
a. summarization, relevance, timeliness,
accuracy, and completeness
b. relevance, summarization, accuracy,
timelessness, and completeness
c. timeliness, relevance, summarization,
accuracy, and conciseness
d. disaggregation, relevance, timeliness,
accuracy, and completeness
40. Internal control system have limitations. These
include
a. possibility of honest error
b. circumvention
c. management override
d. stability of systems
41. Management can expect various benefits to
follow from implementing a system of strong
internal control. Which of the following benefits
is least likely to occur?
a. reduced cost of an external audit.
b. prevents employee collusion to commit fraud.
c. availability of reliable data for decision-making
purposes.
d. some assurance of compliance with the
Foreign Corrupt Practices Act of 1977.
e. some assurance that important documents
and records are protected.
42. Which of the following situations is not a
segregation of duties violation?
a. The treasurer has the authority to sign checks
but gives the signature block to the assistant
treasurer to run the check-signing machine.
b. The warehouse clerk, who has the custodial
responsibility over inventory in the warehouse,
selects the vendor and authorizes purchases
when inventories are low.
c. The sales manager has the responsibility to
approve credit and the authority to write off
accounts.
d. The department time clerk is given the
undistributed payroll checks to mail to absent
employees.
e. The accounting clerk who shares the record
keeping responsibility for the accounts
receivable subsidiary ledger performs the
monthly reconciliation of the subsidiary ledger
and the control account.
43. Which of the following is not an issue to be
addressed in a business code of ethics required
by the SEC?
a. Conflicts of interest
b. Full and Fair Disclosures
c. Legal Compliance
d. Internal Reporting of Code Violations
e. All of the above are issues to be addressed
9.
In real-time processing systems, routine credit
authorizations are automated.
ANS: T
10. In a computerized accounting system,
segregation of functions refers to inventory
control, accounts receivable, billing, and general
ledger tasks.
ANS: F
Chapter 4—The Revenue Cycle
1.
The packing slip is also known as the shipping
notice.
ANS: F
2.
The bill of lading is a legal contract between the
buyer and the seller.
ANS: F
3.
PTS: 1
The cash receipts journal is a special journal.
ANS: T
8.
PTS: 1
In most large organizations, the journal voucher
file has replaced the formal general journal.
ANS: T
7.
PTS: 1
The purpose of the invoice is to bill the
customer.
ANS: T
6.
PTS: 1
Warehouse stock records are the formal
accounting records for inventory.
ANS: F
5.
PTS: 1
Another name for the stock release form is the
picking ticket.
ANS: T
4.
PTS: 1
PTS: 1
In the revenue cycle, the internal control “limit
access” applies to physical assets only.
ANS: F
PTS: 1
PTS: 1
11. A written customer purchase order is required to
trigger the sales order system.
ANS: F
TRUE/FALSE
PTS: 1
PTS: 1
12. Inventory control has physical custody of
inventory.
ANS: F
PTS: 1
13. The principal source document in the sales order
system is the sales order.
ANS: T
PTS: 1
14. Sales orders should be prenumbered documents.
ANS: T
PTS: 1
15. Integrated accounting systems automatically
transfer data between modules.
ANS: T
PTS: 1
16. If a customer submits a written purchase order,
there is no need to prepare a sales order.
ANS: F
PTS: 1
17. Sales return involves receiving, sales, credit, and
billing departments, but not accounts receivable.
ANS: F
PTS: 1
18. A remittance advice is a form of turn-around
document.
ANS: T
PTS: 1
19. A bill of lading is a request for payment for
shipping charges.
ANS: F
PTS: 1
20. In point-of-sale systems, authorization takes the
form of validation of credit card charges.
ANS: T
PTS: 1
21. The warehouse is responsible for updating the
inventory subsidiary ledger.
ANS: F
ANS: F
ANS: F
ANS: T
1.
The revenue cycle consists of
a. one subsystem–order entry
b. two subsystems–sales order processing and
cash receipts
c. two subsystems–order entry and inventory
control
d. three subsystems–sales order processing,
credit authorization, and cash receipts
2.
The reconciliation that occurs in the shipping
department is intended to ensure that
a. credit has been approved
b. the customer is billed for the exact quantity
shipped
c. the goods shipped match the goods ordered
d. inventory records are reduced for the goods
shipped
3.
The adjustment to accounting records to reflect
the decrease in inventory due to a sale occurs in
the
a.warehouse
b. shipping department
c. billing department
d. inventory control department
4.
Which document triggers the revenue cycle?
a. the sales order
b. the customer purchase order
c. the sales invoice
d. the journal voucher
5.
Copies of the sales order can be used for all of
the following except
a. purchase order
PTS: 1
PTS: 1
25. When customer payments are received, the
mailroom clerk sends the checks to the cash
receipts clerk and the remittance advices to the
AR clerk.
ANS: T
PTS: 1
26. Physical controls are imbedded in computer
systems to control access to data.
ANS: F
PTS: 1
27. Process controls are controls over the logic of the
application.
ANS: T
PTS: 1
28. In a basic technology revenue cycle system, a
robust password control policy should be
implemented.
ANS: T
PTS: 1
29. In an integrated cash receipts system, the cash
receipts clerk reconciles the checks and the
remittance advices and prepares deposit slips.
PTS: 1
CHAPTER 4 – MULTIPLE CHOICE
24. The accounts receivable clerk is responsible for
updating the AR Control accounts to reflect each
customer sale.
ANS: F
PTS: 1
31. Application integrity is achieved through the
systems development and program change
processes.
PTS: 1
23. The stock release document is prepared by the
shipping department to provide evidence that
the goods have been released to the customer.
PTS: 1
30. Multilevel security employs programmed
techniques that permit simultaneous access to a
central system by many users with different
access privileges but allows them to obtaining
information for which they lack authorization.
PTS: 1
22. In a manual system, the billing department is
responsible for recording the sale in the sales
journal.
ANS: T
ANS: T
b. credit authorization
c. shipping notice
d. packing slip
6.
7.
The purpose of the sales invoice is to
a. record reduction of inventory
b. transfer goods from seller to shipper
c. bill the customer
d. select items from inventory for shipment
The customer open order file is used to
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
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 back-orders
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. prenumber 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. prenumber 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 PC accounting system?
a. reliance on paper documentation is
increased
b. functions that are segregated in a manual
environment may be combined in a
microcomputer accounting system
c. backup procedures require human
intervention
d. data are easily accessible
33. Which journal is not used in the revenue cycle?
a. cash receipts journal
b. sales journal
c. purchases journal
d. general journal
34. Periodically, the general ledger department
receives all of the following except
a. total increases to accounts receivable
b. total of all sales backorders
c. total of all sales
d. total decreases in inventory
35. The credit department
a. prepares credit memos when goods are
returned
b. approves credits to accounts receivable
when payments are received
c. authorizes the granting of credit to
customers
d. none of the above
36. Adjustments to accounts receivable for
payments received from customers is based
upon
a. the customer’s check
b. the cash prelist
c. the remittance advice that accompanies
payment
d. a memo prepared in the mailroom
37. The revenue cycle utilizes all of the following
files except
a. credit memo file
b. sales history file
c. shipping report file
d. cost data reference file
38. All of the following are advantages of real-time
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
39. Which document is NOT prepared by the sales
department?
a. packing slip
b. shipping notice
c. bill of lading
d. stock release
40. Which type of control is considered a
compensating control?
a. segregation of duties
b. access control
c. supervision
d. accounting records
41. Which of the following is NOT a common
method for achieving multilevel security?
a.Access control list
b. Application integrity
c. Role based access control
d. All of the above
42. In an integrated cash receipts system, which of
the following is not a task of the mail room
clerk?
a.Prepare deposit slips
b. Open envelopes
c. Prepare remittance list
d. Make bank deposit