Sample Chapter

INSTANT DOWNLOAD COMPLETE TEST BANK WITH ANSWERS
 
Accounting Information Systems The Processes And Control 2nd Edition By Leslie Turner – Test Bank
Sample  Questions       
  1. When a company receives returned goods from a customer, the business process to accept the return would most likely be a(n):
  2. Administrative process
  3. Conversion process
  4. Expenditure process
  5. Revenue process

 

  1. Which of the following is least likely to be an output of the accounting information system?
  2. A check
  3. A report
  4. An invoice
  5. A bar code

 

  1. Which of the following is not true of the supply chain?
  2. The supply chain includes vendors.
  3. The supply chain excludes customers.
  4. The supply chain includes information flows.
  5. The supply chain include secondary suppliers.

 

  1. Which of the following is not an objective of IT enablement?
  2. Increased accuracy of data
  3. Reduced cost
  4. Reduced security problems
  5. Increased efficiency

 

  1. The correct order of the computer data hierarchy is:
  2. Byte, bit, record, field, file, database
  3. Bit, byte, record, field, file, database
  4. Bit, byte, field, record, file, database
  5. Bit, byte, field, record, database, file

 

  1. The process of searching for identifiable patterns in data is called:
  2. Sequential processing
  3. Data warehousing
  4. Data mining
  5. Real-time processing

 

  1. An IT enabled system for purchasing that is an “invoice-less” system is called a(n):
  2. Automated matching system
  3. Evaluated receipt settlement
  4. E-payables
  5. Point of sale system

 

  1. The COSO report written for the purpose of assisting managers in the challenge of managing risk in their organization is entitled:
  2. Internal Control – Integrated Framework
  3. Enterprise Risk Management – Integrated Framework
  4. Corporate Governance Guidance
  5. IT Governance Guidance

 

  1. Accountants have some form of use of the AIS in all but which role?
  2. User
  3. Programmer
  4. Auditor
  5. Designer

 

  1. Which of the following is not true of unethical behavior?
  2. The only category of unethical behavior for accountants is inflating revenue.
  3. Accountants are often pressured to help commit or coverup unethical behavior.
  4. Hacking is an unethical behavior that accountants should be concerned about.
  5. An accounting information system can be used to cover up unethical behavior.

 

ANSWERS TO QUESTIONS 1 – 10 (FROM THE TEXTBOOK)

  1. D                                     6.    C
  2. D                                     7.    B
  3. B                                      8.    A
  4. C                                      9.    B
  5. C                                   10.    A

 

TEST BANK – CHAPTER 1 – MULTIPLE CHOICE

 

  1. A prescribed sequence of work steps preformed in order to produce a desired result for the organization is called a(n):
  2. Accounting Information System
  3. Business Process
  4. Financial Transaction
  5. Capital Transaction Process

 

  1. The process that must identify the transactions to be recorded, capture all the important details of the transactions, properly process the transaction details, and provide reports is termed the:
  2. Revenue Process
  3. Expenditure Process
  4. Accounting Information System
  5. Business Process

 

  1. An accounting information system serves many functions – which of the following is NOT one of those functions?
  2. Capture the details of a transaction
  3. Implement the start of a transaction
  4. Provide reports of transactions
  5. Process the transactions details into appropriate accounts

 

  1. The proper order of activity in an accounting information system would be as follows:
  2. Capture, Record, Process, Report
  3. Process, Record, Capture, Report
  4. Capture, Process, Report, Record
  5. Record, Capture, Process, Report

 

  1. Which of the following is not one of the general types of business processes identified by the textbook?
  2. Revenue Processes
  3. Expenditure Processes
  4. Conversion Processes
  5. Human Resource Processes

 

  1. Which of the following statements, related to business processes, is false?
  2. Each business process has a direct effect on the financial status of the organization.
  3. A business process is initiated by a particular kind of event.
  4. A business process has a well-defined beginning and end.
  5. Each business process is usually completed in a relatively short period.

 

  1. Which of the following is least likely to be part of an accounting information system function?
  2. Record the accounting data in the appropriate records
  3. Generation of data to be part of the information system.
  4. Process the detailed accounting data.
  5. Report the summarized accounting data.

 

  1. Work steps that are internal controls within the business process would include:
  2. Using an electronic register to record all sales transactions.
  3. Combining both manual and computer based records.
  4.     Reconciling a cash register at the end of each day.
  5. Preparation of internal reports to monitor the performance of a specific department.

 

  1. Five different components of the accounting information system were presented in the textbook.  Which of the following is not one of those components?
  2. Work steps within a business process intended to capture accounting data as the business process occurs.
  3. Work steps that are internal controls within the business process to safeguard assets and to ensure the accuracy and completeness of the data.
  4. Work steps that generate both internal and external reports.
  5. Work steps to assure that all business processes are recorded using computer-based procedures.

 

  1. Output from an accounting information system would include:
  2. Checks to vendors
  3. Invoices from vendors
  4. Customer statements
  5. Purchase orders

 

 

  1. The entities, processes, and information flows that involve the movement of materials, funds, and related information through the full logistics process, from the acquisition of raw materials to the delivery of the finished produces to the end use is a set of linked activities referred to as:
  2. Management Information System
  3. Supply Chain
  4. Accounting Information System
  5. Logistics Management

 

  1. The organization and control of all materials, funds, and related information in the logistics process, from the acquisition of raw materials to the delivery of finished products to the end user is referred to as:
  2. Supply Chain Management
  3. Management Information System
  4. Logistics Management
  5. IT Enablement

 

  1. When discussing the supply chain:
  2. Any concern about vendors would relate only to those vendors with which a company has direct contact.
  3. Service providers would not be part of the supply chain.
  4. Concern would not extend beyond the point where the product is shipped to a customer.
  5. An entity may not be able to directly control all of the interrelated activities within the supply chain.

 

  1. Using IT systems to enhance efficiency and effectiveness of internal or supply chain processes is called:
  2. Information Technology Enablement
  3. Information Systems Control
  4. Information Technology Process Engineering
  5. Information Technology Business Processes

 

  1. The purposeful and organized changing of business processes to make them more efficient is referred to as:
  2. Information Technology Engineering
  3. Information Systems Management
  4. Business Process Reengineering
  5. Business Process Supply Chain

 

  1. The use of BPR (Business Process Reengineerin) is a two-fold: (1) Aligns business processes with the IT systems used to recorded processes and, (2):
  2. Improves the efficiency and effectiveness of these processes.
  3. Reduces the cost of these processes.
  4. Enhances the usefulness of these processes.
  5. Increases the accuracy of the process.
  6. The smallest unit of information in a computer system can have only one of two values, zero or one, and is referred to as a(n):
  7. Field
  8. Record
  9. Byte
  10. Bit

 

  1. A unit of storage that represents one character is referred to as a:
  2. Byte
  3. Bit
  4. Bat
  5. Field

 

  1. A set of related fields is referred to as a:
  2. File
  3. Record
  4. Byte
  5. Binary Digit

 

  1. Each record is made up of related:
  2. Files
  3. Bytes
  4. Name
  5. Fields

 

  1. A collection of data stored on a computer in a form that allows the data to be easily accessed, retrieved, manipulated, and stored is referred to as a(n):
  2. Accounting Information System
  3. Information Technology
  4. Database
  5. Master File

 

  1. A collection of data stored in several small two-dimensional tables that can be joined together in many varying ways to represent many different kinds of relationships among the data is referred to as a(n):
  2. Database
  3. Master File
  4. Relational Database
  5. Relation Based Accounting Software

 

  1. Accounting software traditionally uses two different types of files.  The file type that is relatively permanent and used to maintain the detailed data for each major process is a(n):
  2. General Ledger
  3. Master File
  4. Transaction File
  5. Subsidiary File

 

  1. Accounting software traditionally uses two different types of files.  The file type that is the set of relatively temporary records that will be process to update the permanent file is referred to as a(n):
  2. Master File
  3. General File
  4. Transaction File
  5. Subsidiary File

 

  1. The chart of accounts would be a good example of a:
  2. Transaction File
  3. Master File
  4. Field
  5. Record

 

  1. The organization of files in a computer system normally uses one of two different access methods.  The access method where the files store records in sequence, with one record stored immediately after another, is referred to as:
  2. Chronological Access
  3. Sequential Access
  4. Random Access
  5. Numerical Access

 

  1. The organization of files in a computer system normally uses one of two different access methods.  The access method where the files are not stored in sequence, one record not stored immediately after another, is referred to as:
  2. Indexed Access
  3. Batch Access
  4. Sequential Access
  5. Random Access

 

  1. There are two modes of processing transactions in accounting systems.  The mode that requires all similar transactions be grouped together and be processed at the same time, is referred to as:
  2. Batch Processing
  3. Online Processing
  4. Real-time Processing
  5. Sequential Processing

 

  1. There are two modes of processing transactions in accounting systems.  The mode that will record transactions, one at a time, is referred to as:
  2. Batch Processing
  3. Online Processing
  4. Real-Time Processing
  5. Sequential Processing

 

  1. A type of online processing where a transaction is processed immediately so that the output is available immediately is termed:
  2. Virtual Processing
  3. Sequential Processing
  4. Real-Time Processing
  5. Batch Processing
  6. An integrated collection of enterprise-wide data that includes five to ten fiscal years of non-volatile data, used to support management in decision making and planning is referred to as:
  7. Operational Database
  8. Relational Database
  9. Data Storage
  10. Data Warehouse

 

  1. This type of database contains the data that are continually updated as transactions are processed and includes data for the current fiscal year and supports day-to-day operations is referred to as a(n):
  2. Data Warehouse
  3. Data Storage
  4. Relational Database
  5. Operational Database

 

  1. The data in the data warehouse are said to be enterprise-wide because:
  2. The data relate to all areas of the business.
  3. The data are pulled from each of the operational databases and maintained in the data warehouse for many fiscal periods.
  4. All areas of the business are able to access the data warehouse.
  5. All transactions across the all areas of the business are recorded in the data warehouse.

 

  1. The process of searching data within the data warehouse for identifiable patterns that can be used to predict future behavior is referred to as:
  2. Data mining
  3. Data digging
  4. Data housing
  5. Data querying

 

  1. Two or more computers linked together to share information and / or resources is referred to as a(n):
  2. Computer Intranet
  3. Computer Internet
  4. Computer System
  5. Computer Network

 

  1. This type of computer network is one that spans a relatively small area – often confined to a single building or group of buildings, and are intended to connect computers within an organization.
  2. Local Area Network
  3. Land Arena Network
  4. Extranet
  5. Internet

 

  1. The global computer network, or “information super highway”, is the:
  2. WAN
  3. Intranet
  4. Internet
  5. LAN
  6. A company’s private network, accessible only to the employees of that company is the:
  7. WAN
  8. Intranet
  9. Internet
  10. LAN

 

  1. This computer network is similar to a company’s intranet except that it does allow access to selected outsiders, such as buyers, suppliers, distributors, and wholesalers.
  2. Ultranet
  3. Internet
  4. Extranet
  5. LAN

 

49A.   A contemporary type of computer infrastructure that is used by an increasing number of companies involves the use of shared services, software, and / or data stored on servers at a remote location, which are accessible over a network, is referred to as:

  1. Database
  2. Cloud Computing
  3. Internet
  4. Relational Internet

 

  1. The use of electronic means to enhance business processes is termed:
  2. E-business
  3. Electronic data interchange
  4. Point of sale system
  5. E-commerce

 

  1. The intercompany, computer-to-computer transfer of business documents in a standard business format is called:
  2. E-business
  3. E-commerce
  4. Local area network
  5. Electronic data interchange

 

  1. Which of the following is NOT one of the three components of electronic data interchange?
  2. Commerce – encompasses all forms of electronic trading.
  3. Intercompany – two or more companies conducting business electronically.
  4. Standard business format – necessary so that the various companies can interact and trade electronically.
  5. Computer to computer – indicates that each company’s computers are connected via a network.

 

  1. This term refers to a system of hardware and software that captures retail sales transactions by standard bar coding.
  2. E-business
  3. Electronic data interchange
  4. Point of sale system
  5. E-commerce

 

  1. When a point of sale system is used and a customer checks out through a cash register, which of the following processes occur?
  2. Net income is computed
  3. Inventory values are updated
  4. Accounts payable balances are updated
  5. Replacement inventory is purchased

 

  1. A system of computer hardware and software in which the software matches an invoice to its related purchase order and receiving report is called:
  2. Point of sale system
  3. Electronic data interchange
  4. Automated matching
  5. Evaluated receipt settlement

 

  1. An invoice-less system in which computer hardware and software complete an invoice-less match that is a comparison of the purchase order with the goods received is termed:
  2. Evaluated receipt settlement
  3. Automated matching
  4. Electronic invoice presentation and payment
  5.     Enterprise resource planning

 

  1. This system enables a vendor to present an invoice to its trading partner via the internet, eliminating the paper, printing, and postage costs of traditional paper invoicing.
  2. Evaluated receipt settlement
  3. Electronic invoice presentation and payment
  4. Automated matching
  5. Electronic data interchange

 

 

  1. A multi-module software system designed to manage all aspects of an enterprise usually broken down into modules such as financials, sales, human resources, and manufacturing, is referred to as a(n):
  2. Electronic data system
  3. Electronic data interchange
  4. Enterprise resource planning
  5. Electronic resource program

 

59X.   Management has the responsibility, and the ability, to take action to reduce risks or to lessen the impact al nearly all risks an organization faces.  The steps taken by management to lessen the risk or reduce the impact of the risk, are referred to as:

  1. Programs
  2. Risk assessment
  3. Information evaluation
  4. Controls

 

  1. Which of the following groups of professionals within an organization have a history of designing and implementing the controls to lessen risks?
  2. Management
  3. Accountants
  4. Human Resources
  5. Lawyers

 

  1. Which of the following is not one of broad categories of controls?
  2. The risk that assets will be stolen or misused.
  3. The risk of errors in accounting data or information.
  4. The risk of loss due to a natural disaster.
  5. The risk of fraudulent activity by employees.

 

  1. Which of the following is not a risk inherent in an IT system?
  2. Computer security breaches.
  3. Computers being stolen.
  4. Erroneous input of data.
  5. Hardware or software failure.

 

63X.   A comprehensive report on enterprise risk management was issued by this organization.

  1. American Accounting Association
  2. New York Stock Exchange
  3. Institute of Internal Auditors
  4. Committee on Sponsoring Organizations

 

  1. A process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may effect the entity, and manage risk to be withing its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives is referred to as:
  2. Enterprise resource planning
  3. Enterprise risk management
  4. IT system control structure
  5. Corporate governance structure

 

  1. In order to achieve the objective of managing risk, management should establish control structures that include, at a minimum:
  2. Accounting internal controls.
  3. Accounting internal controls, IT controls, corporate governance, enterprise risk management, and IT governance.
  4. IT controls, IT governance, corporate governance, and accounting internal controls.
  5. IT controls and accounting internal controls.

 

  1. The company’s development and adherence to this should reduce the opportunities for managements or employees to conduct fraud.
  2. Code of ethics
  3. Internal control structure
  4. Application controls
  5. Corporate governance

 

67X.   The COSO report, Internal Controls – Integrated Framework, identified interrelated components of internal control.  Which of the following is not one of those components?

  1. Monitoring
  2. Risk assessment
  3. Control activities
  4. Enterprise risk management

 

  1. IT controls can be divided into two categories.  Which of the following is a correct statement of one of those categories?
  2. Application controls apply overall to the IT accounting system.
  3. Application controls apply to the prevention of erroneous or incomplete input or processing of data.
  4. Application controls are used specifically in accounting applications to control inputs, processing, and output.
  5. Application controls are used to prohibit fraudulent financial reporting.

 

  1. An elaborate system of checks and balances, whereby a company’s leadership is held accountable for building shareholder value and creating confidence in the financial reporting processes, is referred to as:
  2. Enterprise risk management
  3. Corporate governance
  4. Application controls
  5. Internal control structure

 

  1. The purpose of this 2002 act was to improve financial reporting and reinforce the importance of corporate ethics.
  2. Foreign Corrupt Practices Act
  3. Sarbanes-Oxley Act
  4. Securities and Exchange Act
  5. Treadway Act

 

  1. Which of the following is not one of the corporate functions interrelated within the corporate governance system?
  2. Management Oversight
  3. Ethical Conduct
  4. Risk Assessment
  5. Financial Stewardship

 

  1. The proper management, control, and use of IT systems are known as:
  2. IT Governance
  3. IT Controls
  4. IT Risk Management
  5. IT Code of Ethics

 

  1. Accountants have several possible roles related to accounting information systems.  Which of the following is not normally one of those roles?
  2. Auditor of an AIS
  3. User of the AIS
  4. Programmer of the AIS
  5. Design of the AIS

 

  1. There are many reasons for accountants to become aware of potential unethical behaviors.  Which of the following is not one of the reasons identified by the authors?
  2. Accountants are responsible for identifying unethical and illegal activities.
  3. Accounts assist in developing and implementing internal control structures that should decrease the chance of unethical actions.
  4. Accountants are often pressured to assist in, or cover up, unethical actions.
  5. Accountants deal with assets or records that could easily tempt accountants to engage in unethical behavior.End of Chapter Questions:
    1. The careful and responsible oversight and use of the assets entrusted to management is called:
    2. Control environment
    3. Stewardship
    4. Preventive control
    5. Security

     

    1. Which of the following is not a condition in the fraud triangle?
    2. Rationalization
    3. Incentive
    4. Conversion
    5. Opportunity

     

    1. There are many possible indirect benefits to management when management fraud occurs.  Which of the following in not an indirect benefit of management fraud?
    2. Delayed exercise of stock options.
    3. Delayed cash flow problems.
    4. Enhanced promotion opportunities.
    5. Increased incentive-based compensation.

     

    1. Which of the following is not an example of employee fraud?
    2. Skimming
    3. Larceny
    4. Kickbacks
    5. Earnings management

     

    1. Which of the following is not a common form of employee fraud?
    2. Inventory theft
    3. Expense account fraud
    4. Payroll fraud
    5. Refund fraud
    6. Segregation of duties is a fundamental concept in an effective system of internal controls.  Nevertheless, the effectiveness of this control can be compromised through which situation?
    7. A lack of employee training
    8. Collusion among employees
    9. Irregular employee reviews
    10. The absence of an internal audit function

     

    1. The most difficult type of misstatement to discover is fraud that is concealed by:
    2. Over-recording the transactions
    3. Nonrecorded transactions
    4. Recording the transactions in subsidiary records
    5. Related parties

     

    1. The review of amounts charged to the company from a seller that it purchased from is called a:
    2. Vendor audit
    3. Seller review
    4. Collusion
    5. Customer review

     

    1. Which of the following is generally an external computer fraud, rather than an internal computer fraud?
    2. Spoofing
    3. Input manipulation
    4. Program manipulation
    5. Output manipulation

     

    1. Which control activity is intended to serve as a method to confirm the accuracy or completeness of data in the accounting system?
    2. Authorization
    3. Segregation of duties
    4. Security of assets
    5. Independent checks and reconciliations

     

    1. COSO describes five components of internal control.  Which of the following terms is best described as “policies and procedures that help ensure management directives are carried out and management objectives are achieved”?
    2. Risk assessment
    3. Information and communication
    4. Control activities
    5. Control environment
    6. Proper segregation of functional responsibilities calls for separation of the functions of:
    7. Authorization, execution, and payment
    8. Authorization, recording, and custody
    9. Custody, execution, and reporting
    10. Authorization, payment, and recording

     

    1. AICPA Trust Principles identify five categories of risks and controls. Which category is best described by the statement, “Information process could be inaccurate, incomplete, or not properly authorized”?
    2. Security
    3. Availability
    4. Processing integrity
    5. Confidentiality

     

    1. A company’s cash custody function should be separated from the related cash recordkeeping function in order to:
    2. Physically safeguard the cash
    3. Establish accountability for the cash
    4. Prevent the payment of cash disbursements from cash receipts
    5. Minimize opportunities for misappropriations of cash

     

    ANSWER TO QUESTIONS 1-14 (FROM THE TEXTBOOK)

     

    1. B                                      5.    D                                     9.    A                                   13.    C
    2. C                                      6.    B                                   10.    D                                   14.    D
    3. A                                     7.    B                                   11.    C
    4.     D                                     8.    A                                   12.    B

     

    TEST BANK – CHAPTER 3 – MULTIPLE CHOICE

     

    1.     The chance for fraud or ethical lapses will not be reduced if management:
    2. Emphasizes ethical behavior
    3. Models ethical behavior
    4. Hires ethical employees
    5. Is unethical

     

    1. The Phar-Mor fraud began when management:
    2. Forgot to change the budgeted figures that had been incorrectly computed.
    3. Attempted to make the actual net income match the budgeted amounts.
    4. Overstated their expenses to cover amounts embezzled from the company.
    5. Understated the revenue in order to reduce the tax payable to the IRS.

     

    1. Each of the following companies was involved in fraudulent financial reporting during 2001 and 2002, except:
    2. Adelphia Communications Corp.
    3. Microsoft Corporation
    4. Enron Corp.
    5. Xerox Corporation

     

    1. In addition to ethical practices, management has an obligation to maintain a set of processes and procedures to assure accurate financial reporting and protection of company assets.  This obligation arises because:
    2. Many groups have expectations of management.
    3. Management has a stewardship obligation to investors.
    4. Management has an obligation to provide accurate reports to non-investors.
    5. All of the above are reasons for the obligation.

     

    1. The careful and responsible oversight and use of the assets entrusted to management is referred to as:
    2. Ethics
    3. Internal Control
    4. Stewardship
    5. Confidentiality

     

    1. A process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives related to the effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations is:
    2. COSO’s definition of internal control
    3. AICPA’s definition of stewardship
    4. ACFE’s definition of confidentiality
    5. IMA’s definition of competency

     

    1. If an organization’s IT systems are not properly controlled, they may become exposed to the risks of:
    2. Unauthorized access
    3. Erroneous processing
    4. Service interruption
    5. All of the above

     

    1. A set of documented guidelines for moral and ethical behavior within an organization is termed a(n):
    2. Accounting Information System
    3. Code of Ethics
    4. Internal Control
    5. Sarbannes-Oxley
    6. Which individual or group has the responsibility to establish, enforce, and exemplify the principles of ethical conduct within an organization?
    7. Board of Directors
    8. Securities and Exchange Commission
    9. Management
    10. Audit Committee

     

    1. The theft, concealment, and conversion of personal gain of another’s money, physical assets, or information is termed:
    2. Defalcation
    3. Skimming
    4. Larceny
    5. Fraud

     

    1. An example of concealment would include:
    2. Changing the payee on a check improperly paid by the organization.
    3. Selling a piece of inventory that has been stolen
    4. Stealing money from an organization before the related sale and cash receipt has been recorded.
    5. All of the above are examples of concealment.

     

    1. Changing the accounting records to hide the existence of a fraud is termed:
    2. Theft
    3. Conversion
    4. Collusion
    5. Concealment

     

    1. The definition of fraud includes the theft of:
    2. Assets
    3. Money
    4. Information
    5. All of the above

     

    1. The theft of any item of value is referred to as:
    2. Fraudulent financial reporting
    3. Misappropriation of assets
    4. Misstatement of financial records
    5. Earnings management

     

    1. Financial pressures, market pressures, job-related failures, and addictive behaviors are all examples of which condition of the Fraud Triangle?
    2. Opportunity
    3. Conversion
    4. Incentive
    5. Rationalization

     

    1. Circumstances that provide access to the assets or records that are the objects of the fraudulent activity describes which condition of the Fraud Triangle?
    2. Rationalization
    3. Incentive
    4. Concealment
    5. Opportunity

     

    1. Fraudsters typically try to justify their behavior by telling themselves that they intend to repay the amount stolen or that they believe the organization owes them the amount stolen.  This justification is referred to as:
    2. Opportunity
    3. Rationalization
    4. Incentive
    5. Concealment

     

    1. According to the authors of this textbook, which of the following is not one of general categories of people who commit fraud?
    2. Employees
    3. Government Agencies
    4. Customers
    5. Management

     

    18a1.    Studies completed by the Association of Certified Fraud Examiners, have determined that what percent of revenues are lost annually as a result of occupational fraud and abuse?

    1. 2%
    2. 3%
    3. 6%
    4. 8%

     

    18a2.    In the 2010 study completed by the Association of Certified Fraud Examiners, the median loss due to fraud was:

    1. $160,000
    2. $135,000
    3. $250,000
    4. $1,000,000

     

    18a3.    Which of the following types of fraud is the most common, according to the Association of Certified Fraud Examiners?

    1. Corruption Schemes
    2. Asset Misappropriation
    3. Earnings Management
    4. Financial Statement Misstatement

     

    18a4.    Which of the following is the most common method of detecting occupational fraud?

    1. Financial Statement Audit
    2. Management Review
    3. Internal Audit
    4. Tip from an employee, customer, or vendor

     

     

    1. The falsification of accounting reports is referred to as:
    2. Defalcation
    3. Internal Theft
    4. Misappropriation of Assets
    5. Earnings Management

     

     

    1. Management fraud may involve:
    2. Overstating expenses
    3. Understating assets
    4. Overstating revenues
    5. Overstating liabilities

     

    1. Management misstatement of financial statements often occurs in order to receive indirect benefits such as:
    2. Decreased income taxes
    3. Delayed cash flows
    4. Increased stock prices
    5. Increased dividends

     

    1. Management circumvention of systems or internal controls that are in place is termed:
    2. Management override
    3. Management collusion
    4. Management stewardship
    5. Management manipulations

     

    1. The theft of assets by a non-management employee is termed:
    2. Inventory theft
    3.     Employee fraud
    4. Expense account fraud
    5. Skimming

     

    1. A situation where the organization’s cash is stolen before it is entered in the accounting records is termed:
    2. Kickback
    3. Larceny
    4. Collusion
    5. Skimming

     

    1. A situation where the organization’s cash is stolen after it is entered in the accounting records is termed:
    2. Kickback
    3. Larceny
    4. Collusion
    5. Skimming

     

    1. A cash payment made by a vendor to an organization’s employee in exchange for a sale to the organization by the vendor is termed:
    2. Bribery
    3. Collusion
    4. Kickback
    5. Payment Fraud

     

    1. When two or more people work together to commit a fraud, it is called:
    2. Collusion
    3. Larceny
    4. Skimming
    5. Override

     

    1. Jamie Stark, a sales employee, stole merchandise from her employer, and Frank Adams, the accounting clerk, covered it up by altering the inventory records.  This is an example of:
    2. Inventory theft
    3. Financial journal fraud
    4. Skimming
    5. Collusion

     

    1. When a customer improperly obtains cash or property from a company, or avoids liability through deception, it is termed:
    2. Check fraud
    3. Customer fraud
    4. Credit card fraud
    5. Refund fraud

     

    1. Which of the following would be considered a vendor fraud?
    2. The submission of duplicate or incorrect invoices.
    3. A customer tries to return stolen goods to collect a cash refund.
    4. The use of stolen or fraudulent credit cards.
    5. Inflating hours worked.

     

    1. The theft of proprietary company information is called:
    2. Vendor fraud
    3. Customer fraud
    4. Espionage
    5. Management fraud

     

    1. Which of the following is a characteristic of computer fraud?
    2. A computer is used in some cases to conduct a fraud more quickly and efficiently.
    3. Computer fraud can be conducted by employees within the organization.
    4. Computer fraud can be conducted by users outside an organization.
    5. All of the above are characteristics

     

    1. A fraudster uses this to alter a program to slice a small amount from several accounts, crediting those small amounts to the perpetrator’s benefit.
    2. Trap door alteration
    3. Salami technique
    4. Trojan horse program
    5. Input manipulation

     

    1. A small, unauthorized program within a larger legitimate program, used to manipulate the computer system to conduct a fraud is referred to as a(n):
    2. Trap door alteration
    3. Salami technique
    4. Trojan horse program
    5. Input manipulation

     

    1. When a person alters a system’s checks or reports to commit fraud it is referred to as:
    2. Input manipulation
    3. Output manipulation
    4. Program manipulation
    5. Collusion

     

    1. This type of external computer fraud is intended to overwhelm an intended target computer system with so much bogus network traffic so that the system is unable to respond to valid traffic.
    2.     DoS Attack
    3. Hacking
    4. Spoofing
    5. Phishing
    6. When a person, using a computer system, pretends to be someone else, it is termed:
    7. DoS Attack
    8. Hacking
    9. Spoofing
    10. Phishing

     

    38X.    Which of the following is NOT one of the three critical actions that a company can undertake to assist with fraud prevention and fraud detection?

    1. Maintain and enforce a cost of ethics.
    2. Maintain an accounting information system
    3. Maintain a system of accounting internal controls
    4. Maintain a system of information technology controls

     

    1. The Sarbanes-Oxley act was passed in 2002 as a Congress’s response to the many situations of fraudulent financial reporting discovered during 2001.  The intention of the Act was:
    2. Police the accounting firms responsible for auditing the corporations.
    3. Punish the companies that had been involved in the cases of fraudulent financial reporting.
    4. Establish accounting standards that all companies are to follow.
    5. Reform accounting, financial reporting, and auditing functions of companies that are publicly traded.

     

    1. The types of concepts commonly found in a code of ethics would not include:
    2.     Obeying applicable laws and regulations that govern business.
    3. Avoiding all conflicts of interest.
    4. Operating at a profit in all reporting periods.
    5. Creating and maintaining a safe work environment.

     

    1. The objectives of an internal control system include all of the following except:
    2. Maintain ongoing education
    3. Safeguard assets
    4. Maintain accuracy and integrity of accounting data
    5. Ensure compliance with management directives

     

    1. The authors presented their “picture” of internal control as a series of umbrellas which represent different types of controls.  Which of the following is not one of those types of controls?
    2. Prevention
    3. Investigation
    4. Detection
    5. Correction

     

    1. This type of control is designed to avoid errors, fraud, or events not authorized by management.
    2. Prevention
    3. Judicial
    4. Detection
    5. Correction

     

    1. This type of control is included in the internal control system because it is not always possible to prevent all frauds.  They help employees to discover or uncover errors, fraud, or unauthorized events.
    2. Investigation
    3. Judicial
    4. Detection
    5. Correction

     

    1. The accounting profession has accepted this report as the standard definition and description of internal control..
    2. Sarbanes-Oxley Report
    3. FCPA Report
    4. ERI Report
    5. COSO Report

     

    45a1.    The COSO report is also known as:

    1. Fraud Triangle
    2. Internal Control Integrated Framework
    3. Code of Ethical Behavior
    4. Report to the Nation

     

    45a2.    Which of the following is NOT one of the reasons that is is not possible to eliminate all of the fraud risks?

    1. Human Error
    2. Human Behavior
    3. Opportunity
    4. May not be cost effective

     

    1. According to the COSO report, there are five different interrelated components of internal control.  Which of the following is not one of those five components?
    2. Code of Ethics
    3. Control Environment
    4. Information and Communication
    5. Monitoring

     

    46a1.    Which of the following statements related to the COSO report is false?

    1. The COSO report provided the standard definition of internal control accepted be the accounting industry.
    2. The COSO report is commonly known as the Internal Control Integrated Framework.
    3. The COSO report has not been updated since it was issued in 1992.
    4. The COSO report was the result of a comprehensive study of interest control.

     

    1. The component of internal control, identified in the COSO report, that sets the tome of an organization and includes the consciousness of its employees is:
    2. Risk Assessment
    3. Control Activities
    4. Control Environment
    5. Information and Communication

     

    48X.    The control environment component of internal control was identified to have a number of different factors.  Which of the following is NOT one of those factors?

    1. Management’s oversight responsibility, including its philosophy and operating style
    2. The identification of sources of risk
    3. The integrity and ethical values of the entity’s people
    4. The attention and direction provided by the board of directors

     

    1. One of the components of internal control identified by COSO required that management must be considering threats and the potential for risks, and stand ready to respond  should these events occur.  This component is referred to as:
    2. Control Environment
    3. Control Activities
    4. Risk Assessment
    5. Communication

     

    50X.    The process of risk assessment would include all of the following actions, except:

    1. Identify sources of risk, both internal and external
    2. Determine the impacts of identified risks
    3. Develop and execute an action plan to reduce the impact and probability of identified risks
    4. Report the risks to the audit committee

     

    1. The COSO report identified a component of internal control as the policies and procedures that help ensure that management directives are carried out and that management directives are achieved  The component is:
    2. Control activities
    3. Risk assessment
    4. Monitoring
    5. Information and communication

    52X.    The range of actions that make up the component of internal control referred to as control activities includes each of the following, except:

    1. Segregation of duties
    2. Risk assessment
    3. Independent checks and reconciliations
    4. Authorization of transactions

     

    1. The approval or endorsement from a responsible person or department of an organization that has been sanctioned by top management is the process of:
    2. Securing assets
    3. Segregating duties
    4. Authorizing transactions
    5. Adequate recording

     

    53A1.    Which of the following statements is false, related to the authorization of transactions?

    1. Every transaction that occurs must be properly authorized in some manner.
    2. General authorization is the set of guidelines that allows transactions to be completed as long as they fall within established parameters.
    3. It is not possible, nor is it important, to try to ensure that an organization egage only in transactions that are authorized.
    4. Specific authorization that explicit approval is needed for that single transaction to be completed.

     

    1. The category of control activities referred to as segregation of duties requires that certain activities should be the responsibility of different person or department.  The three duties that are to be separated are:
    2. Authorizing, recording, and paying
    3. Recording, custody, and disposition
    4. Authorizing, paying, and custody
    5. Authorizing, recording, and custody

     

    1. If an accounting supervisor were allowed to hire employees, approve the hours worked, prepare the paychecks, and deliver the paychecks, which of the categories of control activities would be violated?
    2. Adequate records
    3. Segregation of duties
    4. Authorization of transactions
    5. Independent checks

     

    1. A good system of internal control includes many types of documentation.  Which of the following types of documentation is not part of the adequate records and documents category of internal control?
    2. Schedules and analyses of financial information
    3. Supporting document for all significant transactions
    4. Accounting cycle reports
    5. All of the following are types of documentation

     

    1. The existence of verifiable information about the accuracy of accounting records is called a(n):
    2. Audit trail
    3. Internal control
    4. Risk assessment
    5. Supporting documentation

     

    1. When discussing the security of assets and documents, there are many actions that can be taken.  Which of the following would not be related to this category of internal control?
    2.     Securing the assets and records so that they are not misused or stolen.
    3. Limiting access to certain assets to the extent that is practical.
    4. Identifying sources of risk and estimating the possibility of that risk.
    5. Enacting physical safeguards, such as security cameras, to protect some assets.

     

    1. Independent checks on the performance of others is one of the categories of internal control.  These independent checks would include all of the following, except:
    2. Reviewing batch totals
    3. Reconciliation
    4. Comparison of physical assets with records
    5. Use of appropriate ID to enter restricted areas

     

    59A1.    This activity serves as a method to confirm the accuracy and completeness of data in the accounting system:

    1. Compensating control
    2. Independent checks
    3. Audit trail
    4. Supporting documentation

     

    59A2.    Which of the following was NOT listed as a procedure to accomplish independent checks?

    1. Recalculation of amounts
    2. Analysis of reports
    3. Review of auditing procedures
    4. Reconciliation

     

    1. Which of the following objectives were not identified as necessary to be provided by an effective accounting system?
    2. Prepare the appropriate documents
    3. Identify all relevant financial events
    4. Capture the important data
    5. Proper recording and processing of the data

     

    1. The ongoing review and evaluation of a system of internal control is referred to as:
    2. Risk assessment
    3. Monitoring
    4. Segregating
    5. Communication

     

    1. This level of assurance means that controls achieve a sensible balance of reducing risk when compared with the cost of the control.
    2. Absolute assurance
    3. Probable assurance
    4. Reasonable assurance
    5. Convincing assurance

     

    1. Factors that limit the effectiveness of internal controls include all of the following except:
    2. Flawed judgment applied in decision making
    3. Human error
    4. Controls can be circumvented or ignored
    5. All of the above are factors that limit the effectiveness of internal controls

     

    1. In order to have the segregation of duties recommended by COSO, it would be necessary for a small organization to hire two additional individuals.  At this time, there is not enough work for the one office employee to stay busy.  The reason for not hiring the additional people would have to do with:
    2. Human error
    3. Cost versus benefit
    4. Collusion
    5. Authorization

     

    1. In response to the need for internal controls above and beyond what was described by COSO, the Information Systems Audit and Control Association developed an extensive framework of IT controls entitled:
    2. Trust Principles
    3. Control Objectives for Information Technology (COBIT)
    4. Control Instrument for Certified Accountants (CICA)
    5. American Internal Control Practice Association (AICPA)

     

    66X.    The Trust Services Principles document divided the risks and controls in IT into five categories.  Which of the following is not one of those categories?

    1. Certification
    2. Security
    3. Processing Integrity
    4. Confidentiality

     

    67X.    The main risk related to this category of Trust Services Principles is unauthorized access.

    1. Online privacy
    2. Confidentiality
    3. Processing integrity
    4. Security

     

    68X.    The risk related to this category of Trust Services Principles could be inaccurate, incomplete, or improperly authorized information.

    1. Online privacy
    2. Confidentiality
    3. Processing integrity
    4. Security

     

    69X.    The risk related to this category of Trust Services Principles is that personal information about customers may be used inappropriately or accessed by those either inside or outside the company.

    1. Confidentiality
    2. Online privacy
    3. Security
    4. Availability

     

    70X.    The risk related to this category of Trust Principles is system or subsystem failure due to hardware or software problems.

    1. Availability
    2. Security
    3. Integrity
    4. Confidentiality
      1. Which of the following is not considered a component of corporate governance?
      2. Board of Directors Oversight
      3. IRS Audits
      4. Internal Audits
      5. External Audits

       

      1. Good corporate governance is achieved when the interests of which of the following groups are balanced?
      2. Internal auditors and external auditors
      3. Shareholders and regulators
      4. Shareholders, the corporation, and the community
      5. Regulators and the community

       

      1. Over time, corporate leaders establish trust by being active leaders, stressing integrity, clarity, and consistency.  This is referred to as:
      2. Internal control
      3. Corporate governance
      4. Fiduciary duty
      5. Tone at the top

       

      1. Corporate governance is primarily concerned with:
      2. Enhancing the trend toward more women serving on boards of directors.
      3. Promoting an increase in hostile takeovers.
      4. Promoting the legitimacy of corporate charters.
      5. Emphasizing the relative roles, rights, and accountability of a company’s stakeholders.

       

      1. The governing body responsible for establishing the COSO framework for internal controls evaluations is the:
      2. Treadway Commission.
      3. SEC.
      4. PCAOB.
      5. FASB.

       

      1. When financial information is presented properly and its correctness is verifiable, it is:
      2. Transparent.
      3. Compliant.
      4. Accurate.
      5. Accountable.

       

      1. Which of the following nonaudit services may be performed by auditors for a public-company audit client?
      2. IT consulting regarding the general ledger system for a newly acquired division.
      3. Programming assistance on the new division’s general ledger system.
      4. Human resource consulting regarding personnel for the new division.
      5. Income tax return preparation for the new division.

       

      1. Which of the following is not true regarding the requirements for reporting on internal controls under Section 404 of the Sarbanes-Oxley Act of 2002?
      2. Management must accept responsibility for the establishment and maintenance of internal controls and provide its assessment of their effectiveness.
      3. The independent auditor must issue a report on management’s assessment of internal controls.
      4. Management must identify the framework used for evaluating its internal controls.
      5. Management must achieve a control environment that has no significant deficiencies.

       

      1. In the corporate governance chain of command, the audit committee is accountable to:
      2. The company’s vendors and other creditors.
      3. Management and employees.
      4. Governing bodies such as the SEC and PCAOB.
      5. The external auditors.

       

      1. Section 806 of the Sarbanes-Oxley Act is often referred to as the whistle-blower protection provision of the Act because:
      2. It offers stock ownership to those who report instances of wrongdoing.
      3. It specifies that whistelblowers must be terminated so as to avoid retaliation.
      4. It protects whistleblowers’ jobs and prohibits retaliation.
      5. It provides criminal penalties for the alteration of destruction of documents.

       

      1. Which of the following is true regarding the post-Sarbanes-Oxley role of the corporate leader?
      2. More emphasis is placed on strategic planning and less emphasis on financial information.
      3. The corporate leader must be more in tune with IT to provide corporate governance solutions.
      4. The corporate leader must be more focused on merger and acquisition targets.
      5. The corporate leader tends to be less involved with the board of directors.

       

      1. Many corporate frauds involve:
      2. Managers soliciting assistance from their subordinates.
      3. A small deceptive act that intensifies into criminal behavior.
      4. An earnings management motive.
      5. All of the above.

       

      ANSWERS TO QUESTIONS 1 – 12  (FROM THE TEXTBOOK)

      1. B                                      5.    A                                     9.    C
      2. C                                      6.    C                                   10.    C
      3. D                                     7.    D                                   11.    B
      4. D                                     8.    D                                   12.    D

      TEST BANK – CHAPTER 5 – MULTIPLE CHOICE

       

      12A1. This company is well known for its best selling brands such as Jif® peanut butter, but is also recognized in the area of corporate governance:

      1. Unilever
      2. Johnson and Johnson
      3. Kraft Foods
      4. Proctor & Gamble Company

       

      12A2. P&G’s reputation as a leader in corporate governance is based on which of the following?

      1. Active and diligent board of directors that provide effective oversign and interactoin with management and investors.
      2. Strong in ternal controls protect the company’s assets and information, and ensure compliance with applicable regulations, accounting standards, and disclosure requirements
      3. Stressing a high rate of return to the stakeholders.
      4. A code of conduct sets forth high ethical standards for all employees.

       

       

      1. Which of the following groups would use factors such as those that affect the supply and demand of corporate leaders and tend to emphasize the importance of motivating leaders through the use of incentive programs as part of their definition of corporate governance?
      2. Financiers
      3. Economists
      4. Accountants
      5. Lawyers

       

      1. This group of business would tend to emphasize the role of corporate leaders to provide a good rate of return.
      2. Financiers
      3.     Economists
      4. Accountants
      5. Lawyers

       

      15X.   This group of business would tend to emphasize the role of corporate leaders as providing effective internal controls, accurate records, and required disclosures.

      1. Financiers
      2. Economists
      3. Accountants
      4. Lawyers

       

      1. A system of checks and balances where a company’s leadership is held accountable for building shareholder value and creating confidence in the financial reporting process is called:
      2. Internal Control
      3. Tone at the Top
      4. Code of Conduct
      5. Corporate Governance

       

      1. Key ingredients in the concept of corporate governance include:
      2. Motivation of leaders
      3. Providing high rates of return and low costs of capital
      4. Building value and creating confidence
      5. Efficient use of resources

       

      1. The set of values and behaviors in place for the corporate leaders is referred to as:
      2. Corporate Governance
      3. Tone at the Top
      4. Internal Control
      5. Stakeholders

       

      1. There are a number of different participants in the corporate governance process.  These participants are referred to as:
      2. Leaders
      3. Managers
      4. Shareholders
      5. Stakeholders

       

      1. All of the different people who have some form of involvement or interest in the business are referred to as:
      2. Employees
      3. Stakeholders
      4. Executives
      5. Shareholders

       

      1. The group of people who participate in or with the business in a manner that puts them in a position of financial interest or risk, or is otherwise significant to the overall strategies and operations of a business are called:
      2. Managers
      3. Board of Directors
      4. Stakeholders
      5. Audit Committee

       

      1. The internal stakeholders would not include:
      2. Creditors
      3. Shareholders
      4. Internal Auditors
      5. Audit Committee

       

      1. The internal stakeholders who own a portion of the corporation are called:
      2. Directors
      3. Shareholders
      4. Audit Board
      5. Executives

       

      23A1. This group of stakeholders are employees of the corporation who help management establish and monitor internal controls by continuously looking for red flags.

      1. Audit Committee
      2. Executive Branch
      3. Board of Directors
      4. Internal Auditors

       

      23A2. This group of internal stakeholders carry out the day-to-day operations and administrative functions of the company.

      1. Management
      2. Employees
      3. Board of Directors
      4. Executive Branch

       

      1. This group of stakeholders should have the highest level of authority related to the company’s objectives and strategies.  Elected by the shareholders, it’s role is to align the interests of the shareholders and management.
      2. Audit Committee
      3. Internal Auditors
      4. Board of Directors
      5. Executive Branch

       

      1. This group of stakeholders is responsible for financial matters, including reporting, controls, and the audit function.
      2. Audit Committee
      3. External Auditors
      4. Board of Directors
      5. Internal Auditors

       

      26X.   Which of the following properly identifies the top management level of the management team?

      1. Guide the work of a number of employees doing similar tasks within a department or group.
      2. Coordinate a number of different departments within the company by overseeing supervisors.
      3. Made up of the company’s president and chief executive officer, in addition to other executive officers.
      4. Carry out the day-to-day operations and administrative functions of the company.

       

      1. This group of stakeholders help management establish and monitor the internal controls for the company.  They rotate throughout the company, reviewing policies, procedures, and reports in each area to determine whether or not they are working as planned.
      2. External Auditors
      3. Internal Auditors
      4. Audit Committee
      5. Top Management

       

      1. People and organizations outside the corporation who have a financial interest in the corporation are referred to as:
      2. External Auditors
      3. External Stakeholders
      4. Securities and Exchange Commission
      5. Treadway Commission

       

      1. Which of the following groups is NOT considered to be an external stakeholder?
      2. Audit Committee
      3. External Auditors
      4. Governing Bodies
      5. Customers

       

      1. The purpose of this group of stakeholders is to add credibility to the financial statements.  They are responsible for evaluating whether or not the financial statements have been prepared according to the established accounting rules.
      2. Internal Auditors
      3. Governing Bodies
      4. Audit Committee
      5. External Auditors

       

      31X.   The governing group responsible for establishing applicable financial accounting standards in the United States is:

      1. COSO
      2. SEC
      3. FASB
      4. IASB

       

      32X.   This governing group responsible for establishing applicable financial accounting standards globally is:

      1. COSO
      2. SEC
      3. FASB
      4. IASB

       

      1. This governing group is the federal regulatory agency responsible for protecting the interests of investors by making sure that public companies provide complete and transparent financial information:
      2. COSO
      3. SEC
      4. FASB
      5. IASB

       

      1. This governing group created the framework for internal controls evaluations:
      2. COSO
      3. SEC
      4. FASB
      5. IASB

       

      1. It is necessary that certain stakeholders remain independent related to the corporation’s financial reporting.  Which of the following correctly states the stakeholders that should remain independent?
      2. Internal Auditors, Audit Committee and External Auditors
      3. Audit Committee and Internal Auditors
      4. External Auditors and Audit Committee
      5. Both Internal and External Auditors

       

      1. The system of checks and balances in corporate governance includes several interrelated functions.  Which of the following is not one of those functions?
      2. Management Oversight
      3. Financial Stewardship
      4. Ethical Conduct
      5. Governing Bodies

       

      1. The concept that encompasses the policies and procedures in place to lead the directorship of the company is called:
      2. Financial Stewardship
      3. Management Oversight
      4. Ethical Conduct
      5. Internal Controls and Compliance

       

      1. Which of the following is not typical relationship in an organization chart?
      2. Supervisors report to managers
      3. Managers report to officers
      4. Managers report to supervisors
      5. Officers report to the board of directors

       

      1. According to the authors, the downfall of Enron involved poor management oversight, and included the following criticism(s) of the board of directors:
      2. Board meetings were few and brief
      3. They did not challenge the company’s aggressive accounting policies
      4. Board allowed senior executives to be exempted from the company’s policies regarding conflicts of interest
      5. All of the above

       

      1. The correctness of the financial information presented is called:
      2. Accuracy
      3. Transparency
      4. Stewardship
      5. Fiduciary

       

      40A1. This characteristic of financial information is concerned with avoiding omissions of important information:

      1. Accuracy
      2. Completeness
      3. Transparency
      4. Stewardship

       

      41X.   This characteristic of financial information, relates to how clearly the information can be understood.  It requires a straightforward and consistent approach.

      1. Accuracy
      2. Financial Stewardship
      3.     Fiduciary Duty
      4. Transparency

       

      42X.   Companies that emphasize accuracy, transparency, and completeness:

      1. Will have internal controls in place to make sure that their financial reports do not contradict each other.
      2. Will have fewer opportunities for errors or fraud.
      3. Will be more likely to prevent opportunities for wrongdoers to cross the line into fraud.
      4. All of the above.

       

      1. A special obligation of trust, especially with respect to the finances of another, is called:
      2. Financial Stewardship
      3. Fiscal Transparency
      4. Fiduciary Duty
      5. Internal Controls

       

      1. Within the corporate environment, this term means that management has been entrusted with the power to manage the assets of the corporation, which are owned by the shareholders.
      2. Fiscal Transparency
      3. Fiduciary
      4. Stewardship
      5. Accuracy

       

      1. The manner in which an agent handles the affairs and/or finances of another is referred to as:
      2. Financial Stewardship
      3. Fiscal Transparency
      4. Accuracy
      5. Fiduciary

       

      1. The most important factors for success in a leader in fulfilling the duty of financial stewardship are:
      2. Financial Stewardship and Fiscal Transparency
      3. Financial Accuracy and Internal Control
      4. Fiduciary Duty and Ethical Conduct
      5. Good Communication and Open Dialogue

       

      1. In order for an environment to thrive where corporate leaders can be good financial stewards:
      2. Well-defined rules and procedures must be in place for decision making.
      3. It is necessary to consider objectives at the starting point.
      4. Any decision made must be in the best interest of the shareholders.
      5. All of the above.

       

      1. The act of manipulating financial information in such a way as to shed more favorable light on the company or its management than is actually warranted is referred to as:
      2. Financial accountability
      3. Earnings management
      4. Income performance
      5. Financial stewardship

       

      1. Which of the following is not one of the typical earnings management techniques?
      2. Early revenue recognition
      3. Falsification of customers
      4. Creation of non-existent vendors
      5. Early shipment of products

       

      1. According to the authors, the origin of the corporate governance concept in the United States coincides with:
      2. The passage of Sarbanes-Oxley Act
      3. The creation of the Public Company Accounting Oversight Board
      4. The establishment of the SEC and enactment of the securities laws
      5. The Treadway Commission and the ultimate creation of COSO

       

      1. The Securities Act of 1933 requires:
      2. The implementation of a proper climate of internal controls
      3. The full disclosure of financial information through the filing of registration statements before the securities can be sold
      4. Ongoing disclosures for registered companies, in addition to the regulation stock exchanges, brokers, and dealers.
      5. The legislation enacted to combat deceptive accounting practices by banks and financial institutions

       

      1. The Securities Exchange Act of 1934 requires:
      2. The implementation of a proper climate of internal controls
      3. The full disclosure of financial information through the filing of registration statements before the securities can be sold
      4. Ongoing disclosures for registered companies, in addition to the regulation stock exchanges, brokers, and dealers.
      5. The legislation enacted to combat deceptive accounting practices by banks and financial institutions

       

      1. The establishment of the SEC and the enactment of securities laws were responses to:
      2. The stock market crash of 1929 and the Great Depression of the 1930s
      3. Market pressures during the 1980s
      4. Increased inflation and cost of capital during the 1970s
      5. High-profile accounting scandals in the early 2000s

       

      53A1. The passage of this act prohibited briger payments associated with business transactions, and addressed the necessity for internal controls over financial reporting:

      1. Sarbanes-Oxley Act
      2. US Patriot Act
      3. Security and Exchange Act
      4. Foreign Corrupt Practices Act

       

      53A2. During the early 2000s, legislation was passed to provide for improved financial systems for the financial services industry.  This legislation included:

      1. Sarbanes-Oxley Act
      2. US Patriot Act
      3. Foreign Corrupt Practices Act
      4. Security Exchange Act
      1. This legislation was enacted in an effort to curb the corruption and accounting blunders that had been discovered in connection with the bankruptcies of corporate giants, such as WorldCom.
      2. Securities Exchange Act
      3. US Patriot Act
      4. Sarbanes-Oxley Act
      5. Securities Act

       

      1. The PCAOB was established to carry the provisions of the:
      2. Sarbanes-Oxley Act
      3. Securities Act
      4. US Patriot Act
      5. Securities Exchange Act

       

      1. The Sarbanes-Oxley Act relates to:
      2. Private companies and auditors of public companies
      3. Public companies
      4. Auditors of public companies and public companies
      5. Auditors of private companies

       

      1. Auditors of public companies are now prohibited from providing non-audit services to their audit clients as a result of which section of the Sarbanes-Oxley Act:
      2. Section 201
      3. Section 301
      4. Section 302
      5. Section 401

       

      1. Title II of the Sarbanes-Oxley Act relates to auditor independence and includes items such as:
      2. Requiring the lead partner on a public company audit to rotate off the engagement each year.
      3. If an auditor is hired away from the audit firm to take a job with the client, there must be a cooling off period of three years if the new job is in a key accounting role.
      4. If the auditor’s involvement with the design of the client’s accounting information system and expands into areas of IT system development, then the auditor is considered to have impaired independence.
      5. Auditors of public companies are now allowed to provide non-audit services to their audit clients.

       

      1. Which of the following is not considered to be a non-audit service?
      2. Preparation of accounting records and financial statements
      3. Investment advisory, investment banking, or brokerage services
      4. External auditing services
      5. Internal audit outsourcing services

       

      60X.   This section of the Sarbanes-Oxley Act requires that public companies have an audit committee that is a subcommittee of the board of directors.

      1. Section 201
      2. Section 301
      3. Section 401
      4. Section 404
      1. This section of the Sarbanes-Oxley Act requires that the CEO, CFO, and other responsible offices of the company submit a certified statement accompanying each annual and quarterly report acknowledging their responsibility for the contents of the reports and the underlying system of internal controls.
      2. Section 301
      3. Section 401
      4. Section 302
      5. Section 404

       

      61A1. The certified statement, signed by the CEO, CFO, and other responsible offices, indicate their acceptable of the responsibilities.  Those responsibilities include:

      1. The signing offices have reviewed the report in detail.
      2. Based on the officer’s knowledge, the financial statements and related disclosures are fairly presented.
      3. The signing officers are responsible for the establishment, maintenance, and effectiveness of internal controls.
      4. All of the above.

       

      1. This section of the Sarbanes-Oxley Act requires that there be disclosures in periodic reports disclosing any off-balance-sheet transactions, including obligations or arrangements that may impact the financial position of the company.
      2. Section 201
      3. Section 401
      4. Section 906
      5. Section 404

       

      1. This section of the Sarbanes-Oxley Act requires management assessment and reporting of the company’s internal controls.
      2. Section 404
      3. Section 409
      4. Section 301
      5. Section 201

       

      1. This section of the Sarbanes-Oxley Act requires that auditors include, as part of their audit procedures, an attestation to the internal control report prepared by management.
      2. Section 404
      3. Section 409
      4. Section 301
      5. Section 201

       

      1. This section of the Sarbanes-Oxley Act requires that all public companies have in place a code of ethics covering its CFO and other key accounting officers.  The code must include principles that advocate honesty and morat conduct, fairness in financial reporting, and compliance with applicable governmental rules and regulations.
      2. Section 401
      3. Section 404
      4. Section 406
      5. Section 409

       

      1. The section of the Sarbanes-Oxley Act makes it a felony to knowingly alter, destroy, falsify, or conceal any records or documents with the intent to influence an investigation.  This provision relates to both the company and its auditors.
      2. Section 602
      3. Section 802
      4. Section 806
      5. Section 409

       

      1. Someone who reports instances of wrongdoing or assists in a fraud investigation is referred to as a(n):
      2. Ringer
      3. External Auditor
      4. Internal Auditor
      5. Whistleblower

       

      1. This section of the Sarbanes-Oxley Act is referred to as the “whistleblower protection” provision.
      2. Section 201
      3. Section 306
      4. Section 806
      5. Section 1102

       

      69X.   Which of the following describes a change in management oversight as a result of Sarbanes-Oxley?

      1. Management focus has gone from one of strategic decision making and risk management to overall accountability.
      2. The board of directors and the audit committee have a lower level of accountability.
      3. Members of upper management have the opportunity to focus on overall financial information and can leave the details to subordinates.
      4. The jobs of management have been lightened as a result of the certification requirements.

       

      1. Which of the following describes a change in internal controls and compliance as a result of the Sarbanes-Oxley Act?
      2. The corporate associates who are responsible for the development and maintenance of the accounting information system have become less important.
      3. Although there are new management reporting requirements, the financial reporting has actually decreased.
      4. The creation of new reporting requirements has created a large amount of extra work for accountants, IT departments, and executives.
      5. A side effect of compliance with the internal control sections of the Act has resulted in a decrease in the amount of accounting information.
      1. Which of the following types of audits is most likely to be conducted for the purpose of identifying areas for cost savings?
      2. Financial Statement Audits
      3. Operational Audits
      4. Regulatory Audits
      5. Compliance Audits

       

      1. Financial statement audits are required to be performed by:
      2. Governmental Auditors
      3. CPAs
      4. Internal Auditors
      5. IT Auditors

       

      1. Which of the following is not considered a cause for information risk?
      2. Management’s geographic location is far from the source of the information needed to make effective decisions.
      3. The information is collected and prepared by persons who use the information for very different purposes.
      4. The information relates to business activities that are not well understood by those who collect and summarize the information for decision makers.
      5. The information has been tested by internal auditors and a CPA firm.

       

      1. Which of the following is not a part of general accepted auditing standards?
      2. General Standards
      3. Standards of Fieldwork
      4. Standards of Information Systems
      5. Standards of Reporting

       

      5X.    Which of the following best describes what is meant by the term “generally accepted auditing standards”?

      1. Procedures used to gather evidence to support the accuracy of a client’s financial statements.
      2. Measures of the quality of an auditor’s conduct carrying out professional responsibilities.
      3. Professional pronouncements issued by the Auditing Standards Board.
      4. Rules acknowledged by the accounting profession because of their widespread application.

       

       

      6X.    In an audit of financial statement in accordance with generally accepted auditing standards, an auditor is required to:

      1. Document the auditor’s understanding of the client company’s internal controls.
      2. Search for weaknesses in the operation of the client company’s internal controls.
      3. Perform tests of controls to evaluate the effectiveness of the client company’s internal controls.
      4. Determine wether controls are appropriately operating to prevent or detect material misstatements.

       

      7X.    Auditors should develop a written audit program so that:

      1. All material transactions will be included in substantive testing.
      2. Substantive testing performed prior to year end will be minimized.
      3. The procedures will achieve specific audit objectives related to specific management assertions.
      4. Each account balance will be tested under either a substantive test or a test of controls.

       

      1. Which of the following audit objectives relates to the management assertion of existence?
      2. A transaction is recorded in the proper period.
      3. A transaction actually occurred (i.e., it is real)
      4. A transaction is properly presented in the financial statements.
      5. A transaction is supported by detailed evidence.

       

      9X.    Which of the following statements regarding an audit program is true?

      1. An audit program should be standardized so that it may be used on any client engagement.
      2. The audit program should be completed by the client company before the aud planning stage begins.
      3. An audit program should be developed by the internal auditor during the audit’s completion/reporting phase.
      4. An audit program establishes responsibility for each audit test by requiring the signature or initials of the auditor who performed the test.

       

      10X.   Risk assessment is a process designed to:

      1. Identify possible circumstances and events that may effect the business.
      2. Establish policies and procedures to carry out internal controls.
      3. Identify and capture information in a timely manner.
      4. Review the quality of internal controls throughout the year.

       

      1. Which of the following audit procedures is most likely to be performed during the planning phase of the audit?
      2. Obtain an understanding of the client’s risk assessment process.
      3. Identify specific internal control activities that are designed to prevent fraud.
      4. Evaluate the reasonableness of the client’s accounting estimates.
      5. Test the timely cutoff of cash payments and collections.

       

      1. Which of the following is the most significant disadvantage of auditing around the computer rather than through the computer?
      2. The time involved in testing processing controls is significant.
      3. The cost involved in testing processing controls is significant.
      4. A portion of the audit trail is not tested.
      5. The technical expertise required to test processing controls is extensive.

       

      1. The primary objective of compliance testing in a financial statement audit is to determine whether:
      2. Procedures have been updated regularly.
      3. Financial statement amounts are accurately stated.
      4. Internal controls are functioning as designed.
      5. Collusion is taking place.

       

      1. Which of the following computer assisted auditing techniques processes actual client input data (or a copy of the real data) on a controlled program under the auditor’s control to periodically test controls in the client’s computer system?
      2. Test data method
      3. Embedded audit module
      4. Integrated test facility
      5. Parallel simulation

       

      1. Which of the following computer assisted auditing techniques allows fictitious and real transactions to be processed together without client personnel being aware of the testing process?
      2. Test data method
      3. Embedded audit module
      4. Integrated test facility
      5. Parallel simulation

       

      1. Which of the following is a general control to test for external access to a client’s computerized systems?
      2. Penetration tests
      3. Hash totals
      4. Field checks
      5. Program tracing

       

      1. Suppose that during the planning phase of an audit, the auditor determines that weaknesses exist in the client’s computerized systems.  These weaknesses make the client company susceptible to the risk of an unauthorized break-in.  Which type of audit procedures should be emphasized in the remaining phases of this audit?
      2. Tests of controls
      3. Penetration tests
      4. Substantive tests
      5. Rounding errors tests

       

      1. Generalized audit software can be used to:
      2. Examine the consistency of data maintained on computer files.
      3. Perform audit tests of multiple computer files concurrently.
      4. Verify the processing logic of operating system software.
      5. Process test data against master files that contain both real and fictitious data.

       

       

      1. Independent auditors are generally actively involved in each of the following tasks except:
      2. Preparation of a client’s financial statements and accompanying notes.
      3. Advising client management as to the applicability of a new accounting standard.
      4. Proposing adjustments to a client’s financial statements.
      5. Advising client management about the presentation of the financial statements.

       

      20X.   Which of the following is most likely to be an attribute unique to the financial statement audit work of CPAs, compared with work performed by attorneys or practitioners of other business professions?

      1. Due professional care
      2. Competence
      3. Independence
      4. A complex underlying body of professional knowledge

       

      21X.   Which of the following terms in not associated with a financial statement auditor’s requirement to maintain independence?

      1. Objectivity
      2. Neutrality
      3. Professional Skepticism
      4. Competence

       

      ANSWERS TO QUESTIONS 1 – 21  (FROM THE TEXTBOOK)

      1. B                                      7.    C                                   13.    C                                   19.    A
      2. B                                      8.    B                                   14.    D                                   20.    C
      3. D                                     9.    D                                   15.    C                                   21.    D
      4. C                                   10.    A                                   16.    A
      5. B                                   11.    A                                   17.    C
      6. A                                   12.    C                                   18.    A

       

       

       

      TEST BANK – CHAPTER 7 – MULTIPLE CHOICE

       

      1. Accounting services that improve the quality of information provided to the decision maker, an audit being the most common type of this service, is called:
      2. Compliance Services
      3. Assurance Services
      4. Substantive Services
      5. Operational Services

       

      1. A type of assurance services that involves accumulating and analyzing support for the information provided by management is called an:
      2. Audit
      3. Investigation
      4. Financial Statement Examination
      5. Control Test

       

       

      1. The main purpose of an audit is to assure users of the financial information about the:
      2. Effectiveness of the internal controls of the company.
      3. Selection of the proper GAAP when preparing financial statements.
      4. Proper application of GAAS during the examination.
      5. Accuracy and completeness of the information.

       

      1. Which of the following is not one of the three primary types of audits?
      2. Compliance Audits
      3. Financial Statement Audits
      4. IT Audits
      5. Operational Audits

       

      26X.   This type of audit is completed in order to determine whether a company has adhered to the regulations and policies established by contractual agreements, governmental agencies, or some other high authority.

      1. Compliance Audit
      2. Operational Audit
      3. Information Audit
      4. Financial Statement Audit

       

      1. This type of audit is completed to assess the operating policies and procedures of a client for efficiency and effectiveness.
      2. Efficiency Audit
      3. Effectiveness Audit
      4. Compliance Audit
      5. Operational Audit

       

      28X.   This type of audit is completed to determine whether or not the client has prepared and presented its financial statements fairly, in accordance with established financial accounting criteria.

      1. GAAP Audit
      2. Financial Statement Audit
      3. Compliance Audit
      4. Fair Application Audit

       

      1. This type of auditor is an employee of the company he / she audits.
      2. IT Auditor
      3. Government Auditor
      4. Certified Public Accountant
      5. Internal Auditor

       

      30X.   This type of auditor specializes in the information systems assurance, control, and security.  They may work for CPA firms, government agencies, or with the internal audit group.

      1. IT Auditor
      2. Government Auditor
      3. Certified Public Accountant
      4. Internal Auditor

       

       

      1. This type of auditor conducts audits of government agencies or income tax returns.
      2. IT Auditor
      3. Government Auditor
      4. Certified Public Accountant
      5. Internal Auditor

       

      1. This type of audit is performed by independent auditors who are objective and neutral with respect to the company and the information being audited.
      2. Compliance Audit
      3. Operational Audit
      4. Internal Audit
      5. External Audit

       

      1. The independence of a CPA could be impaired by:
      2. Having no knowledge of the company or the company management
      3. By owning stock of a similar company
      4. Having the ability to influence the client’s decisions
      5. Being married to a stockbroker

       

      1. The IT environment plays a key role in how auditors conduct their work in all but which of the following areas:
      2. Consideration of Risk
      3. Consideration of Information Fairness
      4. Design and Performance of Audit Tests
      5. Audit Procedures Used

       

      1. The chance that information used by decision makers may be inaccurate is referred to as:
      2. Sample Risk
      3. Data Risk
      4. Audit Trail Risk
      5. Information Risk

       

      1. Which of the following is not one of the identified causes of information risk?
      2. Audited information
      3. Remote information
      4. Complexity of data
      5. Preparer motive

       

      1. The main reasons that it is necessary to study information-based processing and the related audit function include:
      2. Information users often do not have the time or ability to verify information themselves.
      3. It may be difficult for decision makers to verify information contained in a computerized accounting system.
      4. Both of the above.
      5. Neither of the above.

       

       

      1. The existence of IT-based business processes often result in details of transactions being entered directly into the computer system, results in a lack of physical evidence to visibly view. This situation is referred to as:
      2. Physical Evidence Risk
      3. Loss of Audit Trail Visibility
      4. Transaction Summary Chart
      5. Lack of Evidence View

       

      1. The existence of IT-based business processes, that result in the details of the transactions being entered directly into the computer system, increases the likelihood of the loss or alternation of data due to all of the following, except:
      2. System Failure
      3. Database Destruction
      4. Programmer Incompetence
      5.     Environmental Damage

       

      1. The advantages of using IT-based accounting systems, where the details of transactions are entered directly into the computer  include:
      2. Computer controls can compensate for the lack of manual controls
      3. Loss of audit trail view
      4. Increased internal controls risks
      5. Fewer opportunities to authorize and review transactions

       

      1. The ten standards that provide broad guidelines for an auditor’s professional responsibilities are referred to as:
      2. Generally accepted accounting standards
      3. General accounting and auditing practices
      4. Generally accepted auditing practices
      5. Generally accepted auditing standards

       

      1. The generally accepted auditing standards are divided into three groups.  Which of the following is not one of those groups?
      2. General Standards
      3. Basic Standards
      4. Standards of Fieldwork
      5. Standards of Reporting

       

      43X.   GAAS, generally accepted auditing standards, provide a general framework for conducting quality audits, but the specific standards – or detailed guidance – are provided by all of the following groups, except:

      1. Public Company Accounting Oversight Board
      2. Auditing Standards Board
      3. Certified Fraud Examiners
      4. International Auditing and Assurance Standards Board

       

       

      1. This organization, established by the Sarbanes-Oxley Act, was organized in 2003 for the purpose of establishing auditing standards for public companies.
      2. Auditing Standards Board
      3. Public Company Accounting Oversight Board
      4. International Audit Practices Committee
      5. Information Systems Audit and Control Association

       

      1. This organization is part of the AICPA and was the group responsible for issuing Statements on Auditing Standards which were historically widely used in practice.
      2. Auditing Standards Board
      3. Public Company Accounting Oversight Board
      4. International Audit Practices Committee
      5. Information Systems Audit and Control Association

       

      46X.   This organization was established by the IFAC to set International Standards on Auditing (ISAs) that contribute to the uniform application of auditing practices on a worldwide basis.

      1. International Systems Audit and Control Association
      2. Auditing Standards Board
      3. Public Company Accounting Oversight Board
      4. International Auditing and Assurance Standards Board (IAASB)

       

       

      1. This organization issues guidelines for conducting the IT audit.  The standards issued address practices related to control and security of the IT system.
      2. Auditing Standards Board
      3. Public Company Accounting Oversight Board
      4. International Audit Practices Committee
      5. Information Systems Audit and Control Association

       

      1. The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor.  This is one of the generally accepted auditing standards that is part of the:
      2. General Standards
      3. Operating Standards
      4. Fieldwork Standards
      5. Reporting Standards

       

      1. Independence in mental attitude is to be maintained in all matters related to the audit engagement.   This is one of the generally accepted auditing standards that is part of the:
      2. General Standards
      3. Operating Standards
      4. Fieldwork Standards
      5. Reporting Standards

       

       

      1. The general guidelines, known as the generally accepted auditing standards, which include the concepts of adequate planning and supervision, internal control, and evidence relate to the:
      2. General Standards
      3. Operating Standards
      4. Fieldwork Standards
      5. Reporting Standards

       

      51X.   The general guidelines, known as the generally accepted auditing standards, which include the concepts of presentation in accordance with the established criteria, the consistent application of established principles, adequate disclosure, and the expression of an opinion, relate to the:

      1. General Standards
      2. Operating Standards
      3. Fieldwork Standards
      4. Reporting Standards

       

      52X.   Although there are a number of organizations that provide detailed guidance, it is still necessary for auditors to rely on other direction regarding the types of audit tests to use and the manner in which the conclusions are drawn.  These sources of information include:

      1. Industry Guidelines
      2. PCAOB
      3. ASB
      4. ASACA

       

      53X.   Claims regarding the condition of the business organization and in terms of its operations, financial results, and compliance with laws and regulations, are referred to as:

      1. Financial Statements
      2. Management Assertions
      3. External Audit
      4. Presentation and Disclosure

       

      1. Audit tests developed for an audit client are documented in a(n):
      2. Audit Program
      3. Audit Objective
      4. Management Assertion
      5. General Objectives

       

      55X.   The management assertion related to valuation of transactions and account balances would include all of the following, except:

      1. Accurate in terms of dollar amounts and quantities
      2. Supported by detailed evidence
      3. Real
      4. Correctly summarized

       

      1. There are four primary phases of the IT audit.  Which of the following is not one of those phases.
      2. Planning
      3. Evidence Audit
      4. Tests of Controls
      5. Substantive Tests

       

      57X.   The proof of the fairness of the financial information is:

      1. Tests of Controls
      2. Substantive Tests
      3. Audit Completion
      4. Audit Evidence

       

      58X.   Techniques used for gathering evidence include all of the following, except:

      1. Physical examination of assets or supporting documentation
      2.     Observing activities
      3. Adequate planning and supervision
      4. Analyzing financial relationships

       

      1. During this phase of the audit, the auditor must gain a thorough understanding of the client’s business and financial reporting systems.  When completing this phase, the auditors review and assess the risks and controls related to the business.
      2. Tests of Controls
      3. Substantive Tests
      4. Audit Completion / Reporting
      5. Audit Planning

       

      1. During the planning phase of the audit, auditors estimate the monetary amounts that are large enough to make a difference in decision making.  This amount is referred to as:
      2. Risk
      3. Materiality
      4. Substantive
      5. Sampling

       

      1. The likelihood that errors or fraud may occur is referred to as:
      2. Risk
      3. Materiality
      4. Control Tests
      5. Sampling

       

      1. A large part of the work performed by an auditor in the audit planning process is the gathering of evidence about the company’s internal controls.  This can be completed in any of the following ways, except:
      2. Interviewing key members of the accounting and IT staff.
      3. Observing policies and procedures
      4.     Review IT user manuals and systems
      5. Preparing memos to summarize their findings

       

      1. The Accounting Standards Board issued the following SAS in recognition of the fact that accounting records and files often exist in electronic form.  The statement was issued in 2001 to expand the historical concept of audit evidence to include electronic evidence.
      2. SAS 82
      3. SAS 86
      4. SAS 94
      5. SAS 101

       

      64X.   Auditing standards address the importance of understanding both the automated and manual procedures that make up an organization’s internal controls and consider how misstatements may occur, including all of the following, except:

      1. How transactions are entered into the computer
      2. How financial statement are printed from the computer
      3. How nonstandard journal entries and adjusting entries are initiated, recorded, and processed.
      4. How standard journal entries are initiated, recorded, and processed.

       

      65X.   IT auditors may need to be called in to:

      1. Consider the effects of computer processing on the audit.
      2. To assist in testing the automated processes.
      3. Both of the above.
      4. None of the above.

       

      1. Many companies design their IT system so that all documents and reports can be retrieved from the system in readable form.  Auditors can then compare the documents used to input the data into the system with reports generated from the system, without gaining any extensive knowledge of the computer system and does not require the evaluation fo computer controls.  This process is referred to as:
      2. Auditing through the system
      3. Auditing around the system
      4. Computer assisted audit techniques
      5. Auditing with the computer

       

      1. This approach, referred to as the whitebox approach, requires auditors to evaluate IT controls and processing so that they can determine whether the information generated from the system is reliable.
      2. Auditing through the system
      3. Auditing around the system
      4. Computer assisted audit techniques
      5. Auditing with the computer

       

      68X.   The IT auditing approach referred to as “Auditing through the system” is necessary under which of the following conditions?

      1. Supporting documents are available in both electronic and paper form.
      2. The auditor does not require evaluation of computer controls.
      3. The auditor wants to test computer controls as a basis for evaluating risk and reducing the amount of substantive audit testing required.
      4. The use of the IT system has a low impact on the conduct of the audit.

       

      1. Audit procedures designed to evaluate both general controls and application controls are referred to as:
      2. Substantive Tests
      3. Audit Planning
      4. IT Auditing
      5. Test of Controls

       

      1. The automated controls that affect all computer applications are referred to as:
      2. General Controls
      3. Specific Controls
      4. Input Controls
      5. Application Controls

       

      1. The two broad categories of general controls that relate to IT systems include which of the following:
      2. IT systems documentation
      3. IT administration and the related operating systems development and maintenance processes
      4. Authenticity table
      5. Computer security and virus protection

       

      1. Related audit tests to review the existence and communication of company policies regarding important aspects of IT administrative control include all of the following, except:
      2. Personal accountability and segregation of incompatible responsibilities
      3. Job description and clear lines of authority
      4. Prevention of unauthorized access
      5. IT systems documentation

       

      1. Controls meant to prevent the destruction of information as the result of unauthorized access to the IT system are referred to as:
      2. IT administration
      3. System controls
      4. Information administration
      5. Security controls

       

      73A1. These risks tend to escalate as companies embrace newer technologies and allow sensitive data to be shared via smar devices, web and mobile applications, and social networks.

      1. Input Risks
      2. Authenticity Risks
      3. Access Risks
      4. Security Risks

       

      73A2. Destruction of information may occur as a result of:

      1. Natural disasters
      2. Accidents
      3. Environmental conditions
      4. All of the above

       

      74X.   Auditors should perform this type of test to determine the valid use of the company’s computer system, according to the authority tables.

      1. Authenticity tests
      2. Penetration tests
      3. Vulnerability assessments
      4. IT systems documentation

       

      75X.   These tests of the security controls involve various methods of entering the company’s system to determine whether controls are working as intended.

      1. Authenticity tests
      2. Penetration tests
      3. Vulnerability assessments
      4. IT systems documentation

       

      76X.   These tests of security controls analyze a company’s control environment for possible weaknesses.  Special software programs are available to help auditors identify weak points in their a company’s security measures.

      1. Authenticity tests
      2. Penetration tests
      3. Vulnerability assessments
      4. IT systems documentation

       

      1. One of the most effective ways a client can protect its computer system is to place physical controls in the computer center.  Physical controls include all of the following, except:
      2. Proper temperature control
      3. Locks
      4. Security guards
      5. Cameras

       

      78X.   One of the most effective ways a client can protect its computer system is to place environmental controls in the computer center.  Environmental controls include:

      1. Card keys
      2. Emergency power supply
      3. Alarms
      4. Security guards

       

      79X.   This type of application control is performed to verify the correctness of information entered into software programs.  Auditors are concerned about whether errors are being prevented and detected during this stage of data processing.

      1. Security controls
      2.     Processing controls
      3. Input controls
      4. Output controls

       

      1. IT audit procedures typically include a combination of data accuracy tests where the data processed by computer applications are reviewed for correct dollar amounts or other numerical values.  These procedures are referred to as:
      2. Security controls
      3. Processing controls
      4. Input controls
      5. Output controls

       

      1. This type of processing control test involves a comparison of different items that are expected to have the same values, such s comparing two batches or comparing actual data against a predetermined control total.
      2. Validation Checks
      3. Batch Totals
      4. Run-to-Run Totals
      5. Balancing Tests

       

      81A1. This law, also known as the first-digit law, was named after a physicist who discovered a specific, but non-uniform pattern in the frequency of digits occurring as the first number in a list of numbers:

      1. Number-up Law
      2. Benford’s Law
      3. Adams’ Digit Law
      4. Jackson First Digit Law

       

      81A2. Frank Benford found that the number one is likely to be the leading digit, the first digit, approximately:

      1. One-third of the time
      2. One-fourth of the time
      3. One-fifth of the time
      4. One-sixth of the time

       

      82X.   This is one of the computer-assisted audit techniques, related to processing controls, that involves processing company data through a controlled program designed to resemble the company’s application.  This test is run to find out whether the same results are achieved under different systems.

      1. Integrated Test Facility
      2. Embedded Audit Module
      3. Parallel Simulation
      4. Test Data Method

       

      1. Regardless of whether the results are printed or retained electronically, auditors may perform all of the following procedures to test application outputs, except:
      2. Integrated Tests
      3. Reasonableness Tests
      4. Audit Trail Tests
      5. Rounding Errors Tests

       

      83A1. A detailed report assessing the correctness of an account balance or transaction record that is consistent with supporting documentation and the company’s policies and procedures, is termed a(n):

      1. Integrated test
      2. Compliance test
      3. Simulation
      4. Reconciliation

       

      1. The auditor’s test of the accuracy of monetary amounts of transactions and account balances is known as:
      2. Testing of controls
      3. Substantive tests
      4. Compliance tests
      5. Application tests

       

      85X.   A process of constant evidence gathering and analysis to provide assurance on the information as soon as it occurs, or shortly thereafter, is referred to as:

      1. Real-time auditing
      2. Virtual auditing
      3. E-auditing
      4. Continuous auditing

       

      1. This phase of auditing occurs when the auditors evaluate all the evidence that has been accumulated and makes a conclusion based on that evidence.
      2. Tests of Controls
      3. Audit Planning
      4. Audit Completion / Reporting
      5. Substantive Testing

       

      1. This piece of audit evidence is often considered to be the most important because it is a signed acknowledgment of management’s responsibility for the fair presentation of the financial statements and a declaration that they have provided complete and accurate information to the auditors during all phases of the audit.
      2. Letter of Representation
      3. Audit Report
      4. Encounter Statement
      5. Auditors Contract

       

      1. Which of the following is a proper description of an auditor report?
      2. Unqualified opinion – identifies certain exceptions to the clean opinion.
      3. Adverse opinion – notes that there are material misstatements presented.
      4. Qualified opinion – states that the auditors believe the financial statements are fairly and consistently presented in accordance with GAAP.
      5. Unqualified opinion – states that the auditors were not able to reach a conclusion.

       

      1. When PCs are used for accounting instead of mainframes or client-server system, they face a greater risk of loss due to which of the following:
      2. Authorized access
      3. Segregation of duties
      4. Lack of backup control
      5. All of the above

       

      90X.   When companies rely on external, independent computer service centers to handle all or part of their IT needs it is referred to as:

      1. External Processing
      2. WAN Processing
      3. Database Management System
      4. IT Outsourcing

       

      90A1. When a company uses cloud computing, the auditor needs to thoroughly understand the underlying technologies and related risks and controls.  When evaluating the security risk in a cloud computing environment, the auditor needs to consider all of the following, except:

      1. What damage would result if an unauthorized user accessed the company’s data?
      2. How does the cloud service provider segregate information between clients?
      3. How and when are data encrypted?
      4. How does the cloud service provider handle internal security?

       

      90A2. When a company uses cloud computing, the auditor needs to thoroughly understand the underlying technologies and related risks and controls.  When evaluating the availability risk is a cloud computing environment, the auditor needs to consider all which of the following?

      1. How and when are data encrypted?
      2. How does the cloud service provider handle internal security?
      3. What disaster recovery and business continuity plans are in place?
      4. What damage would result if an unauthorized user accessed the company’s data?

       

      90A3. Which of the following properly describes the listed SOC Report?

      1. SOC 1 Type 1 Report – Considers controls over compliance and operations
      2. SOC 1 Type II Report – Contains management’s assessment on the operating design of internal controls
      3. SOC 2 Report – Includes an evaluation of the operating effectiveness of internal controls
      4. SOC 1 Report – Addresses internal controls over financial reporting.

       

      1. Because it is not possible to test all transactions and balances, auditors rely on this to choose and test a limited number of items and transactions and then make conclusions about the balance as a whole.
      2. Sampling
      3. Materiality
      4. Compliance
      5. Substance

       

      92X.   All types of auditors must follow guidelines promoting ethical conduct. For financial statement auditors, the PCAOB/AICPA has established a Code of Professional Conduct, commonly called the Code of Ethics, which consists of two sections.  Which of the following correctly states the two sections?

      1. Integrity and responsibility
      2. Principles and rules
      3. Objectivity and independence
      4. Scope and nature

       

      93X.   The rule in thePCAOB/AICPA Code of Professional Conduct that is referred to as Responsibilities, can be stated as:

      1. CPAs should act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.
      2. To maintain and broaden public confidence, CPAs should perform their professional duties with the highest sense of integrity.
      3. In carrying out their professional duties, CPAs should exercise sensitive professional and moral judgments in all their activities.
      4. CPAs in public practice should observe the principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.
  1. Within the purchases processes, which of the following is the first document prepared and thereby the one that triggers the remaining purchasing processes?
  2. The invoice
  3. The receiving report
  4. The purchase order
  5. The purchase requisition

 

2X.    Personnel who work in the receiving area should complete all of the following processes, except:

  1. Counting the goods received
  2. Inspecting goods received for damage
  3. Preparing a receiving report
  4. Preparing an invoice

 

  1. Which of the given departments will immediately adjust the vendor account for each purchase transaction so that the company will know the correct amount owed to the vendor?
  2. Purchasing
  3. Receiving
  4. Accounts Payable
  5. Shipping

 

  1. One of the most critical controls to prevent theft of inventory purchased is to:
  2. Require authorization of the purchase requisition.
  3. Segregate inventory custody from inventory record keeping.
  4. Compare the purchase order, receiving report, and invoice.
  5. Segregate the authorization of purchases from the inventory record keeping.

 

  1. Internal control is strengthened by the use of a blind purchase order, upon which the quantity of goods ordered is intentionally left blank.  This blind copy is used in which department?
  2. The department that initiated the purchase request.
  3. The receiving department.
  4. The purchasing department.
  5. The accounts payable department.

 

  1. Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchasing transactions?
  2. Is an authorized purchase order required before the receiving department can accept a shipment or the accounts payable department can record a voucher?
  3. Are prenumbered purchase requisitions used and are they subsequently matched with vendor invoices?
  4. Is there a regular reconciliation of the inventory records with the file of unpaid vouchers?
  5. Are prenumbered purchase orders, receiving reports, and vouchers used, and are the entire sequences accounted for?

 

  1. Which of the following controls is not normally performed in the accounts payable department?
  2. The vendor’s invoice is matched with the related receiving report.
  3. Vendor invoices are approved for payment.
  4. Asset and expense accounts to be recorded are assigned.
  5. Unused purchase orders and receiving reports are accounted for.

 

  1. In a system of proper internal controls, the same employee should not be allowed to:
  2. Sign checks and cancel the supporting voucher package.
  3. Receive goods and prepare the related receiving report.
  4. Prepare voucher packages and sign checks.
  5. Initiate purchase requisitions and inspect goods received.

 

  1. The document prepared when purchased items are returned is a(n):
  2. Debit memo
  3. Invoice
  4. Receiving report
  5. Shipping notice

 

  1. Within cash disbursements, all of the following should be true before a check is prepared, except that:
  2. The purchase order, receiving report, and invoice have been matched.
  3. The purchased goods have been used.
  4. Sufficient cash is available.
  5. The invoice discount date or due date is imminent.

 

11X.   A manager suspects that certain employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise.  When vendors’ invoices arrive, one of the employees approves the invoices for payment.  After the invoices are paid, the employee destroys the invoices and related vouchers.  To trace whether this is actually happening, it would be best to begin tracing from the:

  1. Cash disbursements.
  2. Approved vouchers.
  3. Receiving reports.
  4. Vendors’ invoices.

 

  1. Within accounts payable, to ensure that each voucher is submitted and paid only once, each invoice approved to be paid should be:
  2. Supported by a receiving report.
  3. Stamped “paid” by the check signer.
  4. Prenumbered and accounted for.
  5. Approved for authorized purchases.

 

  1. For proper segregation of duties in cash disbursements, the person who signs checks also:
  2. Reviews the monthly bank reconciliation.
  3. Returns the checks to accounts payable.
  4. Is denied access to the supporting documents.
  5. Is responsible for mailing the checks.

 

  1. Which of the following internal controls wold help prevent overpayment to a vendor or duplicate payment to a vendor?
  2. Review and cancellation of supporting documents after issuing payment.
  3. Requiring the check signer to mail the payment to the vendor
  4. Review of the accounts where the expenditure transaction has been recorded
  5. Approving the purchase before the goods are ordered from the vendor

 

  1. Which of the following is not an independent verification related to cash disbursements?
  2. The cash disbursements journal is reconciled to the general ledger.
  3. The stock of unused checks should be adequately secured and controlled.
  4. The bank statement is reconciled on a monthly basis.
  5. The accounts payable subsidiary ledger is reconciled to the general ledger.

 

16X.   Which of the following IT systems is designed to avoid the document matching process and is an “invoiceless” system?

  1. Computer-based matching system
  2. Electronic data interchange
  3. Evaluated receipt settlement
  4. Microsoft Dynamics

 

  1. Input controls such as field check, validity check, limit check, and reasonableness check are useful in IT systems of purchase to lessen which of the following risks?
  2. Unauthorized access
  3. Invalid data entered by vendors
  4. Repudiation of purchase transactions
  5. Virus and worm attacks

 

  1. Which of the following is most likely to be effective in deterring fraud by upper level managers?
  2. Internal controls
  3. An enforced code of ethics
  4. Matching documents prior to payment
  5. Segregating custody of inventory from inventory record keeping

 

ANSWERS TO QUESTIONS 1 – 18  (FROM THE TEXTBOOK)

  1. D                                     5.    B                                      9.    A                                   13.    B                                   17.    B
  2. D                                     6.    D                                   10.    B                                   14.    A                                   18.    B
  3. C                                      7.    D                                   11.    A                                   15.    B
  4. B                                      8.    C                                   12.    B                                   16.    C

 

 

TEST BANK – CHAPTER 9 – MULTIPLE CHOICE

 

19X.   The policies and procedures that employees follow when completing the purchase of goods or materials, capturing vendor data and purchase quantities, and routing the resulting purchasing documents to the proper departments within the company are called:

  1. Systems
  2. Processes
  3. Activities
  4. Requisitions

 

20X.   The information from a purchase must flow into the purchase recording systems, the accounts payable and cash disbursement systems, and the inventory tracking systems.  In an IT accounting system, these recording and processing systems are called:

  1. General Ledger Systems
  2. Integrated Accounting Systems
  3. Journal Application Systems
  4. Transaction Processing Systems

 

  1. The acquisition of materials and supplies and the related cash disbursements is referred to as:
  2. The Procurement Process
  3. Systems and Control Process
  4. Expenditure and Return Process
  5. Conversion Process

 

  1. Which of the following would be referred to as a common carrier?
  2. Taxi-cab
  3. Trucking company
  4. City bus
  5. Fire department vehicle

 

23X.   Common expenditure processes would include all of the following, except:

  1. Preparation of a purchase requisition
  2. Receipt of the goods or services
  3.     Recording the liability
  4. Payment received on account

 

24X.   The textbook referred to the three primary categories of processes in the typical purchasing system.  Which of the following in not one of those categories?

  1. Purchase Processes
  2. Cash Disbursement Processes
  3. Receiving Processes
  4. Purchase Return Processes

 

  1. Each category of processes in the typical purchasing system would include controls and risks.  For each of the categories, the goal of the internal controls system is to reduce specific types of business risks.  Which of the following is not one of those risks?
  2. Recording invalid transactions.
  3. Recording transactions at the wrong amounts.
  4. Omitting actual transactions from the accounting records.
  5. Transactions properly accumulated or transferred to the correct accounting records.

 

  1. This form is prepared to document the need to make a purchase and requests that the specific items and quantities be purchased.
  2. Purchase order
  3. Purchase requisition
  4. Purchase invoice
  5. Purchase journal

 

  1. This form is issued by the buyer, and presented to the seller, to indicate the details for products or services that the seller will provide to the buyer.  Information included on this form would be: products, quantities, and agreed-upon prices.
  2. Purchase order
  3. Purchase requisition
  4. Purchase invoice
  5. Purchase journal

 

  1. A record keeping tool used to record purchases in a manual accounting system.  This “tool” would consist of recording all of the purchased orders issued to vendors in a chronological order.
  2. Purchase order
  3. Purchase requisition
  4. Purchase invoice
  5. Purchase journal

 

  1. There are different ways to issue a purchase order to a vendor.  Which of the following is not one of the ways?
  2. Hard copy via fax or mail
  3. Hard copy by hand
  4. Electronically via e-mail
  5. Directly through the computer network

 

  1. When purchased goods are received, which of the following tasks should be completed in the receiving area?
  2. An inspection of the goods – quantity counted and condition assessed.
  3. Documenting the details of the receipt, before the carrier leaves.
  4. Match the purchase order, the receiving report, and the purchase invoice to be sure that they agree.
  5. Preparation of a receiving report detailing the contents and condition of the goods.

 

  1. This document, prepared and maintained by the receiving department, is a sequential listing of all receipts.
  2. Receiving report
  3. Packing slip
  4. Bill of lading
  5. Receiving log

 

  1. This document, prepared by the purchasing department, for use by the receiving department, is copy of the purchase order that eliminates all data about the price and quantity of the items ordered.
  2. Packing slip
  3. Blind purchase order
  4. Empty purchase order
  5. Receiving report
  6. This document, prepared by the vendor, provides details of the items included in the delivery; and is normally signed by the receiving clerk as verification of receipt.
  7. Packing slip
  8. Receiving report
  9. Bill of lading
  10. Purchase order

 

34X.   This document, prepared by the vendor, is intended to show the quantities and descriptions of items included in the shipment.

  1. Packing slip
  2. Sales invoice
  3. Bill of lading
  4. Purchase order

 

  1. When goods are received at the end of the accounting period, and the invoice is not received until after the start of the following period, a problem may arise as to when to record the liability.  This is referred to as a(n):
  2. Obligation referral
  3. Cutoff issue
  4. Liability deferral
  5. Channel stuffing

 

  1. The date that is the end of the accounting period is referred to as the:
  2. Fiscal date
  3. Change off
  4. Accounting cut
  5. Cutoff

 

37X.   The accounting record that includes the details of amounts owed to each vendor is called the:

  1. Accounts payable subsidiary ledger
  2. Purchases journal
  3. Accounts receivable subsidiary ledger
  4. Receiving log

 

  1. The internal control activities within the purchasing process, related to authorization of transactions, would include which of the following?
  2. The accounting duties related to requisitioning, ordering, and receiving goods should be performed by different individuals.
  3. The custody of inventory and the recording of inventory transactions are required to be maintained.
  4. Specific individuals are to be authoritative responsibility for preparing purchase requisitions and purchase orders which would include which items to purchase, how many items, and which vendor.
  5. Periodic physical inventory counts are to be reconciled with the inventory ledger and general ledger.

 

  1. Internal control activities within the purchasing process, identified as segregation of duties, would include all of the following, except:
  2. Responsibility for authorization, custody, and record keeping are to be assigned to different individuals.
  3. Duties related to requisitioning, ordering, purchase approval, receiving, inventory control, accounts payable, and general accounting are to be delegated to separate departments or individuals.
  4. Complete separation of inventory custody from inventory accounting.
  5. Purchasing records and programs must be protected from unauthorized access.

 

  1. Internal control activities within the purchasing process, identified as adequate records and documents, would include which of the following?
  2. Files are to be maintained for purchase requisitions, purchase orders, receiving reports, and invoices.
  3. Periodic physical inventory counts are to be reconciled with the inventory ledger.
  4. Companies are to implement controls where the corresponding benefit exceeds the related cost.
  5. Avoid having the same individuals who handle the inventory also have access to the related accounting records.

 

41X.   A company should study risks common to its system prior to deciding the mix of controls needed.  High-risk characteristics that might justify the need for extensive internal controls include all of the following, except:

  1. Goods received are especially difficult to differentiate, count, or inspect.
  2. High volumes of goods are often received, or the goods are of high value.
  3. Receiving and / or record keeping are performed at one centralized location.
  4. Changes in price or vendors is frequent.

 

  1. The internal control process of having the receiving reports prepared on pre-numbered forms so that the sequence of receipts can be reviewed for proper recording will help to minimize the related risk of:
  2. Invalid vendors
  3. Omitted purchases
  4. Fictitious purchases
  5. Timing issues

 

43X.   The internal control process of separating the custody of inventory from the accounts payable record keeping will help to minimize the risk of:

  1. Fictitious purchases
  2. Invalid vendors
  3. Duplicate purchases
  4. Incorrect amounts

 

  1. The internal control process of requiring physical controls in the warehouse and receiving areas,  in order to limit access to inventory items, will help to minimize the risk of:
  2. Incorrect posting
  3. Omitted purchases
  4. Invalid vendors
  5. Stolen goods

 

45X.   The internal control process that requires purchase records to be matched and verified for item descriptions, quantities, dates, authorized prices, and mathematical accuracy, will help to minimize the risk of:

  1. Stolen goods
  2. Omitted transactions
  3. Invalid purchases
  4. Incorrect accumulation

 

  1. A company may reject goods received due to a number of reasons.  The process related to this is referred to as:
  2. Purchases
  3. Purchase Returns
  4. Accounts Payable
  5. Receiving

 

  1. Goods received are unacceptable due to may different situations.  Which of the following is not one of those situations?
  2. Damage or defects
  3. Changes in the company needs regarding future sales or production
  4. Errors in the type of goods delivered or ordered
  5. Timing issues

 

  1. The document that identifies the items being returned, along with the relevant information regarding the vendor, quantity and price, is called:
  2. Credit memo
  3. Receiving report
  4. Purchase requisition
  5. Debit memo

 

  1. Internal controls related to the purchase returns would include all of the following, except:
  2. The accounts payable employee who prepares the debit memo should also be responsible for handling the inventory and approving the return.
  3.     Special authorization should be required to officially reject and return the items.
  4. Debit memos should be issued on pre-numbered forms in numerical sequence.
  5. Accounts payable records and data files should be restricted to those who are specifically authorized to approve or record the related purchase return.

 

  1. The internal control process that requires the approval of the purchase return transaction take place before the preparation of the debit memo, will help to minimize the risk of:
  2. Fictitious returns
  3. Omitted returns
  4. Invalid returns
  5. Wrong vendor

 

  1. The internal control process that requires the segregation of the authorization of purchase returns and the accounts payable record keeping and the custody of inventory, will help to minimize the risk of:
  2. Incorrect amounts
  3. Fictitious returns
  4. Timing issues
  5. Duplicate returns
  6. The internal control process that requires vendor statements to be reviewed monthly and reconciled with accounts payable records, will help to minimize the risk of:
  7. Invalid returns
  8. Stolen goods
  9. Wrong account numbers
  10. Omitted returns

 

  1. The internal control process that requires purchase return records be matched with the original purchase documentation and verified for item descriptions, quantities, dates, and prices, will help to minimize the risk of:
  2. Incorrect amounts
  3. Omitted returns
  4. Fictitious returns
  5. Invalid vendors

 

  1. The careful oversight of cash balances, forecasted cash payments, and forecasted cash receipts to insure that adequate cash balances exist to meed obligations is called:
  2. Cash disbursements
  3. Cash management
  4. Independent checks
  5. Accounts payable management

 

  1. Which department is generally responsible for the notification of the need to make cash disbursements and the maintenance of vendor accounts?
  2. Accounting department
  3. Purchasing department
  4. Accounts payable department
  5. Shipping department

 

  1. It is important that documentation support or agree with an invoice before payment is approved and a check is issued.  Which documents should be matched to make sure that the invoice received relates to a valid order that was placed and that the goods were received?
  2. Purchase requisition, purchase order, and receiving report.
  3. Purchase order, receiving log, and invoice.
  4. Purchase requisition, receiving report, and statement.
  5. Purchase order, receiving report, and invoice.

 

  1. It is necessary for a company to maintain good control over their accounts payable and paying by the due date, for all of the following reasons, except:
  2. Avoid late payment fees
  3. Maintain relationships with customers
  4. To take advantage of discounts for early payment
  5. To stay on good terms with its vendors

 

  1. A tear-off part of a check that has a simple explanation of the reasons for the payment is called:
  2. Remittance advice
  3. Disbursement journal
  4. Transaction description
  5. Cash register
  6. When a payment has been made, the cash disbursements clerk will clearly mark the invoice with information pertaining to the date an the check number used to satisfy the obligation.  This process is called:
  7. Marking the invoice
  8. Retiring the invoice
  9. Cancelling the invoice
  10. Destroying the invoice

 

  1. A chronological listing of all payments is referred to as a(n):
  2. Remittance Advice
  3. Cash Disbursements Journal
  4. Accounts Payable Ledger
  5. Purchases Journal

 

  1. This control requires the approval and signature of two authorized persons, which reduces the risk of significant fraud or error.
  2. Double Remittance
  3. Duo-Authorization
  4. Bi-Sign
  5. Dual Signature

 

62X.   The security of assets and documents related to cash disbursements would include all of the following, except:

  1. Access to cash should be limited to the authorized check signers.
  2. Physical controls should be in place where the cash is retained and disbursed.
  3. Access to records should be limited to persons with the authority to sign checks.
  4. The company’s stock of unused checks should be protected and controlled.

 

63X.   The internal control process that requires the approval of a cash disbursement transaction to take place prior to the preparation of the check, will help to minimize the risk of:

  1. Fictitious payments
  2. Invalid payments
  3. Timing issues
  4. Stolen cash

 

  1. The internal control process that requires that the bank reconciliation be performed monthly, will help to minimize the risk of:
  2. Invalid payments
  3. Invalid vendors
  4. Incorrect posting
  5. Duplicate payments

 

65X.   A computer software technique in which the computer software matches an invoice to its related purchase order and receiving report is called a(n):

  1. Three way matching
  2. Document matching
  3. Disbursement approval
  4. Automated matching

 

  1. Advantages of an automated system includes all of the following, except:
  2. Reduce time, costs, errors, and duplicate payments.
  3. Increased cost of the system.
  4. Provides management more timely information to forecast future cash outflows for payment of invoices.
  5. Summarized detailed transactions into summary amounts that are posted to the general ledger accounts.

 

  1. The security and confidentiality risks of computer based matching would include:
  2. Unauthorized access to the system’s ordering and matching functions would allow the insertion of fictitious vendors and / or invoices.
  3. Errors in system logic can cause systematic and repetitive errors in matching.
  4. The criteria used to identify duplicate payments may be too tightly defined and will overlook duplicate payments.
  5. System breakdowns or interruptions can stop or slow the processing of invoices and payments.

 

  1. This type of system matching takes place without invoices. The receipt of goods is carefully evaluated an, if it matches the purchase order, settlement of the obligation occurs through the system.
  2. Business Process Engineering
  3. Controlled Access Invoicing
  4. Evaluated Receipt Settlement
  5. Double Matching System

 

  1. In order to help safeguard the security and confidentiality in an electronic business environment, a company should implement controls such as user ID, password, log-in procedures, access levels, and authority tables in order to reduce the risk of:
  2. Unauthorized access
  3. Incomplete audit trail
  4. Virus and worm attacks
  5. Repudiation of purchase transactions

 

  1. In order to help safeguard the processing integrity in an electronic business environment, a company should implement input controls such as field check, validity check, limit check, reasonableness check, and computer logs in order to reduce the risk of:
  2. Worm attacks
  3. Hackers
  4. Unauthorized access
  5. Invalid data entry

 

  1. In order to help safeguard the availability in an electronic business environment, a company should implement controls such as business continuity planning, backup data and systems,  in order to reduce the risk of:
  2. Unauthorized access
  3. System failures
  4. Repudiation of purchase transactions
  5. Invalid data entry

 

  1. The examination of the system to determine the adequacy of security measures and to identify security deficiencies is called:
  2. Intrusion detection
  3. Penetration testing
  4. Vulnerability testing
  5. Integrity testing

 

  1. Intentionally attempting to circumvent IT system access controls to determine whether there are weaknesses in any controls is called:
  2. Penetration testing
  3. Intrusion detection
  4. Integrity testing
  5. Vulnerability testing

 

  1. This type of software alerts the organization to hacking or other unauthorized use of the system or net work.
  2. Penetration testing
  3. Intrusion detection
  4. Integrity testing
  5. Vulnerability testing

 

  1. One of the newest technologies related to payables is one where invoices are exchanged and payments are made via the internet.  The name given to this process is:
  2. Random Array of Invoice and Disbursements (RAID)
  3. Electronic Invoice Payment Procedures (EIPP)
  4. Electronic Invoice Presentment and Payment (EIPP)
  5. Routing Application Invoice Delivery (RAID)

 

  1. Credit cards given to employees by the organization in order for the employees to make designated purchases are called:
  2. Employee Debit Cards
  3. Organization Purchase Cards
  4. Expenditure Cards
  5. Procurement Cards

 

  1. Which of the following groups has an ethical obligation to establish the proper tone at the top, strong internal controls, and high ethical standards?
  2. Stockholders
  3. Board of Directors and Management
  4. Employees
  5. Audit Committee

 

  1. There are four primary functions of corporate governance.  Which of the following is NOT one of those functions?
  2. Availability
  3. Management Oversight
  4. Internal Controls and Compliance
  5. Financial Stewardship
    1. Manufacturing has changed in recent years as a result of each of the following factors except:
    2. globalization
    3. technological advances
    4. increased competition
    5. lack of economic prosperity

     

    1. The term conversion processes is often used synonymously with
    2. Operations.
    3. Production.
    4. Manufacturing.
    5. All of the above.

     

    1. Which of the following activities is not part of the planning component of the logistics function?
    2. Research and development
    3. Capital budgeting
    4. Human resource management
    5. Scheduling

     

    1. Which of the following activities is an inventory control activity?
    2. Engineering
    3. Maintenance
    4. Routing
    5. Quality control

     

    1. Which of the following statements concerning an operations list is true?
    2. It is an engineering document that describes the chain of events within a company’s conversion process.
    3. It is an engineering document that specifies the descriptions and quantities of component parts within a product.
    4. It is a capital budgeting document that describes the chain of events within a company’s conversion process.
    5. It is a capital budgeting document that specifies the descriptions and quantities of component parts within a product.

     

    1. Which of the following terms relates to the control of materials being held for future production?
    2. Routing
    3. Work-in-process
    4. Stores
    5. Warehousing

     

    1. Which of the following questions is most likely to be found on an internal control questionnaire concerning a company’s conversion processes?
    2. Are vendor invoices for materials purchases approved for payment by someone who is independent of the cash disbursements function?
    3. Are signed checks for materials purchased mailed promptly without being returned to the department responsible for processing the disbursement?
    4. Are approved requisitions required when materials are released from the company’s warehouse into production?
    5. Are details of payments for materials balanced to the total posted to the general ledger?

     

    1. When additional procedures are necessary to bring a defective product up to its required specifications, this is referred to as
    2. Rework.
    3. Scrap.
    4. Work-in-process.
    5. Variance reporting.

     

    1. A firm expects to sell 1000 units of its best-selling product in the coming year. Ordering costs for this product are $100 per order, and carrying costs are $2 per unit. Compute the optimum order size, using the EOQ model.
    2. 10 units
    3. 224 units
    4. 317 units
    5. 448 units

     

    1. Which of the following internal controls is typically associated with the maintenance of accurate inventory records?
    2. Performing regular comparisons of perpetual records with recent costs of inventory items
    3. Using a just-in-time system to keep inventory levels at a minimum
    4. Performing a match of the purchase request, receiving report, and purchase order before payment is approved
    5. Using physical inventory counts as a basis for adjusting the perpetual records

     

    1. If a manufacturing company’s inventory of supplies consists of a large number of small items, which of the following would be considered a weakness in internal controls?
    2. Supplies of relatively low value are expensed when acquired.
    3. Supplies are physically counted on a cycle basis, whereby limited counts occur quarterly and each item is counted at least once annually.
    4. The stores function is responsible for updating perpetual records whenever inventory items are moved.
    5. Perpetual records are maintained for inventory items only if they are significant in value.

     

    1. The goal of a physical inventory reconciliation is to
    2. Determine the quantity of inventory sold.
    3. Compare the physical count with the perpetual records.
    4. Compare the physical count with the periodic records.
    5. Determine the quantity of inventory in process.

     

    1. Which of the following is not considered a benefit of using computerized conversion systems?
    2. Automatic computation of materials requirements
    3. Increased sales and cost of sales
    4. Increased efficiency and flexibility
    5. Early error detection and increased accuracy

     

    1. Which of the following represents a method of managing inventory designed to minimize a company’s investment in inventories by scheduling materials to arrive at the time they are needed for production?
    2. The economic order quantity (EOQ)
    3. Material resource planning (MRP)
    4. First-in, first-out (FIFO)
    5. Just-in-time (JIT)

     

    1. For which of the following computerized conversion systems is Wal-Mart well known?
    2. CAD/CAM
    3. MRP-II
    4. CIMs
    5. JIT

     

    ANSWERS TO QUESTIONS 1 – 15 (FROM THE TEXTBOOK)

     

    1. D                                     4.    C                                      7.    C                                   10.    D                                   13.    B
    2. D                                     5.    A                                     8.    A                                   11.    C                                   14.    D
    3. C                                      6.    C                                      9.    C                                   12.    B                                   15.    D

     

     

     

    TEST BANK – CHAPTER 11 – MULTIPLE CHOICE

     

    1. A company’s conversion processes includes all of the following except:
    2. Materials.
    3. Office supplies.
    4. Labor.
    5.     Overhead

     

    1. A company must have systems in place to accomplish all of the following except:
    2. Capture data.
    3. Vocalize data.
    4. Record data.
    5. Summarize data.

     

    1. The conversion process is initiated when the company recognizes:
    2. The receipt of raw materials.
    3. The shipment of finished goods to customers.
    4. The need to conduct operations.
    5. None of the above.

     

    19X.   Overhead includes all of the following except:

    1. Various other expenses necessary to run the operating facility.
    2. The president’s salary.
    3. Indirect labor.
    4.       Indirect materials.

     

    20X.   The major activities within the conversion process include all but

    1. Strategic planning that supports the company’s operational goals.
    2. Optimizing the use of the employees, property, and inventories that are needed in operations.
    3. Controlling production flows, ensuring product quality.
    4.     Preparing the related cost accounting and financial accounting records.

     

    21X.   Which of the following company activities would NOT be considered a productive activity?

    1. The manufacture of automobiles.
    2.     The treatment of patients in a medical facility.
    3. Providing consulting services.
    4.     All of the above, A, B, and C, are considered productive activities.

     

    1. The process of logical, systematic flow of resources throughout the organization is referred to as:
    2. Logistics.
    3. Planning.
    4. Reporting.
    5. Sales forecast.

     

    1. The component of the logistics function that directs the focus of operations is referred to as:
    2. Logistics.
    3. Planning.
    4. Reporting.
    5.     Sales forecast.

     

    1. The form that specifies the components of a product, including descriptions and quantities of materials and parts needed is the:
    2. Operations list.
    3. Bill of materials.
    4. Engineering.
    5.     Capital budgeting.

     

    1. The form that describes the chain of events that constitute a product’s production is referred to as the:
    2. Operations list.
    3. Bill of materials.
    4. Engineering.
    5.       Capital budgeting.

     

    1. The process that plans the timing for production activities is referred to as:
    2. Operations list.
    3. Bill of materials.
    4. Scheduling.
    5.       Capital budgeting.

     

    1. The form that authorizes production activities for a particular sales order or forecasted needs is referred to as the:
    2. Production schedule.
    3. Production orders.
    4. Maintenance and control process.
    5.     Human resources process.

     

    1. The process that is concerned with maintaining the capital resources used to support production is referred to as:
    2. The production schedule.
    3. Production orders.
    4. Maintenance and control.
    5.     The human resources process.

     

    29X.   This schedule outlines the specific timing required for a sales order, including the dates and times designated for the production run.

    1. Production schedule
    2. Production orders schedule
    3. Maintenance and control schedule
    4.     Human resources schedule

     

    30X.   The responsible for managing the placement and development of sufficient qualified personnel which includes hiring and training workers as well as maintaining records of their performance is the task of the:

    1. Production schedule department.
    2. Production orders department.
    3. Maintenance and control department.
    4.     Human resources department.

     

    31X.   The responsibility for managing and recording the movement of inventory in the many different directions that it may go throughout the conversion process is assigned to the:

    1. Production schedule department.
    2. Inventory control department.
    3. Maintenance and control department.
    4.     Human resources department.

     

    1. The issuance and movement of materials into the various production phases is referred to as:
    2. Production scheduling process.
    3. Inventory control process.
    4. The routing process.
    5.     The production orders process.

     

    1. Which document provides the descriptions and quantities of materials taken into production for  a specified sale or other authorized production activity?
    2. The routing slip.
    3. The shipping notice.
    4. The purchase requisition.
    5.     The sales order.

     

    34X.   Which of the following involves managing the holding area for finished goods awaiting sale?

    1. Purchase orders
    2. Shipping notices
    3. Purchase requisitions
    4.     Inventory warehousing

     

    1. The major function within the conversion process is the:
    2. Sales order function.
    3. Sales forecast function.
    4. Logistics function.
    5.     Reporting function.

     

    1. The component of the logistics function that directs the focus of operations is the:
    2. Operations component.
    3. Resource management component.
    4. Planning component.
    5.     The sales component.

     

    37X.   The planning component of the logistics function has all of the following elements except:

    1. Maintenance and control.
    2. Engineering.
    3. Scheduling.
    4.     Capital budgeting.

     

    38X.   The resource management component of the logistics function has all of the following elements except:

    1. Maintenance and control.
    2. Human resources.
    3. Inventory control.
    4.     Capital budgeting.

     

    1. The operations component of the logistics function has which of the following elements?
    2. Maintenance and control.
    3. Production.
    4. Inventory control.
    5.     Capital budgeting.

     

    1. The responsibility to conduct make/buy decisions is usually given to:
    2. Engineering.
    3. Capital budgeting.
    4. Operations.
    5.     Research and development.

     

    1. Capital budgeting:
    2. Is responsible for the issuance of stocks and bonds to finance operations.
    3. Plans the capital resources needed to support operations.
    4. Is responsible for the procurement of production materials.
    5.     Is not a function of a company once established and functioning.

     

    1. Engineering is responsible for:
    2. Designing the product while operations is responsible the bill of materials and the operations list.
    3. Designing the plant and equipment used in manufacturing.
    4. Is responsible for the procurement of production equipment.
    5.     Designing the product and creating the bill of materials and the operations list.

     

    1. The bill of materials is the:
    2. Cost of raw materials purchased from a vendor.
    3. Document of instructions utilized to assemble a product.
    4. Form that specifies the components of a product.
    5.     Designing the product and creating the bill of materials and the operations list.

     

    44X.   The operations list is the:

    1. Schedule of production for the day, week, or month as specified by the company.
    2. Document of instructions utilized to assemble a product.
    3. Form that specifies the components of a product.
    4.     Designing the product and creating the bill of materials.

     

    1. Scheduling:
    2. Plans the timing for acquisition of fixed assets.
    3. Does not take into account machine breakdowns.
    4. Takes into consideration all the open sales orders.
    5.     Does not take inventory needs.

     

    1. Production orders:
    2. Outline the specific timing required for sales orders.
    3. Authorize production activities for a particular need or order.
    4. Are forecasts of needs based on known and anticipated sales.
    5.     Are issued by the engineering department to correct product deficiency issues.

     

    1. A production schedule:
    2. Does not contain requirements due to sales forecasts.
    3. Does not contain information from the bill of materials.
    4. Contains information from the operations list.
    5.     Are issued by the maintenance and control department.

     

    1. The department responsible for training production personnel is the:
    2. Production department.
    3. Human resources department.
    4. Engineering department.
    5.     None of the above.

     

    1. Economic order quantity (EOQ) is a function:
    2. Of the purchasing customer or client.
    3. Of the sales force to provide the purchasing customer or client with the greatest value.
    4. Of the responsibility of engineering through the operations list.
    5.       Associated with inventory control.

     

    50X.   Routing is the:

    1. Path electronic messages follow in the inventory system.
    2. Issuance and movement of materials into the various production phases.
    3. Physical movement of materials from the point of sale to the customer.
    4.     Physical movement of materials from the vendor to the inventory stores facility.

     

    51X.   Inventory status reports are:

    1. Generated only for raw materials.
    2. Only generated for finished goods.
    3. Prepared at various stages of the production process.
    4.     Only generated for work in process.

     

    1. Select the true statement from the choices below.
    2. Inventory stores and warehousing are both concerned with raw materials.
    3. Neither inventory stores nor warehousing are concerned with raw materials.
    4. Inventory stores is concerned with raw materials and warehousing is concerned with finished goods.
    5.     Inventory stores is concerned with finished goods and warehousing is concerned with raw materials.

     

    53X.   The term “operations” is commonly used to refer to:

    1. The main function of the business.
    2. Any function of the business which generates revenues.
    3. Only those functions of the business accomplished by the operations department.
    4.     Only those functions which move inventory through the production cycle.

     

    54X.   Operations may be performed by all of the following except:

    1. Continuous processing of homogeneous products.
    2. Batch processing.
    3. Custom, made-to-order processing.
    4.     Each of the above is a valid form of operations.

     

    1. The final hub in the logistics function is:
    2. Packaging.
    3. Quality control.
    4. Sales.
    5.     Shipping to the customer.

     

    1. Rework refers to:
    2. Generating a better quote for a customer.
    3. Overhaul of a manufacturing machine.
    4. Additional procedures to bring a product up to specifications.
    5.     Parts that are beyond repair at any cost.
    6. The final hub in the logistics function which involves a follow-up to production, where the products are inspected before they are moved to the warehouse or shipping area is referred to as:
    7. Quality control.
    8. Shipping notice.
    9. Purchase requisition.
    10.     Warehousing.

     

    1. The expected cost based on projections of a product’s required resources which includes direct materials, direct labor and overhead is referred to as:
    2. Quality control costs.
    3. Sales order cost.
    4. Rework costs.
    5.     Standard costs.

     

    1. A system which involves recording purchases of raw materials inventory, recording all the components of work in process, and recording the total cost of sales for products completed and sold is referred to as:
    2. A perpetual inventory system.
    3. The accounting information system.
    4. A periodic inventory system.
    5.     None of the above.

     

    1. Perpetual inventory systems:
    2. Record changes in inventory categories only at the end of each period.
    3. Record changes in inventory categories only when sales are made.
    4. Record changes in inventory categories whenever material is moved from one category to another.
    5. Does not address raw materials.

     

    1. Variances represent the differences between:
    2. actual costs and the standard costs applied.
    3. raw materials ordered and raw materials received.
    4. the sales targets and sales accomplishments.
    5.     actual quantity on hand and quantity according to the inventory system.

     

    62X.   Standard costs are the:

    1. Responsibility of production accountants.
    2. Expected costs based on required resources.
    3. Costs normally paid for a component.
    4.     Prices the customer is expected to pay upon sale.

     

    63X.   Standard costs take into consideration all of the following except:

    1. The cost of materials utilized to maintain production equipment.
    2. The cost of labor used to operate the production machinery.
    3. The cost of the sales manager’s salary.
    4.     Factory overhead items that cannot be directly correlated to product production.

     

    1. Perpetual inventory systems:
    2. Are only updated at the end of each fiscal period.
    3. Are concerned only with finished goods.
    4. Are not concerned with raw materials.
    5.     Involve every level of inventory necessary for production.

     

    1. Periodic inventory systems:
    2. Are only updated at the end of each fiscal period.
    3. Are concerned only with finished goods.
    4. Are not concerned with raw materials.
    5.     May not reflect current inventory levels.

     

    1. Variances:
    2. Represent the differences between actual costs and the standard costs applied.
    3. Represent the difference between design specifications and production results.
    4. Represent flaws in the production results.
    5.     Each of the answers, A, B, and C are correct.

     

    1. Variances:
    2. Are only investigated if they are unfavorable.
    3. Are always investigated.
    4. Will always result in the improvement of the logistics function.
    5.     May not result in any changes in the logistics function.

     

    68X.   Which of the following is NOT a responsibility given to the individuals making purchases for the company?

    1. Purchasing raw materials for production.
    2. Specifying the order and sequence of payments to vendors.
    3. Selecting vendors.
    4.     Specifying the quantities to be ordered.

     

    69X.   Which of the following activities in the conversion process does NOT require express authorization?

    1. Initiation of production orders.
    2. Issuance of materials into the production process.
    3. Transfer of finished goods to the warehouse or shipping areas.
    4.     Initiation of a sales order.

     

    1. Segregation of duties is accomplished by which of the following?
    2. Accounting personnel having restricted access to physical inventory.
    3. Warehouse personnel signing all documents related to material movements.
    4. Production personnel restricted to one manufacturing station at all times.
    5.     None of the above.

     

    71X.   Security of assets and documents include all of the following except:

    1. Water sprinklers.
    2. Adequate insurance coverage.
    3. Restricted movement of office supplies.
    4.     Security guards.

     

    1. In inventory systems, when the actual quantity and the accounting records quantity are  compared it is referred to as:
    2. Perpetual inventory.
    3. Inventory resolution.
    4. The physical inventory reconciliation.
    5.     Periodic inventory.

     

    73X.   Cost-benefit can be defined as:

    1. Gross profit after sales are made.
    2. Cameras and security guards to protect construction materials in a restricted access warehouse.
    3. Verifying inventory levels at the end of each working shift.
    4. Alarm systems and vaults for fine jewelry inventories.

     

    74X.   The activity in the conversion process that does NOT require express authorization is the:

    1. Initiation of production orders.
    2. Issuance of materials into the production process.
    3. Transfer of finished goods to the warehouse or shipping areas.
    4.     Movement of production pieces from one stage of production to the next.

     

    1. Within the logistics function, segregation of duties means:
    2. One person should not have both inventory and accounting responsibilities.
    3. One person should not have production responsibilities over more than one station.
    4. One person should not have quality assurance responsibilities over a work station other than his own.
    5.     Each person can only have one duty or function in the production function.

     

    1. Physical controls include all but:
    2. Fences and alarm systems.
    3. Security guards.
    4. High tech security tools.
    5. Each of the answers, A, B, and C are correct.

     

    1. Physical inventory counts should only include:
    2. Finished goods.
    3. Finished goods and raw materials.
    4. Finished goods and work-in-process.
    5.     Raw materials, work-in-process, and finished goods.

     

    1. When there is a difference between the inventory records quantity and the physical count of inventory:
    2. There is a variance.
    3. The difference can be ignored if minor.
    4. The difference is resolved through inventory reconciliation.
    5.     The difference is ignored if the physical quantity exceeds inventory record quantity.

     

    1. Which of the following factors does NOT influence the need to safeguard and monitor inventory movement?
    2. Inconsistent or high levels of inventory movement.
    3. If the inventory is held at various locations.
    4. If a company’s inventory items are difficult to differentiate.
    5.     Each of the answers, A, B, and C are correct.

     

    80X.   This software allows engineers to work with advanced graphics at electronic work stations to create 3-D models that depict the production environment.

    1. Computer-integrated manufacturing systems (CIMs)
    2. Computer aided design (CAD)
    3. Material resource planning (MRP)
    4.     Computer aided manufacturing (CAM)

     

    1. _________________ involves the automated scheduling of production orders and movement of materials in the production process.
    2. Computer-integrated manufacturing systems (CIMs)
    3. Computer aided design (CAD)
    4. Material resource planning (MRP)
    5.     Computer aided manufacturing (CAM)

     

    1. _____________ integrates all of the conversion processes to allow for minimal disruptions due to reporting requirements or inventory movement issues.
    2. Computer-integrated manufacturing systems (CIMs)
    3. Computer aided design (CAD)
    4. Material resource planning (MRP)
    5.     Computer aided manufacturing (CAM)

     

    83X.   IT systems permit or allow all of the following except:

    1. Automatic computation of materials requirements based on sales orders.
    2. Reduced internal security measures.
    3. Automatic updating of inventory status reports
    4.     Timely transfer of inventories throughout the process.

     

    84X.   Computerization of the conversion process results in all except:

    1. Automatic computation of materials requirements based on purchase orders.
    2. Timely transfer of inventories throughout the process.
    3. Automatic updating of inventory status reports.
    4.     Automatic computation of materials requirements based on sales orders.

     

    1. Select the false completion to the statement which starts “A computer-based conversion       process:”
    2. Requires less data input into the system.
    3. Automatically prepares financial accounting entries and cost accounting reports.
    4. Yields greater benefits in terms of workforce efficiency.
    5.     Permits more systematic scheduling which allows for greater flexibility.

     

    1. Select the true statement.
    2. Computer-aided manufacturing (CAM) requires computer-aided design.
    3. Computer-aided design is always two dimensional.
    4. Computer-aided design may be three dimensional.
    5.     Computer-aided design requires additional manpower during assembly.
    6. Just-in-time (JIT) production systems:
    7. Require close communications with the engineering department.
    8. Do not require close communications with vendors.
    9. Require closely controlled inventory levels.
    10.     Do not require additional monitoring.

     

    1. The act of misstating financial information in order to improve financial statement results is referred to as:
    2. Just in time production systems.
    3. Manufacturing resource planning.
    4. Earning management.
    5.     Absorption costing.

     

    89X.   Which of the following involves the inclusion of both variable and fixed costs in the determination of unit costs for ending inventories and cost of goods sold?

    1. Just in time production systems
    2. Manufacturing resource planning
    3. Earning management
    4.     Absorption costing

     

    90X.   Ethical issues of manufacturing include all except:

    1. Reassignment or retraining employees terminated due to automation.
    2. Absorption costing.
    3. Production of excessive inventory levels.
    4.     Earnings management.

     

    91X.   When absorption costing is used:

    1. Production inefficiencies are immediately identified.
    2. Production to absorb the cost of waste and yield factors not considered in other costing methods.
    3. Both variable and fixed costs are included in unit costs.
    4. The transfer of values to the income statement through inventory accounts.

     

    1. Earnings management:
    2. Is the act of misstating financial information.
    3. Is the goal of cost/benefit relationships.
    4. Accomplished through the proper management of inventory and sales.
    5.     Is an ethical goal of management.

     

    1. Manpower displacement through automation:
    2. Is considered a benefit through cost/benefit analysis.
    3. Should be a concern of management.
    4. Is the goal of proper engineering.
    5.     Seldom results in termination of employees.

     

    94X.   Functions of corporate governance includes all of the following except:

    1. Management oversight
    2. Earnings management
    3. Financial stewardship
    4.     Internal control system.

     

    1. When the proper tone of corporate governance is in place:
    2. Encouraging ethical conduct is unnecessary.
    3. Effectiveness is not improved.
    4. Risk of fraud tends to increase.
    5.     Proper stewardship of assets increases.

    1X.    Which of the following best describes the relationship between data and information?

    1. Data are interpreted information.
    2. Information is interpreted data.
    3. Data are more useful than information in decision making.
    4. Data and information are not related.

     

    1. A character is to a field as
    2. Water is to a pool.
    3. A pool is to a swimmer.
    4. A pool is to water.
    5. A glass is to water.

     

    1. Magnetic tape is a form of
    2. Direct access media.
    3. Random access media.
    4. Sequential access media.
    5. Alphabetical access media.

     

    1. Which of the following is not an advantage of using real-time data processing?
    2. Quick response time to support timely record keeping and customer satisfaction
    3. Efficiency for use with large volumes of data
    4. Provides for random access of data
    5. Improved accuracy due to the immediate recording of transactions

     

    1. If a company stores data in separate files in its different departmental locations and is able to update all files simultaneously, it would not have problems with
    2. Attributes.
    3. Data redundancy.
    4. Industrial espionage.
    5. Concurrency.

     

    1. When the data contained in a database are stored in large, two-dimensional tables, the database is referred to as a
    2. Flat file database.
    3. Hierarchical database.
    4. Network database.
    5. Relational database.

     

    1. Database management systems are categorized by the data structures they support. In which type of database management system is the data arranged in a series of tables?
    2. Network
    3. Hierarchical
    4. Relational
    5. Sequential

     

    1. A company’s database contains three types of records: vendors, parts, and purchasing. The vendor records include the vendor number, name, address, and terms. The parts records include part numbers, name, description, and warehouse location. Purchasing records include purchase numbers, vendor numbers (which reference the vendor record), part numbers (which reference the parts record), and quantity .What structure of database is being used?
    2. Network
    3. Hierarchical
    4. Relational
    5. Sequential

     

    1. Which of the following statements is not true with regard to a relational database?
    2. It is flexible and useful for unplanned, ad hoc queries.
    3. It stores data in tables.
    4. It stores data in a tree formation.
    5. It is maintained on direct access devices.

     

    1. A collection of several years’ nonvolatile data used to support strategic decision-making is a (n)
    2. Operational database.
    3. Data warehouse.
    4. Data mine.
    5. What-if simulation.

     

    1. Data mining would be useful in all of the following situations except
    2. Identifying hidden patterns in customers’ buying habits.
    3. Assessing customer reactions to new products.
    4. Determining customers’ behavior patterns.
    5. Accessing customers’ payment histories.

     

    1. A set of small databases where data are collected, processed, and stored on multiple computers within a network is a:
    2. Centralized database.
    3. Distributed database.
    4. Flat file database.
    5. High-impact process.

     

    1. Each of the following is an online privacy practice recommended by the AICPA Trust Services Principles Privacy Framework except:
    2. Redundant data should be eliminated from the database.
    3. Notification of privacy policies should be given to customers.
    4. Private information should not be given to third parties without the customer’s consent.
    5. All of the above.

     

    ANSWERS TO TEXTBOOK – CHAPTER 13 – END OF CHAPTER QUESTIONS

    1. B                                      4.    B                                      7.    C                                   10.    B                                   13.    A
    2. A                                     5.    D                                     8.    C                                   11.    C
    3. C                                      6.    A                                     9.    C                                   12.    B

     

    TEST BANK – CHAPTER 13 – MULTIPLE CHOICE

     

    14X.   Data is

    1. The interpretation of facts that have been processed.
    2. The set of facts collected from transactions.
    3. The set of facts pertaining to accounts payable.
    4. The set of facts pertaining to accounts receivable.

     

    15X.   Information is the:

    1. Interpretation of data that have been processed.
    2. Set of facts collected from transactions.
    3. Set of facts pertaining to accounts payable.
    4. Set of facts pertaining to accounts receivable.

     

    16X.   Data collected would be all but the:

    1. Name of the customer.
    2. Selling company’s name.
    3. Address of the customer.
    4. Credit card number of the customer.

     

    1. Examples of data collection events are
    2. Transactions that fill customer orders.
    3. Transactions to replenish inventory.
    4. Neither A nor B are examples of data collection.
    5. Both A and B are examples of data collection.

     

    18X.   The reason that detailed data must be collected and stored is:

    1. The data must be stored for future transactions or follow-up.
    2. The data must be incorporated into the accounting system so that regular financial statements can be prepared.
    3. Management needs to examine and analyze data from transactions to operate the organization.
    4.             Only 1.
    5. Only 1 and 2.
    6. Only 1, 2, and 3.
    7. Include 1, 2, and 3 among other reasons.

     

    20A.   Structured data:

    1. Includes data collected from transactions.
    2. Easily fit into rows and columns
    3. Include accounting data
    4. All of the above are true of structured data

     

    1. Detailed information from a sale may be used by:
    2. The sales department.
    3. The accounts receivable section.
    4. The inventory department.
    5. General ledger accountants.
    6. Customer service.
    7. Only 1, 3, and 5.
    8. Only by 1, 2, 3, and 5.
    9. Only by 1, 2, and 3.
    10. Only by 1, 2, 3, and 4.

     

    20X.   The reasons for storing data to complete a customer sales transactions include all of the following EXCEPT:

    1. Taking the order.
    2. Pulling the items from the warehouse.
    3. Shipping the items to the customer.
    4. Billing the customer.
    5. Providing feedback to the customer on the order.
    6. Updating the customer account for payment.
    7. 1.
    8. 1 and 5.
    9. 2 and 3.
    10. 5.

     

    21X.   The reasons to store customer names, addresses, and other similar information include all but:

    1. To follow up with the customer.
    2. To create financial reports.
    3. To expedite future orders.
    4. To ease the customer’s follow-on ordering processes.

     

    1. Storage media and methods of processing are:
    2. Sequential and random access storage with random and batch data processing.
    3. Sequential and real time access storage with batch and real time data processing.
    4. Batch and random access storage with random and batch data processing.
    5. Sequential and random access storage with batch and real time data processing.

     

    1. Select the false statement from the following.
    2. A character is a single letter only.
    3. A field is a set of characters.
    4. A field can be thought of as a column of data.
    5. A record is the entire set of fields.

     

    1. Select the true statement from the following.
    2. A character is a single letter only.
    3. A character is a single number only.
    4. A character is a single symbol only.
    5. A character is a single letter, number, or symbol.
    6. A field is a:
    7. Row within a record.
    8. Column within a record.
    9. Series or collection of records.
    10. Character is a single letter, number, or symbol.

     

    1. A record is:
    2. An entire set of fields for a specific entity.
    3. A series of characters.
    4. A collection of files.
    5. Another name for a database.

     

    1. A field is a (n):
    2. Entire set of records within a file.
    3. Row within a record.
    4. Set of characters.
    5. Set of files within a database.

     

    1. A file is a:
    2. Set of characters.
    3. Column within a record.
    4. Row within a record.
    5. Collection of related records.

     

    29X.       A database is a (n):

    1. Set of characters.
    2. Row within a file.
    3. Collection of related records.
    4. Entire set of files.

     

    1. Magnetic tape storage medium allows:
    2. Sequential access storage with random data processing.
    3. Random access storage with random data processing.
    4. Batch access storage with random data processing.
    5. Sequential access storage with sequential data processing.

     

    31X.   Random access means:

    1. All data items in the group must be read but the groups do not need to read in order.
    2. Any data item can be directly accessed without reading in sequence.
    3. All data items must be read in the order placed into the system, not alphabetically.
    4. All data items must be read in alphabetical order, not in the order they were placed in the system.

     

    1. Direct access:
    2. Means no passwords are required to access data items in a database.
    3. Is the same as sequential access.
    4. Is the same as random access.
    5. Is the process used by magnetic tape storage medium.

     

    1. (Magnetic) Disk storage is:
    2. The same as magnetic tape storage.
    3. Sequential access.
    4. Random access.
    5. Not direct access.

     

    1. (Magnetic) Disk storage is:
    2. Preferred over magnetic tape storage.
    3. Sequential access.
    4. Not random access.
    5. Not direct access.

     

    35X.   Batch processing:

    1. Occurs when dissimilar transactions are grouped and processed as a group.
    2. Occurs when similar transactions are grouped together and processed as a group.
    3. Occurs when the transaction is processed as soon as it is entered.
    4. Would not be used for payment to vendor type transactions since they are time sensitive.

     

    36X.   Real-time processing:

    1. Would not be used for payment to vendor type transactions since they are not time sensitive.
    2. Occurs when similar transactions are grouped into a batch and processed as a group.
    3. Would be utilized for processes such as payroll due to their time-sensitive nature.
    4. Occurs when the transaction is processed immediately.

     

    1. Select the true statement from those provided.
    2.     Batch processing fails to attain the efficiency of real-time processing.
    3. Real-time processing fails to attain the efficiency of batch processing.
    4. Real-time processing is efficient for large groups of similar data.
    5. Real-time processing has less complex audit trails.

     

    1. Select the false statement from those provided.
    2. Batch processing attains a greater efficiency than real-time processing for large amounts of data items.
    3. Batch processing has a faster response time than real-time processing due to the grouping of like data items.
    4. Batch processing should be utilized for payroll type processes as it groups these similar data items.
    5. Real-time data processing has more complex audit trails for data items than batch processing.

     

    39X.   Select the false statement from those provided.

    1. Real-time processing is more complex because of the interactive nature of data processing.
    2. Real-time processing must use sequential storage concepts.
    3. The audit trail is as complex within both real-time and batch processing systems.
    4. Control totals are difficult within real-time processing due to the lack of data item groupings.

     

    1. Real-time data item processing is more complex because:
    2. It must utilize sequential storage medium.
    3. It must group data items together before processing.
    4. The slower response times indicate more systems activity.
    5. There is duplication of effort in processing transactions.

     

    1. Batch processing of data items is less complex because:
    2. Entries are recorded as soon as entered, eliminating queues of data.
    3. Audit trails are not required as required with real-time processing.
    4. The individuals doing data entry need not learn their jobs to high skill levels.
    5. The individual processes are not as complex as with real-time processing.

     

    42X.   Select the correct statement from those provided below.

    1. Batch processing has a slow response time and must use sequential data storage.
    2. Batch processing is very efficient for large volumes of transactions while real-time processing has a slower processing time.
    3. Batch processing is complex while real-time processing is simple.
    4. Data may be stored sequentially batch processing and but must be random access real-time processing.

     

    43X.   Select the false statement from those provided below.

    1. Data must be stored sequential order for batch processing and in random order for real-time processing.
    2. Batch processing is very efficient for large volumes of transactions while real-time processing has a rapid processing time.
    3. Batch processing is simple while real-time processing is more complex.
    4. Batch processing has a slow response time and may use random order data access.

     

    1. Select the correct statement from those provided below.
    2. If batch processing is selected due to payroll and production type processing mandates, the entire system must be batch processing.
    3. If real-time processing is selected due to sales and inventory type processing mandates, the entire system must be real-time processing.
    4. If sales and inventory are real-time, payroll and production may be batch processing in a well-designed system.
    5. Because sales are frequently shipped out of warehouses, sales, inventory, and payroll are all good candidates for batch processing concepts.

     

    1. Data redundancy occurs:
    2. When shared databases are utilized.
    3. When inventory has the same data in its files as sales has in its files.
    4. When customer addresses are needed by both shipping and billing.
    5. In all properly designed database management systems.

     

    46X.   Concurrency:

    1. Provides all departments with the same data at the same time.
    2. All of the multiple instances of the same data are exactly alike.
    3. Is a feature of a properly designed database to protect data.
    4. Occurs when inventory and sales can access the same data files.

     

    47X.   Select the correct statement from the following.

    1. Data redundancy and concurrency are features of well-designed database management systems.
    2. Data redundancy, not concurrency, is a feature of a well-designed database management system.
    3. Concurrency not, data redundancy, is a feature of a well-designed database management system.
    4.     Data redundancy and concurrency are not features of well-designed database management systems.

     

    48X.   Database management systems, DBMS, is (are):

    1. Software that manages a database and controls access and use of data
    2. Printed policies about the use and access to data.
    3. Systems which require each user to create his own master data file.
    4. Systems that allow unlimited access to the data files by all users.

     

    49X.   Data reveal relationships between records. These can be thought of as:

    1.     One-to-one relationships.
    2. Many-to-many relationships.
    3. One-to-many relationships.
    4. All of the above are examples of relationships.

     

    1. Database relationships may be:
    2. One-to-one relationships.
    3. One-to-one relationships only.
    4. One-to-many relationships.
    5. One-to-many relationships only.
    6. Many-to-one relationships.
    7. Many-to-one relationships only.
    8. Many-to-many relationships.
    9. Many-to-many relationships only.
    10. 1, 3, 5, and 7 only.
    11.     2 or 4 or 6 or 8 only, each is exclusive of the others.
    12. 1 and 3 only.
    13. 1 or 3 or 5 or 7 only, each is exclusive of the others.

     

    1. An example of a one-to-one relationship would be:
    2. One employee, three timecards for the pay period.
    3.     One customer, one billing address.
    4. One customer, four shipping addresses.
    5. Two employees, one skill set.

     

    1. An example of a one-to-many relationship would be:
    2. One employee, three timecards for the pay period.
    3. One customer, one billing address.
    4. One customer, one shipping invoice.
    5. Two employees, one skill set.

     

    1. An example of many-to-many relationship would be:
    2. One customer for one billing date.
    3. Multiple customers for one inventory item.
    4. Multiple vendors for multiple items.
    5. One employee, three timecards for the pay period.

     

    54X.   A flat file database has:

    1. The ability to call necessary information from linked databases.
    2. Two dimensions, rows and depth.
    3. Only columns.
    4. Two dimensions, rows and columns.

     

    1. Processing of a flat file table is:
    2. Random.
    3. Sequential.
    4. Random or sequential, selectable by the user.
    5. Direct.

     

    1. Flat file records are:
    2. Kept in random order.
    3. Kept is sequential order.
    4. Linked to other records by a common attribute.
    5. Interactive and real-time processed.

     

    1. Tables in a flat file database must:
    2. Must contain at least two data items at the intersection of each row and column.
    3. Contain similar data throughout the row.
    4. Label all columns the same to maintain the relationships of the rows.
    5. Contain similar data in the column.

     

    58X.   Hierarchical databases are NOT:

    1. Inverted tree structures.
    2. One-to-one relationships.
    3. One-to-many relationships.
    4. Many-to-one relationships.

     

    59X.   A record pointer is a:

    1. Column value that relates to all other values in the row.
    2. Column value that points to the next address with the linked attribute.
    3. Row value that points to the next address with the linked attribute.
    4. Link that is only required in one-to-many relationships.

     

    1. Hierarchal databases:
    2. Are effective in retrieving records without explicit linkages.
    3. Are efficient in processing large volumes of transactions with explicit linkages.
    4. Do not require built-in linkages, they can be created with queries.
    5. Do not require record pointers.

     

    1. Network databases:
    2. Allow shared branches within the inverted tree structure.
    3. Allow creation of records without complete information.
    4. Are popular today because of LAN and WAN usage.
    5. Are very flexible because of the network access.

     

    1. Relational databases are:
    2. Two-dimensional tables which can be joined in only one way.
    3. Three-dimensional tables allowing increased data relationships.
    4. Two-dimensional tables which can be joined in many ways.
    5. Either two- or three-dimensional as defined by the user.

     

    1. Relational databases are:
    2. Many large tables linked together to associate data.
    3. Many large tables to isolate data within common identifiers.
    4. Many small tables linked by primary keys to associate data.
    5. Single tables with multi-dimensional characteristics – rows, columns, and depth.

     

    1. The primary key of a relational database:
    2. Must be a common identifier for all of the data within the table.
    3. Must never be the first field of the table.
    4. Represents a value that is used to sort, index, and access records with.
    5. Is the password which allows unlimited access to the database.

     

    1. Structured query language (SQL):
    2. Isolates data within tables.
    3. Takes advantage of the primary record key to link tables.
    4. Is a complex language used to extract data from a limited number of tables.
    5. Does not allow conditions to be put on the query.

     

    1. With structured query language (SQL):
    2. One-to-one relationships can be determined.
    3. One-to-many relationships can be determined.
    4. Many-to-one relationships can be determined.
    5. All of the possibilities, A, B, and C, are correct.

     

    1. A “Where” condition within a structured query of a relational database:
    2. Must be limited to a location such as “Warehouse #1.”
    3. May establish a requirement where the results are equal to a specific value.
    4. May establish a requirement where the results are not equal to a specific value.
    5. Both B and C are correct.

     

    1. The additive characteristic means:
    2. The linked tables are synergetic within themselves – linked they are more powerful than alone.
    3. The values in the preceding fields must total into a following field.
    4. That if the preceding rules are met, the rule can be met.
    5. That if the preceding rules are not met, the rule must be met.

     

    1. Data normalization:
    2. Requires repeated groups to be deleted from the same row.
    3. Requires repeated groups to be deleted from the same column.
    4. Allows repeated groups if contained within the column.
    5. Allows repeated rows of information within two or more tables.

     

    1. Select the correct statement from those provided.
    2. The hierarchal and relational database models are both extremely flexible in their queries.
    3. The hierarchal model is better suited to queries than the relational database model.
    4. The relational database model is more flexible in its queries than the hierarchal mode.
    5. The relational database model has better processing of large volumes of transactions.

     

    1. In today’s IT environment:
    2. Processing speed is compromised for query capability with relational databases.
    3. Query capability is compromised for processing speed with relational databases.
    4. Neither querying nor processing speed need be compromised with relational databases.
    5. Both querying and processing speed are compromised with relational databases.

     

    1. The loss of transaction processing efficiency:
    2. Is substantial but a necessary trade-off with relational databases.
    3. Is minimized because of the increased computing power available.
    4. Is a primary reason why relational databases are not utilized.
    5. Both B and C are correct.

     

    1. Select the true statement from those provided below.
    2. Managers use much the same data as operational departments to manage the organization.
    3. All users, managers, sales, production, utilize the features of a data warehouse equally.
    4. Data warehouses are isolated to protect operational information from unauthorized access.
    5. Managers require access to historical data this is generally not available to other individuals.

     

    1. Select the true statement from those provided below.
    2. The data warehouse has five to ten years of data while the operational database has current year data.
    3. The data warehouse has current year data while the operational database has five to ten years of data.
    4. The data warehouse archives both current and long-term, five to ten years of data, within its storage.
    5. The data warehouse contains only general ledger type information while the operational database has detail.

     

    75X.   Data within the data warehouse is:

    1. Volatile – its release is restricted and potentially hazardous to the organization.
    2. Volatile – it may be deleted by specific users.
    3. Nonvolatile – it does not change rapidly.
    4. Nonvolatile – is protected against deletion.

     

    1. The data warehouse:
    2. Contains five to ten years of historical data in detail for planning and analysis.
    3. Contains the current fiscal year in detail for planning, analysis, and reporting.
    4. Contains the historical information needed for planning and analysis.
    5. Is not utilized for planning and analysis, this information is extracted from the operational database.

     

    77X.   High-impact processes (HIPs) are:

    1. Critical to the short-term objectives of the organization.
    2. Only associated with events such as sales and collections.
    3. Identified and established by single-functional teams.
    4. Critical to the long-term objectives of the organization.

     

    1. High-impact processes (HIPs):
    2. Determine the structure of the data in the data warehouse.
    3. Address the short-term goals of the organization.
    4. Must compromise user requirements for organizational needs.
    5. Determine the structure of the data in the operational database.

     

    1. Select the true statement from the following.
    2. High-impact processes (HIPs) are identified by single-functional teams.
    3. High-impact processes (HIPs) and user’s needs determine the data in the data warehouse.
    4. High-impact processes (HIPs) address both short-term and long-term objectives.
    5. High-impact processes (HIPs) determine the long-term strategy of the organization.

     

    1. Standardizing data:
    2. Configures all of the data from one department into a single database for analysis.
    3. Configures all of the data from numerous departments into a single data configuration.
    4. Is not required within relational databases.
    5. Requires sales to keep its own files and references apart from marketing (example).

     

    1. Cleansed or scrubbed data:
    2. Has had all viruses removed.
    3. Has had all fields standardized.
    4. Has had errors and problems fixed.
    5. Is data that has been stored in the data warehouse.

     

    82X.   Uploading data is putting:

    1. Scrubbed files into the operational database.
    2. Files from each HIP system into the operational database.
    3. Standardized files onto local desktop systems for access.
    4. Files from each HIP system into the data warehouse.

     

    1. The purpose of the data warehouse does NOT include:
    2. Giving managers rich sources of current trends and data.
    3. Storing current fiscal data and activity records.
    4. Providing sales with current customer information.
    5. Giving managers rich sources of historical trends and data.

     

    1. Data is the data warehouse:
    2. Is analyzed by data mining.
    3. Is analyzed by SQL.
    4. Is analyzed by analytical processing.
    5. Both A and C are correct.

     

    1. Proper data analysis of data warehouse files:
    2. Improves short-term planning.
    3. Improves long-term planning.
    4. Enhances the ability to meet customer needs.
    5. Increase performance.
    6. 1, 2, 3, and 4.
    7. 2, 3, and 4.
    8. 1, 3, and 4.
    9. 1, 2, and 4.

     

    86X.   The various types of online analytical processing (OLAP) does NOT include:

    1. MOLAP – Multidimensional online analytical processing.
    2. NOLAP – Notational online analytical processing.
    3. ROLAP – Relational online analytical processing.
    4. All of the above, A, B, and C are types of OLAP systems.

     

    87X.   Data mining:

    1. Searches for random patterns.
    2. Searches for patterns in the operational database.
    3. Results will not generally predict customer preferences.
    4. Analyzes past patterns to predict future events.

     

    88X.   OLAP tools include all of the following EXCEPT:

    1. Drill down.
    2. Drill up.
    3. Pivoting.
    4. Time series analysis.

     

    86X.   OLAP tools include all of the following EXCEPT:

    1. Consolidation.
    2. Inclusion reports.
    3. Exception reports.
    4. What if simulations.

     

    1. Drill down within OLAP is:
    2. Identifying trends in the comparison of data in several databases.
    3. The aggregation or collection of similar data from several databases.
    4. The presentation of variances from the expected in dollar value.
    5. Is the successive expansion of data as lower levels of data are exposed.

     

    1. Potential variations in conditions that are used to understand interactions between different parts of the business is referred to as:
    2. Exception reports.
    3. Pivoting.
    4. What-if simulations.
    5. Time series analysis.

     

    1. Data processing and storage:
    2. Must be kept centralized for control and security.
    3. Must be distributed for control and security.
    4. Can be distributed to meet organizational requirements.
    5. Must be kept centralized for efficient operations.

     

    1. Select the correct statement from the following.
    2. DDP and DDB require dependable and extensive processing power for large organizations.
    3. Distributed databases can only be accessed by local queries.
    4. Centralized data processing and databases require dependable and extensive processing power for large organizations.
    5. The trend in data processing and databases is towards centralization due to reliable internet access and increased computer power.

     

    94X.   Advantages of distributed databases include all EXCEPT:

    1. Reduced hardware costs.
    2. Improved responsiveness.
    3. Eased managerial obligations.
    4. Easier incremental growth.

     

    95X.   Disadvantages of distributed databases include all EXCEPT:

    1. Increased difficulty in managing the database.
    2. Maintaining integrity of the data.
    3. Easier security controls.
    4. Easier control of the database configuration.

     

    96X.   Advantages of distributed databases include all EXCEPT:

    1. Easier incremental growth.
    2. Multiple site access for processing.
    3. Decreased user involvement.
    4. Increased user control.

     

    1. Automatic integrated backup means:
    2. That each site must accomplish its own backup.
    3. One site may backup sites it does not normally support.
    4. If data is lost at one site it may be available from another site.
    5. All of the above are correct.

     

    98X.   Automatic integrated backup

    1. May create problems because a single site’s data may be at multiple locations.
    2. May create problems because backups at multiple sites may have hardware differences.
    3. At remote sites may not all be the same configuration as the central configuration.
    4. All of the above are correct.

     

    1. Distributed data processing and databases:
    2. May require management to enforce hardware and software configuration policies.
    3. Make hardware and software configuration easier as local assets can be utilized.
    4. Ease security concerns as remote systems are not required to maintain connectivity.
    5. All of the above are correct.

     

    100X. Client systems usually rely on the network for all EXCEPT:

    1. File sharing.
    2. Printing.
    3. Video presentation.
    4. Network/Internet access.

     

    1. Select the true statement from the following:
    2. Clients are usually workstations that contain data files.
    3. Servers are usually less capable computing power since their function is routing requirements to resources.
    4. Servers may contain shared files and resources.
    5. Servers usually do not control assets such as printers and Internet portals.

     

    102X. The three major concerns related to database control and security do NOT include:

    1. Unauthorized access.
    2.     Inadequate backup.
    3. Data integrity.
    4. Adequate backup.

     

    102A. In this type of distributed system, each computer or process on the network is either a Client or a server.

    1. Distributed Data Processing
    2. Client / Server System
    3. Online Analytical Processing
    4. Distributed Database System

     

    102B. The fastest growing area of IT is:

    1. Cloud-based database services
    2. Online analytical processing
    3. Distributed data storage
    4. Distributed database processing

     

    102C. When a company buys data storage from a cloud provider, the arrangement is referred to as:

    1. Online analytical processing
    2. Cloud services assessment
    3. Distributed data storage
    4. Database as a service

     

    102D. The advantages of cloud-based computing includes all of the following, EXCEPT:

    1. Scalability – as the company grows, it can easily purchase additional capacity.
    2. Expanded access – once the data are store in the cloud, it can be accessed by multiple devices form different locations.
    3. Increased infrastructure – the company has more need for servers and data storage.
    4. Cost savings – because of the advantages related to cloud-based computing, there are usually significant cost savings recognized.

     

    103X. Database security includes all EXCEPT:

    1. Password protection.
    2. Encryption
    3. LAN structure.
    4. Firewalls.

     

    104X. Unauthorized users might include all of the following EXCEPT:

    1. Hackers attempting to penetrate firewalls.
    2. Sales personnel accessing inventory files.
    3. Human resource managers accessing production reports.
    4. Payroll clerks accessing pay rate databases.

     

    105X. Ethical issues associated with data collection and storage include all of the following EXCEPT:

    1. Collecting only the necessary information for the transaction.
    2. Selling non-sensitive information only to trusted agents.
    3. Correcting errors in data as quickly as possible.
    4. Precluding unnecessary access of customer data by employees.

     

    106X. It is the ethical responsibility of employees:

    1. To review customer records not associated with their division for errors.
    2. Disclose customer data to related parties
    3. To collect only necessary data from customers
    4. To sell customer data to competitors.

     

    1. A bank would consider which of the following as nonprivate information?
    2. Customer name.
    3. Customer address if the customer is a business.
    4. Customer phone number if it is listed number.
    5. All of the above, A, B, and C, are private and privileged types of information.

     

    108X. Appropriate information for a medical facility would NOT include:

    1. Social Security number.
    2. Health insurance company.
    3. Next of kin notification information.
    4. Personal spending habits.

     

    1. The AICPA Trust Services Principles include:
    2. Management, notice, choice & consent, collection, use & retention, detention, and disclosure to third parties.
    3. Management, choice & consent, collection, use & retention, backup, access, disclosure to third parties, and security for privacy.
    4. Choice & consent, collection, use & retention, access, disclosure to third parties, redundancy for privacy, and quality.
    5. Management, choice & consent, use & retention, access, disclosure to third parties, and monitoring & enforcement.

     

    110X. The prevention of industrial espionage is aided by all EXCEPT:

    1. Password protection
    2. Smart cards.
    3. Federal and state laws.
    4. Encryption of data.

     

    111X. While an employee may have access to privileged information, an example of unethical activities would be a:

    1. Nurse viewing the medications of the next patient.
    2. Car salesman viewing the credit rating of a customer with a car in for warranty repairs.
    3. Manager reviewing the hours worked of an assigned employee.
    4. Warehouseman viewing the availability of materials needed for production.

     

    112X. Proper IT controls will NOT:

    1. Prevent a hacker from penetrating the firewall.
    2. Prevent an unauthorized user from using the computer systems.
    3. Restrict employee access to any information.
    4. Prevent an employee from sharing his password.

     

    113X. Ethical responsibilities are shared by:

    1. Company employees only.
    2. Company employees and management only.
    3. Company employees, IT, and management only.
    4. All concerned including employees, customers, and management.
      1. Which of the following advantages is least likely to be experienced by a company implementing an enterprise resource planning (ERP) system?
      2. Reduced cost
      3. Improved efficiency
      4. Broader access to information
      5. Reduced errors

       

      2X.    An ERP system is a software system that provides each of the following EXCEPT:

      1. Collection, processing, storage, and reporting of transactional data.
      2. Enhancement of e-commerce and e-business.
      3. Coordination of multiple business processes.
      4. Physical controls for the prevention of inventory theft.

       

      3X.    Which of the following is NOT a feature of an ERP system’s database?

      1. Increased efficiency
      2. Increased need for data storage within functional areas
      3. Increased customer service capability
      4. Increased data sharing across functional areas

       

      1. Manufacturing companies implement ERP systems for the primary purpose of
      2. Increasing productivity.
      3. Reducing inventory quantities.
      4. Sharing information.
      5. Reducing investments.

       

      1. What company developed the first true ERP systems?
      2. Microsoft
      3. Peoplesoft
      4. SAP
      5. IBM

       

      1. In the late 1990s, the Y2K compatibility issue was concerned primarily with computer systems’
      2. File retrieval capability.
      3. Data storage.
      4. Human resource comparisons.
      5. Capital budgeting.

       

      1. The primary difference between ERP and ERP II systems is that ERP II may include
      2. Internet EDI.
      3. Logistics modules.
      4. Reporting modules.
      5. A data warehouse.

       

      8X.    Which of the following is NOT one of the reasons for increased spending on ERP systems in recent years?

      1. The need for Sarbanes-Oxley compliance
      2. Globalization and increased competitive pressures
      3. The need for earnings management
      4. The need for customer service enhancements

       

      1. Supply chain management (SCM) is a critical business activity that connects a company more closely with its
      2. Customers.
      3. Suppliers.
      4. Subsidiaries.
      5. Customers and suppliers.

       

      1. The type of ERP system used by large, multinational corporations is known as
      2. Big bang implementation.
      3. Modular implementation.
      4. Tier one software.
      5. Tier two software.

       

      1. Which of the following ERP approaches accomplishes the ERP implementation beginning with one department?
      2. The pilot method
      3. The modular implementation approach
      4. The big bang approach
      5. The location-wise implementation method

       

      1. Which of the following statements best describes the risks of ERP systems?
      2. The risks of implementing and operating ERP systems are nearly identical to the risks of implementing and operating IT systems.
      3. The risks of operating and implementing ERP systems are greater than the risks of implementing and operating IT systems, due to the scope, size, and complexity of ERP systems.
      4. The risks of implementing ERP systems are greater than the risks of implementing IT systems, but the operating risks are nearly identical.
      5. The risks of operating ERP systems are greater than the risks of operating IT systems, but the implementation risks are nearly identical.

      ANSWERS TO TEXTBOOK – CHAPTER 15 – END OF CHAPTER QUESTIONS

       

      1. A                                     4.    C                                      7.    A                                     9.    D                                   11.    B
      2. D                                     5.    B                                      8.    C                                   10.    C                                   12.    A
      3. B                                      6.    B

       

       

      TEST BANK – CHAPTER 15 – MULTIPLE CHOICE

       

      1. Select the true statement from those provided below.
      2. An ERP system is designed to interact with a stand-alone sales and inventory application to create general ledger information.
      3. An ERP system is designed to be a stand-alone software application to accomplish revenue, expenditures, conversion, and administrative processes.
      4. An ERP system will accomplish e-commerce but relies on other software applications for the accomplishment of e-business transactions.
      5. An ERP system will not collect, process, store, and report the data resulting from e-business transactions.

       

      1. An ERP system uses:
      2. One database for each module associated with the organization – sales, inventory, human resources, etc.
      3. One database for manufacturing, one database for sales, one database for administrative, and one database for design and research.
      4. One database which contains all data items associated with the organization.
      5. Relational databases for interactive queries between modules and departments.

       

      1. An enterprise resource planning (ERP) system would:
      2. Update both accounts receivable and inventory when purchased goods are received from a vendor.
      3. Update both accounts payable and accounts receivable when inventory purchased from a vendor is received.
      4. Update both accounts payable and sales when purchased goods are received from a vendor.
      5. Update both accounts payable and inventory when purchased goods are received from a vendor.

       

      16X.   An enterprise resource planning (ERP) system allows a sales representative to provide a customer with all of the following information EXCEPT:

      1. Is the product in stock?
      2. What is the price of the product?
      3. What is the cost of the product?
      4. When will it be shipped?

       

      17X.   MRP applications are:

      1. Management resource programs software
      2. Manufacturing resources planning software
      3. Management reporting programs software
      4. Manufacturing reporting programs software

       

      18X.   ERP modules include all EXCEPT:

      1. Financial.
      2. Operational database.
      3. Sales and services.
      4. Product development and manufacturing.

       

      1. Within an ERP program:
      2. The operational database contains five to ten years of transaction histories.
      3. The data warehouse is updated as daily transactions are recorded.
      4. The data warehouse contains five to ten years of transaction histories.
      5. The data warehouse information is available to sales personnel for customer histories.

       

      20X.   Interfaces between modules of ERP systems would be accepted for all of the following EXCEPT:

      1. Sales and inventory.
      2. Sales and human resources.
      3. Sales and accounts receivable.
      4. Sales and manufacturing.

       

      1. Material requirements planning (MRP) software:
      2. Calculated raw materials quantities needed for manufacturing.
      3. Calculated lead times on raw materials orders.
      4. Calculated material needs on accounts payable data.
      5. 1, 2, and 3.
      6. 1 and 2 only.
      7. 2 and 3 only.
      8. 1 and 3 only.

       

      22X.   The purpose of MRP II was to integrate all of the following into a single database EXCEPT:

      1. Human resources.
      2. Manufacturing.
      3. Marketing.
      4. Finance.

       

      23X.   SAP R/3 operates on a:

      1. Mainframe environment with closed architecture.
      2. Client-server environment with open architecture.
      3. Client-server environment with closed architecture.
      4. Mainframe environment with open architecture.

       

      1. Y2K compatibility issues arose because:
      2. Older computer systems recorded dates in mm/dd/yyyy formats and memory for these was expense.
      3. Older computer systems recorded dates in mm/dd/yyyy formats and memory in older systems was unreliable.
      4. Old computer systems kept dates in mm/dd/yy formats.
      5. Memory in older systems would fail when challenged with a mm/dd/yy formatted date.
      6. Select the correct statement from those provided below.
      7. MRP II allows interaction between suppliers and their customers via the internet or other electronic means.
      8. While MRP II provides automatic inventory reordering, it does not allow suppliers to see customer inventory levels.
      9. MRP II systems preclude e-commerce and e-business transactions due to internal security measures to protect data.
      10. To increase operational response times, MRP II systems utilize operational databases but not data warehouses.

       

      26X.   Spending on ERP systems increased or decreased based on several factors.  These factors include all of the following EXCEPT:

      1. Y2K compliance concerns.
      2. The need for better customer service.
      3. Multi-national sites of operation.
      4. Compliance with the Sarbanes-Oxley Act.

       

      26A.   Which of the following is NOT one of the reasons for the increased spending on ERP systems since 2004?

      1. Bigger IT budgets replaced leaner budgets as economic conditions improved.
      2. Many companies needed upgraded systems to enhance compliance with the Sarbanes-Oxley Act.
      3. Business processes were separated and standardized.
      4. ERP has become so important to daily operations that many companies cannot allow their ERP system to become outdated.

       

      27X.   The financials module of an ERP such as SAP would include all of the following components EXCEPT:

      1. Inventory.
      2. Financial accounting.
      3. Management accounting.
      4. Corporate governance.

       

      28X.   The sales and services module of an ERP such as SAP would include all of the following components EXCEPT:

      1. Sales order management.
      2. Procurement.
      3. Professional service delivery.
      4. Incentive and commissions management.

       

      29X.   The analytics module of an ERP system such as SAP would include all of the following EXCEPT:

      1. Financial analysis
      2. Strategic enterprise management
      3. Project portfolio management
      4. Workforce analysis

       

      1. Management would use the _____________ module for feedback from the ERP system to assist in the proper management and control of operations.
      2. Financials.
      3. Corporate services.
      4. Analytics.
      5. Human capital management.

       

      1. To employ analytical processes on the organization’s data:
      2. Data mining is performed on the operational database.
      3. Data is uploaded to the analytics module’s database.
      4. Data mining is performed on the data warehouse.
      5. Data is uploaded to the financials module’s database.

       

      1. Supply chain management is:
      2. The management and control of all materials.
      3. The management and control of all funds related to purchasing.
      4. The management of information related to the logistics process.
      5. Limited to the flow of materials from vendors into the production cycle.
      6. 1, 2, 3, and 4 are all correct.
      7. 1, 2, and 3 are correct.
      8. 1, 2, and 4 are correct.
      9. 1, 3, and 4 are correct.

       

      1. Processes in supply chain management:
      2. Involve trading processes from a supplier to the business.
      3. Involve trading processes from the business to a customer.
      4. Involve trading between the business and other intermediaries.
      5. Do not include any transactions once raw materials are put into production.
      6. 1, 2, 3, and 4 are all correct.
      7. 1, 2, and 4 are correct.
      8. 1, 2, and 3 are correct.
      9. 1, 3, and 4 are correct.

       

      1. The term for software solutions that help businesses manage customer relationships in an organized way is:
      2.     Sales and service.
      3. Customer relationship management.
      4. Corporate services.
      5. Human capital resources.

       

      1. Critical factors of CRM success include:
      2. Successful software implementation and effective employee utilization.
      3. Effective use of the analytics module’s data.
      4. The effective use by employees of the sales and services module’s data.
      5. All of the above, A, B, and C, are correct.

       

      1. The two tiers of ERP systems are:
      2. The internal tier and external tier.
      3. The vendor & customer tier and the employee tier.
      4. The large, multinational corporation tier and the midsize business tier.
      5. The acquisitions tier and the sales tier.

       

      1. The ERP program that uses the term “back office” in reference to managerial functions and “front office” in reference to customer and sales functions is:
      2. SAP R/3.
      3. Oracle Applications.
      4. Peoplesoft.
      5.     mySAP.

       

      1. The first “pure Internet” architecture, with no programming code residing on the client computer was:
      2. SAP R/3.
      3. Oracle Applications.
      4. Peoplesoft.
      5. mySAP.

       

      39X.   ERP tier two software applications include:

      1. Axapta, Epicor, MAS 500 ERP, Microsoft Dynamics ERP, and Macola ERP.
      2. Axapta, Epicor, MAS 500 ERP, JD Edwards, and Macola ERP.
      3. Axapta, Epicor, MAS 500 ERP, Microsoft Access, and Macola ERP.
      4. Axapta, Epicor, SAP R/1, Microsoft Dynamics ERP, and Macola ERP.

       

      1. Select the true statement from the following:
      2. The strength of SAP is its human resources capabilities.
      3. The strength of Peoplesoft is its manufacturing capabilities.
      4. The strength of SAP is its financial reporting capabilities.
      5. The strength of Peoplesoft is its human resources capabilities.

       

      40A.   One of the largest risks of ERP systems in the cloud is:

      1. The potential service outage that might cause the system to be unavailable.
      2. The risk of hacking into the system by competitors.
      3. The intense cost of training employees to work in the cloud environment.
      4. The high cost of the investment in hardware to handle the systems in the cloud.

       

      1. ERP implementation:
      2. Must accomplish a full ERP system implementation.
      3. May install only selected modules.
      4. Must be done one module at a time.
      5. Is a short duration process due to total integration of the software.

       

      1. Best of breed means:
      2. Picking the best ERP software on the market for the particular type of business or organization.
      3. Picking the best software on the market for a particular type of business process for this size of an organization.
      4. Picking the best consulting firm to accomplish implementation of the ERP software.
      5. Utilizing the most capable employees within the organization work with the implementation of the ERP application.

       

      1. The advantage of “best of the breed” is:
      2. The best functionality of the ERP system as a result of total implementation.
      3. The best functionality of a unique process of the organization.
      4. Best cost of implementation of the ERP system.
      5. Total integration of the ERP modules

       

      1. Business process reengineering (BPR):
      2. Aligns business processes with IT systems to record processes.
      3. Reengineer the underlying processes to be more effective.
      4. Improves the efficiency of the underlying process through automation.
      5. Requires significant investment in IT resources.
      6. Does not have a mutual enhancement effect with IT.
      7. 1, 2, 3, 4, and 5.
      8. 1, 3, 4, and 5 only.
      9. 1, 2, 3, and 5 only.
      10. 1, 3, and 4 only.

       

      1. When computerized technology is introduced into processes, the processes
      2. Must utilize standardized forms and screens for data entry.
      3. Can be radically redesigned to take advantage of the speed and efficiency of computers to improve processing efficiency.
      4. Data retrieval from the databases will be restricted to upper management for analysis.
      5. Both B and C are correct.

       

      1. Business process reengineering means:
      2. Configuring the business processes to conform to the functionality of the IT system.
      3. Configuring the IT system to the business process for best processing speed.
      4. Matching the IT and business processes to achieve the greatest mutual benefit from each.
      5. Configuring both IT and business processes to meet the goals of ERP.

       

      1. Business process reengineering means:
      2. Reconfiguring the ERP system to fit the current methods of the organization.
      3. Retaining general software applications as legacy systems to reduce training and implementation costs.
      4. Modifying business processes to take advantage of the capabilities of the ERP system.
      5. Acquiring additional computer networking resources to effectively handle current business processes.

       

      1. Customizing an ERP system:
      2. Will tailor the ERP system to the user.
      3. May have a prohibitive cost.
      4. May hinder future system upgrades.
      5. Is recommended wherever possible.
      6. 1, 2, 3, and 4.
      7. 1, 2, and 4 only.
      8. 1, 3, and 4 only.
      9. 1, 2, and 3 only.

       

      49X.   Data conversion will:

      1. Require an appropriate amount of time be devoted to the conversion.
      2. Be done at a minimal cost.
      3. Import data from many legacy systems into a single RDBMS.
      4. Require cleansing of errors and configuration inconsistencies.

       

      1. 1, 2, 3, and 4.
      2. 1, 2, and 4 only.
      3. 1, 3, and 4 only.
      4. 1, 2, and 3 only.

       

      50X.   The big bang approach to implementation means that the company:

      1. Will buy one integrated system to accomplish all business processes.
      2. Implements all modules and all function areas of the ERP system at one time.
      3. Commences training and data cleansing throughout the organization on one date.
      4. Implements the business process reengineering process on a predetermined date.

       

      51X.   All of the following are implementation of software systems EXCEPT:

      1. The big bang implementation.
      2. Location-wise implementation.
      3. Progressive implementation.
      4. Modular implementation.

       

      52X.   When one site is utilized as the pilot approach to ERP, the implementation method is referred to as:

      1. Big bang implementation.
      2. Hardware implementation.
      3. Location-wise implementation.
      4. Modular implementation.

       

      53X.   The advantages and disadvantages of modular implementation are:

      1. Full system integration is available but hardware incompatibilities exist.
      2. Reduces the risks associated with installation and operation of the system, but full system integration is not available.
      3. All employees are exposed to some portion of the ERP system but critical information is still in the legacy system.
      4. Critical information is still available in the legacy system but technical support is not readily available for the legacy system.

       

      54X.   Benefits of an ERP system include all of the following EXCEPT:

      1. The real-time nature of processing increases the total processing time.
      2. The interactive nature of the modules allows processes to interact with each other.
      3. ERP systems have evolved from many years of software experience so the software reflects tried and true practices.
      4. There is the capability to analyze large amounts of data in a single database.

       

      55X.   ERP system benefits include all EXCEPT:

      1. ERP systems are built to interact with the IT systems of trading partners such as customers and suppliers.
      2. ERP systems are configured upon implementation to exceed any reasonable business growth in the future.
      3. The ERP systems incorporate modules to conduct e-commerce and e-business.
      4. Analytical tools that enable detailed analysis of the data are incorporated into ERP systems.

       

      56X.   Organizational benefits of ERP implementation include all EXCEPT:

      1. Retaining long-held work patterns and work focus.
      2. Facilitating organizational learning.
      3. Building a common vision.
      4. Increased employee morale and satisfaction

       

      57X.   Factors which adversely affect the implementation of an ERP system do NOT include:

      1. Cost.
      2. Complexity.
      3. Size.
      4. Scope.

       

      58X.   If one module in the ERP system fails,

      1. The rest of the system will operate correctly.
      2. It has the potential to stop or disrupt all processes across the entire enterprise
      3. That one module will automatically revert to the legacy system.
      4. Will result in the entire system reverting to the legacy system.

       

      59X.   Operation risks with an ERP system includes all of the following EXCEPT:

      1. Security is a greater risk because processes are integrated.
      2. An unauthorized user can affect more processes in the legacy system.
      3. Incorrect data generated in a given process can automatically post flawed data to other processes.
      4. Online privacy and confidentiality risks are magnified.

       

      60X.   As required by Sarbanes-Oxley, enhanced ERP systems provide feedback to management regarding internal controls.  To effectively use the function, there are important steps that need to be taken.

      1. Establish and maintain a list of compatible duties.
      2. Insure that employees are given access and authority only to those parts of the system required.
      3. Periodically review the user profile and change any access and authority levels as necessary.
      4. Configure the ERP system to track and report any instances where an employee initiated or records any event.
      5. Monitoring the periodic reports or real-time reports by the appropriate manager to determine if user profiles have changed.
      6. 1, 2, 3, 4, 5
      7. 2, 3, 5
      8. 1, 2, 4, 5
      9. 2, 3, 4, 5

       

      1. With the proper implementation of an ERP system:
      2. Fraud due to inappropriate transaction recording is eliminated.
      3. Employee IDs, passwords, and segregated duties aid in internal control measures.
      4. Audit trails are not necessary due to ID and password security concepts.
      5. All of the above, A, B, and C, are correct answers.

       

      ANSWERS TO TEST BANK – CHAPTER 15 – MULTIPLE CHOICE:

      1. B                                   23.    B                                   33.    C                                   43.    B                                   53.    B
      2. C                                   24.    C                                   34.    B                                   44.    D                                   54.    A
      3. D                                   25.    A                                   35.    A                                   45.    B                                   55.    B
      4. C                                   26.    A                                   36.    C                                   46.    C                                   56.    A
      5. B                                   27.    A                                   37.    B                                   47.    C                                   57.    A
      6. B                                   28.    B                                   38.    C                                   48.    D                                   58.    B
      7. C                                   29.    C                                   39.    A                                   49.    C                                   59.    B
      8. B                                   30.    C                                   40.    D                                   50.    B                                   60.    B
      9. B                                   31.    C                                   41.    B                                   51.    C                                   61.    B
      10. A                                   32.    B                                   42.    B                                   52.    C

      New Questions:

      26A.    C

      40A.    C

       

      TEST BANK – CHAPTER 15 – TRUE / FALSE

       

      1. The intent of an ERP (enterprise resource planning) system is to provide a single software application for revenue, expenditures, conversion, and administrative processes.

      TRUE

       

      1. The intent of an ERP (enterprise resource planning) system is to provide a sales and inventory software application that will interact with the general ledger software with its sales and inventory transactions.

      FALSE

       

      1. An enterprise resource planning (ERP) system integrates all business processes and functions into a single software system using a single database.

      TRUE

       

      1. An enterprise resource planning (ERP) system would update accounts receivable and inventory when purchased goods are received from a vendor.

      FALSE

       

      1. An enterprise resource planning (ERP) system allows a sales representative to provide the date that inventory for sale will be received from a vendor to a customer upon order placement.

      TRUE

       

      1. Manufacturing resource planning software systems are outgrowths of the ERP concept.

      FALSE

       

      68X.    ERP applications use modules such as financials, human resources, data warehouse, and analytics.

      FALSE

       

      1. ERP data is stored in both financial and operational databases.

      FALSE

       

      1. The data warehouse is up dated as transactions are processed.

      FALSE

       

      1. Today’s ERP systems can be traced back to the first generation of materials requirements planning software.

      TRUE

       

      1. Early MRP applications utilized sales forecasts to compute material requirements for production.

      TRUE

       

      1. The purpose of MRP II was to integrate manufacturing, engineering, marketing, finance, and human resources units to run on the same information system.

      FALSE

       

      1. SAP R/3 had tremendous growth due to the use of closed architecture and client-server hardware compatibility.

      FALSE

       

      1. Y2K compatibility issues arose because computers kept dates in mm/dd/yy type formats.

      TRUE

       

      76X.    ERP II has additional modules including customer relationship management and supply chain management for enhanced e-commerce transactions.

      TRUE

       

      1. MRP II systems let vendors track customer inventory levels and trigger inventory shipments when prearranged levels are met.

      TRUE

       

      1. Spending for ERP and ERP II systems has been consistently growing since the mid 1990s and the Y2K events.

      FALSE

       

      1. The financial module of an ERP such as SAP might contain such components as financial accounting, management accounting, corporate governance, and inventory.

      FALSE

       

      80X.    The product development module of an ERP such as SAP might contain such components as production planning, manufacturing execution, operations analysis, and enterprise asset management.

      FALSE

       

      1. ERP systems such as SAP normally batch their financial transactions for processing due to the large amounts of data.

      FALSE

       

      1. ERP systems such as SAP normally post their financial transactions in real-time for current information through all of the appropriate modules.

      TRUE

       

      1. Management must examine feedback from the ERP system to assist in the proper management and control of operations and financial conditions.

      TRUE

       

      1. Supply Chain Management integrates supply and demand management within and across companies.

      TRUE

       

      1. Processes in supply chain management involve trading processes from a supplier to a business only.

      FALSE

       

      1. Sales and service is a term for software solutions that help businesses manage customer relationships in an organized way.

      FALSE

       

      1. CRM is a term for software solutions that help businesses manage customer relationships in an organized way.

      TRUE

       

      1. CRM success depends entirely on the implementation of the software package designed for customer relationship support.

      FALSE

       

      1. Tier one includes software often used by large, multinational corporations.

      TRUE

       

      1. Tier two describes software used by midsize businesses and organizations.

      TRUE

       

      1. Tier one describes software used by midsize businesses and organizations.

      FALSE

       

      1. Tier two includes software often used by large, multinational corporations.

      FALSE

       

      1. Peoplesoft uses the terms “back office” in reference to managerial functions and “front office” in reference to customer and sales functions.

      FALSE

       

      94X.    SAP was the first “pure Internet” architecture, with no programming code residing on the client computer.

      FALSE

       

      1. The strength of SAP is the human resources aspects of an organization.

      FALSE

       

      1. The strength of Peoplesoft is the human resources aspects of an organization.

      TRUE

       

      96A.    The differences between Tier One and Tier Two software are becoming more definitive as the Tier One vendors attempt to attract larger companies.

      FALSE

       

      96B.    All ERP vendors have developed cloud-based ERP products.

      TRUE

       

      96C.    One of the greatest risks of ERP cloud systems is the potential service outage that might cause the system to be unavailable.

      TRUE

       

      96D.    One of the greatest risks of ERP cloud systems is their vulnerability to hackers.

      FALSE

       

      1. The best fit software is usually defined by the client’s hardware and intranet structure.

      FALSE

       

      1. When ERP implementation is started all of the legacy system must be replaced for proper operation.

      FALSE

       

      1. Best of breed means picking the best ERP software on the market for the particular type of business or organization.

      FALSE

       

      1. Business process reengineering (BPR) is the purposeful and organized changing of business processes to make them more efficient.

      TRUE

       

      1. Business process reengineering means tailoring both the business process to IT and the IT process to the business process for best functionality and processing.

      TRUE

       

      1. Customizing an ERP system is recommended wherever the business has an existing process to accomplish a goal and that process is not compatible with the ERP system.

      FALSE

       

      1. Customizing an ERP system should be limited due to cost and upgrading to the system in the future.

      TRUE

       

      1. ERP implementation costs are kept to a minimum by retaining the legacy computer hardware and operating systems.

      FALSE

       

      104A.    The decision as to whether to adopt cloud-based ERP systems will not have much impact on the computer hardware and IT infrastructure needed.

      FALSE

       

      104B.    A cloud-based ERP system will require less infrastructure at the company.

      TRUE

       

      1. Due to the integration of design, ERP systems do not require extensive testing if implementation does not entail best of breed or legacy modules.

      FALSE

       

      1. Because the ERP system will cleanse and correct data errors while importing legacy data into its RDBMS, a minimum of time, effort, and dollars will be spent on data conversion.

      FALSE

       

      1. Training of employees will be minimal due to BPR and system’s integration.

      FALSE

       

      1. The big bang theory is the easiest to implement since the switch from the legacy system to the ERP system is done on a single date throughout the organization.

      FALSE

       

      1. The big bang theory of implementation is preferred due to the limited problems incurred in transition.

      FALSE

       

      110X.    Modular implementation and pilot implementation are both considered methods of implementation.

      FALSE

       

      111X.    Location-wise implementation and pilot implementation are both considered methods of implementation.

      TRUE

       

      1. The real-time nature of processing decreases the total processing time and allows more immediate feedback to management.

      TRUE

       

      1. The real-time nature of processing increases the total processing time and precludes immediate feedback to management.

      FALSE

       

      1. ERP systems are built to interact with the IT systems of trading partners such as customers and suppliers.

      TRUE

       

      1. ERP systems can grow with the business.

      TRUE

       

      1. ERP implementation regarding IT infrastructure benefits include building business flexibility for current and future changes

      TRUE

       

      1. The integration of an ERP system compensates for its scope, size, and complexity to make implementation less risky than most IT systems.

      FALSE

       

      1. Since the sale of goods in an ERP system may automatically trigger more production, which in turn would trigger the purchase of raw materials there is a significant need to ensure that these integrated processes are triggered at the correct time and in the correct amounts.

      TRUE

       

      1. Since ERP systems are modular the risks of implementation enterprise-wide are minimized.

      FALSE

       

      1. Within an ERP system unauthorized access to a purchase module could trigger a related unauthorized payment within accounts payable.

      TRUE

       

      121X.    Conflicting abilities are also referred to as incompatible duties.

      TRUE

       

      121A.    The assigning of access and authority for a specific user ID is referred to as a user profile.

      TRUE

       

      121B.    Segregation of duties require within an ERP system is difficult due to the free access allowed to employees.

      FALSE

       

      121C.    As the result of promotions or job changes, an employee may have different access or authorizations.  Because of this, it is important that a company review user profiles and make changes to access and authority levels.

      TRUE

       

      121D.    ERP will automatically track and report any instances where an employee initiates or records an event with conflicting abilities.  It is not necessary to configure the system to accomplish this.

      FALSE

       

      121E.    Based on each employee’s user profile, audit trails can be constructed and reported which employees initiated or conducted individual processes.

      TRUE

       

      1. Due to their level of integration, ERP systems have difficulties in properly segregating duties.

      FALSE

       

      1. The ERP system can incorporate a matrix of tasks that are compatible.

      TRUE