CHAPTER 1

1. System
2. Systems Concept 1. An entity consisting of two or more components or subsystems that interact to achieve a
3. Goal Conflict goal, the equipment and programs that comprise a complete computer installation,
4. Goal Congruence and the programs and related procedures that perform a single task on a comp uter.
5. Integration
2. A systems anal ysis principle that states that changes in subsystems cannot be made
6. Data without considering the effect on other subsystems and the system as a whole
7. Information 3. Occurs when a decision or action of a subsyst em is inconsistent with another subsystem
8. Information or the system as a whole
Ov erload 4. Is achi eved when a subsystem achieves its goals while contributing to the organization's
9. Value of overall goal
Information 5. Eliminating duplicate recording, storage, reporting, and other pro cessing activities in an
10. Mandatory organization. For example, companies that used to have separate programs to prepare
Information customer statements, collect cash, and maintain accounts receivable records now
11. Essential combine these functions into a single application.
Information 6. Facts that are collected, recorded, stored, and processed by an information system to
12. Discretionary produce information
Information 7. Data that have been organized and pro cessed to provide meaning to a user.
13. Accounting Information can be classified as mandatory, essential, or discretionary.
Information 8. The state in which additional information cannot be used efficientl y and has no
System (AIS) marginal value
14. Value Chain 9. The benefit produced by in the information minus the cost of producing it
15. Primary Activities 10. Information required by a governm ental entity (such as a report to the IRS on taxable
16. Support Activities income and withholdings)
17. Suppl y Chain 11. Information required to conduct business with external partie s (such as purchase orders
18. Structured and customer billings)
Decision 12. Information that is available only to certain internal users.
19. Semistructured 13. A system that collects, records, stores, and processes data to produce information for
Decision decision makers. An AIS has six components: people, procedures and instructions, data,
20. Unstructured software, information technology infrastructure, and internal controls and security
Decision measures.
21. Operational 14. The linking together of all the primary and support activities in a business. Value is added
Control as a product passes through the chain.
22. Management 15. Activities in the value chain that are performed to create, market, and deliver products
Control and services to customers and provide post -delivery service and support. Primary
23. Strategic Planning activities include production, shipping and receiving, and marketing
24. Product 16. Activities in the value chain the enabl e the primary activities to be performed effici ently
Differentiation and effectivel y. Examples include administration, purchasing, and human resources.
Strategy 17. An extended system that includes an organization's value chain as well as its suppliers,
25. Low-cost strategy distributors, and customers.
26. Variet y-based 18. Decisions that are repetitive, routine, and understood well enough that they can be
strategic position delegated to the lower-level employees of an organization
27. Needs-based 19. Decisions that require subj ective assessment and judgment to supplement formal data
strategic position analysis.
28. Access-based 20. Nonrecurring and nonroutine decisions that require considerable judgem ent and
strategic position intuition. No framework or model exists to solve such problems
29. Synergy 21. Decisions that are concerned with the efficient and effective performance of specific
30. Predictive Anal ysis tasks in an organization
22. Activities by management designed to motivate, encourage, and assist officers and
employees in achi eving corporate goals and obj ectives as effectively and efficientl y as
possible.
23. Decisions that establish the organization's objectives and policies for accompl ishing
those objectives
24. Adding features or services not provided by competitors to a product to be able to
charge customers a premium price
25. Striving to be the most efficient producer of a product or service
26. Producing or providing a subset of the industry's products or services
 27. Trying to serve most or all of the needs of a particular group of customers in a target
market
28. A strategic position that serves a subset of customers who differ from other customers in
terms of factors such as geographic location or size
29. When an entire system of organizational activities is greater that the sum of each
individual part
30. Uses data warehouses and complex algorithms to forecast future events, based on
historical trends and calculated probabilities
MULTIPLE CHOICE

Which of the following is not a financial

transaction? When viewed from the highest to most
a)Purchase or products elementallevel, the data hierarchy is:
b)Cash receipts a)Attribute, record file
c)Updated valid vendor file b)Record, attribute, key
d)Sale of inventory c)File record, attribute
C d)File, record, keye)Key, record, file
C
The follow ing are subsystems of the accounting
information system, except Which is not an accountant's primary role in
a)Transaction processing system information systems?
b)Human resource system a)System user
c)General ledger/ financial reporting system b)System auditor
d)Management reporting system c)System designer
B d)System programmer
D
Which of the following is not a purpose of the
transaction processing system? Which of the following is not an objective of all
a)Managing and reporting on the status of information systems?
financial investments a)Support for the stewardship function of
b)Conv erting economic events into financial management
transactions b)Support for management decision making
c)Distributing essential information to operations c)Support for the day to day operations of the
personnel to support their daily operations firm
d)Recording financial transaction the d)All of the above are the objectives
accounting records D
A
Which of the following best describesthe
The objectives of the data collection activity of activities of the material management function?
the general model for AI S are to collect data a)Purchasing, receiving and inventory control
that are: b)Receiving, sales, distribution and purchasing
a)Relev ant andredundant and accounts payable
b)Efficient and objective c)Receiving, storage, purchasing and accounts
c)Efficient and relev ant payable
d)Efficient and redundant d)Purchasing, receiv ing and storage
e)Purchasing, storage and distribution
C D

Which of the following is not a characteristic of Which of the following best describes the
effective information? activities of the production function?
a)Retrieval a)Maintenance, inventory control and
b)Storage production planning
c)Summarization b)Production planning, qualitycontrol,
d)Precision manufacturing and cost accounting
D
c)Quality control, production planning, The production subsystem of the conversion
manufacturing and payroll cycle includes all of the follow ing, except:
d)Maintenance, production planning, storage a)Determining raw materials requirements
and quality control b)Make or buy decisions on component parts
e)Manufacturing, quality control and c)Release of new materials into production
maintenance d)Scheduling the goods to be produced
E B

Which of the following best describes the Which of the following is a temporary file?
activities of the accounting function? a)Transaction file
a)I nventory control, accounts payable, fixed b)Master file
assets and payroll c)Reference file
b)Fixed assets, accounts payable cash d)Journal file
disbursements and cost accounting A
c)Purchasing, cash receipts, accounts payable, A documentation tool used to represent the
cash disbursements and payroll logical elements of a system is a (an)
d)I nventory control, cost accounting, accounts a)Programming flow chart
payable, cash disbursements and payroll b)Entity relationship diagram
A c)Document flowchart
d)Dataflow diagram
Which statement is not true? D
a)Business activities begin w ith acquisition of
materials, property and labour in exchange for Which of the following is not an adv antage of
cash real time processing files over batch processing?
b)The conversion rule includes the task of a)Shorter transaction processing time
determining raw materials requirements b)Reduction of inventory stocks
c)Manufacturing firms hav e a conversion cycle c)I mproved customer service
but retail firms do not d)All are adv antages
d)A payroll check is an example a product D
documents of the payroll system
e)A journal voucher is actually a special source Which statement is not correct?
document a)Legacy systems may process financially
C significant transactions
b)Some legacy systems use database
A documentation tool that depicts the physical technology
flow of information relating o particular c)Mainframes are exclusive to legacy systems,
transaction through an organization is a: while modern systems use only the client -server
a)Document flowchart model
b)Program flowchart d)All of the above are true
c)Decision tale D
d)Work distribution analysis
e)Systems survey Which of the following is not true of a turnaround
A document?
a)They may reduce the number of errors made
Sequential file processing w ill not permit by external parties
a)Data to be edited on separate computer run b)They are commonly used by utility companies
b)The use of a database structure c)They are documents used by internal parties
c)Data to be edited in an off line mode only
d)Batch reprocessing to be initiated from a d)They are both input and output documents
terminal C
e)Data to be edited on a real time basis
E Which of the following is not a true statement?
a)Transactions are recorded on source
documents and are posted to journals d)I ndependent verification
b)Transactions are recorded in journals and are B
posted to ledgers
c)I nfrequent transactions are recorded in the Which of the following is not a necessary
general journal condition under to constitute a fraudulent act?
d)Frequent transactions are recorded in special a)I njury or loss
journals b)Material fact
A c)Written documentation
d)Justifiable reliance
Which of the following is true of the relationship C
between subsidiary ledgers and general ledger
accounts? Management can expect v arious benefits to
a)The tw o contain different and unrelated facts follow from implementing a system of strong
b)All general ledger accounts have subsidiaries internal control. Which of the following benefits
c)The relationship between the two provides an islikely to occur?
audit trail from the financial statements to the a)Reduction of cost of an external audit
source documents b)Prevention of employee collusion to commit
d)The total of subsidiary ledger accounts usually fraud
exceeds the total in the related general ledger c)Av ailability of reliable data for decision-making
account purposes
C d)Some assurance of compliance
B
Real time systems might be appropriate for all of
the following, except: Providing timely information about transaction in
a)Airline reservations sufficient detail to permit proper classification
b)Payroll and financial reporting is an example of:
c)Point of sale transactions a)The control environment
d)Traffic control systems b)Risk assessment
B c)I nformation and communication
d)Monitoring
The fraud scheme hat is familiar to the borrowing C
from Peter to pay Paul scheme is:
a)Expense account fraud To conceal the theft of cash receipts from
b)Bribery customers in payment of their accounts, which of
c)Lapping the following journal entries should the
d)Transaction fund anomaly bookkeeper make?
C a)Dr miscellaneous expense, Cr cash
b)Dr petty cash, Cr cash
Which ofthe following transaction is often called c)Dr cash, CR accounts receivable
a compensating control? d)Dr sales returns, CR accounts receivable
a)Transaction authorization D
b)Superv ision
c)Accounting records The underlying assumption of reasonable
d)I ndependent verification assurance regarding implementation of internal
B control means that:
a)By the control that fraud has both occurred in
Ensuring that all materials transactions processed the period
by the information system are valid and in b)Auditors are reasonably assured that
accordance with management's objectives is employee carelessness can weaken an internal
anexample of: control structure
a)Transaction authorization c)I mplementation of the control procedure
b)Superv ision should not have a significant adverse effect on
c)Control over accountingrecords efficiency or profitability
d)Management assertions about control
effectivenessshould prov ide auditors with The best reason for establishing a code of
reasonable assurance conduct w ithin an organization is that such
e)A control applies reasonably well to all forms of codes
computer technology a)Are typically required by the government
C b)Express standards of individual behav iour for
members of the organization
The primary purpose of establishing a code of c)Provide a quantifiable basis for personnel
conduct w ithin a professional organization such ev aluation
as PI CPA is to d)Have tremendous public relations potential
a)Reduce the likelihood that members of the B
profession will be sued for substandard work
b)Ensure that all members of the profession Which of the following statements is/ are true
perform at approximately the same level of regarding the prevention of fraud?
competence I -the primary means of preventing fraud is
c)Promote an ethical culture among professions through internal control established and
who serve others maintained by management
d)Require members of the profession to exhibit II -internal auditors are responsible for assisting in
loyal in all matters pertaining to the affairs of their the prevention of fraud by examining and
organization. ev aluating the adequacy of internal
C controlsystem
III -internal audits should assess the operating
An accounting association established code of effectiveness of fraud -related communication
ethics for all members. What is one of the systems
association's primary purpose of establish the a)I only
code of ethics? b)II and III only
a)To outline criteria for professional behaviour to c)II only
maintain standards of integrity and objectivity d)I , II and II
b)To establish standards to follow for effective B
accounting practice
c)To prov ide framework within which accounting The internal audit activity's responsibility for
policies could be effectively developed and preventing fraud is to
executed a)Establish internal control
d)To outline criteria that can be used in b)Maintain internal control
conducting interviews of potential new c)Ev aluate the system of internal control
accountants d)Exercise operating authority over fraud
A prevention activities.
C
A review of an organization's code of conduct
revealed that it contained comprehensive An internal auditor who suspects fraud should
guidelines designed to inspire high level of a)Determine that a loss has been incurred
ethical behav iour. The reviews also revealed that b)I nterview those who have been involved in the
employees were knowledgeable of its provisions. control of assets
However, some of employees still did not comply c)I dentify the employees who could be
with the code. What element should a code of implicated in the case
conduct contain to enhance its effectiveness? d)Recommend an inv estigation after
a)Periodic review and acknowledgement by all determining that fraud has occurred
employees D
b)Employee involvement in its development
c)Public knowledge of its contents and purpose Internal auditors are responsible for reporting the
d)Provisions for disciplinary action in the event of fraud to the Board Audit Committee w hen:
violations a)The incidence of significant fraud has been
D
established to a reasonable certainty b)A ratio analysis discloses cost of goods sold is
b)Suspicious activ ities have been reported 50% of sales
c)I rregular transactions have been indentified c)A cross -sectional analysis of common size
and are under investigation statements discloses the firm's percentage of
d)The review of all suspected fraud -related cost of goods sold to sales is 40% and the industry
transactions is complete av erage percentage of cost of goods sold to
A sales is 50%
d)A cross -sectional analysis of common size
A fraud report is required: statements discloses the firm's percentage of
a)At the conclusion of the detection phase cost of goods sold to sales in 50% and the
b)At the conclusion of the investigation phase industry average percentage of cost of goods
c)At the conclusion of both the detection and sold to sales is 40%.
inv estigation phases A
d)Neither at the conclusion of the detection
phase nor at the conclusion of the investigation Which of the following policies is most likely to
phase result in an environment conducive to the
B occurrence of fraud?
a)Budget preparation input by the employees
Which of the following is the information that who are responsible for meeting the budget
must be included in a fraud report at the b)Unreasonable shares and production goals
conclusion of an investigation? c)The div ision's hiring process frequently results in
a)Purpose, scope, results and when appropriate, the rejection of adequately trained applicants
an expression of auditors overall opinion d)The application of some accounting controls
b)Criteria, condition, cause and effect on sample basis.
c)Background, observ ations and B
recommendations
d)Observations conclusions, recommendations Auditors should have know ledge about red flags
and corrective action that hav e proven to be associated with
C management fraud. Which of the following
factors have generally both been associated
Red flags are conditions that indicate a higher with management fraud?
likelihood of fraud. Which of the following is not a)Generous performance-based reward systems
considered a red flag? b)A domineering management
a)Management has delegated the authority to c)Regular comparison of actual results with
make purchases under a certain value to budgets
subordinates d)A management preoccupation with increased
b)An indiv idual has held the same cash-handling financial performance
job for an extended period without any rotation C
of duties
c)An indiv idual handling marketable securities is When comparing perpetrators w ho have
responsible for making the purchases, recording embezzled organization funds with perpetrators
purchases and reporting any discrepanciesand of financial statement of fraud, those who have
gains/ losses to senior management falsified financial statement are less likely to
d)The assignment of responsibility in the accounts a)Have experienced an autocratic
receivable department is not clear. management style
A b)Be living beyond their obvious means of
support
Which of the following is an indicator of possible c)Rationalize fraudulent behaviour
financial reporting fraud being perpetrated by d)Use organizational expectations as
management of a manufacturer? justifications for the act
a)A trend analysis discloses sales increases of 50% B
andcost of goods sold increases of 25%
Which of the following controls if property favourable contracts. Which of the following is
implemented, is most likely to crease the the lease effective in preventing this problem?
likelihood of fraud: a)A specific organizational policy prohibiting the
a)Require period rotation of purchases among acceptance of anything of value from a v endor
difference vendors b)An organization code of ethics that prohibits
b)Require rotation of duties among the three such activity
purchasing agents c)A requirement for the purchasing agent to
c)Require that receivable reports be sent directly develop a profit of all vendors before the
to accounts payable requiring that the updated vendors is added to the authorized vendor list
to the perpetual inventory recordbe made by d)The establishment of long-term contracts with
the receiv ing department major v endors, with the contract terms approved
d)Require that the updates to perpetual by senior management
inv entory record be made by the receiv ing C
department
C A purchasing agent receive expensive gifts from
a v endor in return for directing a signify ant
Management has requested that the internal amount of business to that vendor. Which of the
auditor investigate the possibility that a following organizational policies most effectively
purchasing agent is receiving kickbacks. Which prevents such an occurrence?
of thefollow ing procedures is least effective in a)Purchases exceeding specified monetary
addressing managements concern? amounts should be approved by an official who
a)Confirm all contract terms with vendors determines compliance with budgetary
b)Analyze, by purchasing agent, all increases in requirements. b)I mportant high-volume materials
cost of procured goods from specific vendors sold regularly is purchased from at least two
c)Take statistical sample of goods purchased different sources in order to afford supply
and compare purchase prices for goods with protection.
those of other sources of similar such as other c)The purchasing function should be
organizations or catalogue decentralized and each department manager
d)Observe any changes in the lifestyles or or supervisor does his/ her own purchasing.
indiv idual consumption habits of the purchasing d)Competitiv e bids should be solicited on
agents involved purchases to the maximum extent that is
A practicable.
C
Which of the following controls is the least
effective in preventing a fraud conducted by A programmer's accumulation of round-off errors
sending purchase order to bogus vendors? into one account, which is later, accessed by the
a)Require that all purchases be made from an programmer, is a type of computer fraud. The
authorized vendor list be maintained best way to prevent this type of fraud is to
independently by the individual placing the a)Built in judgement with reasonableness tests
purchase order. b)Require that only approved b)I ndependently test programs during
vendors e paid for purchases, based on actual development and limit access to the program
producing c)Segregate duties of systems development and
c)Require contract with all major vendors from programming
whom production components are purchased. d)Use control totals and check the results of the
d)Require that total purchases for a month not computer
exceed the total budgeted purchases for that B
month
D Which of the following is a red flag that an
organization may be engaging in fraudulent
A potential problem for a manufacturer is that activity?
purchasing agents may take kickbacks or a)Financial statement results that are above the
receive gifts from v endors in exchange for results for the industry and operations are slightly
more efficient that the average for theindustry
b)Lack of earnings growth despite large reserves example, detective, preventive or directive.
of cash Which of the following is a directive control?
c)Existence of complex transactions that are a)Monthly bank statement reconciliation
difficult to understand and appear to have little b)Dual signatures on all disbursements over a
business purpose specific amount
d)Strong internal reporting in a company w ith c)Recording every transition on the day it occurs
decentralized operations d)Requiring all members of internal audit activity
C to be CPAs
C
Controls should be designed that
a)Operations are performed efficiently Internal auditors regularly ev aluate controls.
b)Management's plans have not been Which of the following best describes the
circumv ented by worker collusion concept of control as recognized by internal
c)The internal audit activity guidance and auditors?
oversight of managements performance is a)Management regularly discharges personnel
accomplished economically and efficiently who do not perform up to expectations
d)Managements planning, organizing and b)Management takes action to enhance the
directing processes are property ev aluated. likelihood that established goals and objectives
C will be achieved.
c)Control represents specific procedures that
Which of the following best defines control? accountants and auditors design to ensure the
a)Control is the result of proper planning, correctness of processing
organizing and directing by management d)Control procedures should bedesigned from
b)Controls are statements of what the the bottom up to ensure attention to detail
organization chooses to accomplish B
c)Control is provided when cost-effective
measures are taken to restrict deviations to a The internal audit service typically prov ides which
tolerable level of the follow ing to the Board Audit Committee?
d)Control accomplishes objects and goals in an a)Ov erall evaluation of the adequacy and
accurate, timely and economical fashion effectiveness of internal control processes
A b)A conclusion about the coverage and
adequacy of the internal auditing report.
Controls that are designed to provide c)The internal audit activity's working papers
management w ith assurance of the realization of d)The committee's report to the governing board
specified minimum margin of sales are: A
a)Directive controls
b)Preventive controls Because of the increased in published reports of
c)Detective controls corporate governance failures, senior
d)Output controls management and the Board Audit Committee
A are requesting additional services from internal
auditors. This most likely includes evaluation of
The procedure requiring preparation of a the:
prelisting of incoming cash receipts,with copies a)Reliability of external auditors
of the prelist going to the cashier and to b)I ntegrity of senior management
account, is anexample of w hich type or control? c)I nternal controls
a)Preventive d)Accountability of senior management
b)Corrective C
c)Detective
d)Directive The most effective internal control guides
B av ailable today is the COSO internal control
integrated framework. Which of the following is
Controls may be classified according to the one of its conclusions?
function they are intended to perform, for
a)Only management's participation is needed d)Determination of the amount of spoilageat the
for control to be effective end of the manufacturing process
b)The control framework is tied to the business B
objectives, so it is not flexible enough to be
adapted w ithout a major undertaking The requirement that purchase be made from
c)I nternal control is limited to accounting supplies on an approved vendor list is an
controls example of
d)Operating efficiently and effectively are a)Preventive control
important aspects of the business b)Detective control
D c)Corrective control
d)Monitoring control
Which of the following is an example of A
feedback control?
a)Preventive maintenance Which of the following are elements included in
b)I nspection of completed goods the control environment?
c)Close supervision of production on line workers a)Organization structure, management
d)Measuring performance against a standard philosophy and planning
B b)I ntegrity and ethical values, assignment of
authority and human resource policies
The steps in a typical control process include: c)Competence of personnel, back up facilities,
1) Selecting strategic control points at w hich to law s and regulars
gather information about activities being d)Risk assessment, assignment of responsibility
performed and human resource practices
2) Accumulating, classifying and recording data B
samples
3) Observing the work or collecting samples of Inadequate system of internal controls is most
data likely to detect a fraud perpetrated by
4) Determining w hether performance is a)Group of employees in collusion
satisfactory b)Single employee
5) Rev iewing and revising standards6) Reporting c)Group of managers in collusion
significant deviations to managers concerned d)Single manager
What is the proper order of these steps? B
a)1,3,2,4,6,5 c)1,3,4,2,6,5
b)1,2,3,4,5,6 d)1,3,4,2,5,6 COSO treats internal control a s process
A designed to provide reasonable assurance
regarding the achievement of objective related
Which of the following statements regarding to
effective control systems is false? a)Reliability of financial reporting
a)Excessive controls are costly in time and b)Effectiveness and efficiency of operations
money b)Outdated information is inappropriate c)Compliance with applicable laws and
c)Controls should measure the performance of regulations
all areas d)All of the above
d)Controls should be simple e)None of the above
C D

Which of the following would minimize defects in Which of the following are elements of the
finished goods caused by poor quality raw control environment?
materials? a)I ntegrity and ethical values
a)Documented procedures for the proper b)Organizational structure
handling of work-in-process inventory c)Assignment of authority and responsibility
b)Requirematerial specifications for all purchases d)All of the above
c)Timely follow-up on all unfavourable usage e)None of the above
variances D
 c)The sales manager has the responsibility
Management has a role in the maintenance of approve credit and the authority to write off
control. In fact, management sometimes is a accounts
control. Which of the following involves d)The department time clerk is given the
managerial functions as a control? undistributed payroll checks o main to absent
a)Monitoring performance employees
b)Use of an organizational policies manual A
c)Maintenance of quality assurance program
d)Establish of in internal audit activity If internal control is well designed, two tasks that
A should be formed by difference persons are:
a)Approval of bad debt write offs and
Which of the following is a factor affecting risk? reconciliation of accounts payable subsidiary
a)A new personnel ledger and controlling account
b)New or revamped information systems b)Distribution f payroll checks and approval of
c)Rapid growth sales returns for credit
d)All of the above c)Posing of amounts from both the cash receipts
D journal and cash payments journal to the
The policies and procedures helping to ensure general ledger
that management directives are executed and d)Recording of cash receipts and preparation of
actions are taken to address risks to bank reconciliations
achievement of objectives describe: D
a)Risk assessments b)Control environments
c)Control activities Which of the following situations represents an
C internal control weakness in the payroll
department?
Budgets are necessary component of financial a)Payroll department personnel are rotated in
decision-making because the help provide an their duties
(an) b)Pay checks are distributed by the employees'
a)Efficient allocation of resources immediate supervisor
b)Means to use of the firm's resources c)Payroll records are reconciled with quarterly
c)Automatic corrective mechanism for errors tax reports
d)Means to check managerial discretion d)The timekeeping function is independent of
A the payroll department
B
Which of the following is the principal advantage
of budgeting? Which of the following activities represents an
a)Employee motiv ation b)Performance appropriate personnel department function and
ev aluation deterrent to payroll fraud?
c)Forced planning d)communication a)Distribution of pay checks b)Authorization of
C overtime
c)Authorization of additions and deletions from
Internal control should following certain basic the payroll
principles to achieve its objective. One of these d)Collection and retention of unclaimed pay
principles is the segregation of functions. Which checks
one of the following example does not violate C
the principle of segregation functions?
a)The treasurer has the authority or sign checks Which of the following described a control
but gives the signature block to the assistant weakness?
treasurer to run the check-signing machine a)Purchasing procedures are well designed and
b)The w arehouse clerk, who has the custodial followed unless otherwise directed by the
responsibility over inventory in the warehouse, purchasing supervisor.
may authorize disposal of damaged goods b)Pre-numbered blackpurchase orders are
secured within the purchasing department
c)Normal operational purchases fell in the range b)I ncreases in insurance overage
from P500 to P1,000 w ith two signatures required c)Regular reconciliation of physical inventories to
for purchases over P1,000 accounting records
d)The purchasing agent invests in publicly traded d)Regular confirmation of the amount on hand
mutual fund that lists the stock of one of the with the custodian of the warehouse
organization supplies in its portfolio C
A
Which of the following controls would prevent
A utility w ith a large investment in repair vehicle the ordering of quantities in excess of
would most likely implement w hich internal organization's needs?
control to reduce the risk of vehicle theft or loss? a)Rev iew of all purchase requisitions by a
a)Rev iew insurance coverage for adequacy supervisor in the user department prior to
b)Systematically account for all repair work submitting them to the purchasing department
orders b)Automatic reorder by the purchasing
c)Physically inventoryvehicles and reconcile the department when low inventory level is indicated
results with the accounting records by the system
d)Maintain vehicles in a secured location w ith c)A policy requiring review of the purchase order
release return subject to approv al by a before receiving a new shipment
custodian d)A policy requiring agreement of the receiving
C report and packing slip before storage of new
receipt
A system of internal control includes physical A
controls over access to and use of asses and
record. A departure from the purpose of such Which function or department stated below,
procedure is that records the decrease in inventory due to a sale?
a)Access to the safe-deposit box requires two a)Warehouse b)Sales department
officers c)Billing department d)I nventory control
b)Only storeroom personnel and line superv isors D
hav e access to the raw materials storeroom
c)The mailroom compiles a list of the checks Which situation indicates a weak internal control
received in the incoming mail structure in these instances?
d)Only sales persons and sales supervisors use a)The AR clerk authorizes the write off of bad
sales department vehicles debts
B b)The record-keeping clerk maintains both AR
and AP subsidiary ledgers
Which of the following controls could be used to c)The inventory control clerk authorizes inventory
detect bank deposits that are recorded but purchases
never made? d)The AR clerk prepares customer authorizations
a)Establishing accountability for receipts at the every month
earliest possible time A
b)Linking receipts to other internal
accountabilities, for example, collections to Which of the following functions should be
either accounts receivable or sales segregated?
c)Consolidating cash receiving points a)Opening the mail and recording cash receipts
d)Hav ing bank reconciliation performed by a in the journal
third party b)Authorizing credit and determining reorder
D quantities
c)Shipping goods and preparing the bill of lading
Management can best strengthen internal d)Providing information on inventory levels and
control over custody of inventory stored in an off- reconciling the bank statement
site warehouse by implementing: A
a)Reconciliation of transfer slips to/ from the Which document triggers the update of the
warehouse with inventory records inv entory subsidiary ledger?
a)Bill of lading b)Stock release b)Cash disbursements is an independent
c)Sales order d)Shipping accounting function
notice c)Cash disbursements is a treasury function
B d)Cash disbursement function in a part of the
general ledger department
When will a credit check approval most likely C
require specific authorization by the credit
department? When goods are received and the receiving
a)When verifying that the current transaction report has been prepared, which ledger may be
does not exceed the customer's credit limit updated?
b)When verifying that the current transaction is a)Standard cost inventory ledger
with a valid customer b)I nventory subsidiary ledger
c)When a v alid customer places a materially c)General ledger
large order d)Accounts payable subsidiary ledger
d)When a valid customer returns goods B
C
Which task must still require human intervention in
Which of the following functions should be automated purchases/ cash disbursements
segregated? system?
a)Opening the mail and recording cash receipts a)Determination of inventory requirements
in the journal b)Preparation of purchase order
b)Authorizing credit and determining reorder c)Preparation of receiving report
quantities d)Preparation of check register
c)Shipping goods and preparing the bill of lading C
d)Providing information on inventory levels and
reconciling the bank statement Which of the following tasks should the cash
A disbursement clerk not perform?
a)Rev iew the supporting documents for
Which document would an auditor most likely completeness and accuracy
choose to examine closely to ascertain that all b)Prepare checks
expenditures incurred during the accounting c)Approve the liability
period have been recorded as liability? d)Mark the supporting documents paid
a)I nvoices b)Purchase orders C
c)Purchase requisitions d)Receiving reports
D Depreciation records include all of the following
information about fixed assets except the
Which one of the following departments does a)Economic benefit of purchasing the asset
not have a copy of the purchase order? b)Cost of the asset
a)Purchasing department c)Depreciation method being used
b)Receiving department d)Location of the asset
c)Accounts payable department A
d)General ledger department
D Which control is not a part of the fixed asset
system?
Which document typically triggers the process of a)Formal analysis of the purchase request
recording liability? b)Rev iew of the assumptions used in the capital
a)Purchase requisition b)Purchase order budgeting model
c)Receiving report d)Suppliers' invoice c)Development of an EOQ model
D d)Estimates of anticipated cost savings
C
Which of the following is true?
a)Cash disbursement function is part of accounts Objectives of the fixed assets system do not
payable include:
a)Authorizing the acquisition of the fixed assets
b)Recording depreciation expense Which of the following is not an adv antageous
c)Computing gain and/ or loss of the disposal of reason to reduce inventories?
fixed assets a)I nventories provide a competitive adv antage
d)Maintaining a record of the fair market value b)I nventories can invite overproduction
of al fixed assets. c)I nventories are expensive to maintain
D d)I nventories may conceal problems
e)All of the above
Which of the following is not a characteristic of E
the fixed asset system?
a)Acquisitions are routine transactions requiring A chart of account would best be coded in an
general authorization (a) _____ scheme
b)Retirements are reported on an authorized a)Alphabetic b)Mnemonic
disposal report form c)Block d)Sequential
c)Acquisition cost is allocated over the expected C
life of the asset
d)Transfer of fixed assets among departments is Which of the following statements is not true?
recorded in the fixed asset subsidiary ledgers a)Sorting records that are coded alphabetically
A tends to be more difficult for users than sorting
numeric sequences
Which department/ or office is responsible for b)Mnemonic coding require the user to
approving pay rate changes? memorize codes
a)Human resource personnel c)Sequential codes carry no information content
b)Timekeeping beyond their order in the sequence
c)Accounting d)Mnemonic codes are limited in their ability to
d)Paymaster e)Payroll preparation represent items within a class
A B

Which internal control is not an important part of Which file has as its primary purpose to present
the payroll system? comparative financial reports on historic basis?
a)Superv isors verify the accuracy of employee a)Journal voucher history file
time cards b)Budget master file
b)Pay checks are distributed by an independent c)Responsibility file
paymaster d)General ledger history file
c)The a/p department verifies the accuracy of D
payroll register before transferring payroll funds to
the general checking account A coding scheme in the form of acronyms
d)The general ledger department reconciles the withother combinations that convey meaning is
labour distribution summary and the payroll a (an):
disbursement voucher a)Sequential code b)Block code
C c)Alphabetic code d)Mnemonic code
D
The fundamental EOQ model:
a)Provides for fluctuating lead times during Which of the following is not a potential exposure
reorder cycles of financial reporting system?
b)Is relatively insensitive to errors in demand, a)A defective audit trail
procurement costs and carrying costs b)General accounts that are out of balance with
c)Focuses on the trade off between production subsidiary accounts
costs and carrying costs c)Unauthorized access to the check registers
d)Is best used in conjunction with a period d)Unauthorized access to the general ledger
inv entory system C
e)None of the above
C
Which task should the general ledger perform? a)Time sharing b)Multitasking
a)Update the general ledger c)Multiprocessing d)Batch processing
b)Prepare journal vouchers C
c)Hav e custody of physical assets
d)Have record keeping responsibility for special Which of the following statements about
journals of subsidiary ledgers personal computers, midrange computers and
A mainframe computers is true?
a)Personal computers usually cost more than
The Ozone Corp uses a performance reporting midrange computers but less than mainframes
system that shows on line of data for each b)Because of the increased use of personal
subordinate who reports to a supervisor. The data computers, there will be little need for
presented show the actual costs incurred during mainframes in the near future
the period, the budgeted costs and all variances c)Midrange computers must be programmed
over budget for that subordinates department. indirectly in machine language while mainframes
The name of this system reporting is: use higher -level language
a)Contribution accounting d)The cost per transaction to process on each
b)Responsibility accounting type of computer has decreased in recent years.
c)Flexible budgeting D
d)Program budgeting
e)Cost benefit accounting A manufacturer is considering using bar code
B identification for recording information on parts
used by the manufacturer. A reason to use bar
What type of computer processing system is codes other than other means of identification is
characterized by data that are assembled from to ensure that:
more than one location and records that are a)The movement of all parts is recorded
updated immediately? b)The movement of parts is easily and quickly
a)Personal computer systems recorded
b)Data compression systems c)Vendors use the same part numbers
c)Batch processing systems d)Vendors use the same identification methods
d)Online, real time systems B
D
The installation of a database management
Which of the following statements most likely system is likely to have the least impact on
presents a disadvantage for an entity that keeps a)Data redundancy
data files on a server rather than on manual b)Entity-w ide sharing of common data
systems? c)Exclusive ownership of data
a)Attention is focused on the accuracy of the d)The logic needed to solve a problem in an
programming rather than efforts in individual application program
transactions e)The internal controls over data access
b)I t is usually easier for unauthorized persons to D
access and alter the files
c)Random error associated with processing The functions of the database administrator (staff
similar transaction in different w ays is usually or office) are
greater a)Database planning, data input preparation
d)I t is usually more difficult to compare recorded and database design
accountability the physical count of assets. b)Data input preparation, database design and
C database operations
c)Database designing, database operation and
Computers containing more than one central equipment operations
processing unit are increasingly common. This d)Database design, database implementation
feature enables a computer to execute multiple and database planning
instructions from multiple programs e)Database operations, database maintenance
simultaneously. This process is: and data input preparation
D c)A statement identifying he framework
management uses to conduct its assessment of
A relational database system contains the internal controls
following inventory data: part number, d)An explicit written conclusion as to the
description, and quantity on hand, and reorder effectiveness of internal control over financial
point. This individual information of inventory reporting.
items is called: e)None of the above
a)Occurrences b)Cardinality B
c)Attributes d)Associations
e)Relations Which of the following is not a task performed in
C the audit planning phase?
a)Rev iew ing an organisation's policies and
Which of the following best describes a system of practices
computers that connects the internal users of an b)Determining the degree of reliance on controls
organization distributed over a wide geographic c)Reviewing general controls
area? d)Planning substantive testing procedures
a)LAN b)I nternet e)None of the above
c)Decentralized network d)Multidrop network B
e)I ntranet
E Which of the following would strengthen
organizational control over a large-scale data
A digital signature: processing centre?
a)Is the encrypted mathematical v alue of the a)Require the user departments to specify the
message sender's name general control standards necessary for
b)Is derived from the document that has been processing transactions
encrypted with the sender's private key b)Require that the requests and instructions for
c)I s derived from the digest of the sender's digital data processing services be submitted directly to
certificate the computer operator in thedata centre
d)Allow s digital messages to be sent over c)Hav ing the data base administrator report to
analogue telephone line the management of computer operations
e)None of the above d)Assigning maintenance responsibility to the
B original system designer w ho best knows its logic
e)None of the above
What is a cookie? E
a)I t was originally intended to facilitate
adv ertising on the web SAP, one of the leading ERP products, makes
b)I t always contain encrypted data several modules available to business. Which of
c)I t is a text file and never contains encrypted the following is not a SAP module?
data a)Business process support
d)I t contains the URL of sites the user visits b)I nternet development support
e)Web browsers cannot function without a c)Logistics
cookie d)e-commerce support
B e)human resources
Which of the following is not a requirement in B
managements' report on the effectiveness of
internal controls over financial reporting? There are a number of risks that maybe
a)A statement of management's responsibility for associated ERP/ SAP implementation. Which of
establishing and maintaining adequate internal the following could be considered a risk?
control user satisfaction. a)ERPs are too large, complex and generic for
b)A statement that the organization's internal them to be well integrated into most company
auditors have issued an attestation report on cultures
management's assessment of the company's b)I mplementing companies have found that
internal controls staff members, employed by ERP consulting firms,
do not have sufficient experience in c.) Receiving report
implementing new systems d.) Job time ticket
c)I mplementing firms fail to select systems that
properly support their business activities Which of the following is LEAST likely to be a
d)The selected system does not adequately specialized journal?
meet the adopting firm's economic growth a.) Sales journal
A b.) Cash receipts journal
c.) Prepaid insurance journal
Auditors of ERP systems: d.) Cash disbursements journal
a)Need not be concerned about segregation of
duties because these systems possess strong How does the chart of accounts list general
computer controls. ledger accounts?
b)Should focus on output controls such as The order in which they appear in financial
independent verification to reconcile batch statements
totals
c)May be concerned that the data in the data Which of the following is NOT an adv antage of
warehouse is too clean and free from errors an ERP system?
d)Do not see the data warehouse as an audit or a.) Better access control
control issue at all because financial records are b.) Standardization of procedures and reports
not stored there c.) I mproved monitoring capabilities
C d.) Simplicity and reduced costs

CHAPTER 2 Records of company data sent to an external

party and then returned to the system as input
Which of the following is NOT a step in the data are called_.
processing cycle? Turnaround documents
a.) Data collection
b.) Data input Recording and processing information about a
c.) Data storage transaction at the time it takes place is referred
d.) Data processing to as w hich of the following?
a.) Batch processing
All of the information (name, GPA, Major, etc.) b.) Online, real-time processing
about a particular student is stored in the same_. c.) Captured transaction processing
Record d.) Chart of accounts processing

Which of the following would contain the total

value of all inventory owned by an organization?
a.) Source document
b.) General ledger
c.) Cash budget

Which of the following is most likely to be a

general ledger control account?
a.) Accounts receiv able
b.) Petty cash
c.) Prepaid rent
d.) Retained earnings

Which of the following documents is most likely to

be used in the expenditure cycle?
a.) Sales orders
b.) Credit memo
1. connector symbol
2. on-line storage
symbol 1. Symbol to indicate that a document is being sent to another department
3. decision symbol 2. Symbol to indicate files stored on the hard disk
4. basic process 3. Symbol to indicate that the bank loan officer approves or does not approve of an
symbol increase in the customer's line of credit
5. off-line storage
4. Symbol to indicate that computer software will calculate the employees' gross pay
symbol
6. manual input deductions, and net pay
symbol 5. Symbol to indicate a file of paper documents
7. terminal symbol 6. Symbol to indicate that a factory employee uses a workstation on the factor floor to key
8. basic input/output in a code that means that the production run has been completed
symbol 7. Symbol to indicate the beginning or the end of the flowchart
9. manual process 8. Symbol to indicate the general ledger file
symbol 9. Symbol to indicate that the treasurer will sign the payroll checks
10. input of payroll data 10. A manual process connecting Batched Time Cards with Time Card Data and Batched
11. flowcharts when the
Time Cards could represent
number of
alternativ es is large - 11. During the review of an electronic data processing (EDP) internal control system, an
helps clarify process auditor may review decision tables prepare by the client. A decision table is usually
steps when there prepared by a client to supplement or replace the preparation of...
are multiple 12. A manual process connecting Time Card Data with Time Card Data, Valid Time Card
alternativ es Data, and Errors could represent
12. v alidation of payroll 13. A document that appears after the validation of payroll could represent...
data 14. What symbolic representation indicates that a file has been consulted?
13. an error report -
15. Consists of systems analysis, design, and implementation
single document,
16. Indicated detailed processing functions
output of the
v alidation process 17. Process of using computer software that supports development and maintenance
14. Off-line storage 18. Uses pools and lanes in swim lanes to organize activities
input to manual 19. International standard, predominately a software systems development technology
process 20. Techniques used to measure activities in a production framework
15. systems 21. Supplements or replaces flowcharts when there are a large number of alternative
development decision paths
project 22. Graphical representation of the sequence of activities of business processes
16. program flowchart 23. Charting technique used to document the logical design of a system
17. computer-aided
24. A collection of IPO charts
software
engineering 25. Confirms the existence and assesses the effectiveness of internal controls
18. business process 26. The direct verification of financial statement figures
modeling notation 27. Charts the flow of documents and processing between different entities, represented by
19. unified modeling columns
language 28. Every pro cess symbol should be placed between an input symbol and an output symbol
20. work measurement 29. What symbolic representation indicates that a sales invoice has been filed?
21. decision table 30. Use of Systems Techniques in Auditing
22. business process 31. Use of Systems Techniques in IS D evelopment
diagram
32. Three components of compliance testing:
23. data flow diagram
24. HIPO chart 33. What must an auditor understand to evaluate/test a process or system
25. compliance testing 34. It is a picture of data flow and sequence of operations, use standard symbols, most
26. substantive testing commonly used system technique
27. analytic flowchart 35. Flowchart symbols:
28. sandwich rule 36. It provides a document process map
29. Document to a file 37. It is a map of where forms come from and got to
(cabinet) 38. It provides a broad overview of process activ ities and participants
30. interim 39. It identifies all significant processing in an application, and emphasizes processing tasks
audit/compliance
that apply controls
testing, financial
statement audit
40. It provides a diagram of processes within the system flowchart
testing 41. It provides hierarchy chart (shows sub-tasks), can be prepared at multiple levels, provides
31. systems analysis, additional processing detail
systems design, 42. It is used by Syst ems Development personal to provide enhanced detail, provides only
systems basic relations
implementation 43. What are narratives useful for? what are the generated through?
32. existence, 44. Narratives may be developed based on existing documentation including:
effectiv eness, 45. What is involved in work measurement?
continuity
33. IS process
34. Flowchart
35. input/output -
document or
computer file, process
- manual or 46. For work measurement, what is used to determine amount of time needed to complete a
task?
automated, flow(line)
- direction(s) of
47. Acquisition of materials, property, and labor in exchange for cash
data/process flow,
48. Cycle composed of the production system and the cost accounting system
miscellaneous -
49. Cycle composed of sales order processing and cash receipts
connectors, terminals,
50. Document, journal, or ledger used in transaction cycles
etc 51. Documents that capture and formalize transaction data needed for processing by their
36. Document flowcharts
respective transaction cycles
37. Forms distribution 52. Documents that result from transaction processing
chart 53. Product documents of one syst em that become source docum ents for another system
38. Systems flowchart 54. Record of a chronological entry
39. Analytic flowchart - 55. Often used to denote certain types of special journals. For example, the payroll journal is
similar to System often called the payroll register
flowchart 56. Book of accounts that reflects the financial effects of the firm's transactions after they are
40. Program flowcharts posted from the various journals
41. HIPO 57. Accounting records that trace transactions from their source documents to the financial
42. IPO statements
43. useful in fact-finding 58. File containing account data
stage of system 59. Temporary file that holds transaction records that will be used to change or update data
analysis; information in a master file
gathering processes - 60. File that stores the data used as standards for processing transactions
interviews and 61. File that contains records of past transactions that are retained for future reference
questionnaires 62. Large mainframe systems implemented in the late 1960s through the 1980s
44. review of flowcharts, 63. Environment in which individual data files are not related to other files
organization charts, 64. Efficient information system that captures and stores data only once and makes this single
procedure/operations source available to all users who need it
/reference manuals, 65. Periodic updating of data stored in the files of an organization
historical records 66. Problem associated with the flat-file model because of its failure to update all the user files
45. identify tasks,
affected by a change in status; may result in decisions based on outdated information
67. User's inability to obtain additional information as his or her needs change
determine amount of
68. Symbolic model of the structure of, and the associations between, an organization's data
time needed for tasks,
entities
control for idle time,
69. Software system that controls access to the data resource
analyze resources
70. Use of a set of symbols in a diagram to represent the processes, data sources, data flows,
needed, allocate
and process sequences of a current or proposed system
resources to tasks
71. Documentation technique used to represent the relationship among data entities in a
46. historical data, time
system
and motion studies,
72. Numerical mapping between entity instances...
test/practice/trial run 73. Blueprint for what ultimately will become the physical database
47. Expenditure Cycle 74. Flowcharts used to show the relationship between the key elements - input sources,
48. Conv ersion Cycle programs, and output products - of computer systems
49. Rev enue Cycle 75. Diagram providing a detailed description of the sequential and logical operations of the
50. Accounting Record program
51. Source Documents 76. Used to reveal the internal structure of the records that constitute a file or database table.
52. Product Documents The layout diagram usually shows the name, data type, and length of each attribute (or
53. Turnaround field) in the record
Documents 77. Systems that assemble transactions into groups for processing
54. Journal 78. Systems that process transactions individually at the moment the economic event occurs
55. Register 79. Codes that represent items in som e sequential order
56. Ledger 80. Coding scheme that assigns ranges of values to specific attributes such as account
57. Audit Trail classifications
58. Master File 81. Listing of an organization's accounts showing the account number and name
59. Transaction File 82. Codes used to represent complex items or events involving two or more pieces of related
60. Reference File data
61. Archive File 83. Alphabetic characters assigned sequentially
62. Legacy Systems 84. Codes that allow the use of pure alphabetic characters embedded within numeric codes
63. Flat-file Model 85. Alphabetic characters in the form of acronyms that convey meaning
64. Data Storage
65. Data Updating
66. Currency of Information
67. Task-data Dependency
68. Database Model
69. Database 86. operations performed on data to generate meaningful and rel evant information
Management System 87. 4 steps in the data processing cycle
(DBMS) 88. company output sent to an external party, who often adds data to the document, and
70. Data Flow Diagram
then are returned to the company as an input document
71. Entity Rela tionship
89. devices that capture transaction data in machine-readable form at the time and place
Diagram (ER)
72. Cardinality
of their origin (ATMs, point-of-sale scanners, barcode scanners)
73. Data Model 90. contains summary-level data for every asset, liability, equity, revenue, and expense
74. System Flowchart account
75. Program Flowchart 91. contains detailed data for any general ledger a ccount with many individual subaccounts
76. Record Layout 92. the general ledger account corresponding to a subsidiary ledger
Diagrams 93. the systematic assignment of numbers and letters to items to classify and organize them
77. Batch Systems 94. items are numbered consecutively to account for all items. any m issing items cause a gap
78. Real- Time Systems in the numerical sequence
79. Sequential Codes 95. blocks of numbers are reserved for specific cat egories of data. users can identify an item's
80. Block Code
type and model using the code numbers
81. Chart of Accounts
96. two or more subgroups of digits used to code items, and are often used in conjunction
82. Group Codes
83. Alphabetic Codes
with block codes
84. Alphanumeric Codes 97. letters and numbers are interspersed to identify an item. derived from the description of
85. Mnemonic Codes the item and is usually easy to memorize
86. data processing cycle 98. be consistent with its intended use, allow for growth, be as simple as possible to minimize
87. data input, data costs, facilitate memorization and interpretation, and ensure employee acceptance, and
storage, data be consistent with the company's organizational structure and across the company's
processing, and divisions
information output 99. a list of the numbers assigned to each general ledger account
88. turnaround documents 100. used to record infrequent or nonroutine transactions, such as loan payments and end -of-
89. source data period adjusting and closing entries
automation
101. records large numbers of repetitive transactions such as sales, cash receipts, and cash
90. general ledger
disbursements
91. subsid iary ledger
92. control account
102. a traceable path of a transaction through a data processing system from point of origin
93. coding to final output, or backwards from final output to point of origin
94. sequence codes 103. something about which information is stored, such as employees, inventory items, and
95. block code customers
96. group codes 104. characteristics of interest, that are stored, such as a pay rate and address, of each entity
97. mnemonic codes 105. the part of the data record that contains the data value for a particular attribute
98. guidelines for a coding 106. the fields containing data about entity attributes constitute a ______
system 107. the contents of each intersecting row and column in a field within a record
99. chart of accounts 108. a group of related records
100. general journal
109. stores cumulative information about an organization
101. specialized journal
110. contains records of individual business transactions that occur during a specifi c time
102. audit trail
103. entity 111. a set of interrelated, centrally coordinated files
104. attrib utes 112. 4 different type of data processing
105. field 113. updating done periodically, such as dail y
106. record
114. updating each transaction as it occurs. ensures that stored information is always current,
107. data value
108. file thereby increasing its decision-making usefulness
109. master file 115. records of transaction or other company data
110. transaction file 116. used by emplo yees to control operational activities and by managers to make decisions
111. database and to formulate business strategies
112. creating new data
records such as 117. used to provide the information needed to deal with problems and questions that need
adding a newly hired rapid action or answers
employee to the 118. uses a centralized database to share information across business processes and
payroll. reading,
coordinate activities. well-designed systems provide management with easy access to
retriev ing, or viewing
existing data. up-to-date information about all of these activities in order to plan, control, and evaluate
updating previously the organization's business processes more effectively
stored data. deleting
data, such as purging 114. online, real-time processing
the vendor master file 115. documents
of all v endors the 116. reports
company no longer 117. database query
does business with 118. enterprise resource pla nning
113. batch processing (ERP) systems
 CHAPTER 3
Which of the following is NOT a task performed in Which of the following is often called a
the audit planning phase? compensating control?
A. Reviewing an organization's policies and A. Transaction
practices B. Supervision
B. Planning Substantive Testing Procedures C. Accounting Records
C. Rev iewing General Controls D. Segregation of Duties
D. Determining the degree of reliance on
Which of the following benefits is least likely to
controls
result form a system of internal controls?
Which of the following statements is true? A. Reduction of cost of an external unit
A. Both the SEC and the PCAOB require use of B. Prevention of employee collusion to commit
the COSO framework fraud
B. Any framew ork can be used that C. Av ailability of reliable data for decision
encompasses all of COSO"s general themes making purposes
C. The SEC recommends COBI T, and the PCAOB D. Some assurance of compliance with the
recommends COSO. foreign corrupt practices act of 1977
D. Both the SEC and the PCAOB require COBI T E. some assurance that important documents
framework and records are protected
E. None of the above are true
Which is NOT a source of evidence for an
The underlying assumption of reasonable external auditor?
assurance regarding implementation of internal A. Work performed by internal auditors who
control means that organizationally report to the controller
A. auditors are reasonably assured that fraud has B. Test of Controls
not occurred in the period C. Substantiv e Tests
B. auditors are reasonably assured that D. Work performed by internal auditors w ho
employee carelessness can weaken an internal report to the audit committee of the BOD
control structure
C. I mplementation of the control procedure Which of the following is a preventive control?
A. credit check before approving a sale on
should not have a significant adverse effect on
efficiency or profitability account
D. management assertions about control B. bank reconciliation
C. physical inventory count
effectiveness should provide auditors with
reasonable assurance D. comparing the accounts receivable subsidiary
E. a control applies reasonably well to all forms of ledger to the control account
computer technology A physical inventory count is an example of a
A. preventive control
Ensuring that all material transactions processed
by the information system are valid and in B. detective control
accordance with management's objectives is an C. corrective control
example of D. Feed-forward control
A. transaction authorization Which of the following is the best reason to
B. Supervision separate duties in a manual system?
C. Accounting Records A. to avoid collusion between the programmer
D. I ndependent Verification and the computer operator
B. to ensure that supervision is not required C. I T auditing is independent of the general
C. to prevent the record keeper from authorizing financial audit.
transactions D. I T auditing can be performed by both external
D. to enable the firm to function more efficiently and internal auditors

The importance to the accounting profession of When planning the audit, information is gathered
the Sarbanes-Oxley Act is that by all of the follow ing methods except
A. bribery will be eliminated A. completing questionnaires
B. management w ill not override the company's B. interviewing management
internal controls C. observing activities
C. management are required to certify their D. confirming accounts receivable
internal control system
All of the following are components of audit risk
D. firms w ill not be exposed to lawsuits
except
The office manager forgot to record in the A. control risk
accounting records the daily bank deposit. B. legal risk
Which control procedure would most likely C. detection risk
prevent or detect this error? D. inherent risk
A. segregation of duties
B. independent verification A DFD is a representation of which of the
C. accounting records following?
a.) The logical operations performed by a
D. supervision
computer program
Control activities under SAS 109/COSO include A. b.) Flow of data in an organization
I T Controls, preventative controls, and Corrective c.) Decision rules in a computer program
controls d.) Computer hardware configuration
B. physical controls, preventative controls, and
corrective controls. Documentation methods such as DFDs, BPDs,
C. general controls, application controls, and and flowcharts save both time and money,
physical controls. adding v alue to an organization.
D. transaction authorizations, segregation of
True
duties, and risk assessment
Which of the following statements is false?
Management can expect v arious benefits to a.) Flow charts make use of many symbols
follow from implementing a system of strong b.) A document flowchart emphasizes the flow of
internal control. Which of the following benefits is documents or records containing data
least likely to occur? c.) DFDs help convey the timing of events
A. reduced cost of an external audit. d.) Both a and b are false
B. prevents employee collusion to commit fraud.
C. av ailability of reliable data for decision- A DFD consists of the following four basic
making purposes. elements: data sources and destinations, data
D. some assurance of compliance with the flows, transformation processes, and data stores.
Foreign Corrupt Practices Act of 1977. Each is represented on a DFD by a different
symbol.
Which statement is not true?
A. Auditors must maintain independence. True
B. I T auditors attest to the integrity of the
All of the following are guidelines that should be
computer system.
followed in naming DFD data elements EXCEPT:
a.) Process names should include action verbs procedures and error routines.
such as update, edit, prepare, and record. c.) Design the flowchart so that flow proceeds
b.) Make sure the names describe all the data or from top to bottom and from left to right.
the entire process. d.) Show the final disposition of all documents to
c.) Name only the most important DFD elements. prevent loose ends that leave the reader
d.) Choose active and descriptive names. dangling.

The documentation skills that accountants

require vary with their job function. However,
they should at least be able to do w hich of the
following:
a.) Read documentation to determine how the
system works.
b.) Critique and correct documentation that
others prepare.
c.) Prepare documentation for a newly
developed information system.
d.) Teach others how to prepare documentation.

Which of the following statements is false?

a.) A flowchart is an analytical technique used to
describe some aspect of an information system
in a clear, concise, and logical manner.
b.) Flow charts use a standard set of symbols to
describe pictorially the flow of documents and
data through a system.
c.) Flowcharts are easy to prepare and revise
when the designer utilizes a flowcharting
software package.
d.) A system flowchart is a narrative
representation of an information system.

Which of the following flowcharts illustrates the

flow of data among areas of responsibility in an
organization?
a.) Program flowchart
b.) Computer configuration flowchart
c.) System flowchart
d.) Document flowchart

All of the following are recommended guidelines

for making flowcharts more readable, clear,
concise, consistent, and understandable EXCEPT:
a.) Divide a document flowchart into columns
with labels.
b.) Flowchart all data flows, especially exception
1. as a square
2. Documentation
3. narrativ e description
IDENTIFICATION
4. data flow diagram
(DFD) 1. How are data sources and destinations represented in a data flow diagram?
5. Document flowchart 2. It encompasses the narratives, flowcharts, diagrams, and other written materials
6. System flowchart that explain how a system w orks. this information covers the who, what, w hen,
7. Program flowchart where, why, and how of data entry, processing, storage, information output, and
8. data source/data
systems control
destination
9. data flow 3. It is a written step-by-step explanation of system components and interactions
10. processes 4. It is a graphical description of data sources, flows, processes, storage, and
11. data store destinations (describes the flow of data w ithin an organization)
12. subdiv iding the DFD
5. It is a graphical description of the flow of documents and information between
13. context diagram
14. input/output symbols departments or areas of responsibility
15. processing symbols 6. A graphical description of the relationship among the input, processing, and
16. storage symbols output in an information system
17. flow and
7. A graphical description of the sequence of logical operations a computer
miscellaneous
symbols
performs as it executes a program
18. internal control 8. Entities that send or receive data the system uses or produces. an entity can be
flowcharts both and are represented by squares
19. eBusiness (Electronic 9. the mov ement of data among processes, stores, sources and destinations (if data
Business)
flows move together, a single line is used; if the data flow separately, two lines are
20. eCommerce
(Electronic used)
Commerce) 10. represent the transformation of data
21. Web Commerce 11. a repository of data (represented by horizontal lines above and below )
22. Internet 12. DFDs are subdivided into successively lower levels to provide ever-increasing
23. IP (Internet Protocol)
address
amounts of detail, because few systems can be fully diagrammed on one sheet of
24. DNS (domain name paper
serv ers) 13. the highest-level DFD because it provides the reader with a summary-level view
25. Intranets of a system. it depicts a data processing system and the entities that are the
26. Extranets
sources and destinations of system inputs and outputs
27. Security concerns
about Intranets
14. represents devices or media that provide input to or record output from
28. Firewalls processing operations
29. client-server 15. show what types of devices are used to process data or indicate when
technology processing is performed manually
30. serv er
31. Clients
16. represent the devices used to store data
32. mail, file, web, 17. indicate the flow of data, w here flowcharts begin or end, where decisions are
commerce, made, and w hen to add explanatory notes to flowcharts
application, and 18. document flowcharts that describe and evaluate internal controls
database
19. use of information technologies in any aspect of business
33. Enterprise
Architecture (EA) 20. use of I T in the exchange of products and services among organizations and
34. align organization's indiv iduals
planning and 21. using I T in the exchange of products and services among individuals and
strategy with organizations over the Internet
company's goals,
management of risks,
22. It is a global system of interconnected computer networks
optimal use of 23. It is a string of numbers used to identify each computer on the I nternet
information systems, 24. What are electronic phone books used to cross list domain names w ith
flexibility to adapt corresponding IP addresses?
35. plan, execute,
25. self-contained, in-house networks
monitor, control,
improv e
36. business, data,
applications,
technical
37. development is top
26. priv ate networks linking intranets of two or more companies
down; support is 27. risk of exposing sensitive information to everyone on the Internet
bottom up 28. used to limit access to information on the company's private computer and
38. Business architecture servers
39. Business domains
29. What has the I nternet largely evolved around?
40. strategies, goals,
objectives, general 30. It is a robot-type program that constantly runs and exchanges information with
policies, business remote users
plan, plan of 31. programs that access and exchange information with servers
operations,
32. Types of servers:
organization
structure; business
33. It describes the joint structure and behavior of the enterprise and its information
processes, workflows, system
ev ents 34. Objectives of an EA:
41. Data architecture 35. Corporate Governance > I T Governance
42. database
36. Enterprise Architecture (EA) involves four enterprise architectural domains:
43. Data model
44. Relational data 37. What direction are development and support in the Enterprise Architecture?
model structures 38. It defines human resources, processes, and infrastructure that a business needs to
45. Structure Query accomplish its business strategy; described in terms of business domains
Language (SQL)
39. Described as groups of business functions, business processes, and concepts for
46. data acquisition,
data management,
which management may assign responsibility
data delivery 40. Specific components of the typical business architecture:
47. Operational 41. It defines the needed data, how it is to be stored, how it is to be processed, how
databases store it is to be utilized, and how it integrates w ith the other main architectural domains
48. Data warehouses
42. What is the primary concept in data architecture?
store
49. Data marts contain 43. It determines how the database is structured, as well as the operations that can
50. copies of subsets of be performed on its data
the data warehouse 44. It is a data in two-dimensional tables
51. complex analysis
45. It is a technology used to define, access, and manipulate data in a relational
performed on data
warehouses
database
52. Technical 46. Corporate Information Factory provides a logical architecture for the EA:
architecture 47. A relatively current transaction data in support of tactical decisions
53. applications, 48. An enormous volumes of current and historical data for use in research and
database, enterprise
analysis
systems
management, 49. A subsets of the data contained in the operational database and data
information, warehouse
integration, network 50. Data mining w arehouse may contain
and 51. Online analytical processing (OLAP) involves
telecommunications,
platform, security
52. It describes the structure and behavior of the I T infrastructure and defines
54. electronic bill standards, principles, procedures, and best practices to govern the I T architecture
payment systems 53. Eight technical domains:
55. transmits a credit or 54. A system that payer sends electronic instructions to his bank detailing who,
debit card dumber
when, and amount to pay
to a secure serv er -
communication link 55. For credit and debit card systems the payer...
protected by 56. It serve as an intermediary between payer and payee (ex. PayPal)
encryption (PCI DSS) 57. It is created when bank attaches a digital signature to a note promising to pay
56. Payment the bearer some amount of money
intermediaries
57. Digital cash (e-cash,
electronic money)
58. Digital signature
59. Virtual cash
60. memory- PIN access
to info stored on
microchip, weak
58. It is an encrypted, digested version of a document that can be used to verify the
security; shared-key- document's authorship and authenticity
encrypted 59. It is based on an electronic wallet which a computer program that keeps track
transactions; of the various items of information associated with electronic money
signature-
60. Smart card is a handheld electronic card that is used for payments. Four types:
transporting- spend
digital cash; 61. Three major functions of the Internet Store:
signature-creating- 62. The merchant's online Web transaction server will perform several key functions:
generate own digital 63. What has eCommerce opened up?
signature
64. Adv erse results of privacy issues include
61. customers use W eb
browser to access
65. It involves proper user identification, validation, data accuracy, completeness,
merchant's website and timeliness, as well as complete disclosure of all terms
via Internet, 66. A user program w hich request information, files, etc.
merchant's online 67. Allows clients to access documents and run computer programs residing on
web transaction
remote computers via the World Wide Web
perform key
functions, financial 68. Servers that specialize in secure financial transactions
institutions clear 69. Allow clients to send and retrieve files to and from remote computers
payments and remit 70. Act like electronic mailboxes, holding incoming electronic mail until the user's
funds to merchant
client program requests it
62. communicate with
shopping cart, relay
71. A program that constantly runs on a computer and shares (exchanges)
customer payment information, etc., with users w ho request the information
information, 72. Protocol that assigns a unique address to each computer on the Internet
transaction server 73. "The" electronic highway
sends purchase info
74. Limits access to information on the company's servers from the rest of the world
to merchant
database 75. A set of commands that a given piece of software makes available so that is
63. prev iously functions and data can be accessed by other pieces of software
unthought-of 76. An applications architecture design framew ork that facilitates the development
problems with
of application suites
consumer priv acy;
cookies are used to
77. Defines the typical business model in terms of four major domains: infrastructure,
collect extensiv e offering, customers, and finance
amounts of info on 78. Middleware that serves as a central switchboard for communications between
customers all enterprise services and applications
64. spam, telephone
79. Describes the join structure and behavior of the enterprise and its information
solicitations, credit
card fraud, and system
identity theft 80. Electronic phone book that associates domain names w ith IP addresses
65. Transaction integrity 81. Encrypt all communications between the card and the point of payment
66. client dev ice, such as a cash register
67. web serv ers
68. commerce servers
82. Allow the user to spend digital cash notes. When the customer inserts the card
69. file servers into the cash register, the note is transferred to the cash register. The cash register
70. mail servers can verify on-line with the bank that the note has not previously been spent
71. serv er 83. Capable of generating their ow n digital signatures, allowing the user to write
72. IP
electronic "checks" containing the cardholders's digital signature
73. internet
74. firewall 84. Only capable of storing information. Could store a customer's prepaid account
75. API (application balance info and be used by a cash register to deduct charges from the card
program interface) when inserted in the cash register
76. SOA (service- 85. Needed to decode an encrypted message
oriented
architecture)
86. The most commonly used protocol for mail servers
77. ORM (osterwalder
reference model)
78. ESB (enterprise
service bus)
79. EA (enterprise
architecture) 87. The most commonly used protocol for file servers
80. DNS (domain name 88. The processing method for very large databases and complicated reporting
serv er) 89. A "pointer" to another document on a Web server
81. shared-key cards 90. Address for an individual computer on the Internet
82. signature-
91. An electronic "promissory note"
transporting cards
83. signature-creating 92. Used to define, access, and manipulate data in a relational database
cards
84. memory cards
85. key CHAPTER 4
86. POP
87. FTP 1. cycle that processes the order, delivers the goods, and collects the money
88. OLAP
2. Sales order process in revenue cycle..
89. hyperlink
90. IP 3. A transaction history, (w hat really happened) support for transactions, key
91. digital cash documents at every step, link from one step to the other.
92. SQL 4. Its objectives are to confirm that system w orked properly, identify where and why
system malfunctioned, and determine where improvements to control are
CHAPTER 4 required
1. Rev enue Cycle 5. Transaction w as authorized, goods or services actually received, quantity
2. Sales Order - Credit
confirmed, price is correct, accounting information inputted.
Check/Customer
Service - Shipping - 6. What are the steps in the revenue cycle?
Billing/Accounts 7. What are the key documents w hen recieve an order?
Receiv able - Cash 8. What are the primary and secondary departments in shipping an order
Receipts/Collection
9. What is the objective of the shippment of an order?
3. Audit trail
4. audit trail objectiv es 10. What are the key documents in shipment of an order?
5. Accuracy of 11. Process in which invoice customer for correct items at correct price and terms on
Accounting a timely basis
Information 12. What are the primary and secondary departments of billing a customer?
6. Reciev e the order,
13. What are the key documents in billing the customer?
check the credit, ship
it, bill them, collect 14. It is a process in revenue cycle in which have to collect amount from customers
the money on a timely basis
7. customer's purchase 15. What are the primary and secondary departments in collecting money from
order, credit
customers?
approv al, sales order
8. primary:
16. Lists containing information that defines the access privileges for all valid users of
manufacturing, the resource. An access control list assigned to each resource controls access to
warehouse shipping system resources such as directories, files, programs, and printers.
supporting: inv entory 17. Account record that shows activity by detail for each account type, and
control
containing, at minimum: customer name; customer address; current balance;
9. get the right items to
the customer at the av ailable credit; transaction dates; invoice numbers; and credits for payments,
right time returns, and allowances.
10. sales order, 18. The credit manager ev aluates the circumstances of the return and makes a
production order,
judgment to grant (or disapprove) credit.
shipping notice
11. Billing the 19. Contains sales order information for the sales manager to review once the sales
Customer order is approved.
12. primary: billing, 20. Records that stay on file until the inventories arrive from the supplier. Back-
supporting: shipping, ordered items are shipped before new sales are processed.
sales
21. Formal contract between the seller and the shipping company that transports
13. shipping notice,
customer inv oice, bill the goods to the customer.
of lading
14. collect money
15. primary:
treasury/finance,
supporing: billing, 22. Records that include details of all cash receipts transactions, including cash
accounts reciev able sales, miscellaneous cash receipts, and cash received.
16. Access control list 23. The cash receipts department typically reports to the treasurer, who has
(ACL) responsibility for financial assets. Accounting functions report to the controller.
17. Accounts receiv able
Normally these two general areas of responsibility are performed independently.
(AR) subsidiary
ledger 24. Document used to authorize the customer to receive credit for the merchandise
18. Approv ed credit returned.
memo 25. Document indicating the type and quantity of merchandise being requested.
19. Approv ed sales
26. Document indicating the type and quantity of merchandise being requested.
order
20. Back-order
27. Written notification accompanying a bank deposit that specifies and
21. Bill of lading categorizes the funds (such as checks, bills, and coins) being deposited.
22. Cash receipts journal 28. Intercompany exchange of computer-processable business information in
23. Controller's standard format.
24. Credit memo
29. Ledger with inventory records updated from the stock release copy by the
25. Customer order
26. Customer order file inv entory control system.
27. Deposit slip 30. Accounting journal entries into an accounting system for the purposes of making
28. Electronic data corrections or adjustments to the accounting data. For control purposes, all JVs
interchange (EDI)
should be approved by the appropriate designated authority.
29. Inventory subsidiary
ledger
31. Compilation of all journal vouchers posted to the general ledger.
30. Journal v oucher 32. Copy of the sales order received along w ith the customer sales invoice by the
31. Journal v oucher file billing department clerk from the sales department.
32. Ledger copy 33. The application of a computer system to process information w ith incompatible
33. Multilev el security
classifications, meaning different security levels.
34. Packing slip
35. Point-of-sale (POS) 34. Document that travels with the goods to the customer to describe the contents
systems of the order.
36. Prenumbered 35. Revenue system in w hich no customer accounts receivable are maintained and
documents
inv entory is kept on the store's shelves, not in a separate warehouse.
37. Remittance adv ices
38. Remittance list
36. Documents (sales orders, shipping notices, remittance adv ices, and so on)
39. Return slip sequentially numbered by the printer that allow every transaction to be
40. Role identified uniquely.
41. Role based access 37. Source document that contains key information required to service the
control (RBAC)
customers account.
42. Sales inv oice
43. Sales journal 38. Cash prelist, where all cash received is logged.
44. Sales order 39. Document recording the counting and inspect of items returned, prepared by
45. Sales order (credit the receiv ing department employee.
copy)
40. Formal technique for grouping users according to the system resources they
46. Sales order (invoice
copy)
require to perform their assigned tasks.
47. Shipping log 41. Formal technique for grouping users according to the system resources they
48. Shipping notice require to perform their assigned tasks.
49. S.O. pending file 42. Document that formally depicts the charges to the custome
50. Stock records
43. Special journal used for recording completed sales transactions.
51. Stock release
52. Trading partner 44. Source document that captures such vital information as the name and address
agreement of the customer making the purchase; the customer's account number; the
53. Univ ersal Product name, number, and description of the product; the quantities and unit price of
Code (UPC)
the items sold; and other financial informatio
54. Verified stock release
55. Master File
56. Transaction and Open
Document Files
57. Sales Order
Processing
58. credit department
45. Copy of sales order sent by the receive-order task to the check-credit task. It is
59. Billing
W arehouse used to check the credit-worthiness of a custome
Shipping 46. Copy of sales order to be reconciled with the shipping notice,. It describes the
60. W arehouse products that were actually shipped to the customer.
61. Shipping
47. Specifies orders shipped during the period.
62. Shipping
63. merchandise,
48. Document that informs the billing department that the customer's order has
packing slip, and bill been filled and shipped.
of lading 49. File used to store the sales order (invoice copy) from the receiv e-order task until
64. packing slip receipt of the shipping notice.
65. Billing
50. Formal accounting records for controlling inventory assets.
66. Billing
67. Accounts Receiv able 51. Document that identifies w hich items of inventory must be located and picked
(A/R) from the warehouse shelves.
Inventory Control 52. An agreement that specifies the terms of a strategic business arrangement
68. Accounts Receiv able
between buyer and seller in which they agree, in advance, to these terms of
69. Inventory Control
70. General Ledger their relationship
department 53. Label containing price information (and other data) that is attached to items
71. Mail Room purchased in a point-of-sale system.
72. mail room clerk 54. After stock is picked, verification of the order for accuracy and release of the
73. Cash Receipts
goods.
74. accounts receiv able
subsidiary ledger 55. customer master file, accounts receivable master file and merchandise inventory
75. General Ledger master file
Department 56. sales order transaction file, open sales order transaction file, sales invoice
76. Controller
transaction file and cash receipts transaction file
77. True
78. a sale is made on
57. Begins w ith a customer placing an order
credit 58. The transaction is authorized by obtaining credit approval by the ____.
a cash refund is 59. Sales information is released to
requested 60. The merchandise is picked from the __________ and sent to Shipping.
posting a cash
61. The merchandise is picked from the Warehouse and sent to _____________
payment received to
a customer's account 62. The merchandise, packing slip, and bill of lading are prepared by ____ and sent
79. Transaction to the customer
authorization should 63. The ___ are prepared by Shipping and sent to the customer
be separate from
64. Shipping reconciles the merchandise received from the Warehouse with the
transaction
processing. sales information on the ____________________
Asset custody should 65. Shipping information is sent to _______________
be separate from 66. _____ compiles and reconciles the relev ant facts and issues an invoice to the
asset record-keeping. customer and updates the sales journal
The organization
67. Information is transferred to:
should be so
structured that the 68. records the information in the customer's account in the accounts receivable
perpetration of a subsidiary ledger
fraud requires 69. adjusts the inventory subsidiary ledger
collusion between 70. Billing, A/R, and I nventory Control submits summary information to the
two or more
individuals. _______________________, which then reconciles this data and posts to the control
80. Sales Order accounts in the G/L.
Processing 71. Customer checks and remittance advices are received in the __________
81. Cash Receipts 72. He prepares a cash prelist and sends the prelist and the checks to Cash Receipts
Processing
82. Supervision
83. Supervision of
employees
84. cash and inv entories
85. accounts receiv able
subsidiary ledger and
cash journal 73. verifies the accuracy and completeness of the checks, updates the cash
86. True receipts journal, prepares a deposit slip and prepares a journal voucher to send
87. True to G/L
88. False (Warehouse)
74. A/R posts from the remittance advices to the ________.
89. False (Billing)
90. False (General) 75. Reconciles the journal voucher from Cash Receipts with the summaries from A/R
91. Formatted screens for and updates the general ledger control accounts
collecting data 76. He reconciles the bank accounts
Edit checks on the 77. Proper authorization of transactions (documentation) should occur so that only
data entered
valid transactions get processed. True or False?
Instructions for
processing and 78. Within the revenue cycle, authorization should take place when:
storing the data 79. Segregation of Functions Three Rules (TAT)
Security procedures 80. Credit authorization separate from SO processing, inventory control separate
Steps for generating
from w arehouse and accounts receivable sub-ledger separate from general
and displaying output
92. record design and ledger control account.
layout. 81. Cash receipts separate from accounting records and accounts receivable sub-
93. True ledger separate from general ledger
94. Computer-Based 82. Often used when unable to enact appropriate segregation of duties
Accounting Systems
83. Serves as a deterrent to dishonest acts and is particularly important in the mail
95. Automation
Reengineering room.
96. Automation 84. Within the revenue cycle, the assets to protect are ____and ____
97. Reengineering 85. Access to records such as the _____ and _____ should be restricted.
98. Real-time
86. Physical procedures as well as record-keeping should be independently
99. Batch
100. *Shortens the cash reviewed at v arious points in the system to check for accuracy and
cycle of the firm by completeness. True or False?
reducing the time 87. Shipping v erifies the goods sent from the w arehouse are correct in type and
between the order quantity. True or False?
date and billing
88. Sales Department reconciles the stock release document (picking slip) and
date
*Better inv entory packing slip. True or False?
management 89. Shipping reconciles the shipping notice with the sales invoice. True or False?
which can lead to a 90. Special ledger reconciles journal vouchers from billing, inventory control, cash
competitive
receipts, and accounts receivable. True or False?
adv antage
*Fewer clerical 91. Revenue cycle programs can include: (FEI SS)
errors, reducing 92. To understand files, you must consider the _______
incorrect items 93. The documents and the files used as input sources must contain the data
being shipped and necessary to generate the output reports. True or False?
bill discrepancies
94. It is a technology that can be viewed as a continuum w ith two extremes
*Reduces the
amount of 95. 2 extremes pofCBAS
expensive paper 96. The use technology to improve efficiency and effectiveness
documents and 97. The use technology to restructure business processes and firm organization
their storage costs
98. The entry of customer order, printout of stock release, packing slip and bill of
101. Mail Room
102. Point-of-Sale
lading; update of credit file, inventory file, and open sales orders file
Systems 99. A printout of invoice, update of closed sales order (journal), accounts receivable
103. Point-of-Sale and general ledger control account
Systems 100. Adv antages of Real-Time Processing
104. Intelligent Agents
101. It is a frequent target for reengineering.
105. Security and control
over data 102. These are used extensively in retail establishments.
106. True
107. Segregation of
Functions in CBAS
108. Supervision in CBAS 103. Customers pick the inventory from the shelves and take them to a cashier
109. Access Control in 104. These are needed to eliminate this time lag
CBAS 105. It is a concern with Internet transactions.
110. Accounting
106. In real-time systems, authorizations are automated. True or False?
Records in CBAS
111. Backups 107. It is where consolidation of tasks by the computer is common
112. PC-Based 108. in POS systems, the cash register's internal tape or database is an added form of
Accounting Systems supervision
113. PC-Based 109. Magnetic records are vulnerable to both authorized and unauthorized exposure
Accounting Systems
and should be protected
114. Segregation of
Duties of PCBAS 110. It rests on reliability and security of stored digitized data
115. Access Control of 111. the system needs to ensure that ________ of all files are continuously kept
PCBAS 112. Used by small firms and some large decentralized firms
116. Accounting
113. Allow one or few individuals to perform entire accounting function
Records of PCBAS
114. Tends to be inadequate and should be compensated for with increased
supervision, detailed management reports, and frequent independent
verification
115. Access controls to the data stored on the computer tends to be weak; methods
such as encryption and disk locking devices should be used
116. Computer disk failures cause data losses; external backup methods need to be
implemented to allow data recovery

MULTIPLE CHOICE

The revenue cycle consists of: b. shipping department

a. one subsystem-order entry c. billing department
b. tw o subsystems-sales order processing and d. inv entory control department
cash receipts
c. two subsystems-order entry and inventory Which document triggers the revenue cycle?
control a. the sales order
d. three subsystems-sales order processing, b. the customer purchase order
credit authorization, and cash receipts c. the sales invoice
d. the journal voucher
The reconciliation that occurs in the shipping
department is intended to ensure that Copies of the sales order can be used for all of
a. credit has been approved the following except
b. the customer is billed for the exact quantity a. purchase order
shipped b. credit authorization
c. the goods shipped match the goods c. shipping notice
ordered d. packing slip
d. inventory records are reduced for the
goods shipped The purpose of the sales invoice is to
a. record reduction of inventory
The adjustment to accounting records to b. transfer goods from seller to shipper
reflect the decrease in inventory due to a sale c. bill the customer
occurs in the d. select items from inventory for shipment
a. w arehouse
The customer open order file is used to Which of follow ing functions should be
a. respond to customer queries segregated?
b. fill the customer order a. opening the mail and making the journal
c. ship the customer order entry to record cash receipts
d. authorize customer credit b. authorizing credit and determining reorder
quantities
The stock release copy of the sales order is not c. maintaining the subsidiary ledgers and
used to handling customer queries
a. locate and pick the items from the d. providing information on inventory levels
warehouse shelves and reconciling the bank statement
b. record any out-of-stock items
c. authorize the warehouse clerk to release Which situation indicates a weak internal
custody of the inventory to shipping control structure?
d. record the reduction of inventory a. the mailroom clerk authorizes credit memos
b. the record keeping clerk maintains both
The shipping notice accounts receivable and accounts payable
a. is mailed to the customer subsidiary ledgers
b. is a formal contract between the seller and c. the warehouse clerk obtains a signature
the shipping company before releasing goods for shipment
c. is always prepared by the shipping clerk d. the accounts receivable clerk prepares
d. informs the billing department of the customer statements every month
quantities shipped
The most effective internal control procedure
The billing department is not responsible for to prevent or detect the creation of fictitious
a. updating the inventory subsidiary records credit memoranda for sales returns is to
b. recording the sale in the sales journal a. supervise the accounts receivable
c. notifying accounts receivable of the sale department
d. sending the invoice to the customer b. limit access to credit memoranda
c. prenumber and sequence check all credit
Customers should be billed for backorders memoranda
when d. require management approval for all credit
a. the customer purchase order is received memoranda
b. the backordered goods are shipped
c. the original goods are shipped The accounts receivable clerk destroys all
d. customers are not billed for backorders inv oices for sales made to members of her
because a backorder is a lost sale family and does not record the sale in the
accounts receivable subsidiary ledger. Which
Usually specific authorization is required for all procedure will not detect this fraud?
of the follow ing except a. prenumber and sequence check all
a. sales on account which exceed the credit inv oices
limit b. reconcile the accounts receiv able control
b. sales of goods at the list price to the accounts receivable subsidiary ledger
c. a cash refund for goods returned without a c. prepare monthly customer statements
receipt d. reconcile total sales on account to the
d. w rite off of an uncollectible account debits in the accounts receivable subsidiary
receivable ledger
Which department is least likely to be involved prepared compared to the actual number of
in the revenue cycle? sales invoices prepared
a. credit c. billing b. sequentially numbered sales invoices
b. accounts payable d. shipping c. v isual verification that all sales invoices were
prepared
Which document is included w ith a shipment d. none of the above w ill detect this error
sent to a customer?
a. sales invoice Which department prepares the bill of lading?
b. stock release form a. sales b. w arehouse
c. packing slip c. shipping d. credit
d. shipping notice
A remittance advice is
Good internal controls in the revenue cycle a. used to increase (debit) an account
should ensure all of the following except receivable by the cash received
a. all sales are profitable b. is a turn-around document
b. all sales are recorded c. is retained by the customer to show proof of
c. credit is authorized payment
d. inv entory to be shipped is not stolen d. none of the above

Which control does not help to ensure that A w eekly reconciliation of cash receipts would
accurate records are kept of customer include comparing
accounts and inventory? a. the cash prelist w ith bank deposit slips
a. reconcile accounts receivable control to b. the cash prelist w ith remittance advices
accounts receivable subsidiary c. bank deposit slips with remittance advices
b. authorize credit d. journal vouchers from accounts receiv able
c. segregate custody of inventory from record and general ledger
keeping
d. segregate record keeping duties of general At w hich point is supervision most critical in the
ledger from accounts receivable cash receipts system?
a. accounts receivable
Internal controls for handling sales returns and b. general ledger
allow ances do not include c. mail room
a. computing bad debt expense using the d. cash receipts
percentage of credit sales
b. v erifying that the goods have been DI trading partner agreements specify all of
returned the following except
c. authorizing the credit memo by a. selling price
management b. quantities to be sold
d. using the original sales invoice to prepare c. payment terms
the sales returns slip d. person to authorize transactions

The printer ran out of preprinted sales invoice A cash prelist is

forms and several sales invoices were not a. a document that records sales returns and
printed. The best internal control to detect this allow ances
error is b. a document returned by customers with
a. a batch total of sales invoices to be their payments
c. the source of information used to prepare c. purchases journal
monthly statements d. general journal
d. none of the above
Periodically, the general ledger department
An adv antage of real-time processing of sales receives all of the following except
is a. total increases to accounts receivable
a. the cash cycle is lengthened b. total of all sales backorders
b. current inventory information is available c. total of all sales
c. hard copy documents provide a d. total decreases in inventory
permanent record of the transaction
d. data entry errors are corrected at the end The credit department
of each batch a. prepares credit memos w hen goods are
returned
Commercial accounting systems have fully b. approves credits to accounts receivable
integrated modules. The w ord "integrated" when payments are received
means that c. authorizes the granting of credit to
a. segregation of duties is not possible customers
b. transfer of information among modules d. none of the above
occurs automatically
c. batch processing is not an option Adjustments to accounts receivable for
d. separate entries are made in the general payments received from customers is based
ledger accounts and the subsidiary ledgers upon
a. the customer's check
The data processing method that can shorten b. the cash prelist
the cash cycle is c. the remittance advice that accompanies
a. batch, sequential file processing payment
b. batch, direct access file processing d. a memo prepared in the mailroom
c. real-time file processing
d. none of the above The revenue cycle utilizes all of the following
files except
Which of the following is not a risk exposure in a. credit memo file
a microcomputer accounting system? b. sales history file
a. reliance on paper documentation is c. shipping report file
increased d. cost data reference file
b. functions that are segregated in a manual
env ironment may be combined in a All of the following are adv antages of real-
microcomputer accounting system time processing of sales except
c. backup procedures require human a. The cash cycle is shortened
intervention b. Paper work is reduced
d. data are easily accessible c. I ncorrect data entry is difficult to detect
d. Up-to-date information can provide a
Which journal is not used in the revenue competitive advantage in the marketplace
cycle?
a. cash receipts journal
b. sales journal
 CHAPTER 5
1. Expenditure Cycle
2. objectives of
expenditure cycle 1. A cycle where convert cash into resources is required to conduct business.
3. Purchase requisition - Determine w hat are needed, secures resources, and pay the bill.
purchasing - 2. secure required resources on a timely basis and at a good price, minimize the
receiving/inspection -
inv estment, safeguard resources prior to consumption, pay correct amount, and
accounts payable -
cash disbursement. record the information correctly into accounting records in appropriate accounts
4. expenditure cycle on a timely basis.
5. three way match 3. The order of expenditure cycle for purchase requisition.
6. physical phase 4. determine needs, secure the resources, pay the bill.....are all part of which cycle
7. financial phase
8. Purchase Requisition
5. three documents involved to process an invoice recieved from a v endor or
9. Purchase Order supplier. Used to verify that accounts payable dept. can process invoice for
10. Open/Closed payment. three documents: vendor's invoice, purchase order, and recieving
Purchase report.
11. Blind Copy of a
6. secure the resources is the ________ phase of the expenditure cycle
Purchase order
12. Receiving Report 7. pay the bill is the ___________ phase of the expenditure cycle
13. AP pending file 8. Document that authorizes a purchase transaction
14. Receiving report file 9. It is a Document based on a purchase requisition that specifies items ordered
15. Inventory- Standard
from a vendor or supplier.
Cost System
16. ACTUAL Cost
10. is the last copy that is filed while preparing a purchase order.
Inventory Ledger 11. PO copy that contains no price or quantity information
17. Vouchers Payable 12. A report that lists quantity and condition of the inventories received.
System 13. file containing supporting documents needed to set up an account payable
18. Cash disbursement
14. File in w hich a copy of the receiving report (stating the quantity and condition of
v ouchers
19. Voucher Register the inventories) is placed.
20. Open AP file 15. Is used in organizations that carry their inventories at a predetermined Standard
21. -inv entory control: Value regardless of the price actually paid to the vendor.
Requistion file
16. a ledger that records inventory values based on actual costs rather than
-Purchasing Dept
-Receiving
standard costs
-AP Dept 17. Is a system under which the AP department uses cash disbursement vouchers and
-General Ledger maintains a voucher register
DeptBa 18. provide improved control over cash disbursements and allow firms to consolidate
22. Purchase requisition
several payments to the same supplier on a single voucher, thus reducing the
file
23. AP Dep number of checks written
Cash Disbursements 19. Register that reflects a firm's accounts payable liability
AP Dept 20. Vouchers payable file is equivalent to.....
General Ledger Dept
21. basic technology purchasing processing system
24. Electronic Funds
Transfer
22. Comprises purchase requisitions. I t is created during the sales activity when the
25. blind copy of inv entories drop to their predetermined reorder point
purchase order 23. Basic Technology cash disbursement system
26. standard cost 24. EFT
inv entory ledger
25. Which document helps to ensure that the receiving clerks actually count the
number of goods received?
26. When the goods are received and the receiving report has been prepared,
which ledger may be updated?
27. Accounts payable is 27. Which statement is NOT correct for an expenditure system w ith proper internal
responsible for
controls?
paying inv oices
28. authorizing payment 28. Which duties should be segregated?
and maintaining the 29. Which documents would an auditor most likely choose to examine closely to
check register ascertain that all expenditures incurred during the accounting period have been
29. receiving reports recorded as a liability?
30. preparation of a
receiving report
30. Which task still (typically) requires human intervention in an integrated
31. general ledger purchases/cash disbursements system?
32. supplier’s inv oice 31. Which one of the following departments does not receive a copy of the
33. approv e the liability purchase order?
34. Cash disbursements
32. Which document typically triggers the process of recording a liability?
is a treasury function
33. Which of the following tasks should the cash disbursements clerk NOT perform?
34. Which of the following is true about cash disbursement?

CHAPTER 6
The document that captures the total amount the payroll register before transferring payroll
of time that individual workers spend on each funds to the general checking accounting.
production job is called a d. General ledger reconciles the labor
a. time card distribution summary and the payroll
b. job ticket disbursement voucher.
c. personnel action form
d. labor distribution form Which transaction is not processed in the Fixed
Asset System?
An important reconciliation in the payroll a. purchase of building
system is b. improv ement of equipment
a. general ledger compares the labor c. purchase of raw materials
distribution summary from cost accounting to d. sale of company v an
the disbursement voucher from accounts
payable Depreciation
b. personnel compares the number of a. is calculated by the department that uses
employees authorized to receive a paycheck the fixed asset
to the number of paychecks prepared b. allocates the cost of the asset over its useful
c. production compares the number of hours life
reported on job tickets to the number of hours c. is recorded weekly
reported on time cards d. results in book value approximating fair
d. payroll compares the labor distribution market value
summary to the hours reported on time cards
Depreciation records include all of the
Which internal control is not an important part following information about fixed assets
of the payroll system? except
a. Supervisors verify the accuracy of employee a. the economic benefit of purchasing the
time cards. asset
b. Paychecks are distributed by an b. the cost of the asset
independent paymaster. c. the depreciation method being used
c. Accounts payable verifies the accuracy of d. the location of the asset
Which control is not a part of the Fixed Asset on the time cards.
System? c. Payroll reconciles personnel action forms
a. formal analysis of the purchase request with time cards and prepares paychecks.
b. review of the assumptions used in the d. Cash disbursements signs paychecks and
capital budgeting model forwards them to the paymaster for
c. development of an economic order distribution.
quantity model
d. estimates of anticipated cost savings In a manufacturing firm, employees use time
cards and job tickets. Which of the following
Objectives of the Fixed Asset System do not statements is not correct?
include a. Job tickets are prepared by employees for
a. authorizing the acquisition of fixed assets each job worked on, so an employee may
b. recording depreciation expense hav e more that one job ticket on a given day.
c. computing gain and/or loss on disposal of b. An indiv idual employee will have only one
fixed assets time card.
d. maintaining a record of the fair market c. The time reported on job tickets should
value of all fixed assets reconcile with the time reported on time
cards.
Which of the following is not a characteristic of d. Paychecks should be prepared from the job
the Fixed Asset System? tickets.
a. Acquisitions are routine transactions
requiring general authorization. Which department is responsible for approving
b. Retirements are reported on an authorized changes in pay rates for employees?
disposal report form. a. payroll b. treasurer
c. Acquisition cost is allocated over the c. personnel d. cash disbursements
expected life of the asset.
d. Transfer of fixed assets among departments Which of the following situations represents a
is recorded in the fixed asset subsidiary ledger. serious control weakness?
a. Timekeeping is independent of the payroll
In the payroll subsystem, w hich function should department.
distribute paychecks? b. Paychecks are distributed by the
a. personnel b. timekeeping employees' immediate supervisor.
c. paymaster d. payroll c. Time cards are reconciled with job tickets.
d. Personnel is responsible for updating
Where does the responsibility lie for reconciling employee records, including creation of
the labor distribution summary and the payroll records for new hires.
disbursement voucher?
a. cash disbursements Why would an organization require the
b. cost accounting paymaster to deliver all unclaimed paychecks
c. personnel to the internal audit department?
d. general ledger a. to detect a "phantom employee" for whom
a check was produced
Which of the following statements is not true? b. to prevent an absent employee's check
a. Routine payroll processing begins with the from being lost
submission of time cards. c. to avoid paying absent employees for
b. Payroll clerks must verify the hours reported payday
d. to prevent the paymaster from cashing c. payroll register
unclaimed checks d. accounts payable register

Which of the following is not a reasonable Personnel action forms are used to do all of
control for fixed assets? the following except
a. Proper authorization is required for a. activ ate new employees
acquisition and disposal of fixed assets. b. terminate employees
b. Fixed asset records show the location of c. record hours worked
each asset. d. change pay rates
c. Fully depreciated assets are immediately
disposed of. The payroll department performs all of the
d. Depreciation policies are in writing. following except
a. prepares the payroll register
Cost accounting updates work-in-process b. distributes paychecks
accounts from c. updates employee payroll records
a. time cards d. prepares paychecks
b. the labor distribution summary
c. job tickets The document that records the total amount
d. personnel action forms of time spent on a production job is the
a. time card
Payroll uses time card data to do all of the b. job ticket
following except c. labor distribution summary
a. prepare the payroll register d. personnel action form
b. update employee payroll records
c. prepare the labor distribution summary A control technique that can reduce the risk
d. prepare paychecks of a terminated employee being paid is
a. a security camera v iewing the time clock
Payroll checks are typically drawn on b. the supervisor taking role during the shift
a. the regular checking account c. paychecks being distributed by an
b. a payroll imprest account independent paymaster
c. a w ages payable account d. reconciliation of time cards and job tickets
d. petty cash
Accounts payable
The personnel action form provides a. signs paychecks
authorization control by b. prepares the payroll voucher -TO BE SENT TO
a. preventing paychecks for terminated GL
employees c. reconciles time cards and employee
b. v erifying pay rates for employees records
c. informing payroll of new hires d. distributes paychecks to employees
d. all of the above
All of the following are processed by the Fixed
Accounting records that provide the audit trail Asset System except
for payroll include all of the following except a. sale of unneeded equipment
a. time cards b. purchase of raw materials
b. job tickets c. repair of production equipment
d. purchase of a new plant
The Fixed Asset System performs all of the service
following except d. records the disposal of assets
a. determines the need for new assets
b. maintains depreciation records Asset disposal
c. records retirement and disposal of assets a. occurs as soon as an asset is fully
d. tracks the physical location of fixed assets depreciated
b. requires no special authorization
The payroll department performs all of the c. automatically initiates the purchase of a
following except replacement asset
a. prepares paychecks d. must follow formal authorization procedures
b. transfers adequate funds to the payroll
imprest account The document that captures the total amount
c. updates employee payroll records of time that individual workers spend on each
d. prepares the payroll register production job is called a
a. time card
Depreciation b. job ticket
a. assures that assets are reported at fair c. personnel action form
market value d. labor distribution form
b. is discretionary for many firms
c. allocates the cost of an asset over its useful An important reconciliation payroll system is
life a. General ledger compare the labor
d. is the responsibility of the department using distributions summary from cost accounting to
the asset the disbursement voucher from accounts
payable
The Fixed Asset System is similar to the b. Personnel compares the number of
expenditure cycle except employees authorized to receive a paycheck
a. fixed asset transactions are non-routine and to the number of paychecks prepared
require special authorization and controls c. Production compares the number of hours
b. fixed assets are capitalized, not expensed reported on job tickets to the number of hours
c. both a and b reported on time cards
d. none of the above d. Payroll compares the labor distribution
summary to the hours reported on time cards
Asset maintenance involves
a. the recording of periodic depreciation Which internal control is not a part of the
b. adjusting the asset records to reflect the payroll system?
cost of physical improvements a. Supervisors verify the accuracy of employee
c. keeping track of the physical location of the time cards
assets b. Paychecks are distributed by an
d. all of the above independent paymaster
c. AP verifies the accuracy of the payroll
The Fixed Asset Systems does all of the register before transferring payroll funds to the
following except general checking accounting
a. records acquisition of assets d. General ledger reconciles the labor
b. records improvements to assets distribution summary and the payroll
c. estimates the fair market v alue of assets in disbursement voucher
In the payroll subsystem, w hich function should department
distribute paychecks? b. Paychecks are distributed by the
personnel employees' immediate supervisor
a. timekeeping c. Time cards are reconciled with job tickets
b. paymaster d. Personnel is responsible for updating
c. payroll employee records, including creation of
records for new hires
Where does the responsibility lie for reconciling
the labor distribution summary and the payroll Why would an organization require the
disbursement voucher? paymaster to deliver all unclaimed paychecks
a. cash disbursements to the internal audit department?
b. cost accounting a. To detect a "phantom employee" for w hom
c. personnel a check was produced
d. general ledger b. To prev ent an absent employee's check
from being lost
Which of the following statements is not true? c. To avoid paying absent employees for
a. Routine payroll processing with the payday
submission of time cards d. To prev ent the paymaster from cashing
b. Payroll clerks must verify the hours reported unclaimed checks
on the time cards
c. Payroll reconciles personnel action forms Cost accounting updates work-in-process
with time cards and prepares paychecks accounts from
d. Cash disbursements signs paychecks and a. Time cards
forwards them to the paymaster for distribution b. The labor distribution summary
c. Job tickets
In a manufacturing firm, employees use time d. Personnel action forms
cards and job tickets. Which of the following
statements is not correct? Payroll uses time card data to do all of the
a. Job tickets are prepared by employees for following except,
each job worked on, so an employee may a. Prepare the payroll register
hav e more than one job ticket on a given day b. Update employee payroll records
b. An indiv idual employee will have only one c. Prepare the labor distribution summary
time card d. Prepare paychecks
c. The time reported on job tickets should
reconcile with the time reported on time cards Payroll checks are typically drawn on
d. Paychecks should be prepared from the job a. The regular checking account
tickets b. A payroll imprest account
c. A w ages payable account
Which department is responsible for approving d. Petty cash
changes in pay rates for employees?
a. Payroll b. Treasurer The personnel action form provides
c. Personnel d. Cash disbursements authorization control by
a. Preventing paychecks for terminated
Which of the following situations represents a employees
serious control weakness? b. Verifying pay rates for employees
a. Timekeeping is independent of the payroll
c. I nforming payroll of new hires The payroll department performs all of the
d. All of the above following except
a. Prepares paychecks
Accounting records that provide the audit trail b. Transfers adequate funds to the payroll
for payroll include all of the following except imprest account
a. Time cards b. Job tickets c. Updates employee payroll records
c. Payroll register d. AP register d. Prepares the payroll register

Personnel action forms are used to do all of Which of the following is NOT an input control
the following except to reduce the risks of data entry errors and
a. Activ ate new employees payroll fraud for a company w ith a mobile or
b. Terminate employees distributed workforce?
c. Record hours worked a. Limit tests that detect excessive hours
d. Change pay rates b. Check digits that detect transcription errors
in employee identification
The payroll department performs all of the c. Biometric scanners, swipe cards, and PINS
following except d. Multilevel security that achieves segregation
a. Prepares the payroll register of duties
b. Distributes paychecks
c. Updates employee payroll records CHAPTER 7
d. Prepares paychecks
Which of the following is not an adv antageous
reason to reduce inventories?
The document that records the total amount
a. I nventories provide a competitive
of time spent on a production job is the
a. Time card adv antage
b. I nventories can invite overproduction
b. Job ticket
c. I nventories are expensive to maintain
c. Labor distribution summary
d. Personnel action form d. I nventories may conceal problems
e. All of these are good reasons to reduce
inv entories
A control technique that can reduce the risk
of a terminated employee being paid is
a. A security camera viewing the time clock The fundamental EOQ model
a. provides for fluctuating lead times during
b. The superv isor taking role during the shift
c. Paychecks being distributed by an reorder cycles
independent paymaster b. is relatively insensitive to errors in demand,
procurement costs, and carrying costs
d. Reconciliation of time cards and job tickets
c. focuses on the trade-off between
AP______ production costs and carrying costs
d. is stochastic in nature
a. signs paychecks
e. is best used in conjunction with a periodic
b. Prepares the payroll voucher
c. Reconciles time cards and employee inv entory system
records
Which of the following is NOT a principle of
d. Distributes paychecks to employees
Prepares the payroll voucher lean manufacturing?
a. Products are pushed from the production
end to the customer
b. All activities that do not add value and
maximize the use of scarce resources must be a.Standard costing motiv ates management to
eliminated produce large batches of products and build
c. Achieve high inventory turnover rate inv entory
d. A lean manufacturing firm must have b. Applying standard costing leads to product
established and cooperative relationships with cost distortions in a lean environment
vendors. c. Standard costing data are associated with
e. All of the above are lean manufacturing excessive time lags that reduce its usefulness
principles d. The financial orientation of standard costing
may promote bad decisions
All of the following are problems w ith e. All of the above are problems w ith standard
traditional accounting information EXCEPT costing
a. Managers in a JI T setting require immediate
information Which one of the following statements is true?
b. The measurement principle tends to ignore a. ERP evolved directly from MRP
standards other than money b. ERP evolved into MRP and MRP evolved into
c. Variance analysis may yield insignificant MRP ll
values c. MRP ll evolved from MRP and MRP ll evolved
d. The overhead component in a into ERP
manufacturing company is usually very large d. None of the above is true
e. All of these are problems associated w ith
traditional accounting information

Which of the following is NOT a problem

associated with standard cost accounting?
1. Work Order
2. materials & operations
requirement 1. What document authorizes production?
3. coordinates production of 2. What 2 requirements must be determined in Plan and control production
multiple batches step?
4. Minimize total inv entory
3. Production scheduling does what?
cost, ensure adequate
inv entories 4. What is the objective of maintain inventory control step?
5. Work Order 5. Cost accounting activities is initiated by what?
6. records financial effects of 6. Cost accounting step does what?
ev ents occurring in the 7. What signals completion of production process?
production process
8. Transaction authorization in conversion cycle deals with what?
7. Receipt of last mov e ticket
8. Work orders, move tickets, 9. Materials requisition authorizes w hat?
materials requisitions 10. SOD inv olved for what duties?
9. W arehouse to release 11. The accounting records goal in conversion cycle is to?
materials
12. Internal and External auditors periodically verifying raw materials and FGs
10. Production planning &
control : work centers inv entories through physical count is an example of independent
record keeping : asset verification in the CONVERSION CYCLE. (True/False)
custody 13. World class companies have undergone fundamental changes from
GL Department : subsidiary traditional production model (True/False)
ledger dept.
11. Establish an audit trail
14. What's wrong with traditional accounting information?
12. True 15. ABC assumes product cause costs (True/False)
13. True 16. ABC's one activ ity driver is machine hour (True/False)
14. Promotes non-lean 17. Planning, scheduling and control of physical production and monitoring
behav ior
the flow of information related to production.
Inaccurate cost allocation
Time lag 18. What documents are in the batch production system? (BMMRSPW)
Financial orientation 19. It is an expected demand of the finished goods
15. False - Activity 20. It is a production, planning, and authentication to produce
16. False - multiple drivers
21. It specifies the types and quantities of raw materials and subassemblies
17. Conv ersion cycle
18. sales forecast, production
used to produce a single finished good unit
schedule, bill of materials, 22. Details that the production path a particular batch w ill take in the
route sheet, work order, manufacturing process. (sequence of operations, time allotted at each
mov e ticket, materials station)
requisition
23. It uses the BOM and route sheet to specify the exact materials and
19. sales forecast
20. production schedule production processes for each batch
21. bill of materials 24. It records work done in each work center and authorizes the batch
22. route sheet movements
23. work order 25. It authorizes the inventory warehouse to release raw materials for use in
24. mov e ticket
25. material requisition
the production process
26. purchasing, ordering, 26. What are the costs associated with goods for sale (POCSQ)
carrying, stockout, and 27. The cost of goods sold including delivery
quality costs 28. It is the procurement process cost
27. purchasing costs
29. The storage and "opportunity" costs
28. ordering costs
29. carrying costs
30. The prevention, appraisal, internal failure, and external failure
30. quality costs 31. An equation that figures out how to minimize costs. not all inventory costs
31. Economic order quantity are incorporated into the model.
 CHAPTER 8

1. The most common means of making entries in the general ledger is via the journal voucher.
1. TRUE
2. TRUE 2. I ndividuals with access authority to general ledger accounts should not prepare journal
3. TRUE vouchers.
4. TRUE 3. The journal voucher is the document that authorizes entries to be made to the general
5. FALSE
ledger.
6. TRUE
7. FALSE 4. Each account in the chart of accounts has a separate record in the general ledger master
8. FALSE file.
9. TRUE 5. The responsibility center file is primarily used by the Financial Reporting System.
10. FALSE ANS:
11. TRUE
6. Management reporting is often called discretionary reporting because it is not mandated
12. TRUE
13. FALSE as is financial reporting.
14. TRUE 7. Primary recipients of financial statement information are internal management.
15. TRUE ANS:
16. FALSE
8. The Management Reporting System is a nondiscretionary system.
17. TRUE
18. FALSE 9. When ev aluating decision alternatives, one option is to take no action.
19. FALSE 10. I n most cases intangible decision criteria can be quantified.
20. FALSE ANS:
21. FALSE 11. One benefit of the Management Reporting System is that it can alert management to
22. TRUE
delays in project implementation.
23. FALSE
24. TRUE 12. Responsibility refers to an individual's obligation to achieve desired results.
ANS:
13. A firm w ith a wide span of control tends to have relatively more layers of management.
ANS:
14. The control function entails ev aluating a process against a standard and, if necessary,
taking corrective action.
15. Standards are the basis for evaluating actual performance.
16. A report is said to have information content if it eliminates uncertainty associated with a
problem facing the decision maker.
17. An inv entory out-of-stock report is an example of a programmed, on-demand report.
18. A principle of responsibility accounting is that managers are responsible for controllable
and uncontrollable costs.
19. The manager of a cost center is responsible for cost control and revenue generation.
ANS:

20. Designing an effective management reporting system does not require an understanding
of the information managers need to deal with the problems they face.
21. The formalization of tasks principle suggests that management should structure the firm
around the unique skills sets of key indiv iduals.
22. If a manager delegates responsibility to a subordinate, he or she must also grant the
subordinate authority to make decisions.
23. Operational control involves motivating managers at all levels to use resources, including
materials, personnel, and financial assets, as productively as possible.
24. The block code is the coding scheme most appropriate for a chart of accounts.
 MULTIPLE CHOICE
1. The coding scheme most appropriate for a 7. Which statement is not correct? The general
chart of accounts is ledger master file
a. sequential code a. is based on the firm's chart of account
b. block code b. contains a record for control accounts
c. group code c. is an output of the Financial Reporting System
d. mnemonic code (FRS)
d. supplies information for management decision
2. A common use for sequential coding is making
a. creating the chart of accounts
b. identifying inventory items 8. What type of data is found in the general
c. identifying documents ledger master file?
d. identifying fixed assets a. a chronological record of all transactions
b. the balance of each account in the chart of
3. The most important adv antage of sequential accounts
coding is that c. budget records for each account in the chart
a. missing or unrecorded documents can be of accounts
identified d. subsidiary details supporting a control account
b. the code itself lacks informational content
c. items cannot be inserted 9. Which report is not an output of the Financial
d. deletions affect the sequence Reporting System (FRS)?
a. v ariance analysis report
4. When a firm w ants its coding system to convey b. statement of cash flows
meaning w ithout reference to any other c. tax return
document, it would choose d. comparative balance sheet
a. an alphabetic code
b. a mnemonic code 10. Which steps in the Financial Accounting
c. a group code Process are in the correct sequence?
d. a block code a. record the transaction, post to the ledger,
prepare the adjusted trial balance, enter
5. The most important adv antage of an adjusting entries, prepare financial
alphabetic code is that statements
a. meaning is readily conveyed to users b. record the transaction, prepare the
b. sorting is simplified unadjusted trial balance, record adjusting
c. the capacity to represent items is increased journal entries, record closing entries,
d. missing documents can be identified prepare financial statements
c. record the transaction, post to the ledger,
6. Entries into the General Ledger System (GLS) record adjusting entries, prepare the
can be made using information from unadjusted trial balance, prepare financial
a. the general journal statements
b. a journal voucher which represents a summary d. record the transaction, post to the ledger,
of similar transactions prepare the adjusted trial balance, prepare
c. a journal voucher which represents a single, financial statements, record closing entries
unusual transaction
d. all of the above
11. Which statement is not correct? combination of duties performed by a single
a. the post-closing trial balance reports the indiv idual presents the least risk exposure?
ending balance of each account in the a. maintaining the inv entory ledger and
general ledger recording the inventory journal voucher in
b. one purpose of preparing the unadjusted trial the general ledger
balance is to ensure that debits equal credits b. recording the inventory journal voucher in the
c. financial statements are prepared based on general ledger and maintaining custody of
the unadjusted trial balance inv entory
d. the unadjusted trial balance reports control c. maintaining the cash disbursements journal
account balances but omits subsidiary and recording direct labor costs applied to
ledger detail specific jobs
d. preparing the accounts payable journal
12. What account appears on the postclosing voucher and recording it in the general
trial balance? ledger
a. income summary b. machinery
c. rent expense d. interest income 17. The audit trail fulfills all of the following
purposes except
13. Financial statements are prepared from the a. provides the ability to answer inquiries
a. trial balance b. ensures the accuracy of the application
b. adjusted trial balance software
c. general ledger c. fulfills governmental regulations
d. general journal d. offers a means for preventing, detecting, and
correcting errors
14. Risk exposures in the General Ledger and
Financial Reporting Systems include all of the 18. Which best describes a batch process
following except General Ledger System (GLS)
a. loss of the audit trail a. paper documents are eliminated
b. unauthorized access to the general ledger b. the general ledger master file is updated each
c. loss of physical assets night
d. general ledger account out of balance with c. there is a time lag between transaction
the subsidiary account processing and posting to the general
15. Which situation indicates an internal control ledger
risk in the General Ledger/Financial d. no direct access or querying of the General
Reporting Systems (GL/FRS)? Ledger is possible
a. the employee w ho maintains the cash journal
computes depreciation expense 19. An adv antage of a batch General Ledger
b. the cash receipts journal voucher is approved System (GLS) is that
by the Treasurer a. separation between authorization and
c.the cash receipts journal vouchers are transaction processing is strictly enforced
prenumbered and stored in a locked safe b. the general ledger master file is recreated with
d. the employee who maintains the cash each update
receipts journal records transactions in the c. updates and reconciliation of transactions
accounts receivable subsidiary ledger occur as a step within the transaction cycle
d. errors and out-of-balance conditions are
16. With a limited work force and a desire to identified at the end of the month
maintain strong internal control, which
20. A characteristic of the Management c. preparing a work force utilization budget for
Reporting System (MRS) is the next quarter
a. the MRS operates in conformity w ith generally d. deciding the optimum size of the firm
accepted accounting principles
b. it is a legal requirement that the MRS be 25. The level of management that makes tactical
installed and functioning properly planning decisions is
c. the MRS is developed by implementing SEC a. top management
requirements b. middle management
d. the MRS focuses on internal decision-making c. operations management
information d. front-line management

21. Which statement is not true? 26. The decision to enter a new market is an
a. authority refers to an individual's obligation to example of
achieve desired results a. strategic planning
b. if an employee is given the responsibility for a b. tactical planning
task, that employee should be given c. management control
authority to make decisions within the limits d. operational control
of that task
c. the level of detail provided to an employee is 27. All of the following are elements of
a function of the employee's position with operational control decisions except
the firm a. determining the scope of the activity
d. all of the above are true b. setting operating standards
c. evaluating performance
22. Which statement is not true? The manager's d. taking corrective action when necessary
span of control
a. is narrow for routine and repetitive tasks 28. I n contrast to tactical planning decisions,
b. is related to the number of layers of management control decisions, and
management operational control decisions, strategic
c. affects the amount of detail provided to a planning decisions usually
manager a. are more focused
d. can affect employee morale and motiv ation b. hav e a shorter time frame
c. are unstructured
23. Short-range planning involves d. hav e a high degree of certainty
a. setting goals and objectives of the firm
b. planning the production schedule for the next 29. Which of the following management
quarter principles affects the management reporting
c. planning the growth of the firm system?
d. deciding on the degree of diversification a. formalization of tasks
among the firm's products b. authorization
c. span of control
24. Long-range planning involves d. all of the above
a. planning the marketing and promotion for a
product 30. All of the following are elements of problem
b. presenting department heads with budgetary structure except
goals for the next year a. certainty b. data
c. procedures d. objectives
31. All of the following are examples of a. Sorting records that are coded alphabetically
programmed reports except tends to be more difficult for users than
a. cash flow reports for Division B sorting numeric sequences.
b. year-to-date local income tax payments b. Mnemonic coding requires the user to
made by all employees living in City X and memorize codes.
working in City Y c. Sequential codes carry no information content
c. inventory exception reports for Div ision G beyond their order in the sequence.
d. equipment utilization reports for Plant M d. Mnemonic codes are limited in their ability to
represent items within a class.
32. A fundamental principle of responsibility
accounting is that 37. Which file has as its primary purpose to
a. managers are accountable only for items they present comparative financial reports on a
control historic basis?
b. a manager's span of control should not a. journal voucher history file
exceed eight people b. budget master file
c. structured reports should be prepared weekly c. responsibility file
d. the information flow is in one direction, top- d. general ledger history file
dow n
38. All of the following are characteristics of the
33. Which statement is not true? Responsibility strategic planning process except the
accounting a. emphasis on both the short and long run.
a. inv olves both a top-down and bottom-up flow b. review of the attributes and behavior of the
of information organization's competition.
b. acknowledges that some economic events c. analysis of external economic factors.
cannot be traced to any manager d. analysis of consumer demand.
c. creates a budget
d. compares actual performance with budget 39. Which of the following performance
measures can not result in dysfunctional
34. What mechanism is used to convey to behav ior?
managers the standards by which their a. price variance b. quotas
performance w ill be measured? c. ROI d. net income
a. the responsibility report e. all of the above can result in dysfunctional
b. the scheduled report behav ior
c. the budget
d. all of the above 40. Which of the following best describes a profit
center:
35. All of the following concepts encourage goal a. authority to make decisions affecting the
congruence except major determinants of profit, including the
a. detailed information reporting at all power to choose its markets and sources of
management lev els supply.
b. authority and responsibility b. authority to make decisions affecting the
c. formalization of tasks major determinants of profit, including the
d. responsibility accounting power to choose its markets and sources of
supply, and significant control over the
36. Which of the following statements is NOT amount of invested capital.
true?
c. authority to make decisions over the most independently reconciled and posted to the
significant costs of operations, including the journal voucher history file
power to choose the sources of supply.
d. authority to provide specialized support to An XBRL Taxonomy is
other units within the organization. a. the document format used to produce
e. responsibility for combining the raw materials, web pages
direct labor, and other factors of production b. the final product (report)
into a final product. c. a classification scheme
d. a tag stored in each database record
Which of the following statements is most true?
a. Journal vouchers authorize all GL postings Which of the following is NOT a potential
in a real-time GLS exposure of the FRS?
b. Batch processing of journal vouchers is a. a defective audit trail
common for large organizations with multiple b. general ledger accounts that are out of
sources of transactions balance with subsidiary accounts
c. Adjusting and reversing entries to the GL c. unauthorized access to the check register
do not require journal vouchers because d. unauthorized access to the general
these entries are not transactions ledger
d. Journal vouchers are used to capture
summaries of multiple transactions but are Which task should the general ledger perform?
not used to capture single transactions. a. update the general ledger
b. prepare journal vouchers
Which file has as its primary purpose to provide c. have custody of physical assets
historical financial data for comparative d. hav e record-keeping responsibility for
financial reports? special journals of subsidiary ledgers
a. journal voucher history file
b. budget master file The Ozment Corporation uses a performance
c. responsibility file reporting system that shows online the data
d. general ledger history file for each subordinate who reports to a
supervisor. The data presented show the
Which of the following statements is true about actual costs incurred during the period, the
journal vouchers? budgeted costs, and all v ariances fro the
a. journal vouchers detailing transaction budget for that subordinate's department.
activity flow from v arious operational The name of this system of reporting is
departments into the GLS, where they are a. contribution accounting
independently reconciled and posted to the b. responsibility accounting
journal voucher history file c. flexible budgeting
b. journal vouchers summarizing transaction d. program budgeting
activity flow from v arious operational e. cost-benefit accounting
departments into the GLS, where they are
independently reconciled and posted to the Which of the following is NOT a characteristic of
general ledger accounts the strategic planning process?
c. journal vouchers summarizing transaction a. emphasis on both the short and long run
activity flow from v arious operational b. analysis of external economic factors
departments into the GLS, where they are c. review of the attributes and behavior of
the organization's competition
 d. analysis and review of departmental Which of the following is the basic purpose of a
process responsibility accounting?
e. analysis of consumer demand a. v ariance analysis
b. motiv ation
The follow ing are all output reports of the c. authority
financial reporting system, EXCEPT a d. budgeting
a. v ariance analysis report e. pricing
b. statement of cash flows
c. tax return Which statement below best describes a profit
d.comparative balance sheet center?
a. the authority to make decision affecting
Which of the following budgeting processes is the major determinants of profit, including
LEAST likely to motiv ate managers tow ard the power to choose its markets and sources
organizational goals? of supply
a. setting budget targets at attainable levels b. the authority to make decisions affecting
b. participation by subordinates in the the major determinants of profit, including
budgetary process the power to choose its markets, sources of
c. use of management by exception supply, and significant control over the
d. holding subordinates accountable for the amount of invested capital
items they control c. the authority to make decisions over the
e. hav ing top management set budget most significant costs of operations, including
levels the power to choose the sources of supply
d. the authority to provide specialized
Which of the following would normally be support to other units w ithin the organization
considered in a strategic plan? e. the responsibility for combining the raw
a. setting a target of 12 percent return on materials, direct labor, and other factors of
sales production into a final product
b. maintaining the image of the company as
the industry leader Which statement below best describes an
c. setting a market price per share of stock inv estment center?
outstanding a. the authority to make decisions affecting
d. distributing monthly reports for the major determinants of profit, including
departmental variance analysis the power to choose its markets and sources
e. tightening credit terms for customers of of supply
2/10, n/30 b. the authority to make decisions affecting
the major determinants of profit, including
At w hat level of management is the long-range the power to choose its markets and sources
planning function most important? of supply and significant control over the
a. at top management levels amount of invested capital
b. at middle management levels c. the authority to make decisions over the
c. at lower management levels most significant costs of operations, including
d. for staff functions the power to choose the sources of supply
e. for line functions d. the authority to provide specialized
support to other units w ithin the organization
e. the responsibility for developing markets
 for and selling of the output of the a. v ariance analysis report
organization b. statement of cash flows
c. tax return
Which statement is not true? d. comparative balance sheet
a. The journal v oucher is the only source of
input into the general ledger. Which steps in the Financial Accounting Process
b. A journal voucher can be used to are in the correct sequence?
represent summaries of similar transactions or a. record the transaction, post to the ledger,
a single unique transaction. prepare the adjusted trial balance, enter
c. Journal vouchers are not used to make adjusting entries, prepare financial
adjusting entries and closing entries in the statements
general ledger. b. record the transaction, prepare the
d. Journal vouchers offer a degree of control unadjusted trial balance, record adjusting
against unauthorized general ledger entries. journal entries, record closing entries,
prepare financial statements
Entries into the General Ledger System (GLS) can c. record the transaction, post to the ledger,
be made using information from record adjusting entries, prepare the
a. the general journal unadjusted trial balance, prepare financial
b. a journal voucher which represents a statements
summary of similar transactions d. record the transaction, post to the ledger,
c. a journal voucher which represents a prepare the adjusted trial balance, prepare
single, unusual transaction financial statements, record closing entries
d. all of the above
Which statement is not correct?
Which statement is not correct? The general a. the post-closing trial balance reports the
ledger master file ending balance of each account in the
a. is based on the firm's chart of account general ledger
b. contains a record for control accounts b. one purpose of preparing the unadjusted
c. is an output of the Financial Reporting trial balance is to ensure that debits equal
System (FRS) credits
d. supplies information for management c. financial statements are prepared based
decision making on the unadjusted trial balance
d. the unadjusted trial balance reports
What type of data is found in the general ledger control account balances but omits
master file? subsidiary ledger detail
a. a chronological record of all transactions
b. the balance of each account in the chart What account appears on the post-closing trial
of accounts balance?
c. budget records for each account in the a. income summary
chart of accounts b. Machinery
d. subsidiary details supporting a control c. rent expense
account d. interest income

Which report is not an output of the Financial

Reporting System (FRS)?
Financial statements are prepared from the Operational control decisions
a. trial balance a. set the goals and objectives for the firm
b. adjusted trial balance b. inv olve motiv ating managers to use
c. general ledger resources as productively as possible.
d. general journal c. are more focused than tactical decisions
d. hav e a fairly high degree of uncertainty
Risk exposures in the General Ledger and
Financial Reporting Systems include all of the Which of the following is not a report attribute
following except needed to make a report effective?
a. defective audit trail a. relevance
b. unauthorized access to the general b. accuracy
ledger c. detailed
c. loss of physical assets d. exception orientation
d. general ledger account out of balance
with the subsidiary account XBRL
a. is the basic protocol that permits
Which situation indicates an internal control risk in communication between I nternet sites.
the General Ledger/Financial Reporting b. controls Web browsers that access the
Systems (GL/FRS)? Web.
a. the employee w ho maintains the cash c. is the document format used to produce
journal computes depreciation expense Web pages.
b. the cash receipts journal voucher is d. w as designed to provide the financial
approved by the Treasurer community with a standardized method for
c. the cash receipts journal vouchers are preparing
prenumbered and stored in a locked safe e. is a low-level encryption scheme used to
d. the employee who maintains the cash secure transmissions in higher-level (HTTP)
receipts journal records transactions in the format.
accounts receivable subsidiary ledger
An XBRL taxonomy:
With a limited work force and a desire to a. is the document format used to produce
maintain strong internal control, which web pages.
combination of duties performed by a single b. is the final product (report).
indiv idual presents the least risk exposure? c. is a classification scheme.
a. maintaining the inv entory ledger and d. is a tag stored in each database record.
recording the inventory journal voucher in e. none of the above is true.
the general ledger
b. recording the inventory journal voucher in A characteristic of the Management Reporting
the general ledger and maintaining custody System (MRS) is
of inventory a. the MRS operates in conformity w ith
c. maintaining the cash disbursements generally accepted accounting principles
journal and recording direct labor costs b. it is a legal requirement that the MRS be
applied to specific jobs installed and functioning properly
d. preparing the accounts payable journal c. the MRS is developed by implementing
voucher and recording it in the general SEC requirements
ledger d. the MRS focuses on internal decision-
making information
Which statement is not true? The decision to enter a new market is an
a. authority refers to an individual's obligation example of
to achieve desired results a. strategic planning
b. if an employee is given the responsibility b. tactical planning
for a task, that employee should be given c. management control
authority to make decisions within the limits d. operational control
of that task
c. the level of detail provided to an All of the following are elements of operational
employee is a function of the employee's control decisions except
position with the firm a. determining the scope of the activity
d. all of the above are true b. setting operating standards
c. evaluating performance
Which statement is not true? The manager's span d. taking corrective action when necessary
of control
a. is narrow for routine and repetitive tasks In contrast to tactical planning decisions,
b. is related to the number of layers of management control decisions, and
management operational control decisions, strategic
c. affects the amount of detail provided to a planning decisions usually
manager a. are more focused
d. can affect employee morale and b. hav e a shorter time frame
motiv ation c. are unstructured
d. hav e a high degree of certainty
Short-range planning involves
a. setting goals and objectives of the firm Which of the following management principles
b. planning the production schedule for the affects the management reporting system?
next quarter a. formalization of tasks
c. planning the growth of the firm b. authorization
d. deciding on the degree of diversification c. span of control
among the firm's products d. all of the above

Long-range planning involves All of the following are elements of problem

a. planning the marketing and promotion for structure except
a product a. certainty b. data
b. presenting department heads with c. procedures d. objectives
budgetary goals for the next year
c. preparing a work force utilization budget All of the following are examples of programmed
for the next quarter reports except
d. deciding the optimum size of the firm a. cash flow reports for Division B
b. year-to-date local income tax payments
The lev el of management that makes tactical made by all employees living in City X and
planning decisions is working in City Y
a. top management c. inventory exception reports for Div ision G
b. middle management d. equipment utilization reports for Plant M
c. operations management
d. front-line management
A fundamental principle of responsibility Which file has as its primary purpose to present
accounting is that comparative financial reports on a historic
a. managers are accountable only for items basis?
they control a. journal voucher history file
b. a manager's span of control should not b. budget master file
exceed eight people c. responsibility file
c. structured reports should be prepared d. general ledger history file
weekly
d. the information flow is in one direction, All of the following are characteristics of the
top-down strategic planning process except the
a. emphasis on both the short and long run.
Which statement is not true? Responsibility b. review of the attributes and behavior of
accounting the organization's competition.
a. inv olves both a top-down and bottom-up c. analysis of external economic factors.
flow of information d. analysis of consumer demand.
b. acknowledges that some economic
events cannot be traced to any manager Which of the following performance measures
c. creates a budget cannot result in dysfunctional behavior?
d. compares actual performance with a. price variance b. quotas
budget c. ROI d. net income
e. all of the above can result in dysfunctional
What mechanism is used to convey to managers behav ior
the standards by w hich their performance
will be measured? Which of the following best describes a profit
a. the responsibility report center:
b. the scheduled report a. authority to make decisions affecting the
c. the budget major determinants of profit, including the
d. all of the above power to choose its markets and sources of
supply.
All of the following concepts encourage goal b. authority to make decisions affecting the
congruence except major determinants of profit, including the
a. detailed information reporting power to choose its markets and sources of
b. authority supply, and significant control over the
c. formalization of tasks amount of invested capital.
d. responsibility c. authority to make decisions over the most
significant costs of operations, including the
Which of the following statements is NOT true? power to choose the sources of supply.
a. XML stands for eXperimental Markup d. authority to provide specialized support to
Language. other units within the organization.
b. XML is a is a meta-language for describing e. responsibility for combining the raw
markup languages. materials, direct labor, and other factors of
c. Unlike HTML, XML is capable of storing production into a final product.
data in relational form.
d. Any markup language can be created
using XML
XRLB reporting:
a. must be used by banks to file required d. All of the above.
quarterly "Call Reports"
b. is used substantially both in the US and e. None of the above.
internationally.
c. facilitates the fulfillment of legal
requirements stipulated in SOX.