ACCT341, Study Guide for Test 2, Final
Chapters 9-12, 14
The test will consist of two parts:
 The first part of the exam will be closed-book. It will cover the subject material on the
study guide below. This part of the exam should take no more than one-hour. Expect a
mixture of objective questions (e.g. T/F, MC) and short answers.
 The second part of the test will be open-book, open-note and you can use computers.
Anything we have covered since the mid-term (in the textbook or out of the textbook)
might show up on this part of the test. Doing your assignments, paying attention in class
and reading your chapters are prerequisites for doing well on this part.
Both parts of the test should be completed within the two-hour period, so if you take too long on
the closed-book portion, there may be insufficient time to complete the open-book portion
CLOSED-BOOK PORTION:
Chapter 9, Internal Controls in an AIS
1.
Be able to identify the five components of internal controls and the major controls that
fall under each component.
2.
Why are mandatory vacations important?
3.
How do fidelity bonds reduce the risk of loss caused by employee theft?
4.
In order to strengthen internal controls, which broad categories of duties should be
separated? (Remember ARCO).
5.
What is the fraud triangle? From the fraud cases covered, be able to use one case to
illustrate the fraud triangle.
6.
Be able to list at least four red flags of fraud.
7.
What percent of American workers steal on the job?
8.
What portion of asset misappropriation involves cash? Why?
9.
Know the definition of skimming, larceny and fraudulent disbursement and be able to
give a real-life example of each.
10.
Why are small business more vulnerable to fraud?
11.
What percent of revenue is estimated to be lost because of fraud?
12.
Which is more frequent or severe: asset misappropriation or financial statement fraud?
13.
In light of the most common initial detection method for fraud, what does the SarbanesOxley Act (SarbOx or Sox) require for public companies?
14.
What data support the effectiveness of anonymous hotlines?
15.
What relationship is there between the size of a fraud and the perpetrator’s position in the
company?
16.
Why are frauds committed by owner/executives more likely detected through a tip than
caught through internal controls?
17.
Define lapping and be able to give an example. Why do virtually all lapping schemes
eventually reveal themselves?
18.
How can shell companies be used to steal? What steps need to be taken to create a shell
company? Be familiar with the Starbucks case and other similar shell company cases.
19.
What internal controls can help prevent ghost employee fraud?
20.
What are two ways that cashiers can steal money?
21.
Why is it hard for top management to deal with an executive who commits fraud?
22.
What are the limitations of internal controls?
23.
Why are internal controls often ineffective against fraud perpetuated by top management?
24.
25.
Be able to give a real-life example.
We watched several videos in class. One video included a segment on the Crazy Eddie’s
case. Review the quiz over Crazy Eddie’s and be able to briefly summarize how and why
the fraud was perpetrated. Also, review the quiz about ZZZZ Best (Barry Minkow) video
and be able to briefly summarize the ZZZZ Best fraud and what Barry is doing today.
In light of the fraud cases we covered in the course, be prepared for a fraud case in which
you will need to identify the controls that could have prevented the fraud from occurring.
Chapter 10, Computer Controls in an AIS
26.
Be able to distinguish between the following and give real-life examples: cold site, hot
site, and flying-start site.
27.
If you owned a small business that used QuickBooks, how would you backup your files
in a responsible manner? Be specific.
28.
How much stronger is a 15-character password than an 8-character password?
29.
Distinguish between general and application controls.
30.
Study the various input controls (e.g. POS devices, input masks, edit tests, unfound
record tests, check digits) and know their purposes.
31.
Know the purpose of major processing controls, such as batch control totals and record
counts.
Chapter 11, Computer Crime & Ethics
32.
Review the following terms: salami technique, data diddling, logic bomb, hacker, virus,
worm, Trojan Horse, social engineering, lockout systems, forensic accountants (CFE),
dumpster diving, phishing, and smishing.
33.
Who is Kevin Mitnick? What did he do to get arrested and what is he doing now?
34.
Why is Robert Morris Jr. infamous and what did he do?
Chapter 12, Auditing AISs
35.
What is the primary concern of internal auditors? Who should they report to?
36.
What is the primary concern of external auditors?
37.
How does auditing around the computer differ from auditing through the computer?
Which is being done more today and why?
38.
Regarding the three approaches for auditing through the computer (test data, integrated
test facility, parallel simulation), know the advantages and disadvantages of each.
39.
Review the purpose of each of the following: audit hook, exception reports, transaction
tagging, snapshot technique.
40.
What is Benford’s Law and how can it be used? What is the probability that the first
digit in a number will be a 1? What about a 9?
41.
Which section of SarbOx deals with internal controls?
42.
What tools in Excel can be used to find spreadsheet errors?
Chapter 14, Accounting on the Internet
43.
Know the difference between HTML, XML and HTML.
44.
Understand how XBRL works, its benefits and its current status around the world. Has
the SEC mandated its use for public companies?
45.
Distinguish between e-payment and e-wallet.
46.
Understand the purpose of digital signatures, certificates and time stamps.
47.
Be able to decrypt a secret message using a simple encryption technique as illustrated in
your text.
Practice Set 2
48.
Know which windows in QB various transactions should be entered and how those
transactions affect the accounts (dr and cr). Transactions to know include: credit sales,
cash sales, receive payments, deposit money at bank, pay bills, pay sales tax, order
inventory, receive inventory ordered along with invoice, adjust inventory after physical
count, record depreciation, write-off to bad debts expense, adjust prepaid insurance, write
check to employee, record employer’s payroll, etc.
49.
What is the purpose of Form W-2? Form 941? Form 940? Who pays SS and MC tax?
How is FIT withholding determined? Who pays FUTA tax?
50.
Be able to explain the following terms: B&O tax, WCI tax, FUTA tax.
51.
Does QB allow a person to set up budgets and make comparison reports?
52.
What types of graphs does QB automatically produce?
53.
Be able to give an example for using the filter feature on QB.
54.
Be able to give an example of a form letter that QB automatically generates?
55.
Be able to give an example of how the password feature in QB can strengthen internal
controls.
56.
In QB, can you delete an account that has transactions posted in it? Can you merge two
accounts?
57.
In QB, what does it mean to make an account inactive? Is this the same as deleting an
account?
58.
Can a person customize invoices in QB and add letterhead or logos?
Practice Set 3
59.
Know the windows in Multiledger in which various transactions should be entered and
how the accounts are affected (dr and cr). For example, in which window would income
earned on credit (giving rise to a receivable) be entered?
60.
How is a profit from a partnership taxed? Which tax forms are sent to partner’s showing
their share of the taxable income?
61.
In a typical profit-sharing agreement, how are partners awarded for their work and for
their investment? Know the mechanics of how profits (losses) are distributed in a
partnership?
Practice Set 4 - Peachtree
62.
How is Peachtree (Sage50) similar to QuickBooks? Different? What options does
Peachtree allow that QuickBooks does not (and vice versa)? Which is your preference?
Why?